Aug 212018
 
 August 21, 2018  Posted by at 8:38 am Finance Tagged with: , , , , , , , , , , , ,  


Henri Matisse The painter and his model 1916-17

 

China’s Biggest Risk May Be Its Property Market – Not The Trade War (CNBC)
Why Do American CEOs Get Paid So Much? (Galbraith)
Trump Says It Is ‘Dangerous’ For Twitter, Facebook To Ban Accounts (R.)
Trump Worries That Mueller Interview Could Be A ‘Perjury Trap’ (R.)
Trump Demands Fed Help On Economy, Complains About Interest Rate Rises (R.)
UK’s Hunt To Call On Trump To Impose Fresh Sanctions On Russia (G.)
‘Secret Directive’ Bans UN Agencies From Helping Rebuild Syria – Lavrov (RT)
UK Household Debt Balloons To £19bn As Bailiff Problems Multiply (Ind.)
NHS Leak Warns Of Brexit Drug Shortages And Disease Risk (G.)
Jacinda Ardern Freezes New Zealand MPs’ Pay To Tackle Rich-Poor Divide (G.)
Salvini Refuses To Let In Refugees After Coastguard Ship Docks (G.)
What Being Back in the Markets Actually Means for Greece (TPP)
The Winners Will Lose and the Losers Will Win (Kunstler)
The Inescapable Weight Of My $100,000 Student Debt (G.)

 

 

“Real estate investment accounts for about two-thirds of Chinese household assets..”

China’s Biggest Risk May Be Its Property Market – Not The Trade War (CNBC)

China’s hot real estate market remains a challenge for authorities trying to maintain stable economic growth in the face of trade tensions with the U.S. In fact, property is the country’s biggest risk in the next 12 months, much greater than the trade war, according to Larry Hu, head of greater China economics at Macquarie. He said he is especially watching whether the real estate market in lower-tier, or smaller, cities will see a downturn in prices or housing starts after recent sharp increases. Real estate investment accounts for about two-thirds of Chinese household assets, according to wealth manager Noah Holdings. The property market also plays a significant role in local government revenues, bank loans and corporate investment.

As a result, a sharp slowdown in the real estate market’s growth and drop in prices would have a negative affect on overall economic growth. So far, the market has been hot: The average selling price for newly built non-governmental housing in 60 tier-three and tier-four cities tracked by Tospur Real Estate Consulting rose 28.1 percent from January 2016 to May 2018. [..] Last week, Nanjing, a tier-two city, announced a ban on corporate purchases of residential properties, following similar moves to limit speculation by Shanghai and some other cities. That’s a good move for controlling risk, according to Joe Zhou, real estate and investment management firm JLL’s regional director for China capital markets. He said the government is not likely to loosen its policy soon and that prices could decline on average.

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“The reliance of tech firms on venture capital and bubble psychology, rather than cash flow..”

Why Do American CEOs Get Paid So Much? (Galbraith)

A new report from the Economic Policy Institute calls attention to the hardy perennial of how much America’s corporate titans make: bosses of the top 350 firms made an average of $18.9m in 2017. That’s a ratio of 312-1 over the median worker in their industries. Big bucks to be sure. And a big change since 1965, when the ratio was just 20-1. But what does it mean? And if there’s a problem, what is it, exactly? What it means, as the EPI economists carefully document, is that the top US corporate chiefs are paid overwhelmingly with stock options, and their income fluctuates with the market. About 80% of the pay packet is in stocks, and the rise of 17% in 2017 after two flat years surely suggests that the top CEOs (not unreasonably) sensed the market peaked last year.

So they cashed in. On the other 20% of the pay packets, no gains occurred. The US numbers have shock value. But bear in mind that they reflect not only the way companies are run, but also changes over decades in the structure of the US economy and tax law, specifically the rise of market valuations in technology and finance at the expense of the major industrial corporations, and a corresponding decline in unions, which held down the ratios in the sectors the industrial firms dominated a half century back. Plus, there is the radical decline in top marginal tax rates on income and capital gains, beginning in 1978, which gave executives strong reasons to restructure their pay away from inside-the-corporation perks (the penthouses and country clubs of yore) and toward cash and capital assets.

The reliance of tech firms on venture capital and bubble psychology, rather than cash flow, deepened this trend. Note also that there is something a bit artificial about the resulting “wealth.” Jeff Bezos may have a net worth of over $150bn, mostly in Amazon stock, but he couldn’t convert it into cash if he wanted to, neither by selling nor by borrowing. Any effort to sell would demolish Amazon’s valuation and hence his own fortune. The rich aren’t like us – they have more money, true, but some of it isn’t really money and it can disappear, by the billions, pretty fast.

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As I wrote yesterday, this will have to change.

Trump Says It Is ‘Dangerous’ For Twitter, Facebook To Ban Accounts (R.)

U.S. President Donald Trump said on Monday that it is “very dangerous” for social media companies like Twitter and Facebook to silence voices on their services. Trump’s comments in an interview with Reuters come as the social media industry faces mounting scrutiny from Congress to police foreign propaganda. Trump has made his Twitter account – with more than 53 million followers – an integral and controversial part of his presidency, using it to promote his agenda, announce policy and attack critics. Trump previously criticized the social media industry on Aug. 18, claiming without evidence in a series of tweets that unnamed companies were “totally discriminating against Republican/Conservative voices.”

In the same post, Trump said “too many voices are being destroyed, some good & some bad.” Those tweets followed actions taken by Apple, Alphabet, YouTube and Facebook to remove some content posted by Infowars, a website run by conspiracy theorist Alex Jones. Jones’ own Twitter account was temporarily suspended on Aug. 15. “I won’t mention names but when they take certain people off of Twitter or Facebook and they’re making that decision, that is really a dangerous thing because that could be you tomorrow,” said Trump.

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Also mentioned yesterday. Chances of a sitdown in the next 10 days don’t look good.

Trump Worries That Mueller Interview Could Be A ‘Perjury Trap’ (R.)

U.S. President Donald Trump said on Monday he was worried that any statements under oath he provides to Special Counsel Robert Mueller could be used to bring perjury charges against him as part of the probe into Russia’s electoral interference. In an interview with Reuters, Trump echoed the concerns of his top lawyer in the probe, Rudy Giuliani, who has warned that any sit-down with Mueller could be a “perjury trap.” The president expressed fears that investigators could compare his statements with that of others who have testified in the probe, such as former FBI Director James Comey, and that any discrepancies could be used against him.

“So if I say something and he (Comey) says something, and it’s my word against his, and he’s best friends with Mueller, so Mueller might say: ‘Well, I believe Comey,’ and even if I’m telling the truth, that makes me a liar. That’s no good.” Despite his concerns, Trump did not comment on whether he would ultimately agree to an interview with Mueller, who is, among other things, investigating whether Trump’s campaign team colluded with Russians during the 2016 election and whether Trump has obstructed justice in the probe. Trump also declined to say whether he might strip Mueller of his security clearance, as he did last week to former CIA Director John Brennan, who had repeatedly criticized Trump’s handling of foreign policy and national security issues.

“I haven’t given it a lot of thought,” he said. [..] Trump asserted that he retained the power to intervene in the probe, but that he had chosen not to do so for the moment. His administration, Trump said, was “a smooth-running machine, except in that world. And I’ve decided to stay out. Now I don’t have to stay out. “I can go in, and I could do whatever — I could run it if I want. But I decided to stay out,” he said. “I’m totally allowed to be involved if I wanted to be. So far, I haven’t chosen to be involved. I’ll stay out.”

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Whatever the predictable comments on this, what he really does is confirm the Fed’s independence.

Trump Demands Fed Help On Economy, Complains About Interest Rate Rises (R.)

U.S. President Donald Trump said on Monday he was “not thrilled” with the Federal Reserve under his own appointee, Chairman Jerome Powell, for raising interest rates and said the U.S. central bank should do more to help him to boost the economy. In the middle of international trade disputes, Trump in an interview with Reuters also accused China and Europe of manipulating their respective currencies. American presidents have rarely criticized the Fed in recent decades because its independence has been seen as important for economic stability.

Trump has departed from this past practice and said he would not shy from future criticism should the Fed keep lifting rates. The president spooked investors in July when he criticized the U.S. central bank’s over tightening monetary policy. On Monday he said the Fed should be more accommodating on interest rates. “I’m not thrilled with his raising of interest rates, no. I’m not thrilled,” Trump said, referring to Powell.

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Nobody Hunt goes to Washington with veiled criticism of Trump. Good luck with that.

UK’s Hunt To Call On Trump To Impose Fresh Sanctions On Russia (G.)

The British foreign secretary, Jeremy Hunt, is to urge Donald Trump to face down Moscow’s threat to western values by imposing wider economic sanctions against Russia and agreeing new rules to protect the legitimacy of democratic elections. In a speech in Washington on Tuesday during his first visit since taking over from Boris Johnson as the UK’s most senior diplomat, Hunt will specifically call for tighter regulation of online political advertising and new measures to prevent cyber attacks on electoral machinery. Hunt will also throw out a challenge to Trump’s protectionist policies by warning a weakening of free trade will only damage western economies, and ultimately western political power.

He will say the emergence of an international order based on the application of law rather than might had led to an exponential growth in trade, leading to extraordinary advances in economic and social prosperity across the globe. He will also call for Nato to set clearer red lines about Russia’s use of chemical weapons and incursions into foreign territory such as the annexation of Crimea in 2014. Without directly challenging the legitimacy of Trump’s election as president in 2016, he will point to the drawbacks in many recent democratic outcomes, saying: “The heart of any democracy is freedom of expression, which allows citizens to access independent information to help decide who to vote for. But the ubiquity of fake news, social media targeting and foreign attempts to manipulate elections have undermined confidence that this can actually happen.”

Any tarnishing of Trump’s electoral mandate is highly perilous territory for a foreign politician, and Hunt will temper his criticism by saying western leaders should not deceive themselves that populism is merely a byproduct of social media spreading fake news.

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Rebuilding Syria can solve a large part of Europe’s refugee problem, and US and UN are holding it back?

‘Secret Directive’ Bans UN Agencies From Helping Rebuild Syria – Lavrov (RT)

Washington’s “absolutely deconstructive” stance is hampering the rebuilding of Syria and constricts the UN in aiding the country until a so called ‘political transition’ takes place, Sergey Lavrov, Russia’s Foreign Minister, said.
“We addressed UNESCO on how they plan to implement the longtime talks, the longtime understanding on attracting the potential of this organization to rebuilding Palmyra,” an ancient city, regarded by the agency as a World Heritage Site, Lavrov said. “From the explanations of why UNESCO has still been unable to get involved in this process actively, we took that there was some kind of a directive from the United Nations headquarters in New York.”

He said that the UN Secretariat, which is the organizations’ executive arms, has “actually issued and distributed a secret directive throughout the UN system in October last year that prohibited the agencies included in this system from participating in any kind of projects aimed at restoring the Syrian economy.” Only humanitarian aid and nothing more” was allowed, the minister told the journalists after talks with Lebanese counterpart, Gebran Bassil, in Moscow. “A term was put forward that restoration of Syria would only be on the agenda after a certain progress is made in the so-called political transition” in the country, he added. The Russian Foreign Ministry also said that due to the “absolutely deconstructive” stance of the US one also shouldn’t expect any positive decisions on rebuilding Syria and return of refugees to the country from the UN Security Council.

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“People can face having their essential services cut off, be kicked out of their home due to rent arrears or even face prison if they get behind on their council tax..”

A country moving backwards.

UK Household Debt Balloons To £19bn As Bailiff Problems Multiply (Ind.)

UK households have fallen behind on essential bills such as council tax and electricity by as much as £18.9bn, according to Citizens Advice, which says it helps someone with bailiff-related problems every three minutes. The total outstanding debt includes almost £7.5bn in tax credit overpayments, £2.84bn owed in council tax and £2.2bn owed to water companies. Household debt has now overtaken consumer credit as the main money problem people contact Citizens Advice about, and the charity said that falling behind on household bills “has more severe consequences than missing consumer credit repayments”, such as overdrafts and personal loans.

“People can face having their essential services cut off, be kicked out of their home due to rent arrears or even face prison if they get behind on their council tax,” Citizens Advice warned. The charity said it had seen a 24 per cent increase in bailiff problems since the government introduced reforms in 2014 that were meant to protect people from unfair bailiff practices. Under the reforms, bailiffs are no longer allowed to make late-night visits to collect debts, and are prevented from using force against people who owe money, amongst other rules.

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Since there is no progress on many essential Brexit elements, this is not some doom fantasy.

NHS Leak Warns Of Brexit Drug Shortages And Disease Risk (G.)

Hospitals face running out of drugs in a chaotic no-deal Brexit, the group that represents NHS hospital and ambulance service has privately warned. Poor co-ordination by ministers and health service bosses means there has been a failure to prepare for the UK to be left without a Brexit deal, a leaked letter from NHS Providers said. “Public health and disease control co-ordination could suffer,” said NHS Providers chief executive Chris Hopson, setting out how a hard Brexit or no deal could negatively effect “the entire supply chain of pharmaceuticals” and “jeopardise” the EU citizens making up the “workforce on which the NHS relies”. Hopson’s letter, sent to NHS England chief executive Simon Stevens and NHS Improvement chief Ian Dalton on Friday, was leaked to the Times.

Hopson said the possibility of a no-deal or hard Brexit “with minimal regulatory alignment appears to be growing … For as long as that risk remains it is important that detailed operation planning is undertaken across the NHS. “Yet trusts tell us that their work in this area is being hampered by the lack of visible and appropriate communication. “Our members have begun planning … but they have hit a problem, in that some activities are clearly best done at a national level and, in the view of trusts, are best co-ordinated by NHS England and NHS Improvement. “However there has been no formal communication to trusts from either of your organisations on this issue.”

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Always risky to cut your immediate colleagues, but makes a ton of sense.

Jacinda Ardern Freezes New Zealand MPs’ Pay To Tackle Rich-Poor Divide (G.)

Jacinda Ardern has frozen the salaries of New Zealand’s MPs, saying the pay rises were out of step with the wider workforce and were adding to the rich-poor divide. The radical move has cross-party support from Ardern’s coalition partners, as well as the opposition National party. MPs’ salaries and allowances would be frozen till July 2019, Ardern said, while “a fairer formula for future pay increases” is developed for those in politics, who earn between NZ$163,000 ($108,000) to more than NZ$450,000 ($300,000). Ardern said the freeze was “the right thing to do” and was not about cost-cutting, but making New Zealand a more equitable nation.

The PM was prompted to take action after the Remuneration Authority recommended MPs receive a 3% pay rise, in a year that is seeing widespread strike action by teachers, nurses and other workers across New Zealand. Ardern earns more than NZ$450,000 a year, making her the fifth-highest paid leader in the OECD, and better paid than Canada’s Justin Trudeau and the UK’s Theresa May. According to a survey by Stuff, 62% of New Zealanders think the country’s prime ministers are paid too much. Australian prime minister Malcolm Turnbull earns the largest salary of any leader in the OECD. “It’s about whether or not it’s right that we receive a 3% pay increase that continues to extend that gap between those on the highest incomes and those on lower and more modest incomes,” Ardern told Radio NZ today.

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The EU MUST come up with a plan.

Salvini Refuses To Let In Refugees After Coastguard Ship Docks (G.)

An Italian coastguard ship with 177 people on board has docked in the Sicilian seaport of Catania, but Italy’s far-right interior minister Matteo Salvini has not given authorisation for the refugees and migrants to disembark. The passengers, who have been stuck on the coastguard boat Ubaldo Diciotti for five days will not be allowed on land until “Europe steps in to help’’, Salvini said. The Diciotti picked up 190 refugees and migrants last Wednesday from an overcrowded boat about 17 sea miles from the island of Lampedusa. Thirteen of them were evacuated for emergency medical treatment. Since then, Rome has insisted that Malta should take the group because their boat first passed through its search-and-rescue area.

But Malta has refused, claiming that the migrants wanted to reach Italy. Questioned by the Italian authorities, the 13 evacuated migrants claimed that the Maltese had escorted them outside its search-and-rescue zone. On Monday afternoon, after three days of negotiations, Italy’s transport minister Danilo Toninelli announced finally on Twitter that “The Diciotti ship will dock in Catania.” But shortly afterwards, sources close to Salvini said he had not given the authorisation to disembark, suggesting the boat was granted permission to dock but the migrants will have to remain on board. Salvini said on Italian TV: “The ship may land in Italy, as long as the 177 migrants are distributed, in a spirit of solidarity by the EU.”

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What does it mean? More debt.

What Being Back in the Markets Actually Means for Greece (TPP)

The devil, as they say in English, lies in the details. Being ‘back in the markets’, ‘turning a page,’ even declaring ‘the end of the Greek Crisis’ have all become commonplace expressions over the past few weeks. But what does this substantively mean? It means that an economy that has shrunk by around 25% saw, due to that shrinkage, its debts go up by about the same amount, despite near 100 billion Euro in debt being wiped off in 2012. Current outstanding Greek debt stands at 343 billion Euro. It now needs to pay a large chunk of that back to get back to where it was in 2008, with 109% debt to GDP.

The years of the Greek crisis (2010-2018) were the years that former finance minister Yanis Varoufakis famously described as the years of ‘extend and pretend.’ The EU would extend more credit (debt) to Greece that Greece would pretend to pay back. While most of the bailout cash prior to 2013 went through Greece back to Northern Banks, after 2013 most of the Debt was held by an opaqueprivate financial institution housed in Luxemburg called the European Stability Mechanism (ESM). It’s the debts held by the ESM, and the loans disbursed by the ESM, that have been the focus of the new game of extend and pretend that is called variously ‘debt-relief’ and Greece ‘being back in the markets.’

Consider the following. The ESM lent 86 Billion Euro to Greece between August 2015 and July 2018. The final tranche of these loans will not be paid back until 2060, with payments beginning in 2034. This ten year deferral of payments along with an interest rate reduction to an average of 1.62% across issues is the much heralded debt relief agreement of June 21st 2018. All things considered, and given real ‘go to the market’ alternatives if you have Greece’s bond rating, this is not a bad deal – on paper. These measures, plus the final bailout cash being added to cash reserves, means that Greece will actually not have to return to the markets for funding for almost two years. Given this, the ‘return to the markets’ comes with some pretty large airbags, all of which makes buying Greek debt more attractive, hence recent bond rating upgrades. So, we are extending, but what are we still pretending?

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“..Pabst Blue Ribbon by the case!”

The Winners Will Lose and the Losers Will Win (Kunstler)

What a revoltin’ development, as Chester A. Riley used to say on “The Life of Riley” TV show back in 1955, when America was great (at least that’s the theory). Riley was an original deplorable before the concept even emerged from the murk of early pop culture. He worked in an aircraft factory somewhere in southern California, which only a few decades prior was the mecca of an earlier generations of losers: the Oakies and other Dust Bowl refugees who went west to pick fruit or get into the movies. Chester A. Riley supported a family on that job as a wing-riveter. All the male characters in the series had been through the Second World War, but were so far removed from the horror that the audience never heard about it.

That was the point: to forget all that gore and get down with the new crazes for backyard barbeque, seeing the USA in your Chevrolet, enjoying that healthful pack of Lucky Strikes in the valley of the Jolly Green Giant… double your pleasure, double your fun… and away go troubles down the drain…. As Tom Wolfe pointed out eons ago, the most overlooked feature of post-war American life was the way that the old US peasantry found themselves living higher on the hog than Louis the XVI and his court at Versailles. Hot and cold running water, all the deliciously engineered Betty Crocker cake you could eat, painless dentistry, and Yankees away games on Channel 11, with Pabst Blue Ribbon by the case! By 1960 or so, along came color TV and air-conditioning, and in places like Atlanta, St. Louis, and Little Rock, you barely had to go outside anymore, thank God! No more heat stroke, hookworm, or chiggers.

It was a helluva lot better than earlier peasant classes had it, for sure, but let’s face it: it was kind of a low-grade nirvana. And a couple of generations beyond “The Life of Riley” the whole thing has fallen apart. There are few hands-on jobs that allow a man to support a family. And what would we even mean by that? Stick the women back in kitchen and the laundry room? What a waste of human capital (even for socialists who oppose capital). The odd thing is that there is increasingly little for this class of people to do besides stand near the door of the WalMart, and if the vaunted tech entrepreneurs of this land have their way with robotics, you can be sure there would be less than nothing for them to do… except crawl off and die quietly, without leaving an odoriferous mess.

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Long read. Steve Keen comments: This will doom the USA to stagnation: a generation with too much debt and no prospect of using credit like the previous generation.

The Inescapable Weight Of My $100,000 Student Debt (G.)

On Halloween in 2008, about six weeks after Lehman Brothers collapsed, my mother called me from Michigan to tell me that my father had lost his job in the sales department of Visteon, an auto parts supplier for Ford. Two months later, my mother lost her job working for the city of Troy, a suburb about half an hour from Detroit. From there our lives seemed to accelerate, the terrible events compounding fast enough to elude immediate understanding. By June, my parents, unable to find any work in the state where they spent their entire lives, moved to New York, where my sister and I were both in school. A month later, the mortgage on my childhood home went into default.

After several months of unemployment, my mother got a job in New York City, fundraising for a children’s choir. In the summer of 2010, I completed my studies at New York University, where I received a BA and an MA in English literature, with more than $100,000 of debt, for which my father was a guarantor. My father was still unemployed and my mother had been diagnosed with an aggressive form of breast cancer. She continued working, though her employer was clearly perturbed that she would have to take off every Friday for chemotherapy. To compensate for the lost time, on Mondays she rode early buses into the city from the Bronx, where, after months of harrowing uncertainty, my parents had settled. She wanted to be in the office first thing.

In January 2011, Chase Bank took full possession of the house in Michigan. Our last ties were severed by an email my father received from the realtor, who had tried and failed to sell the property, telling him he could now cancel the utilities. In May, I got a freelance contract with a newspaper that within a year would hire me full-time – paying me, after taxes, roughly $900 every two weeks. In September 2011, my parents were approved for bankruptcy, and in October, due to a paperwork error, their car was repossessed in the middle of the night by creditors. Meanwhile, the payments for my debt – which had been borrowed from a variety of federal and private lenders, most prominently Citibank – totalled about $1,100 a month.

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Aug 052018
 
 August 5, 2018  Posted by at 8:57 am Finance Tagged with: , , , , , , , , , , ,  


Claude Monet Hollowed Cliff near Étretat 1883

 

The Real Threat To The Fed’s Independence Is Wall Street, Not Trump (WM)
The Trillion-Dollar Question: Can The Tech Giants Keep Growing? (G.)
Light It Up (Kunstler)
IMF Option Looms Larger For Turkey Amid Row With US (AL M.)
Beware the Slippery Slope of Facebook Censorship (Matt Taibbi)
Why Theresa May Must Stop The Brexit Clock (O.)
UK Trade Minister Fox Says EU Is Pushing Britain To No-Deal Brexit (R.)
Separating Children From Their Parents Puts UK Government To Shame, Too (O.)
Britain’s Economics Students Are Dangerously Poorly Educated (G.)
How Reality Is Being Redefined (Slog)
Greece’s Unemployment Highest in Developed World (GR)
Greece: An Economy That Has Shrunk So Much It Looks War-Torn (WaPo)

 

 

But we’ve given them all the power…

The Real Threat To The Fed’s Independence Is Wall Street, Not Trump (WM)

[..] the real threat to the Fed’s independence isn’t coming from Trump—it’s coming from Wall Street. The Fed’s structural flaws have led to regulatory capture, which compromises its ability to set monetary and regulatory policy in a manner that isn’t tilted to favor those at the very top of the economic ladder. Trump may have broken a norm by commenting on monetary policy, but the Fed’s status quo is unaccountable, opaque decision-making shaped by deep conflicts of interest with the very financial institutions the Fed is ostensibly supposed to supervise. Consider, for instance, the abrupt resignation in March of David Cote from the New York Fed’s board of directors—a move that came as a shock to many Fed watchers.

Cote was one of just a couple people responsible for choosing the next president of the New York Fed, the most powerful economic policymaking position in the country that Trump doesn’t control. Yet before the search for New York Fed President Bill Dudley’s successor had formally concluded, Cote left the board to pursue “new business opportunities that could affect his eligibility to serve”—later revealed to be helping Goldman Sachs undertake an ambitious corporate acquisition strategy. The New York Fed claims that Cote and his fellow board members had already decided on former San Francisco Fed President John Williams to succeed Dudley by the time that Cote announced his resignation, but that means that Cote was simultaneously negotiating a new gig at Goldman Sachs while selecting one of Goldman’s top regulators.

The entire ordeal served as an unsettling reminder of the cozy relationship between the Federal Reserve and the biggest behemoth on Wall Street. Prior to being selected as New York Fed president in 2009, Dudley was Goldman Sachs’s chief economist. In 2008, Goldman Sachs Director Stephen Friedman chaired the New York Fed’s board of the directors at the same moment that it was reviewing Goldman’s application to become a bank holding company. In 2014, leaked tapes exposed New York Fed regulators pressuring one of their examiners to back off of a finding that would have imperiled Goldman Sachs’s ability to engage in a deal with Banco Santander. And in 2015, the Fed chose three consecutive men with strong ties to Goldman Sachs to be new Federal Reserve Bank presidents.

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Only if we let them.

The Trillion-Dollar Question: Can The Tech Giants Keep Growing? (G.)

It has been a tumultuous couple of weeks for America’s high-flying technology stocks, even by their own unique standards. Their shares have been soaring since the start of the year, despite being buffeted by trade war fears as President Trump talked of limiting Chinese investments in the US and restricting American technology imports to China. But now there are signs that cracks may be starting to appear in some of the biggest firms in the sector. Facebook suffered the biggest ever one-day drop in a company’s market value – losing more than £90bn – after its growth slowed in the wake of the Cambridge Analytica scandal. Twitter lost 20%, or $5bn, as it reported a surprise fall in active monthly users, while streaming service Netflix missed its targets for subscriber numbers.

On the other hand, electric car specialist Tesla managed to head in the right direction despite making a $717m second-quarter loss, as its controversial chief executive, Elon Musk, regained investor confidence after apologising for previous outbursts. That was in marked contrast to a conference call for the company’s previous set of figures, when he accused a Wall Street analyst of “boring bonehead questions” and ignored queries from investors. But the pick of the bunch remains Apple, which beat Amazon and Google to reach the landmark $1 trillion valuation on Thursday.

Despite the recent rollercoaster ride, the five key tech stocks, known as the “Faangs” – Facebook, Amazon, Apple, Netflix, and Alphabet-owned Google – have reached breathtaking heights. The total value of the five companies amounts to a staggering 19% of total US GDP. But their surge in value has prompted fears of a re-run of the dotcom boom of the late 1990s, when technology businesses dominated the stock market before coming crashing to earth. Russ Mould at investment group AJ Bell says: “That [19%] compares to the 15.5% of US GDP reached by the five biggest companies by value at the US stock market’s peak in the fourth quarter of 1999, just before the technology, media and telecoms bubble burst and that particular mania came to grief.”

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“That’s my theory about what Russia is up to. If you have a better one, let’s hear it?”

Light It Up (Kunstler)

The Guardians of the Galaxy at National Public Radio were beside themselves Wednesday night reporting that “the lights are blinking red for a 2018 election attack by Russia.” Well, isn’t that an interesting set-up? In effect, NPR is preparing its listeners in advance to reject and dispute the coming midterm election if they’re not happy with the results. Thus continues America’s institutional self-sabotage, with the help of a news media that’s become the errand boy of the Deep State.

What do I mean by the Deep State? The vested permanent bureaucracy of Washington DC, and especially its vastly overgrown and redundant “Intel Community,” which has achieved critical mass to take on a life of its own within the larger government, makes up its own rules of conduct, not necessarily within the rule of law, and devotes too much of its budget and influence defending its own prerogatives rather than the interests of the nation.

Personally, I doubt that President Putin of Russia is dumb enough to allow, let alone direct, his intel services to lift a finger “meddling” in the coming US midterm election, with this American intel behemoth vacuuming every digital electron on earth into the NSA’s bottomless maw of intercepted secrets. Mr. Putin must have also observed by now that the US Intel Community is capable of generating mass public hallucinations, to the beat of war-drums, and determined not to give it anything to work with. That’s my theory about what Russia is up to. If you have a better one, let’s hear it?

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Turkey double-crossed the US in a prisoner swap deal. Bad idea of course. Erdogan wants Gulen, but this is not the way.

IMF Option Looms Larger For Turkey Amid Row With US (AL M.)

While the climate of uncertainty is discouraging investments, inflation is eroding real incomes and curbing domestic consumption. As a result, the shrinking demand is bearing on economic growth, which has relied largely on the domestic market. The Turkish economy, which grew 7.4% in 2017, is expected to slow in the third quarter before beginning to contract.

The growing uncertainties are discouraging also the inflow of hot money from abroad, which Turkey desperately needs. Moreover, existing foreign investors have been fleeing the Turkish stock market, albeit slowly — a trend that contributes to sustaining the high prices of foreign exchange, especially the dollar. Accordingly, Turkey’s risk premium — reflected in credit default swaps (CDS) — is on the rise. Turkey’s CDS, which had stood at 166 basis points Feb. 1 and 199 basis points May 1, hit a record high of 334 basis points on the evening of Aug. 1 — up from 321 points in the morning. The increasing risk premium means that Turkey will now face higher interest rates when it tries to borrow from foreign creditors.

The country’s external financing needs for the next 12 months amount to $230 billion, including $180 billion to roll over external debts and $50 billion to cover its gaping current account deficit. Hence, the question of how the required funds will be secured and at what cost is crucial. The tensions with Washington came amid this already serious crunch, exacerbating the woes of Erdogan’s regime. The row over Brunson had flared last week, as both President Donald Trump and Vice President Mike Pence threatened sanctions unless Ankara took “immediate action” to release the pastor, who is being held on what Washington sees as bogus charges of espionage and collaboration with terrorist groups.

The warnings had an immediate economic effect, pushing up Turkey’s risk premium, as pundits sought to predict the scope of the upcoming sanctions. Some suggested that Washington’s hardening stance would bear on the flow of foreign capital to Turkey and the support it might seek from the IMF, while others saw trouble looming over Halkbank, the Turkish public lender embroiled in a scheme to evade US sanctions against Iran. Ultimately, Washington announced sanctions on Interior Minister Suleyman Soylu and Justice Minister Abdulhamit Gul under the 2016 Magnitsky Act, which targets individuals and entities involved in human rights abuses. According to Bloomberg, this “could be just the start of what would look like a US assault on Turkey’s vulnerable economy,” including a potentially hefty fine on Halkbank.

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There’s Mark Warner again, the guy who with Comey screwed up the Assange deal with the DOJ.

Beware the Slippery Slope of Facebook Censorship (Matt Taibbi)

You may have seen a story this week detailing how Facebook shut down a series of accounts. As noted by Politico, Facebook claimed these accounts “sought to inflame social and political tensions in the United States, and said their activity was similar — and in some cases connected — to that of Russian accounts during the 2016 election.” Similar? What does “similar” mean? The death-pit for civil liberties is usually found in a combination of fringe/unpopular people or ideas and a national security emergency. This is where we are with this unsettling new confab of Facebook, Congress and the Trump administration.

Read this jarring quote from Sen. Mark Warner (D-VA) about the shutting down of the “inauthentic” accounts: “Today’s disclosure is further evidence that the Kremlin continues to exploit platforms like Facebook to sow division and spread disinformation… I also expect Facebook, along with other platform companies, will continue to identify Russian troll activity and to work with Congress…” This was in a story in which Facebook stated that it did not know the source of all the pages. They might be Russian, or they might just be Warner’s idea of “sowing division.” Are we comfortable with that range of possibilities?

[..] Facebook was “helped” in its efforts to wipe out these dangerous memes by the Atlantic Council, on whose board you’ll find confidence-inspiring names like Henry Kissinger, former CIA chief Michael Hayden, former acting CIA head Michael Morell and former Bush-era Homeland Security chief Michael Chertoff. (The latter is the guy who used to bring you the insane color-coded terror threat level system.) These people now have their hands on what is essentially a direct lever over nationwide news distribution. It’s hard to understate the potential mischief that lurks behind this union of Internet platforms and would-be government censors. As noted in Rolling Stone earlier this year, 70 percent of Americans get their news from just two sources, Facebook and Google. As that number rises, the power of just a few people to decide what information does and does not reach the public will amplify significantly.

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Makes sense. But too much of the whole thing doesn’t.

Why Theresa May Must Stop The Brexit Clock (O.)

May’s cabinet colleagues, fanning out across the continent like Patton’s Third Army to advance her Chequers compromise, do not appear to have fared any better. Especially embarrassing are the efforts of Jeremy Hunt, the new foreign secretary. He gravely warned puzzled Europeans last week that Britain was heading for “no-deal by accident” by pushing itself off a cliff. The UK would not “blink first”, he added. Perhaps Hunt thinks he is Clint Eastwood. It matters not. On Brexit, this government has its eyes tight shut. It is blind to the consequences – and the waiting chasm. Blinking does not come into it. What part of the EU’s unchanging position on the principles governing Britain’s future relationship with Europe does May’s government not understand?

For two years or more, Barnier, the chief negotiator, firmly backed by 27 governments, has been telling London there can be no compromise and no fudge that weakens the integrity of the single market, pan-European customs and legal regulations and Europe’s borders. Yet May’s Chequers plan, seeking exceptional (and unworkable) arrangements, blithely ignores all that. In case the European public did not appreciate what was at stake, or was taken in by chauvinistic Tory claims of EU vindictiveness and dogmatism, Barnier published an op-ed in 20 European newspapers last week. Amid Brexit’s baffling complexities, his concision and clarity were refreshing. He explained the EU’s justified fears about the impact of Brexit on Europe and why it cannot reasonably be expected to bow to May’s demands for special treatment:

“The UK knows well the benefits of the single market. It has contributed to shaping our rules over the last 45 years. And yet some UK proposals would undermine our single market, which is one of the EU’s biggest achievements. The UK wants to keep free movement of goods between us, but not of people and services. And it proposes to apply EU customs rules without being part of the EU’s legal order. The UK wants to take back sovereignty and control of its own laws, which we respect, but it cannot ask the EU to lose control of its borders and laws,” Barnier wrote.

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Oh, yeah, they’re going to blame it on the EU.

UK Trade Minister Fox Says EU Is Pushing Britain To No-Deal Brexit (R.)

British trade minister Liam Fox said “intransigence” from the European Union was pushing Britain toward a no-deal Brexit, in an interview published on Saturday by the Sunday Times. With less than eight months until Britain quits the EU, the government has yet to agree a divorce deal with Brussels and has stepped up planning for the possibility of leaving the bloc without any formal agreement. Fox, a prominent Brexit supporter in Prime Minister Theresa May’s cabinet, put the odds of Britain leaving the European Union without agreeing a deal over their future relationship at 60-40. “I think the intransigence of the commission is pushing us toward no deal,” Fox told the Sunday Times after a trade mission in Japan.

“We have set out the basis in which a deal can happen but if the EU decides that the theological obsession of the unelected is to take priority over the economic wellbeing of the people of Europe then it’s a bureaucrats’ Brexit — not a people’s Brexit — (and) then there is only going to be one outcome.” It was up to the EU whether it wanted to put “ideological purity” ahead of the real economy, Fox said. If Britain fails to agree the terms of its divorce with the EU and leaves without even a transition agreement to smooth its exit, it would revert to trading under World Trade Organization rules in March 2019.

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All sociopaths do it. They are defined by their lack of empathy.

Separating Children From Their Parents Puts UK Government To Shame, Too (O.)

Donald Trump’s policy of forcibly separating immigrant parents and children at the US border has been greeted with shock and abhorrence. Around the world, people have listened to audio of young children sobbing for their parents while federal agents crack jokes and heard the stories of children locked up in cages in the richest country in the world. Even the prime minister broke with her usual timidity about Trump’s transgressions to call his family separation policy “deeply disturbing”. What hypocrisy. Less noticed – although no less inhumane – is the British government’s policy of separating parents from their young children as part of immigration detention, all conducted on Theresa May’s watch, first as home secretary, then as prime minister.

Charities such as Bail for Immigration Detainees (BID) have for years been raising the cases of children, many of whom are British citizens, taken into care because their parents have been detained, or even deported, without them. In recent months, a long list of cruelties meted out in the name of the government’s “hostile environment” policy has come to the public’s attention: people who’ve lived in Britain legally for decades, paying their taxes, suddenly denied life-saving NHS care; young people who’ve grown up in Britain facing many thousands of pounds in fees and a multi-year slog to get permanent residency; children raised in care facing the risk of deportation as an adult to a country they don’t know. Any sense of basic justice or human compassion seems to have eluded the Home Office.

But separating tiny children from their parents is cruelty of a whole different order. Today, we report on the case of Kishi, a young mother who dropped her two-year-old off at nursery in order to attend an appointment at an immigration reporting centre. There, she was restrained by immigration security officials and taken to an immigration removals centre. No arrangements were made for her toddler, who was put into emergency foster care when no one came to pick her up, and Kishi was not told where her daughter was for two days. It was another month before she saw her. Kishi and her child are not alone. BID says more than 300 children were removed from their parents in the last 12 months, an increase of 16% on the previous year. Many of those will have been taken into care as a result. The Home Office does not keep records on this; perhaps because it contravenes its own guidance, which says children must not be separated from their parents for immigration purposes if it means they will be taken into care.

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Sometimes I think in Britain it’s not only the economists.

Britain’s Economics Students Are Dangerously Poorly Educated (G.)

This month, the pressure group Rethinking Economics said Britain’s universities were failing to equip economics students with the skills that businesses and the government say they need. Following extensive interviews with employers, including organisations such as the Bank of England, it found that universities were producing “a cohort of economic practitioners who struggle to provide innovative ideas to overcome economic challenges or use economic tools on real-world problems”. Moreover, the group said, “when political decisions are backed by economics reasoning, as they so often are, economists are unable to communicate ideas to the public, resulting in a large democratic deficit.”

You could easily level that criticism at the economists forecasting the impact of AI. What are people supposed to think when those who study the field come up with such wildly varying predictions? More importantly, what will politicians think they should do? Nothing, probably, given the confusion. The Rethinking group is concerned that university departments only train, rather than educate, huge numbers of graduates for econometrics jobs across the banking, insurance and consulting sectors. In our increasingly student-led system, these young people don’t want to mess around with history or modules on inequality. They are on a mission to make money for themselves in the private sector.

If they were diverted into discussions of economic history, they might find out we are about to repeat the mistakes of the past and trigger another financial crisis. Even more inhibiting, their course might show that higher inequality dampens workers’ incentives to increase productivity, and might prompt them to ask why young economists in the City are paid colossal amounts of money to analyse bond yields or forecast oil prices. Pay them less, share the money around, and productivity might improve. Failing that, let a robot do their job.

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John put something like dictatorship in the title. Bit much.

How Reality Is Being Redefined (Slog)

The last burgeoning growth sector on the Planet is the pursuit of redefinition. The idea is first to confuse, then create a climate of acceptance, and finally do away with every form of liberty that stands in the way of power. Both Capital and Labour are actively following the same road. It will be the end of the road for citizen freedom unless they’re both stopped. John Williams at Shadowstats.com reckons that the real unemployment rate in the US is 21.4%. Unimpressed by the US State’s insane assumption that all those no longer able to claim unemployment welfare “have found a job”, Mr Williams provides further fuel for my longstanding thesis that no real recovery can occur – if more and more mass-market consumers work fewer and fewer hours for less and less money or have no job at all – because their personal disposable income is disappearing out of sight. The term ‘in employment’ has been redefined.

When he arrived at the UK Treasury as Chancellor, George Osborne immediately gave notice that he’d be switching from the higher RPI measure of inflation (then at 5.2%) to the lower CPI at 4.5%. That doesn’t sound like much, but one has to remember two things: first, that is a 14% difference in levels that makes inflation look much lower; and second, over time the different impression given is huge: from 1996 to 2011, under the RPI system prices rose 53.6%….but using the CPI method, it only came to 35.6%. Significantly, the CPI system excludes financial services costs and government charges to the consumer. Just fancy that. So the term ‘inflation’ has been redefined.

Within two years of taking office, the Conservative-led coalition’s leader David Cameron started claiming that “the Government’s long-term economic plan is working to create more jobs”. Government Party Political Broadcasts showed the statistics, and yes, it certainly looked that way. But “a job” to most people over the last half century meant 38-40 hours a week with a month’s notice. When analysed, these new jobs were averaging 20 hours a week, often at unsocial hours and frequently on no contracts at all. They typically demand, for example, that the “employee” be ready to come into the workplace without notice. When using the weasel term ‘job’, Cameron was comparing meat and two veg with bread and dripping. So the term ‘job’ has been redefined.

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One thing: people earning a low income ‘rate’ is much higher than 10.6%, and up by much more than 2% in 10 years. Lost in translation?

Greece’s Unemployment Highest in Developed World (GR)

Greece tops all countries in the developed world in unemployment according to the Organization for Economic Cooperation and Development’s (OECD) Employment Outlook 2018. Greece has suffered a dramatic spike in unemployment, with the 2017 total climbing to 21.7% of the working population, more than double the 2006 figure.

Large increases in unemployment and an underutilized workforce were accompanied by falling output, very high debt, a serious GDP deficit and deflation, the report says. Along with its impact on employment levels, the financial crisis caused a reduction in wage growth in a lot of countries, leading to a drop in living standards for many.

The proportion of working-age people earning the “low-income” rate jumped to 10.6%, up from 9.56% a decade earlier. Although Korea, Mexico, and Chile have seen a decrease in the number of low-income households, most of the countries hit hardest by the euro crisis, such as Greece, Italy, Spain and Slovenia, have suffered a 2% rise.

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Thank you Brussels and Berlin.

Greece: An Economy That Has Shrunk So Much It Looks War-Torn (WaPo)

The point is that this kind of economic collapse is usually the symptom of a broader state collapse. Which is why it almost never happens in rich countries. That’s clear enough if you look at the late Angus Maddison’s historical GDP per capita numbers. Going back to 1900, there have been only three general times when European economies have shrunk over a 10-year period as much as Greece’s has since 2008: after World War I, after World War II and after the fall of communism. Most of the exceptions to this involve other wars – in particular, the Balkan wars of the 1910s, the Spanish Civil War, the Greek Civil War and the Yugoslav wars of the 1990s — but there is one that largely took place during peacetime. That was Weimar Germany’s hyperinflation.

It’s worth pointing out what isn’t here: the Great Depression. That wasn’t quite as bad in Europe as it was in the United States — at its nadir in 1933, the U.S. 10-year decline was actually comparable to Greece’s today — partly due to the fact that most European countries were quicker to leave the gold standard when things did start to get more dire. That allowed them to inject enough monetary stimulus into their economies to jump-start almost immediate recoveries. The problem, of course, is that it’s a lot harder for Greece to do the equivalent of that right now. The gold standard and the euro are similar in that they are both fixed-exchange rate systems that can get countries into trouble if they are hit by a big enough shock that their economy “needs” a cheaper currency than it has under the system.

But they’re different in that it’s a lot simpler to say your currency won’t be worth as much gold as it used to than to replace all of your currency with a new one. So instead of stimulus, Greece has gotten austerity — and a lot of it. Under the terms of its just-about-to-be-completed bailout agreement, Greece is actually supposed to keep running primary budget surpluses of at least 2.2 percent of GDP until 2060. That’s right: four more decades of austerity. It’s no wonder, then, that Greece’s economy might not get back to where it was in 2008 until 2030. This is what Europe calls a success: an economy that has shrunk so much it looks war-torn.

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Aug 042018
 
 August 4, 2018  Posted by at 8:38 am Finance Tagged with: , , , , , , , , , , , ,  


John French Sloan Spring rain 1912

 

The Everything Bubble Has Found Its Pin. The Pin’s Name is Jerome Powell. (PC)
The Fed Accelerates its QE Unwind (WS)
US Gains Only 157,000 Jobs In July As Unemployment Falls To 3.9% (MW)
US Government Has No Idea How Many Gig Workers There Are (MW)
Mark Carney Says Risk Of A No-Deal Brexit Is ‘Uncomfortably High’ (G.)
The Conservatives Are In Crisis Over Austerity, Not Just Brexit (NS)
US Secret Service And The Guardian Face Off Over ‘Russian Spy’ (RT)
Russia Seeks US Help To Rebuild Syria (R.)
Judge Calls US Efforts To Reunite Deported Parents ‘Unacceptable’ (R.)
US Court Orders Trump Administration To Fully Reinstate DACA Program (R.)
Trump Administration Lifts GMO Crop Ban For US Wildlife Refuges (R.)

 

 

Error? Powell obviously wants a strong dollar. And yes, that has consequences.

The Everything Bubble Has Found Its Pin. The Pin’s Name is Jerome Powell. (PC)

The Powell Fed is playing with matches next to over $60 trillion in $USD-denominated debt. The $USD is the reserve currency of the world. As such it is the currency of choice if you are going to issue debt. As a result of this, entities around the globe, whether they be corporations or countries, will often choose to issue debt denominated in the $USD, even if the $USD is not a currency used in their economy. When you borrow money in the $USD… you are effectively SHORTING the $USD. You are betting/hopingthat the $USD will weaken, making your debt servicing/ future debt repayment, cheaper on a relative basis. In this environment, when the $USD strengthens, it becomes MORE DIFFICULT to service your debt.

This is true even for the US itself. The $20 trillion we owe in public debt is effectively one gigantic $20 trillion $USD short. Enter Jerome Powell. For whatever reason, the Powell Fed has decided to embark on the most aggressively hawkish monetary policy in Fed history. And the currency markets have taken note. The $USD is breaking out of downtrends in Every. Single. Currency. Pair. The day Jerome Powell became Fed chair is annotated buy the vertical blue line. Assuming Jerome Powell DOESN’T want to blow up the $60 trillion $USD-denominated debt bubble… the above chart SCREAMS “policy error.”

I’m not being dramatic here… the last time the $USD rallied like this against every major currency was in 2014. At that time the entire commodity complex imploded by over 60% and the Emerging Market came within a hair’s breadth of systemic collapse. Again, I’m not being dramatic here… within six months of the $USD’s rally in 2014, Brazil’s stock market was down nearly 70%. China’s was down nearly 50%. Emerging Markets across the board dropped over 30%. Oil fell from $105 to $30 and change. Etc. I don’t see any indication Powell is aware of this… which means… BUCKLE UP. THE EVERYTHING BUBBLE HAS FOUND ITS PIN. AND THE PIN’S NAME IS JEROME POWELL.

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And Powell is very clear on “balance sheet normalization” too.

The Fed Accelerates its QE Unwind (WS)

The Fed’s QE Unwind – “balance sheet normalization,” as it calls this – is accelerating toward cruising speed. The first 12 months of the QE unwind, which started in October 2017, are the ramp-up period – just like there was the “Taper” during the final 12 months of QE. The plan calls for shedding up to $420 billion in securities in 2018 and up to $600 billion a year in each of the following years until the balance sheet is sufficiently “normalized” – or until something big breaks. In July, the QE Unwind accelerated sharply. According to the plan, the Fed was supposed to shed up to $24 billion in Treasury Securities in July, up from $18 billion a month in the prior three months. And? The Fed released its weekly balance sheet Thursday afternoon. Over the four weeks ending August 1, the balance of Treasury securities fell by $23.5 billion to $2,337 billion, the lowest since April 16, 2014.

Since the beginning of the QE-Unwind, the Fed has shed $129 billion in Treasuries. The step-pattern in the chart is a result of how the Fed sheds Treasury securities. It doesn’t sell them outright but allows them to “roll off” when they mature. Treasuries only mature mid-month or at the end of the month. Hence the stair-steps. In mid-July, no Treasuries matured. But on July 31, $28.4 billion matured. The Fed replaced about $4 billion of them with new Treasury securities directly via its arrangement with the Treasury Department that cuts out Walls Street (its “primary dealers”) with which the Fed normally does business. Those $4 billion in securities, to use the jargon, were “rolled over.” But it did not replace about $24 billion of maturing Treasuries. They “rolled off.”

Total assets on the Fed’s balance sheet for the four weeks ending August 1 dropped by $34.1 billion. This brought the drop since October, when the QE unwind began, to $205 billion. At $4,256 billion, total assets are now at the lowest level since April 9, 2014, during the middle of the “taper.” It took the Fed about six years to pile on these securities, and now it’s going to take years to shed them:

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Trend is towards lower paid jobs.

US Gains Only 157,000 Jobs In July As Unemployment Falls To 3.9% (MW)

The U.S. posted another solid spurt in hiring in July, showing that companies are still able to find enough workers to meet the growing needs of a rapidly expanding U.S. economy. Some 157,000 new jobs were created last month despite widespread complaints among businesses about a shortage of skilled labor, the Labor Department said Friday. The increase in hiring fell below the 195,000 MarketWatch forecast, but job gains in May and June was stronger than previously reported. The smaller gain in employment was also a result of governments cutting jobs in education during the summer break and the closure of Toys R Us. Otherwise hiring may have topped 200,000.

Unemployment, meanwhile, slipped below 4% again, to 3.9%, as more people found work.The jobless rate is at a nearly two-decade low. Far-flung complaints about how hard it is to find good workers still aren’t inducing companies to jack up salaries and wages, however. Hourly pay rose 7 cents in July to $25.07, but the 12-month rate of wage gains was unchanged at 2.7%. And even those increases have been largely eaten up by rising inflation. Wages usually rise 3% to 4% a year when the labor market is as tight as it is now.

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Much more interesting than the jobs report. 75 million gig workers? And they’re all counted as ’employed’?

US Government Has No Idea How Many Gig Workers There Are (MW)

The BLS does not have an explicit definition for a gig worker, or a formal way of tracking them. It comes closest in a survey called the Contingent Worker Supplement, which studies “contingent workers” in temporary working arrangements that they don’t expect to last more than a year. But prior to last month, the BLS had not released the Contingent Worker Supplement since 2005 due in large part to a lack of funding. The most recent report found that 5.9 million people or 3.8% of all workers are contingent workers. “It’s not that the BLS doesn’t care about secondary work, they do,” said Demetra Nightingale at the Urban Institute, a think tank. But without adequate funding it is difficult for the BLS to study those workers, she said.

These workers come in many forms. They include side hustlers with regular jobs and freelancers who take on extra clients on their off-hours, according to Freelancing in America, a 2017 survey conducted in part by Freelancers Union. That survey estimated that 57.3 million Americans are freelancing, or 36% of the workforce. Other estimates say the gig economy is even larger than that. The Federal Reserve has a very broad definition of people working in the gig economy. The Fed says gig workers could be anyone from a babysitter to an Uber driver. According to that definition, there are as many as 75 million gig workers.

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My first thought when reading this: he’s trying to get himself fired. Brexit Britain doesn’t need some Canadian opinion.

Mark Carney Says Risk Of A No-Deal Brexit Is ‘Uncomfortably High’ (G.)

Mark Carney has warned that the possibility of a no-deal Brexit is “uncomfortably high” and will lead to higher prices, as Theresa May prepares to meet the French president, Emmanuel Macron, for talks. The Bank of England governor said both the UK and EU should “do all things to avoid” a no-deal scenario. He added that the banks had done the “stockpiling” and the country’s financial system was in a position to be able to withstand a shock that could result from the UK leaving the EU without an agreement. His remarks led to sterling falling sharply to just under $1.30. Carney told BBC Radio 4’s Today programme: “I think the possibility of a no-deal is uncomfortably high at this point.” Asked if no deal would be a disaster, he said: “It is highly undesirable. Parties should do all things to avoid it.”

Pushed on what no deal would mean, he said “disruption to trade as we know it”, before adding: “As a consequence of that, a disruption to the level of economic activity, higher prices for a period of time. “Our job at the Bank of England is to make sure those issues don’t happen in the financial system, so that people will have things to worry about in a no-deal Brexit, which is still a relatively unlikely possibility but it is a possibility, but what we don’t want to have is people worrying about their money in the bank, whether or not they can get a loan from the bank – whether for a mortgage or for a business idea – and we have put the banks through the wringer well in advance of this to make sure they have the capital.”

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An already completely gutted society. More to come. Local councils are being cut to the bone.

The Conservatives Are In Crisis Over Austerity, Not Just Brexit (NS)

The Conservative party is engaged in the bloodiest incarnation yet of its 30-year Europe war. After Theresa May’s Chequers deal succeeded in alienating almost everyone, Remainers are backing a “people’s vote”, while Leavers are embracing no deal. There is no obvious means by which the parliamentary deadlock can be broken. But the Brexit crisis is masking another one: over austerity. The Leave vote in 2016 and the loss of the Tories’ majority in 2017 were symptoms of voter discontent over spending cuts (a new study published this week suggested that austerity may have directly caused Brexit). As the New Statesman’s Crumbling Britain series has charted, eight years of austerity have enfeebled the public realm.

Rough sleeping, which fell by three-quarters under the last Labour government, has risen by 169 per cent since 2010. The NHS has been forced to cancel operations and even urgent surgery as it struggles to meet ever greater demand. Relative child poverty has increased for three consecutive years and now stands at 4.1 million, or 30 per cent of children. Nearly 1,000 Sure Start children’s centres and 478 libraries are estimated to have closed since 2010. Potholed roads and uncollected bins are evidence of the scale of austerity borne by councils (real-terms funding for local authorities has been cut by 49 per cent since David Cameron took office as prime minister). Northamptonshire Council, a Conservative flagship, has declared itself effectively bankrupt – and others may follow.

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The Guardian is up to some strange things.

US Secret Service And The Guardian Face Off Over ‘Russian Spy’ (RT)

US Secret Service has scolded the Guardian for “irresponsible and inaccurate” reporting on an alleged Russian spy at the US embassy in Moscow. Unfazed, the newspaper continued to spin the story calling it the ‘tip of the iceberg.’ The British newspaper, never one to pass up a good Russia scare story, published a fresh one on Friday, citing multiple intelligence analysts to reinforce the idea that its own anonymously-sourced revelations of a suspected spy with high-level security clearance having been embedded for a decade in the US embassy in Moscow,”could be just the tip of the iceberg.” The Secret Service, meanwhile, has been issuing repeated rebuttals to the Guardian’s reporting.

The security officials were quite emphatic in bashing the article as “wrought with irresponsible and inaccurate reporting based on the claims of “anonymous sources’.” In its press release on Thursday, the Secret Service specifically points out that before the publication came out, it had provided the Guardian with background to the story “clearly refuting unfounded information” in its statement to the editor. The Guardian did mention the agency’s response, bundling it in the middle of its article, while citing its unnamed “intelligence source” profusely, claiming that the Russian woman, the suspected mole, “had access to the most damaging database, which is the US Secret Service official mail system.”

This allegedly included “schedules of the president – current and past, vice-president and their spouses, including Hillary Clinton.” According to the Secret Service, the allegations that a mysterious foreign ‘femme fatale’ could have access to such sensitive information, are unfounded. “FSNs [Foreign Service Nationals] working under the direction of the U.S. Secret Service have never been provided or placed in a position to obtain, secret or classified information as erroneously reported.”

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You break it, you bought it.

Russia Seeks US Help To Rebuild Syria (R.)

Russia has used a closely guarded communications channel with America’s top general to propose the two former Cold War foes cooperate to rebuild Syria and repatriate refugees to the war-torn country, according to a U.S. government memo. The proposal was sent in a July 19 letter by Valery Gerasimov, the chief of the Russian military’s General Staff, to U.S. Marine General Joseph Dunford, chairman of the Joint Chiefs of Staff, according to the memo which was seen by Reuters. The Russian plan, which has not been previously reported, has received an icy reception in Washington. The memo said the U.S. policy was only to support such efforts if there were a political solution to end Syria’s seven-year-old civil war, including steps like U.N.-supervised elections.

The proposal illustrates how Russia, having helped turn the tide of the war in favor of President Bashar al-Assad, is now pressing Washington and others to aid the reconstruction of areas under his control. Such an effort would likely further cement Assad’s hold on power. “The proposal argues that the Syrian regime lacks the equipment, fuel, other material, and funding needed to rebuild the country in order to accept refugee returns,” according to the memo, which specified that the proposal related to Syrian government-held areas of the country. The United States in 2011 adopted a policy that Assad must leave power but then watched as his forces, backed by Iran and then Russia, clawed back territory and secure Assad’s position. The United States has drawn a line on reconstruction assistance, saying it should be tied to a process that includes U.N.-supervised elections and a political transition in Syria. It blames Assad for Syria’s devastation.

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But what can Sabraw do?

Judge Calls US Efforts To Reunite Deported Parents ‘Unacceptable’ (R.)

A federal judge on Friday described as “unacceptable” the U.S. government’s progress in reuniting immigrant children in the United States with deported parents and ordered the government to appoint a person to take charge of its efforts. “This is going to be a significant undertaking and it’s clear there has to be one person in charge,” said U.S. District Judge Dana Sabraw at a hearing in San Diego. Sabraw in June ordered the government to begin reuniting some 2,500 children that officials separated from their parents after they crossed the U.S.-Mexican border. The families were separated as part of a “zero tolerance” U.S. government policy toward illegal immigration that began in early May.

Many of them had crossed the border illegally, while others had sought asylum. About 1,900 children have since been reconnected with their parents or a sponsor. On Thursday, the government proposed that non-profit groups should take the lead in locating as many as 500 parents deported or removed from the United States without their children. At Friday’s hearing, Sabraw said it was it was “100 percent the responsibility of the administration” to reunite those families. Sabraw also noted that as few as 12 of the 500 parents in question have been located. “That is just unacceptable at this point,” he said. “The reality is that for every parent who is not located there will be a permanently orphaned child.”

The government’s lawyer, Scott Stewart, said that the agencies involved would consider appointing a point person or persons. Stewart said the government had proposed a plan with non-profit groups in a prominent role because it believed that was the quickest way to locate parents.

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Different judge. Legal opinions are sorely need in the US.

US Court Orders Trump Administration To Fully Reinstate DACA Program (R.)

A federal judge on Friday ruled that the Trump administration must fully restore a program that protects from deportation some young immigrants who were brought to the United States illegally as children, including accepting new applications for the program. U.S. District Judge John Bates in Washington, D.C., said he would stay Friday’s order, however, until August 23 to give the administration time to decide whether to appeal. Bates first issued a ruling in April ordering the federal government to continue the Deferred Action for Childhood Arrivals, or DACA, program, including taking applications. He stayed that ruling for 90 days to give the government time to better explain why the program should be ended.

On Friday Bates, who was appointed by former President George W. Bush, a Republican, said he would not revise his previous ruling because the arguments of President Donald Trump’s administration did not override his concerns. Under DACA, roughly 700,000 young adults, often referred to as “Dreamers”, were protected from deportation and given work permits for two-year periods, after which they must re-apply to the program.

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Better put this before a judge as well. But no surprise that Monsanto is powerful stateside.

Trump Administration Lifts GMO Crop Ban For US Wildlife Refuges (R.)

The Trump administration has rescinded an Obama-era ban on the use of pesticides linked to declining bee populations and the cultivation of genetically modified crops in dozens of national wildlife refuges where farming is permitted. Environmentalists, who had sued to bring about the 2-year-old ban, said on Friday that lifting the restriction poses a grave threat to pollinating insects and other sensitive creatures relying on toxic-free habitats afforded by wildlife refuges. “Industrial agriculture has no place on refuges dedicated to wildlife conservation and protection of some of the most vital and vulnerable species,” said Jenny Keating, federal lands policy analyst for the group Defenders of Wildlife.

Limited agricultural activity is authorized on some refuges by law, including cooperative agreements in which farmers are permitted to grow certain crops to produce more food or improve habitat for the wildlife there. The rollback, spelled out in a U.S. Fish and Wildlife Service memo, ends a policy that had prohibited farmers on refuges from planting biotech crops – such as soybeans and corn – engineered to resist insect pests and weed-controlling herbicides. That policy also had barred the use on wildlife refuges of neonicotinoid pesticides, or neonics, in conjunction with GMO crops. Neonics are a class of insecticides tied by research to declining populations of wild bees and other pollinating insects around the world.

Rather than continuing to impose a blanket ban on GMO crops and neonics on refuges, Fish and Wildlife Service Deputy Director Greg Sheehan said in Thursday’s memo that decisions about their use would be made on a case-by-case basis.

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Jul 202018
 
 July 20, 2018  Posted by at 9:25 am Finance Tagged with: , , , , , , , , , ,  


Edward Hopper Western Motel 1957

 

Possible Hand-Over Of Julian Assange To The UK May Be Imminent (Vos)
Spanish Court Drops International Warrant For Carles Puigdemont (G.)
Trump Lays Into The Fed, Says ‘Not Thrilled’ About Interest Rate Hikes (CNBC)
Trump Plans To Formally Invite Putin To US Later This Year (G.)
American Cold War Experts: “The Real Threat Is Russophobia” (ZH)
No-Deal Brexit Would Harm EU Countries As Well As UK, Warns IMF (G.)
Theresa May: I Will Never Accept EU’s Ideas On Irish Brexit Border (G.)
Android Antitrust Fine Will Demolish Google Profit (MW)
IMF Raps Greece Over Its Bid To Reintroduce Labor Negotiations (K.)

 

 

Darkness and shame.

Possible Hand-Over Of Julian Assange To The UK May Be Imminent (Vos)

What happens in a world without Julian Assange? It seems we may be in the unthinkable position of facing such a reality, after WikiLeaks Tweeted regarding the recent statement of Margarita Simonyan, RT’s Editor-in-chief. Her message read (In English): “My sources tell me that Julian Assange will be handed over to the UK in the next weeks or days. Like never before I wish that my sources are wrong’.’ An exceptionally brief article published by Russian Insider documented Simonyan’s foreboding Tweet, indicating that her statement seemed especially serious in light of the quality of her sources.

Russian media is hardly the first source of dire warnings regarding Assange’s safety in recent weeks. Just days ago, the World Socialist Website related: “The London Times reported July 15 on secret talks between the British and Ecuadorian governments. They are apparently intending to expel WikiLeaks editor Julian Assange from the Ecuadorian embassy in London, where he has enjoyed political asylum for six years. The article said the talks were “an attempt to remove Assange from the embassy,” and they were being run at the highest levels of government. The Secretary of State for Foreign Affairs, Sir Alan Duncan, is personally involved.” These reports also follow a chilling article penned by award-winning journalist Chris Hedges, who wrote:

“The failure on the part of establishment media to defend Julian Assange, who has been trapped in the Ecuadorean Embassy in London since 2012, has been denied communication with the outside world since March and appears to be facing imminent expulsion and arrest, is astonishing. The extradition of the publisher—the maniacal goal of the U.S. government—would set a legal precedent that would criminalize any journalistic oversight or investigation of the corporate state. It would turn leaks and whistleblowing into treason. It would shroud in total secrecy the actions of the ruling global elites.”

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What should happen for Julian too.

Spanish Court Drops International Warrant For Carles Puigdemont (G.)

A Spanish judge has dropped the international arrest warrants issued for the former Catalan president Carles Puigdemont and five other pro-sovereignty politicians over their roles in last year’s illegal referendum and subsequent unilateral declaration of independence. The supreme court judge Pablo Llarena announced the decision a week after a German court said it would extradite Puigdemont only over alleged misuse of public funds rather than the more serious charge of rebellion. The dropping of the international warrant means Puigdemont and his former colleagues – currently in Belgium, Scotland and Switzerland – no longer face extradition proceedings.

But domestic warrants remain in force, meaning the six will be arrested should they return to Spain. In his ruling, published on Thursday, Llarena hit out at the court in Schleswig-Holstein, accusing it of “a lack of commitment” over acts that could have “broken Spain’s constitutional order”. The German court’s refusal to extradite Puigdemont on the rebellion charge – which prosecutors had argued could be equated to “high treason” in the German penal code – meant the deposed president could not be tried for the offence if sent back to Spain.

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More crazy reactions. Comparing Trump to Erdogan?!

Trump Lays Into The Fed, Says ‘Not Thrilled’ About Interest Rate Hikes (CNBC)

In a stinging and historically rare criticism, President Donald Trump expressed frustration with the Federal Reserve and said the central bank could disrupt the economic recovery. Presidents rarely intercede when it comes to the Fed, which sets the benchmark interest rate that flows through to many types of consumer debt. Fed officials, including Chairman Jerome Powell, have raised interest rates twice this year and have pointed to two more before the end of 2018. Trump, in an interview with CNBC, said he does not approve, even though he said he “put a very good man in” at the Fed in Powell.

“I’m not thrilled,” he told CNBC’s Joe Kernen in an interview to air in full Friday at 6 a.m. ET on “Squawk Box.” “Because we go up and every time you go up they want to raise rates again. I don’t really — I am not happy about it. But at the same time I’m letting them do what they feel is best.” “But I don’t like all of this work that goes into doing what we’re doing.” Markets reacted to Trump’s comments, with stocks, the dollar and Treasury yields all falling.

Fed officials did not comment on the president’s remarks. The White House, in a statement after the interview excerpt aired on CNBC, emphasized that Trump did not mean to influence the Fed’s decision-making process. “Of course the President respects the independence of the Fed. As he said he considers the Federal Reserve Board Chair Jerome Powell a very good man and that he is not interfering with Fed policy decisions ” the statement said. “The President’s views on interest rates are well known and his comments today are a reiteration of those long held positions, and public comments.”

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Keep talking.

Trump Plans To Formally Invite Putin To US Later This Year (G.)

Donald Trump has asked his administration to formally invite Russian president Vladimir Putin to visit Washington later this year, the White House announced on Thursday. Sarah Sanders, the White House press secretary, said Trump asked his national security adviser John Bolton to extend the invitation to Putin for a “working level” dialogue between the two leaders. The invitation comes as the White House has faced a tumultuous week in the aftermath of Trump’s controversial summit with Putin in Helsinki. Trump was roundly criticized from Democrats and Republicans in Washington for siding with the Kremlin over the judgments of US intelligence on whether Russia interfered in the 2016 presidential election.

It took the president several attempts to walk back his comments, amplifying the fallout from his joint appearance with Putin. Trump was nonetheless unfazed by the backlash, deeming the summit a “great success” in a tweet earlier on Thursday while saying he looked forward to a second meeting with Putin. “The Summit with Russia was a great success, except with the real enemy of the people, the Fake News Media,” Trump wrote. “I look forward to our second meeting so that we can start implementing some of the many things discussed, including stopping terrorism, security for Israel, nuclear … proliferation, cyber attacks, trade, Ukraine, Middle East peace, North Korea and more. There are many answers, some easy and some hard, to these problems…but they can ALL be solved!”

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“Russophobia is running amok in this country.”

American Cold War Experts: “The Real Threat Is Russophobia” (ZH)

And now for expert analysis that runs refreshingly contrary to the week’s Trump-Putin mass hysteria over the Helsinki summit, we find ourselves surprised to feature an unusually honest Vice segment on HBO: These American scholars say the real threat to the U.S. is Russophobia. “If he [President Trump] means what he said he was right. It would be great to cooperate with Russia — I would go farther, it’s imperative… We are eyeball to eyeball in a new Cold War with Russia,” begins Stephen F. Cohen, considered among the world’s foremost Russian academic experts, while sitting beside John Mearsheimer in this latest Vice interview, who nods his head in approval.

Both have long been a thorn in the side of the McCarthyite commentariat which alleges Russian collusion behind every decision of the Trump administration. Mearsheimer, a longtime International Security Policy program director at the University of Chicago, questions the now largely cemented narrative created by those who have least understanding of the history of US-Russia relations: “Why won’t people engage in a legitimate debate with people like Steve and me? And I believe the reason they won’t is they would lose the debate – I’m fully confident of that.”

As the American public has from the time of Trump’s election endured endless obtrusive and cacophonous media noise with no real smoking gun (as Former Director of National Intelligence James Clapper famously admitted a year ago) to back the charges of collusion — what CNN’s Van Jones early on admitted was “just a big nothing burger” — the voices of a small cadre of real Russian experts rarely breaks through to a mass audience. “There is an unwillingness to engage in debate on this issue, like I have never seen before,” Mearsheimer tells Vice. And Cohen adds: “We’ve demonized Putin and we’ve Putinized Russia so we demonize Russia. Russophobia is running amok in this country. I’ve seen these things from the inside. I’ve re-thought and re-thought how we got to the edge of war with Russia, where we haven’t been since Cuba in 1962. And I have concluded, and I would be happy to debate my opponents… It is 95 percent our own doing.”

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Getting bored of this yet?

No-Deal Brexit Would Harm EU Countries As Well As UK, Warns IMF (G.)

Britain crashing out of the EU without a deal would inflict significant economic pain across Europe, leaving the region without any winners, the International Monetary Fund has warned. As the new Brexit secretary, Dominic Raab warned Europe to prepare for a no-deal exit, the IMF said such an outcome would hurt the UK most but would also have damaging economic consequences for Ireland and other EU nations. In its annual health check for the euro area, the Washington-based fund said economic growth across the 27 remaining EU states would fall by as much as 1.5% by 2030, if Britain falls back on WTO rules for its trading relationship with the EU after leaving next year.

While economic output for the UK would drop by more than twice that amount – wiping out almost 4% of GDP – Ireland would suffer by almost as much as a result of its strong ties to Britain and shared border. The Netherlands, Denmark and Belgium, with similar close proximity and trading links, would also lose around 1% of GDP. Smaller nations with deep financial links to the City of London, such as Malta, Cyprus and Luxembourg, would also be negatively affected by a hard Brexit, the fund warned. The IMF said the long-run impact from a hard Brexit would be spread across the EU as a result of the economic and financial ties spanning the region, which have grown closer by about 40% over the past quarter century. The UK ranks among the EU’s three largest trading partners, accounting for 13% of trade in goods and services. There are also complex supply chain links between companies across the bloc.

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So no Brexit then?

Theresa May: I Will Never Accept EU’s Ideas On Irish Brexit Border (G.)

Theresa May is to tell the European Union it is time to drop what she feels is their inflexible view on an Irish border solution and “evolve” their position to break the impasse in Brexit talks. In a speech in Belfast on Friday she is expected to brand the bloc’s calls for regulatory alignment north and south of the border as a “backstop” solution in the event of no deal as “unworkable”, and repeat her assertion that a border down the Irish Sea is unacceptable to any British prime minister. “The economic and constitutional dislocation of a formal ‘third country’ customs border within our own country is something I will never accept, and I believe no British prime minister could ever accept,” she will say.

May will tell an audience of business leaders and politicians that the EU proposal is in breach of the Belfast Agreement because it would create a barrier between Northern Ireland and Great Britain and leave the people of Northern Ireland “without their own voice” in trade negotiations. “It is not something the House of Commons will accept,” she is due to say. The EU’s other 27 states will have a chance to examine and respond to the white paper when its General Council of ministers meets in Brussels on Friday morning. They will also receive an update on negotiations from the European Commission’s chief negotiator, Michel Barnier.

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They’ll force people to pay for the software now.

Android Antitrust Fine Will Demolish Google Profit (MW)

When Alphabet Inc. reports earnings Monday, the European Union’s $5.07 billion Android antitrust fine will ruin the company’s profit. Alphabet stock was relatively flat Wednesday, when the fine formally was announced, and Google has said it plans to appeal the fine. However, the company disclosed in an SEC filing that it will account for the fine in its second-quarter report, due Monday after the bell. In terms of what it will cost the company in cash, the fine is not tax-deductible and worth roughly 75% of the company’s expected second-quarter net income of $6.72 billion, which will drastically lower per-share earnings as well.

Since analyst estimates largely do not include the fine as of yet, Alphabet’s earnings are likely to miss published expectations on the bottom line by a significant amount. The question that remains beyond the fine itself is how Google, in the long-term, will respond to the ruling, which prevents the search giant from effectively forcing mobile phone makers and telecom companies to pre-install its search engine and Chrome web browser, among other Google mobile apps, in exchange for use of the Android OS. The ruling is set to go into effect in 90 days, though an appeal would delay implementation.

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How to spell sovereignty. When were countries growing fastest? When they had strong unions.

IMF Raps Greece Over Its Bid To Reintroduce Labor Negotiations (K.)

The International Monetary Fund on Thursday issued a clear warning to the Greek government against its plans to reintroduce collective labor negotiations, saying that such a move would put the competitiveness of the Greek economy at risk. The IMF’s observation, included in its Article IV report that is not only about the Greek economy but concerns eurozone financial policies in general, comes almost a month before the party the government intends to stage for the end of the bailout program. The IMF intervention is particularly important for two additional reasons: first because it concerns a key dimension of the post-bailout government narrative, and second because the IMF is not an independent observer, as its technical experts will be conducting a considerable number of visits to Greece in the context of the post-program surveillance, and will prepare two assessment reports on the Greek economy every year.

There is also a third and possibly more important factor that adds to the significance of the IMF recommendation: It may be just a taste of the attitude the Fund will adopt toward Greece should the government implement its plans to increase the minimum salary. This may actually be an intervention with a preventative character. The government has already legislated the return from August – after the program ends – of two main principles in collective labor negotiations: the provision for the extension of collective contracts and the principle of the more favorable regulation.

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Jul 132018
 
 July 13, 2018  Posted by at 9:20 am Finance Tagged with: , , , , , , , , , , , ,  


Vincent van Gogh View of Saintes-Maries-de-la-Mer 1888

 

Stock Markets See the US Winning the Trade War, Defying Propaganda (WS)
A Decade On, Pre-Crisis Mortgages Linger For Big Banks, Homeowners (R.)
Fed’s Escape From Crisis Holdings Could Hit Dead End (R.)
Social Security, Medicare To Add Another $50 Trillion to Our National Debt (JM)
China’s Record Trade Surplus With US Further Inflames Trade Tensions (R.)
Approval Of Brexit Negotiations Lowest On Record (Orb)
No Brand Of Brexit Can Command A Commons Majority (G.)
Donald Trump Is Right. NATO Is A Costly White Elephant (G.)
Trump Ready To Help Some NATO States Buy US Arms (R.)
Who Wants To Disrupt Strategic Balance In The Black Sea Region? (SCF)
Germany Puts Last Bailout Tranche to Greece on Hold (GR)
Europe’s Remarkable Ability To Remain In Denial (Varoufakis)
US Judge Asked To Create Mental Health Fund For Migrant Children (R.)
Facebook Users Marked With “Treason” Label (ZH)

 

 

“Now they had a fig leaf – the threat of future tariffs – behind which to hide their long-planned offshoring strategies.”

Stock Markets See the US Winning the Trade War, Defying Propaganda (WS)

The trade war talk has been going on since the presidential campaign but markets just brushed it off and rallied. In 2018, the trade war verbiage moved to the foreground. But until June 14, the administration vacillated between thinking about tariffs and putting the trade war “on hold,” depending on who was doing the talking or tweeting. This vacillation ended on June 14 (Thursday) evening, when it was reported that Trump had approved to hit an initial list of $50 billion in goods (1,300 products) from China with tariffs of 25%. At the time, the administration was also preparing a second list of products, accounting for another $100 billion in imports from China.

On the evening of June 19 (Monday), Trump threatened to hit another $200 billion of imports from China with tariffs of 10%. And on Tuesday, the Shanghai stock market plunged. Markets were taking it seriously. Since then, Corporate America’s propaganda machine – the same that for the past two decades had extolled the unrivalled virtues of offshoring production to cheap countries – fired up the mainstream media, which launched into incessant, deafening, repetitive, and manipulative coverage of how these tariffs would hurt US jobs more than anything.

Two glorious examples are Harley-Davidson and GM, which had been laying off workers and shutting plants in the US for years as they were offshoring production to cheap countries. For example, in July 2017, Harley-Davidson announced layoffs in the US as it was building a factory in Thailand. GM has been laying off workers in the US since 2016, even as it opted to produce more models in Mexico. Now they had a fig leaf – the threat of future tariffs – behind which to hide their long-planned offshoring strategies.

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TBTF banks have no incentive to come clean.

A Decade On, Pre-Crisis Mortgages Linger For Big Banks, Homeowners (R.)

A decade on big U.S. banks are still running down and selling off crisis-era mortgages, a process executives point to as weighing on loan growth. Eager to see a turning point in loan books, analysts count these portfolios as one factor, along with home equity loan runoff and new mortgage demand, to watch for when deciphering the true loan growth picture as U.S. second-quarter bank earnings start on Friday. Wells Fargo and Bank of America executives have flagged portfolios from prior to the 2008-2009 crisis era where banks are no longer originating similar new products when they are asked to predict a turning point in consumer loans. “These are portfolios of a bygone era that were very, very painful for the banks,” said Gerard Cassidy at RBC Capital Markets.

“They are not plain vanilla portfolios, which means they are more costly to manage. It may just not be worth the headache.” Analysts have said higher loan growth is critical to driving bank’s stock prices, but they anticipate only a modest acceleration year over year, driven primarily by commercial and industrial loans, not residential. “Remember that there’s a portion of that book that, again, is pre-crisis,” Chief Executive Tim Sloan said about Wells Fargo’s mortgage book at a May conference. He added the bank continues to examine the older portfolio’s risk-return tradeoff and sells assets when the opportunity arises, factors “that could have some impact” on growth.

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Backpedalling.

Fed’s Escape From Crisis Holdings Could Hit Dead End (R.)

Not long ago the Federal Reserve expected to quietly shed nearly half of its $4.5-trillion portfolio by around 2022, leaving little trace of the extraordinary steps it took to face down the financial crisis. But an unexpected market kink could force the Fed to scrap the plan two or three years early and permanently leave it holding $1 trillion more than it wanted. The U.S. central bank is making adjustments on the fly and keeping its options open. “I don’t think that’s problematic in any way” to halt the process “somewhat earlier,” William Dudley, the former New York Fed president and key architect of the portfolio strategy, told reporters last month.

Yet if the world’s largest holder of U.S. bonds tossed out its play book and effectively took on a more accommodative stance, the result could be an across-the-board easing of market borrowing costs, the foreign-exchange value of the dollar, and of the growing strains on emerging markets. “The evidence that we have suggests that the ultimate size of the balance sheet will be bigger than what people expected,” said Matthew Luzzetti, senior economist at Deutsche Bank Securities in New York. All of this amounts to the final chapter in the Fed’s unprecedented decision over the last decade to buy some $3.5 trillion in mortgage and Treasury bonds in an effort to boost riskier investments, hiring and economic recovery from recession. In a nod to a stronger U.S. economy, the Fed since 2015 has raised interest rates well above zero and, since October of last year, begun shrinking its balance sheet to a more normal but yet-unspecified size.

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“As of this year, both programs are in negative cash flow, meaning Congress must provide additional cash to pay the promised benefits.”

Social Security, Medicare To Add Another $50 Trillion to Our National Debt (JM)

The official, on-the-books federal debt is currently about $21.2 trillion, according to the US National Debt Clock. $21.2T is the face amount of all outstanding Treasury paper, including so-called “internal” debt. This is about 105% of GDP and it’s only the federal government. If you add in state and local debt, that adds another $3.1 trillion to bring total government debt in the US to $24.3 trillion or more than 120% of GDP. Then there’s corporate debt, home mortgages, credit cards, student loans, and more. Add it all together and total debt is about 330% of GDP, according to the IIF data I cited in Debt Clock Ticking. We are in hock up to our ears. In calculating debt, however, we don’t factor in Social Security and Medicare. These aren’t yet debt because they have dedicated revenue streams: payroll taxes.

Most Medicare recipients also pay premiums. To date, these revenue sources have covered current expenditures and more, allowing the programs to build up reserves. But that’s about to change. As of this year, both programs are in negative cash flow, meaning Congress must provide additional cash to pay the promised benefits. It will get worse, too. The so-called “trust funds” are going to run dry sooner or later, and it may be sooner. This month’s annual trustee report estimated Social Security will run out of reserves in 2034, and the hospitalization part of Medicare will go dry in 2026. Just for the record, those “trust funds” don’t exist except as an accounting fiction. It is like you saving $100,000 for your child’s education and then borrowing all the money from your child’s education fund.

You can pretend that you have set aside $100,000 for your child’s future education, but when it comes time to make those payments, you’ll have to pull it out of current income or liquidate other assets. The US government has borrowed (or used or whatever euphemism you want to apply) all the money in those trust funds. So, talking about running out of reserves in 2034 or 2026 is rather meaningless. We’ve already run out of reserves. Any time a politician talks about putting a “lock box” around Social Security or Medicare trust funds, he or she is either staggeringly ignorant or lying.

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Stockpiling ahead of the crash?!

China’s Record Trade Surplus With US Further Inflames Trade Tensions (R.)

China’s trade surplus with the United States swelled to a record in June as its overall exports remained solid, a result that could further inflame a bitter trade dispute with Washington. The data came after the administration of U.S. President Donald Trump raised the stakes in its trade row with China on Tuesday, saying it would slap 10 percent tariffs on an extra $200 billion worth of Chinese imports, including numerous consumer items. China’s trade surplus with the United States, which is at the center of the tariff tussle, widened to a record monthly high of $28.97 billion, up from $24.58 billion in May, according to Reuters calculations based on official data going back to 2008.

Trump, who has demanded Beijing cut the trade surplus, could use the latest result to further ratchet up pressure on China after both sides last week imposed tit-for-tat tariffs on $34 billion of each other’s goods. Washington has warned it may ultimately impose tariffs on more than $500 billion worth of Chinese goods – nearly the total amount of U.S. imports from China last year. The dispute has jolted global financial markets, raising worries a full-scale trade war could derail the world economy. Chinese stocks fell into bear market territory and the yuan currency has skidded, though there have been signs in recent days its central bank is moving to slow the currency’s declines.

[..] China’s exports to the United States rose 13.6 percent in the first half of 2018 from a year earlier, while its imports from the U.S. rose 11.8 percent in the same period. Separate data showed Chinese shipments to U.S. ports rose more than expected in June, suggesting some retailers moved up orders to insulate themselves from the intensifying trade war that threatens to send up costs on a growing number of consumer products. For January-June China’s trade surplus with the United States rose to $133.76 billion, compared with about $117.51 billion in the same period last year.

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May will have to find something else.

Approval Of Brexit Negotiations Lowest On Record (Orb)

Approval of the Brexit negotiations has seen a significant fall in July – now the lowest on record. Last month 36% approved of the negotiations and it is now 29%. In June, 32% agreed that Theresa May would get the right deal for Britain in the Brexit negotiations – this has now fallen to 26% – the lowest again on record. These 2,027 interviews were carried out before the resignation of Brexit Secretary David Davis and Foreign Secretary Boris Johnson.

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Perhaps the biggest one of a million problems.

No Brand Of Brexit Can Command A Commons Majority (G.)

Theresa May’s new cabinet has now rallied behind her Chequers plan, set out fully in the government’s white paper on future UK-EU relations. However, far from settling the Brexit debate, recent events have given rise to another nightmare scenario that is only just beginning to take shape: that every conceivable Brexit outcome may now not command a parliamentary majority. The conventional wisdom in Westminster is that since the general election last year, there is no House of Commons majority for a hard Brexit. With a working majority of only 13, including the Democratic Unionists, it would take just seven Tory MPs to oppose it. But there are at least 20-30 pro-European Tories minded to do so.

Yet May’s softer Brexit blueprint has also significantly increased the prospect of Eurosceptic Conservative MPs voting against her EU deal when it is put to parliament later this year. In the febrile atmosphere at Westminster this week, there have been rumours that up to 70 Tories could oppose it – especially if, as seems likely, May makes further concessions in order to win the EU’s backing for a bespoke deal, instead of having to choose between a Canada or Norway-style agreement. Hints in the white paper about a preferential system for EU migrants, despite May’s rhetoric about ending free movement of labour, will fuel the Tory revolt.

May’s embrace for a softer Brexit has therefore changed the Commons arithmetic – and the political calculations that come with it. It is now Labour MPs, rather than Tory ones, who may prove critical. In recognition of this, May has been reaching out to Labour MPs in the hope that soft Brexit supporters vote for her deal, neutralising the impact of the Eurosceptics voting against it. In an unusual move, David Lidington, the Cabinet Office minister and May’s de facto deputy, briefed Labour (as well as Liberal Democrat and SNP) MPs on the Chequers plan. But Labour won’t want to save May. Their leader, Jeremy Corbyn, will almost certainly whip Labour MPs to oppose May’s deal, in the hope that the ensuing chaos will result in an election.

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What I said a few days ago.

Donald Trump Is Right. NATO Is A Costly White Elephant (G.)

Nato was founded in 1949 in response to Stalin’s blockade of Berlin. It was meant to “keep the Soviet Union out, the Americans in, and the Germans down”. Since then, it has welcomed the American nuclear shield, at vast cost to America. Otherwise, its only military achievements have been the breakup of Yugoslavia and the loss of a squalid 17-year war in Afghanistan. Neither has anything to do with the North Atlantic. Nothing better symbolised this than Theresa May’s bizarre gift to Trump this week of 450 British troops for Kabul. Nato was about deterring an attack on Europe from Russia. In 1945, the west agreed the Potsdam settlement, accepting the Soviets’ “sphere of influence” over eastern Europe.

Thus when Russia invaded Hungary in 1956 and Czechoslovakia in 1968, there was no question of Nato, or Europe, retaliating. The iron curtain was iron. Come 1989 and the collapse of Potsdam Europe, Nato did not approach a broken Russia to agree some new settlement. It did the opposite. To protests from Russia’s weakened leader, Boris Yeltsin, it gathered former Warsaw Pact states under its wing and advanced its border east towards Russia. It embraced Poland, Czechoslovakia and Hungary, then the Baltic states, Romania and Bulgaria. It was like Khrushchev stationing missiles in Cuba. Only Germany counselled caution.

Nato’s provocation was so blatant as to be an open invitation to any new populist leader in Moscow to exploit Russia’s bruised patriotism: hence Vladimir Putin. He and his kleptocratic cronies are virtually a Nato creation. But the fact that America was party to the provocation does not invalidate Trump’s question. What is Nato’s policy beyond needling Russia and feebly relying on the American shield?

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But in the end, it’s all about money. That’s why NATO still exists. Nothing to do with security.

Trump Ready To Help Some NATO States Buy US Arms (R.)

U.S. President Donald Trump said on Thursday he was ready to help smaller NATO countries to buy U.S. weapons as he pushed them to spend more on their own defense. Speaking after a NATO summit, at which he said nations had agreed on new spending pledges, Trump said some less wealthy members had asked during meetings in Brussels if he could help them buy U.S. arms equipment, but did not name the countries. Asked about pressures on countries with weaker finances, he said, “We have many wealthy countries with us today but we have some that aren’t so wealthy and they did ask me if they could buy the military equipment, and could I help them out, and we will help them out a little bit,” he told a news conference.

“We are not going to finance it for them but we will make sure that they are able to get payments and various other things so they can buy – because the United States makes by far the best military equipment in the world: the best jets, the best missiles, the best guns, the best everything.” Trump claimed a personal victory at the summit after telling European allies to increase spending or lose Washington’s support. The White House has been pushing a “Buy American” initiative which aims to help drum up billions of dollars more in arms business. The initiative has raised concerns in Europe, where some see increased weapons sales as a key goal of Trump’s repeated calls for NATO members to increase their military spending.

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Americans have no business there. Go home.

Who Wants To Disrupt Strategic Balance In The Black Sea Region? (SCF)

The US-led series of drills in and around Ukraine’s Black Sea coastline is part of NATO exercise Sea Breeze that kicked off on July 9 to last until July 21. The training event involves an international armada representing 19 countries, including such non-NATO states as Ukraine, India, Georgia, the United Arab Emirates and Moldova. All in all, 29 warships, 1 submarine, and 25 aircraft are involved in the exercise held in Odessa and Mykolayiv and the northwestern Black Sea region. The Black Sea regional security is actually an issue paid little attention to. It’s not addressed by an international forum. NATO official documents adopt an openly provocative language to challenge Russia.

The North Atlantic Alliance always emphasizes the Black Sea’s role as a critical intersection. The US-led NATO activities have been intensifying since 2014 to turn the region into another hotbed along with the South China Sea and the Baltic. Turkey, Bulgaria, and Romania, three of the six Black Sea countries, are NATO members. Ukraine and Georgia are the bloc’s close partners aspiring for membership. The alliance has a significant military presence in Romania, including a US Aegis Ashore BMD system capable of firing long-range cruise missiles at Russia.

American military presence in Romania and Bulgaria is gradually growing. The US plans to deploy up to 2,500 troops at Novo Selo, Bulgaria. The facility is large enough to accommodate as many as 5,000 servicemen. Heavy tanks deployment is envisaged. The 1997 NATO-Russia Founding Act, where NATO pledged not to deploy “substantial forces” near Russia, seems to be forgotten. The US Navy’s policy is aimed at ramping up its presence there. The presence of American warships perilously close to Russia’s borders is undoubtedly provocative. For comparison, the Russian Navy does not stage regular maneuvers in the Caribbean Sea with such allies as Cuba, Nicaragua and Venezuela though nothing prevents it from doing so.

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First, Berlin forces Greece to keep the islands loaded with refugees. Then it forces them to load more taxes on the already destroyed economies there.

Germany Puts Last Bailout Tranche to Greece on Hold (GR)

Germany blocked a final 15 billion-euro ($17.5 billion) bailout payment to Greece after the government in Athens postponed a value-added tax (VAT) hike on a handful of islands that have been hit hard by the influx of migrants. For the tranche to be unblocked by early August, Finance Minister Euclid Tsakalotos pledged at yesterday’s Eurogroup that the measure to retain the 30 percent VAT discount on Lesvos, Chios, Samos, Leros and Kos will end in January 2019, and that the loss of 28 million euros of revenues will be offset from other sources.

The SYRIZA-led government postponed the VAT hike in the islands without consulting Greece’s creditors. Germany was eager to send a message to Athens that it will not tolerate any deviation from the program in the future. Commentators say that the Eurogroup decision shows how difficult it will be for the southern country to regain financial sovereignty even as it exits an eight-year bailout regime in August.

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Given how Greece gets treated, denial doesn’t sound like the correct term.

Europe’s Remarkable Ability To Remain In Denial (Varoufakis)

Europe’s establishment is luxuriating in two recent announcements that would have been momentous even if they were only partly accurate: the end of Greece’s debt crisis, and a Franco-German accord to redesign the eurozone. Unfortunately, both reports offer fresh proof of the European Union (EU) establishment’s remarkable talent for never missing an opportunity to miss an opportunity. The two announcements did not come in the same week by accident. The Greek debt implosion, back in 2010, was the ugly symptom of the eurozone’s design flaws, which is why it triggered a domino effect across the continent. Greece’s continuing insolvency reflects the deep disagreements within the Franco-German axis concerning eurozone redesign.

While three French presidents and the same German chancellor were failing to agree on the institutional changes that would render the eurozone sustainable, Greece was asked to bleed quietly. In 2015, the Greeks staged a rebellion, which Europe’s establishment ruthlessly crushed. Neither Brexit nor the EU’s steady delegitimation in the eyes of European voters managed to convince the establishment to change its ways. French President Emmanuel Macron’s election seemed the last hope for the new Berlin-Paris accord needed to prevent a suffocating Italy from triggering the next—this time lethal—domino effect.

Under Macron, new, hopeful ideas were proposed: a common budget for the eurozone; a new safe debt instrument and quasi-federal tax-raising capacities; a common unemployment insurance fund; common bank deposit insurance and a common pot from which to recapitalize failing banks. Moreover, a new investment fund would mobilize idle savings across Europe, without adding to the fiscal stress of member states. A year later, with Italy on a collision course with the EU, the Meseberg Summit between German Chancellor Angela Merkel and Macron delivered an agreement on eurozone reform. A few days later, the Eurogroup of eurozone finance ministers delivered its own “solution” to the Greek debt crisis.

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Sensible.

US Judge Asked To Create Mental Health Fund For Migrant Children (R.)

A civil rights group asked a federal judge on Thursday to order the U.S. government to provide mental health counseling for the around 2,000 immigrant children separated from their parents by officials at the U.S.-Mexican border. The request by the American Civil Liberties Union follows a chaotic week for U.S. immigration officials, who failed to meet a court-ordered deadline on Tuesday for reuniting children under the age of five. The government “must establish a fund to pay for professional mental health counseling, which will be used to treat children who are suffering from severe trauma as a result of their forcible separation from their parents,” said the ACLU in court papers filed late Thursday.

The group said the cost of the fund could be determined at a future date. The rights group brought the lawsuit that prompted U.S. Judge Dana Sabraw in San Diego last month to order the government to reunite families separated at the border. The family separation policy was instituted as part of President Donald Trump’s efforts to curtail illegal immigration. The administration ended the practice last month after widespread protests. The government, in the same court filing on Thursday, acknowledged that it had missed a Tuesday deadline for reuniting the youngest children with their parents, but said it had now complied with the judge’s order.

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How does anyone make this, too, about Russia? It’s your own people who use this for spying on you. Targeting ‘Russians’ is just a way to divert your attention from that.

Facebook Users Marked With “Treason” Label (ZH)

Beleaguered social media giant Facebook has removed “treason” from their database of the keywords assigned to users for advertising purposes, the company stated Wednesday after Danish state broadcaster DR reported its existence. Company spokesman Joe Osborne replied “National treason was an advertising interest because of its historical significance, but as it is an illegal act, we have removed it.” Facebook tags its more than 2 billion users with a wide variety of keywords depending on their interests – from shopping habits to political and religious views in order to sell more efficiently targeted advertising.

This makes Facebook a sublime sales channel for companies. Categorizing users in areas of interest means that companies with ads on Facebook can buy into an almost perfect audience. Eg. garden equipment for people with special interest in gardens, etc. But categorization also allows intelligence services in all countries to look at the population over the shoulder. DR suggests that the a government such as Russia could have used the “treason” tag to locate around 65,000 Facebook users who had been marked with the keyword. The article notes that they do not know “if the Russian authorities have used Facebook’s “treason” keyword” for nefarious purposes – adding “Only the Russian authorities know that.”

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Jul 072018
 
 July 7, 2018  Posted by at 9:10 am Finance Tagged with: , , , , , , , , ,  


Claude Monet Water lilies 1904

 

Fed Discards Flattening Yield Curve as Recession Indicator (WS)
Theresa May Secures Approval From Cabinet To Negotiate Soft Brexit (G.)
Boris Johnson’s Gang Outgunned By Theresa May At Chequers (G.)
UK Government Has No Clue How To Execute Brexit Without Harm – Airbus CEO (G.)
Despite 213K Jobs Gain, Unemployment Up by 499K (Mish)
Russia Hikes Duties On US Imports, Pledges More Retaliation (R.)
US Border Agents Stop Canadian Fishermen In Disputed Waters Off Maine (G.)
More Ways Your Phone Is Spying On You (ZH)
Summer of Tough Love (Jim Kunstler)
Twitter Suspends Over 70 Million Accounts In Two Months (R.)
Tax Arbitrage Is An Issue (Setser)
Mainstream Politicians Short-Sighted, Don’t See World Changing – Grillo (RT)
Number Of Planes In The Sky To More Than Double In Next 20 Years (Ind.)
Pope Warns Earth Turning Into Vast Pile Of ‘Rubble, Deserts And Refuse’ (AP)

 

 

Seems like a risky gamble.

Fed Discards Flattening Yield Curve as Recession Indicator (WS)

In the minutes of the FOMC meeting on June 12 and 13, released this afternoon, there was a doozie, obscured somewhat by the dynamics of the rate hike plus the indication that there would be two more rate hikes this year, for a total of four, up from three at the prior meeting, with more hikes to come in 2019, along with other changes [..] But the doozie in the minutes was about the flattening “yield curve.” The yield curve is formed by Treasury yields of different maturities: normally, the two-year yield is quite a bit lower than the 10-year yield. Over the last several decades, each time the yield curve “inverted” – when the two-year yield ended up higher than the 10-year yield – a recession followed. The last time, the Financial Crisis followed.

So this has become a popular recession indicator that has cropped up a lot in the discussions of various Fed governors since last year. Today, the two-year yield closed at 2.55% and the 10-year yield at 2.84%. The spread between them was just 29 basis points, the lowest since before the Financial Crisis. The chart below shows the yield curves on December 14, 2016, when the Fed got serious about raising rates (black line); and today (red line). Note how the red line has “flattened” between the two-year and the 10-year markers, and how the spread has narrowed to just 29 basis points:

The chart below shows the two-year yield (black) and the 10-year yield (red) going back to 1992. Note how the spread has been narrowing in recent months.

The chart below tracks this spread for every day back to 2008. Today, the spread, at just 29 basis points, is the lowest since before the Financial Crisis:

There has been a lot of handwringing about this being an indicator that the next recession is nearing and that the Fed should back off with its rate hikes. But this Fed is getting seriously hawkish: In the minutes today, it revealed that instead of thinking about backing off with its rate hikes, it’s throwing out the flattening yield curve.

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She’s threatened to fire them. But Brexit looks less likely to happen by the day.

Theresa May Secures Approval From Cabinet To Negotiate Soft Brexit (G.)

Theresa May has secured approval to negotiate a soft Brexit deal with the European Union, signing up her fractious cabinet at a Chequers awayday to a controversial plan to match EU standards on food and goods. The prime minister released a statement following the critical afternoon session of the long-awaited summit that alarmed Tory hard Brexiters, in which she confirmed she had won over the cabinet to new customs arrangements ending political deadlock on the issue. May said the cabinet had “agreed our collective position for the future of our negotiations with the EU”. That included a proposal to “create a UK-EU free trade area which establishes a common rule book for industrial goods and agricultural products” after Brexit.

Tory Brexiters voiced concern at the agreement, while soft Brexiters expressed relief. Andrea Jenkyns, a hardline MP, complained that “British businesses will continue to be a rule taker from the EU” and said she would “pray” that the detail was not as bad as she feared. Heidi Allen, a moderate, said she was “pleased to report Theresa May has secured cabinet agreement for a sensible, soft Brexit”. On Thursday, when the common rule book proposal was first leaked, hardline Brexiter cabinet ministers and Conservative MPs voiced alarm that it could prevent the UK striking a trade deal with the US, which has different standards in goods and foods, such as allowing chickens to be washed in chlorine.

But May was able to release the text of a three-page agreed statement before cabinet, following a relatively undramatic day of discussions, sat down for dinner to listen to No 10 communications chiefs make a presentation on how to sell the new proposals. Michel Barnier, the EU’s chief Brexit negotiator, appeared to react warmly to the proposals, noting in a tweet that the “Chequers discussion on future to be welcomed. I look forward to white paper. We will assess proposals to see if they are workable and realistic”. The prime minister made clear that she expected ministers would be sacked if they did not remain in line with her soft Brexit blueprint.

She wrote to Tory MPs to explain her plans and included a clear warning about discipline: “As we developed our policy on Brexit, I have allowed cabinet colleagues to express their individual views. Agreement on this proposal marks the point where that is no longer the case and collective responsibility is now fully restored.”

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It doesn’t matter one bit unless the EU agrees.

Boris Johnson’s Gang Outgunned By Theresa May At Chequers (G.)

Theresa May has won the battle with her Brexiter rebels in the cabinet, but the war will be a long one. She gambled that the Brexit purists – those who gathered on the eve of the Chequers summit at the Foreign Office with Boris Johnson – would be outgunned at Chequers when the full cabinet was assembled. The choreography was impressive – May locked her ministers inside the Buckinghamshire retreat without their phones or special advisers. The final agreement – sent out on behalf of “HM government” came to journalists an hour before advisers had even seen it – and before they could get in contact with their ministers to know what concessions had been made. Within the hour, out came a letter to Conservative MPs warning the days of debate over the government’s Brexit position were over.

“Collective responsibility is now fully restored,” May warned. The deal clinched with her most difficult members of her cabinet, architects of the leave campaign such as Johnson and Michael Gove, gave May the leverage to demand similarly hardline MPs get in line. Downing Street has been briefing in a strident tone, practically daring hard Brexiter ministers to give it all up to walk down the Chequers drive. The numbers that will matter now are those in her parliamentary party. Some will express predictable fury, though in the hours since the deal was reached, Jacob Rees-Mogg was telling MPs to keep their powder dry. Key will be whether this is a deal that can win over mainstream backbenchers.

In recent weeks, a number of Conservative MPs had begun to express frustration that the prime minister was not prepared to face down one side of her party and lead. [..] On Monday, the prime minister will address the 1922 committee of backbenchers, though the timing of the summit means angry MPs will have the weekend to either cool off or come to the boil. “I’ll wait to see if this collective responsibility lasts the weekend,” another MP said. Perhaps just as crucially there are still some concerns about the future deal for UK services, around 80% of the UK economy. The agreement states the UK would “strike different arrangements for services, where it is in our interests to have regulatory flexibility, recognising the UK and the EU will not have current levels of access to each other’s markets”.

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And that’s the whole point.

UK Government Has No Clue How To Execute Brexit Without Harm – Airbus CEO (G.)

The chief executive of Airbus has accused the government of having “no clue” on how to leave the EU without harming the economy, as the prime minister aimed at uniting the cabinet behind a Brexit plan. The criticism from the aerospace firm, which employs 14,000 people in the UK, is the strongest intervention yet from the business community on the risk of a hard Brexit and came in the same week that Jaguar Land Rover, Britain’s largest carmaker, warned its were under threat. Speaking at a briefing in London before the Farnborough air show later this month, the Airbus chief executive, Tom Enders, said: “The sun is shining brightly on the UK, the English team is progressing towards the [World Cup] final, the RAF is preparing to celebrate its centenary and Her Majesty’s government still has no clue, no consensus on how to execute Brexit without severe harm.”

Enders said Airbus, a Franco-German group that supports a further 100,000 UK jobs in its supply chain, was wary of all types of Brexit, including a worst-case no-deal scenario. “Rest assured that we are taking first preparations as we speak in order to mitigate consequences from whatever Brexit scenario may follow,” he said. “Brexit in whatever form, soft or hard, light or clean, whatever you call it, will be damaging for industry, for our industry and damaging for the UK, whatever the outcome will be.”

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600,000 more looking for a job. Out of 95 million not in labor force. All new jobs are part-time. Full-time jobs fell.

Despite 213K Jobs Gain, Unemployment Up by 499K (Mish)

Today’s establishment survey shows jobs rose by 213,000. Revisions were positive. The unemployment rate rose from 3.8% to 4.0% as the labor force rose by 601,000. More people are starting to look for jobs but employment only rose by 102,000. Nonfarm wage growth was +0.2% vs an Econoday consensus of +0.3%. The Phillips’ curve is a joke, but it’s still widely believed. The change in total nonfarm payroll employment for April was revised up from +159,000 to +175,000, and the change for May was revised up from +223,000 to +244,000. With these revisions, employment gains in April and May combined were 37,000 more than previously reported

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Putin meets Trump in 9 days.

Russia Hikes Duties On US Imports, Pledges More Retaliation (R.)

Russia said on Friday it was imposing additional import duties on some U.S. industrial goods after the United States slapped tariffs on steel and aluminum imports, and warned that more retaliatory steps could be in the pipeline. The economy ministry said Russia would impose extra tariffs on some goods from the United States for which there are Russian-made substitutes.The extra duties of 25 to 40 percent will apply to imports of fiber optics and equipment for road construction, the oil and gas industries and metal processing and mining.

The ministry said the measures, signed by Russian Prime Minister Dmitry Medvedev, were intended to compensate for $87.6 million of damage suffered by Russian export-focused companies as a result of the U.S. metals tariffs. The U.S. tariff hike will cost an overall $537.6 million and Russia has the right to impose more compensatory measures in the future, the economy ministry said.

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Feels like Python.

US Border Agents Stop Canadian Fishermen In Disputed Waters Off Maine (G.)

Canada’s government is investigating reports that US border patrol officers have intercepted and questioned crew members on more than 20 Canadian vessels in disputed waters off the coast of Maine. The reports have thrust a longstanding territorial dispute between the two countries into the spotlight; since the late 1700s tensions have simmered over a pair of tiny, treeless islands that sit between Maine and the Canadian province of New Brunswick. Primarily inhabited by nesting puffins, the islands of North Rock and Machias Seal remain the only disputed lands between US and Canada, with both claiming sovereign jurisdiction over the islands and their surrounding waters.

As a result, the area has long hosted lobster fisherman from both sides of the border. The question of jurisdiction flared up recently after the Grand Manan Fishermen’s Association said a Canadian vessel had been stopped by US border patrol while fishing in the waters near Machias Seal Island in late June. “He informed them he was a Canadian vessel legally fishing in Canadian waters,” wrote Laurence Cook of the association on Facebook. He said he was “not surprised to see the Americans trying to push people around”, describing them as “typical American bullies.”

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In ways we didn’t yet know.

More Ways Your Phone Is Spying On You (ZH)

For years, conspiracy theories about smart phones listening to users without their permission to show them advertisements have abounded. While some researchers have shown this could happen, a first of its kind study just found something far more insidious. Academics at Northeastern University have just proven that your phone is recording your screen – as in taking video – and uploading it to third parties. For the last year, Elleen Pan, Jingjing Ren, Martina Lindorfer, Christo Wilson, and David Choffnes ran an experiment involving more than 17,000 of the most popular Android apps using ten different phones. Their findings were alarming, to say the least.

As Gizmodo points out, during the study, the researchers started to see that screenshots and video recordings of what people were doing in apps were being sent to third-party domains. For example, when one of the phones used an app from GoPuff, a delivery start-up for people who have sudden cravings for junk food, the interaction with the app was recorded and sent to a domain affiliated with Appsee, a mobile analytics company. The video included a screen where you could enter personal information – in this case, their zip code.

GoPuff did not disclose in its terms of use that its app was recording users screens and uploading this data to a third party. What’s more, when they were contacted by the researchers GoPuff merely added a disclosure to their policy acknowledging that “ApSee” might receive users PII. The fact that these apps can record your screen without you knowing and use this data is chilling. It illustrates how easy it would be for a malicious actor to be able to look at your private messages, personal information, passwords, photos, and videos. None of this is stopped by your phone’s security either as it is a function built into the apps and you don’t have an option to disallow it.

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“Mr. Mueller will come up with someone to indict on something, even if it’s ninety-seven ham sandwiches.”

Summer of Tough Love (Jim Kunstler)

The blowup of the bond and stock markets later this year will put to a gloomy rest the ludicrous notion that America has been enjoying a great economic boom. It’s actually been an engineered hallucination, thanks to the global monetary authorities applying the magic of limitless credit to a bad habit of credulous speculation. The central banks have launched a program of so-called “quantitative tightening (QT)” — an idiotic phrase meant to counterpoise the equally fatuous “quantitative easing (QE),” PhD economist-speak for grotesque interference in the bond markets — that will choke down the credit supply at exactly the moment that governments and giant corporations need new loans to pay the interest on old loans. The trajectory there is obvious.

The big question, of course — hardly ever asked in the public arena — is what that will do to currencies, i.e., money. It can really only go two ways: either make money very scarce, in which case a lot of people and enterprises go broke, or, if the monetary authorities respond to the predicament by enabling a return to bottomless credit issuance, the money will become worthless — they’ll be plenty of it, but it won’t buy much. Such a turn of events will make an already-unhinged nation fly apart. [..] Oh, yes, there is also that Hieronymus Bosch Garden of Earthly Delights known as the Mueller Investigation, with its dreary outposts in the executive suite of the FBI, and all the tangled mysteries entailed there.

Mr. Mueller will come up with someone to indict on something, even if it’s ninety-seven ham sandwiches. I suspect Mr. Trump will manage to dump Attorney General Jeff Sessions and Deputy AG Rod Rosenstein. And then the pardons will fly, like so many winged demons flapping from the mouth of Hades. Constitutional crisis may be too mild a word for what ensues. By holiday time in early winter, much will clarified about the actual direction of the country. By then, the “Walk Away” movement may even include the obdurate shills at CNN and The New York Times, and the Intellectual-Yet-Idiots on the college campuses. And the Golden Golem of Greatness will lie upended in the swamp that he just didn’t try hard enough to drain.

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How many fake accounts do they have?

Twitter Suspends Over 70 Million Accounts In Two Months (R.)

Twitter Inc suspended more than one million accounts a day in recent months to reduce the flow of misinformation on the platform, the Washington Post reported. Twitter and other social media platforms such as Facebook Inc have been under scrutiny by U.S. lawmakers and international regulators for doing too little to prevent the spread of false content. The companies have been taking steps such as deleting user accounts, introducing updates and actively monitoring content to help users avoid being a victim to fake content. Twitter suspended more than 70 million accounts in May and June, and the pace has continued in July, the Post reported on Friday, citing data it obtained.

“It’s hard to believe that 70 million accounts were affected when Twitter has only 336 million monthly active users (MAU),” Wedbush analyst Michael Pachter said. Twitter’s MAU is expected to grow nearly 3 percent to 337.06 in the second quarter, according to Thomson Reuters I/B/E/S. “My guess is that a large number of these suspended accounts were dormant … it should have little impact on the company,” Pachter told Reuters. If the 70 million were mostly active accounts, the affected accounts would have been “screaming bloody murder”, added the analyst.

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Tax havens.

Tax Arbitrage Is An Issue (Setser)

The impact of the U.S. tax reform on the U.S. trade balance was a hot item of debate last December. There was an argument that reducing the headline tax rate—and creating an even lower tax for the export of intangibles—would reduce the incentive for firms to book profits abroad in offshore tax centers. Booking those profits at home would raise U.S. services exports—while the service “exports” of countries like Ireland and Luxembourg (really re-exports of intellectual property created in the U.S) would fall. This would have no overall effect on the balance of payments. The rise in the recorded exports of intellectual property from the U.S. would be offset by a fall in the offshore income of U.S. firms.

For example, Google (U.S.) would show a bigger profit as offshore sales would be booked as exports of IP held in the U.S. (a service export) while Google (Bermuda) would show a smaller profit —and that would translate both into a smaller trade deficit and a smaller surplus on foreign direct investment income.* But shifting paper profits around would bring down the measured trade deficit—a potential win for Trump. It is obviously too soon to assess the full impact of the tax reform. But it isn’t too soon to start looking for some clues. The q1 balance of payments data doesn’t suggest that firms have lost their appetite for booking profits abroad, or their appetite for booking the bulk of their offshore profits in low tax jurisdictions. This shouldn’t be a surprise—the lowest rate in the new U.S. tax code is the new global minimum rate on intangibles.

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The existing “ideologies have outlived their usefulness,” Grillo said. “There are just good and bad ideas..”

Mainstream Politicians Short-Sighted, Don’t See World Changing – Grillo (RT)

Mainstream political parties have outlived their purpose as they cannot adapt to the changes in the political system and are out of step with the voters, Beppe Grillo, the founder of the Italian Five Star Movement (M5S), said. “The world of the old politics and old political parties,” which expect the people to trust them with defending the public interests, is “slowly dying out,” Grillo, a former Italian satirist and activist, told Ex-Ecuador President Rafael Correa during the “Conversations with Correa” show on RT Spanish. People are no more willing to just blindly follow some political forces, they are much more informed now, they seek for information in the internet and want to form their own opinions, he explained.

“The world is changing at a fantastic speed. However, the current generation of politicians does not feel these changes. They just do not see it,” Grillo said, adding that the politicians are oriented “on a short-term horizon.” Meanwhile, the society, particularly the young people, is no longer attracted by the ideas propagated by the mainstream parties. The existing “ideologies have outlived their usefulness,” Grillo said. “There are just good and bad ideas,” he added, explaining that “they are not divided into ‘right’ and ‘left’ anymore.” The self-described anti-establishment activist then criticized the mainstream politicians for hiding their own inability to adapt behind the warnings about the perceived threat of populism.

As for the populism, I am proud to be a populist, if the word ‘populus’ (the people) is still of some importance,” Grillo told Correa. “Our goal is to reach out to people, to encourage them to think for themselves, to give them instruments to fulfill their own ideas,” he added. He agreed with Correa’s statement that the so-called “anti-populism” is what really poses a threat to the modern society as it seeks to keep the system unchanged. He particularly agreed that “anti-populism” is in fact a “means of attack” as it sees everything that challenges the system as populism and seeks to clamp it down.

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It’s going to be so annoying people will stop flying.

Number Of Planes In The Sky To More Than Double In Next 20 Years (Ind.)

The number of aircraft in the skies will more than double by 2037, according to the latest Global Market Forecast by Airbus. The Toulouse-based plane maker says half the present 21,450 aircraft flying will still be aloft in 20 years. With 37,390 new planes predicted to take off, the world’s total will increase by 123 per cent to 47,990. The expected total number of aircraft is 11.3 per cent higher than it was in the last big forecast by Airbus, a year ago. The vast majority of the new planes will be smaller, narrow-bodied jets. More than three-quarters of deliveries will be from the Airbus A320 and Boeing 737 families, or aircraft of a similar scale from other manufacturers.

Assuming the 737 is still being made in 2037, it will be the most enduring aircraft in aviation history, having first flown 70-years earlier. Of the 28,550 predicted new narrow-bodied planes, one of Airbus’s leading hopes is the A321 NEO, a re-engined version of an aircraft that attracted little attention when it was launched as a stretched A320 in the early 1990s. The latest version can hold up to 244 passengers, and the long-range variant can fly 4,600 miles – the distance from Manchester to Seattle. The economics of the A321 are very tempting to 21st-century airlines, particularly for “long, thin” routes.

[..] Last month, Eamonn Brennan, director general of the air-traffic provider, Eurocontrol, warned: “On our most likely scenario, there won’t be enough capacity for approximately 1.5 million flights or 160 million passengers in 2040. “Many airports will become much busier, with higher delays. By 2040, 16 airports will be highly congested operating at close to capacity for much of the day, up from six airports today. “As a result of this congestion the number of passengers delayed by between one and two hours will grow from around 50,000 each day now to around 470,000 a day in 2040.”

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You’re going to need a lot tougher words than that.

Pope Warns Earth Turning Into Vast Pile Of ‘Rubble, Deserts And Refuse’ (AP)

Pope Francis urged governments on Friday to make good on their commitments to curb global warming, warning that climate change, continued unsustainable development and rampant consumption threatens to turn the Earth into a vast pile of “rubble, deserts and refuse”. Francis made the appeal at a Vatican conference marking the third anniversary of his landmark environmental encyclical “Praise Be.” The document, meant to spur action at the 2015 Paris climate conference, called for a paradigm shift in humanity’s relationship with Mother Nature. In his remarks, Francis urged governments to honor their Paris commitments and said institutions such as the IMF and World Bank had important roles to play in encouraging reforms promoting sustainable development.

“There is a real danger that we will leave future generations only rubble, deserts and refuse,” he warned. The Paris accord, reached by 195 countries, seeks to avoid some of the worst effects of climate change by curbing global greenhouse gas emissions via individual, non-binding national plans. President Donald Trump has said the US will pull out of the accord negotiated by his predecessor unless he can get a better deal. Friday’s conference was the latest in a series of Vatican initiatives meant to impress a sense of urgency about global warming and the threat it poses in particular to the world’s poorest and most marginalised people. Recently, Francis invited oil executives and investors to the Vatican for a closed-door conference where he urged them to find alternatives to fossil fuels. He warned climate change was a challenge of “epochal proportions”.

Read more …

Jun 152018
 
 June 15, 2018  Posted by at 8:10 am Finance Tagged with: , , , , , , , , , , , , ,  


OR LIGHT Compassion 2018

 

Argentina’s Peso Collapses Even Further Despite $50 Billion IMF Bailout (WS)
ECB Calls Halt To Quantitative Easing, Despite ‘Soft’ Euro (G.)
Japan’s Central Bank Dials Down Inflation View, Complicates Stimulus-Exit (R.)
Powell Orchestrates a Masterful Move (DDMB)
The Fed Creates Problems For Itself (Macleod)
The Art of the Deal Worked On Sentosa Island (AT)
Absence of “CVID” In Joint Statement? (Hani)
Optimism (Caitlin Johnstone)
Blackstone Becomes Biggest Hotel & Property Owner in Spain (WS)
‘Tourism Pollution’: Japanese Crackdown Costs Airbnb $10 Million (G.)
Greeks Are Least Satisfied In The EU (K.)
Turkey: Even Birds Need Our Consent To Fly In The Aegean (K.)
Comey et al Just Made It More Difficult For Mueller To Prosecute Trump (Hill)
A Closer Look At Extreme FBI Bias Revealed In OIG Report (ZH)

 

 

Money has left the building.

Argentina’s Peso Collapses Even Further Despite $50 Billion IMF Bailout (WS)

Today the Argentina peso plunged another 5.5% against the US dollar. It now takes ARS 27.7 to buy $1. Over the past 16 years, the peso has gone through waves of collapses. This collapse began on April 20. The central bank of Argentina (BCRA) countered it by selling $1 billion per day of scarce foreign exchange reserves and buying pesos. The peso fell more quickly. The BCRA responded with three rate hikes, to finally 40%! On May 8, the government asked the IMF for a bailout. On May 16, after a chaotic plunge of the peso, the BCRA was able to refinance about $26 billion in maturing peso-denominated short-term debt (Lebacs) at an annual interest of 40%, and the peso bounced. It was a dead-cat bounce, however, and the peso plunged another 13% against the dollar through today.

Since April 20, the peso has plunged 27.5%. The annotated chart shows the daily moves of the collapse, and the various failed gyrations to halt it (the chart depicts the value of 1 ARS in USD). The collapse of the peso comes despite an endless series of measures to halt it. Just this week so far: On Tuesday, the BCRA decided to keep its key interest rate at 40%; and on Wednesday, the Ministry of Finance announced it would hold daily auctions to sell $7.5 billion in foreign exchange reserves and buy pesos, to prop up the peso. But it was apparently the only one buying pesos. With inflation at 25.5% and heading to 27% by year-end, according to government estimates, with a rising budget deficit, a surging current account deficit, soaring borrowing costs, and burned investors, what else is there to do?

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Not Draghi’s finest hour.

ECB Calls Halt To Quantitative Easing, Despite ‘Soft’ Euro (G.)

The European Central Bank has shrugged off evidence of a slowdown in the eurozone and announced that it will phase out the stimulus provided by its massive three-year bond-buying programme to the eurozone economy by the end of the year. Despite warning that the single currency area was going through a soft patch at a time when protectionist risks were rising, the ECB said it would wind down its bond purchases over the next six months. The ECB is currently boosting the eurozone money supply by buying €30bn of assets each month, but this will be reduced to €15bn a month after September and ended completely at the end of 2018.

The move follows strong pressure from some eurozone countries, led by Germany, that were uncomfortable about the more than €2.4tn of assets accumulated by the ECB since it launched its quantitative easing programme at the start of 2015. Mario Draghi, the ECB’s president, said at the end of a meeting of the bank’s governing council in Latvia that the QE programme had succeeded in its aim of putting inflation on course to meet its target of being below but close to 2%. Eurozone activity has accelerated markedly over the past three years, with some estimates suggesting that QE contributed 0.75percentage points a year to the average 2.25% annual growth rate.

The ECB’s statement reflected the battle between hawks and doves on the bank’s council, with the decision on QE matched by a softening of its approach to interest rates. Draghi said there would be no prospect of an increase in the ECB’s key lending rate – currently 0.0% – until next summer at the earliest. “We decided to keep the key ECB interest rates unchanged and we expect them to remain at their present levels at least through the summer of 2019 and in any case for as long as necessary to ensure that the evolution of inflation remains aligned with our current expectations of a sustained adjustment path,” Draghi said.

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No, really, Abenomics is dead.

Japan’s Central Bank Dials Down Inflation View, Complicates Stimulus-Exit (R.)

The Bank of Japan maintained its ultra-loose monetary policy on Friday and downgraded its view on inflation in a fresh blow to its long-held 2% price goal, further complicating the central bank’s path to rolling back its crisis-era stimulus. Markets are on the lookout for clues from BOJ Governor Haruhiko Kuroda’s post-meeting briefing on how long the central bank could hold off on whittling down stimulus given recent disappointingly weak price growth. As widely expected, the Bank of Japan kept its short-term interest rate target at minus 0.1% and a pledge to guide 10-year government bond yields around zero%.

The move contrasts with the European Central Bank’s decision to end its asset-purchase program this year and the U.S. Federal Reserve’s steady rate increases, which signaled a break from policies deployed to battle the 2007-2009 financial crisis. “Consumer price growth is in a range of 0.5 to 1%,” the BOJ said in a statement accompanying the decision. That was a slightly bleaker view than in the previous meeting in April, when the bank said inflation was moving around 1%. The BOJ stuck to its view the economy was expanding moderately, unfazed by a first-quarter contraction that many analysts blame on temporary factors like bad weather.

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He just likes the attention.

Powell Orchestrates a Masterful Move (DDMB)

Federal Reserve Chairman Jerome Powell has taken the first steps in remaking the central bank in his “plain-English” image, which can only be a good thing for financial markets. Earlier this week, news leaked that the central bank was considering holding a press conference following each Federal Open Market Committee meeting instead of after every other one like it does now. The reports set off a mini-storm. Speculation rose the Fed would implement this new policy immediately, which could mean the central bank was considering accelerating the pace of interest-rate increases as soon as August. After all, investors had become accustomed to the Fed only making a major policy move at meetings followed by a press conference. Now, every meeting would be “live.”

But in a masterful move, Chairman Jerome Powell managed to confirm the policy while also putting financial markets at ease. Rather than announcing the change in the official statement outlining the Fed’s plan to raise its target for the federal funds rate for the seventh time since December 2015, Powell waited until the start of his press conference to drop the bomb, noting that the policy wouldn’t start until January. Here’s Powell’s reasoning: “My colleagues and I meet eight times a year and take a fresh look each time at what is happening in the economy and consider whether our policy needs adjusting. We don’t put our interest rate decisions on auto-pilot because the economy can always evolve in unexpected ways.

History has shown that moving interest rates either too quickly or too slowly can lead to bad economic outcomes. We think the outcomes are likely to be better overall if we are as clear as possible about what we are likely to do and why. To that end, we try to give a sense of our expectations for how the economy will evolve and how our policy stance may change. As Chairman, I hope to foster a public conversation about what the Fed is doing to support a strong and resilient economy. And one practical step in doing so is to have a press conference like this after every one of our scheduled FOMC meetings. We’re going to do that beginning in January. That will give us more opportunities to explain our actions and to answer your questions.

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“..the unsustainable excesses of unprofitable debt created by suppressing interest rates..”

The Fed Creates Problems For Itself (Macleod)

Since Hayek’s time, monetary policy, particularly in America, has evolved away from targeting production and discouraging savings by suppressing interest rates, towards encouraging consumption through expanding consumer finance. American consumers are living beyond their means and have commonly depleted all their liquid savings. But given the variations in the cost of consumer finance (between 0% car loans and 20% credit card and overdraft rates), consumers are generally insensitive to changes in interest rates. Therefore, despite the rise of consumer finance, we can still regard Hayek’s triangle as illustrating the driving force behind the credit cycle, and the unsustainable excesses of unprofitable debt created by suppressing interest rates as the reason monetary policy always leads to an economic crisis.

The chart below shows we could be living dangerously close to another tipping point, whereby the rises in the Fed Funds Rate (FFR) might be about to trigger a new credit and economic crisis. Previous peaks in the FFR coincided with the onset of economic downturns, because they exposed unsustainable business models. On the basis of simple extrapolation, the area between the two dotted lines, which roughly join these peaks, is where the current FFR cycle can be expected to peak. It is currently standing at about 2% after yesterday’s increase, and the Fed expects the FFR to average 3.1% in 2019. The chart tells us the Fed is already living dangerously with yesterday’s hike, and further rises will all but guarantee a credit crisis.

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The view from Asia Times. Many people in that part of the world don’t understand the criticism.

The Art of the Deal Worked On Sentosa Island (AT)

Some statesmen by their sheer force of personality and unorthodox ways of politicking arouse disdain among onlookers. US President Donald is perhaps the most famous figure of that kind in world politics today. No matter what he does, Trump attracts criticism. He evokes strong feelings of antipathy among a large and voluble swathe of opinion within half of America. The making of history in a virtual solo act on his part, which is the rarest of efforts, on Sentosa Island in Singapore on Tuesday and which the world watched with awe and disbelief, will be instinctively stonewalled. Half of America simply refuses to accept the positive tidings about him coming from Singapore.

The skeptics are all over social media pouring scorn, voicing skepticism, unable to accept that if the man has done something sensible and good for his country and for world peace, it deserves at the very least patient, courteous attention. The problem is about Trump – not so much the imperative need of North Korea’s denuclearization. But western detractors – ostensibly rooting for the “liberal international order” – will eventually lapse into silence because what emerges is that North Korean leader Kim Jong-un has enough to “bite” here in the deal that Trump is offering – broadly, a security guarantee from the US and the offer of a full-bodied relationship with an incremental end to sanctions plus a peace treaty.

Succinctly put, Trump has offered a deal that Kim simply cannot afford to reject. The ending of the US-ROK military exercises forthwith; Trump’s agenda of eventual withdrawal of troops from ROK; the lure of possible withdrawal of sanctions once 20% of the denuclearization process gets underway, or once the process becomes irreversible; Trump’s hint that he has sought assurances from Japan and the ROK that they will be “generous” in offering economic assistance to the reconstruction of North Korea; China’s involvement in the crucial process – these are tangibles.

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The view from South Korea.

Absence of “CVID” In Joint Statement? (Hani)

The absence of any reference to “complete, verifiable, and irreversible dismantlement” (CVID) of North Korea’s nuclear program in the joint statement reached at US President Donald Trump and North Korean leader Kim Jong-un’s June 12 summit in Singapore is being seen by some as a “negotiation failure” on the US’s part. But an analysis of Trump’s subsequent remarks – and a reading between the lines of the Pyongyang’s official announcement – suggests the US achieved practical gains in terms of a commitment from the North in exchange for the face-saving measure of avoiding use of the “CVID” term due to possible North Korean objections to it.

To begin with, the Singapore joint statement’s language marks a step forward from the Panmunjeom Declaration of Apr. 27 in terms of the final goal of denuclearizing the Korean Peninsula. The latest statement refers to Kim having “reaffirmed his firm and unwavering commitment to complete denuclearization of the Korean Peninsula.” While the Panmunjeom Declaration referred to “realizing, through complete denuclearization, a nuclear-free Korean Peninsula,” the new statement includes the additional reference to a “firm and unwavering commitment.”

From the reference to Kim’s “firm and unwavering” commitment to denuclearization, some experts are suggesting North Korea may have agreed to verification in addition to denuclearization – in other words, that the language may be a substitute for the “verifiable” part of the CVID approach demanded by Washington. “You could see them as having used the term out of awareness of North Korea’s discomfort with the word ‘verification,’” Handong Global University professor Kim Joon-hyung said after a Korea Press Foundation debate at Singapore’s Swissotel on June 13. “It may be fair to say North Korea made a definite commitment on the implementation and verification issues,” Kim argued.

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“..while you can always count on Capitol Hill to make it incredibly easy for a president to deploy military personnel around the globe, giving that same office the power to bring troops home is a completely different matter. ”

Optimism (Caitlin Johnstone)

Off the top of my head I have a hard time thinking of anything sleazier than smearing peace talks in order to gain partisan political points, but that has indeed been the theme of the last few days when it comes to the Singapore summit. Liberal pundits everywhere have been busily circulating the narrative that Kim Jong-Un “played” Trump by getting him to temporarily halt military drills in exchange for suspended nuclear testing. It was the most fundamental beginning of peace negotiations and a slight deescalation in tensions on the Korean Peninsula, but the way they talk about it you’d think Kim had taken off from Singapore in Air Force One with the keys to Fort Knox and Melania on his lap.

I’m not sure how far up the military-industrial complex’s ass one’s head needs to be to think that one single step toward peace is a gigantic take-all-the-chips win for the impoverished North Korea, but many of Trump’s political enemies are taking it even further. Senate Democrats have introduced a bill to make it more difficult for Trump to withdraw US troops from South Korea, because while you can always count on Capitol Hill to make it incredibly easy for a president to deploy military personnel around the globe, giving that same office the power to bring troops home is a completely different matter.

Surprising no one, MSNBC’s cartoon children’s program The Rachel Maddow Show took home the trophy for jaw-dropping, shark-jumping ridiculousness with an eighteen-minute Alex Jones impression claiming that the chief architect of the Korean negotiations was none other than (and if you can’t guess whose name I’m going to write once we get out of these parentheses I deeply envy your ignorance on this matter) Vladimir Putin. [..] This president is facilitating acts of military violence and dangerous escalations around the world; anyone who isn’t relieved by the possibility of one powder keg being defused in that rampage actually has a lot more faith in Trump’s competence than they’re pretending to.

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Easy pickings.

Blackstone Becomes Biggest Hotel & Property Owner in Spain (WS)

Private equity firm Blackstone, the undisputed king of property funds, continues to bet big on global real estate. In the last week it raised $9.4 billion for Asian real estate. It was also given the green light to acquire Spain’s biggest real estate investment fund (REIT), Hispania, for €1.9 billion. The move, after its prior acquisitions, will cement its position as Spain’s biggest hotel owner and fully private landlord. Hispania’s 46 hotels, added to Blackstone’s other hotels, will turn the PE firm into Spain’s largest hotelier with almost 17,000 rooms, far ahead of Meliá (almost 11,000), H10 (more than 10,000) and Hoteles Globales (just over 9,000).

It took Blackstone just three moves to become market leader. First, it acquired the hotel group HI Partners from struggling Spanish lender Banco Sabadell for €630 million in October 2017. Then, a month ago, it bought 29.5% of the hotel chain NH Hoteles, which is currently in the hands of the Chinese conglomerate HNA. Now, by raising its stake in Hispania from 16.75% to 100%, it will take up a dominant position in one of the world’s biggest tourist markets. With this deal, it will also expand its residential property empire in Spain. Blackstone has over 100,000 real estate assets controlled via dozens of companies. Those assets include a huge portfolio of impaired real estate assets, including defaulted mortgages and real estate-owned assets (REOs).

Blackstone also owns 1,800 social housing units, which it acquired from Madrid City Hall in a controversial deal brokered by the son of former Spanish prime minister José María Aznar and former Madrid mayor Ana Botella. Blackstone paid €202 million for the apartments in 2013; they are now estimated to be worth €660 million — a 227% return in just five year! Since its purchase of the properties, Blackstone has hiked rents on the flats by 49%. Those who can’t pay have been evicted. Blackstone also played a starring role in one of the world’s biggest real estate operations of 2017, in which it payed €5.1 billion for the defaulted loans Banco Santander inherited from its shotgun-acquisition of Banco Popular.

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“..a dramatic drop in the number of Japanese properties available via Airbnb, from more than 60,000 this spring to just 1,000 on the eve of the law’s introduction.”

‘Tourism Pollution’: Japanese Crackdown Costs Airbnb $10 Million (G.)

It has become a familiar scene: tourists in rented kimonos posing for photographs in front of a Shinto shrine in Kyoto. They and other visitors have brought valuable tourist dollars to the city and other locations across Japan. But now the country’s former capital is on the frontline of a battle against “tourism pollution” that has already turned locals against visitors in cities across the world such as Venice, Barcelona and Amsterdam. The increasingly fraught relationship between tourists and their Japanese hosts has spread to the short-stay rental market. On Friday a new law comes into effect that requires property owners to register with the government before they can legally make their homes available through Airbnb and other websites.

The restriction has caused the number of available properties to plummet and has cost the US-based company millions of dollars. Thanks to government campaigns, the number of foreign tourists visiting Japan has soared since the end of a flat period caused by a strong yen and radiation fears in the aftermath of the 2011 Fukushima disaster. A record 28.7 million people visited last year, an increase of 250% since 2012. Almost seven million were from China, with visitors from South Korea, Taiwan, Hong Kong Thailand and the US taking the next five spots. By 2020, the year Tokyo hosts the Olympic Games, the government hopes the number will have risen to 40 million.

[..] Under the new private lodging law, which was supposed to address a legal grey area surrounding short-term rentals – known as minpaku – properties can be rented out for a maximum of 180 days a year, and local authorities are permitted to impose additional restrictions. The result has been a dramatic drop in the number of Japanese properties available via Airbnb, from more than 60,000 this spring to just 1,000 on the eve of the law’s introduction. The legislation has forced the firm to cancel reservations for guests planning to stay in unregistered homes after Friday and to compensate clients to the tune of about $10m.


A sign in Kyoto cautions against touching geishas, taking selfies, littering, sitting on fences and eating and smoking on the street. Photograph: Justin McCurry for the Guardian

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Surprise!

Greeks Are Least Satisfied In The EU (K.)

Greece is the least satisfied nation in the European Union, according to a Eurobarometer survey published Thursday. More specifically, the survey, conducted between March 17 and 28, showed that just 52% of Greeks said they were satisfied with their lives, compared to a 83% average for the 28-member bloc. Only 35% of Greeks surveyed said they were satisfied with the financial situation of their households, compared to 71% across the EU. A staggering 98% said the state of the country’s economy is bad while one in two Greeks said the country’s financial crisis is not over yet and that it will deteriorate even further. As for the country’s general situation, 94% said it is negative. Just 6% said the general situation was positive compared to the 51% average for EU member-states.

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Even turkeys?!

Turkey: Even Birds Need Our Consent To Fly In The Aegean (K.)

With Greece featuring prominently in Turkey’s election campaigning, Turkish Foreign Minister Mevlut Cavusoglu raised the tension a notch again Thursday, warning that not even a bird will fly over the Aegean without Ankara’s permission. Responding to criticism by Turkish ultra-nationalists that 18 islands have been “lost” to Greece in recent years, Cavusoglu said that since the crisis over the Imia islets in 1996 there have been no changes in the legal status of the Aegean. “Not only during our own rule, but before that there has been no change in the status of the Aegean. We will not allow this. Even in the case of research we will not give permission, not even to a bird in the Aegean,” he said during an interview with a Turkish radio station.

He went on to say that Turkey will make no concessions in the Aegean and Cyprus, and that Ankara will also begin gas exploration “around” the Eastern Mediterranean island. “We also have a drill,” he said. Turkey has vowed to stop Cyprus from drilling for gas and oil in its exclusive economic zone (EEZ), insisting there can be no development of the island’s natural resources without the participation of the Turkish Cypriots in the island’s Turkish-occupied north. “In the last few months we have prevented drilling and we drove the Italians away. We will not allow anyone to take away the rights of Turkish Cypriots,” he said. Cyprus government spokesman Prodromos Prodromou said that Nicosia will not be dragged into the “climate of tension” that Turkey is cultivating. He cited international law and said that Cyprus has an established EEZ. Moreover, he said the US, Russia and the European Union have all backed Cyprus’s rights.

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Wonder what the fallout will be.

Comey et al Just Made It More Difficult For Mueller To Prosecute Trump (Hill)

James Comey once described his position in the Clinton investigation as being the victim of a “500-year flood.” The point of the analogy was that he was unwittingly carried away by events rather than directly causing much of the damage to the FBI. His “500-year flood” just collided with the 500-page report of the Justice Department inspector general (IG) Michael Horowitz. The IG sinks Comey’s narrative with a finding that he “deviated” from Justice Department rules and acted in open insubordination. Rather than portraying Comey as carried away by his biblical flood, the report finds that he was the destructive force behind the controversy. The import of the report can be summed up in Comeyesque terms as the distinction between flotsam and jetsam.

Comey portrayed the broken rules as mere flotsam, or debris that floats away after a shipwreck. The IG report suggests that this was really a case of jetsam, or rules intentionally tossed over the side by Comey to lighten his load. Comey’s jetsam included rules protecting the integrity and professionalism of his agency, as represented by his public comments on the Clinton investigation. The IG report concludes, “While we did not find that these decisions were the result of political bias on Comey’s part, we nevertheless concluded that by departing so clearly and dramatically from FBI and department norms, the decisions negatively impacted the perception of the FBI and the department as fair administrators of justice.”

The report will leave many unsatisfied and undeterred. Comey went from a persona non grata to a patron saint for many Clinton supporters. Comey, who has made millions of dollars with a tell-all book portraying himself as the paragon of “ethical leadership,” continues to maintain that he would take precisely the same actions again. Ironically, Comey, fired FBI deputy director Andrew McCabe, former FBI agent Peter Strzok and others, by their actions, just made it more difficult for special counsel Robert Mueller to prosecute Trump for obstruction. There is now a comprehensive conclusion by career investigators that Comey violated core agency rules and undermined the integrity of the FBI. In other words, there was ample reason to fire James Comey.

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Many heads will roll at the Bureau.

A Closer Look At Extreme FBI Bias Revealed In OIG Report (ZH)

As we digest and unpack the DOJ Inspector General’s 500-page report on the FBI’s conduct during the Hillary Clinton email investigation “matter,” damning quotes from the OIG’s findings have begun to circulate, leaving many to wonder exactly how Inspector General Michael Horowitz was able to conclude: “We did not find documentary or testimonial evidence that improper considerations, including political bias, directly affected the specific investigative actions we reviewed” We’re sorry, that just doesn’t comport with reality whatsoever. And it really feels like the OIG report may have had a different conclusion at some point.

Just read IG Horowitz’s own assessment that “These texts are “Indicative of a biased state of mind but even more seriously, implies a willingness to take official action to impact the Presidential candidate’s electoral prospects.” Of course, today’s crown jewel is a previously undisclosed exchange between Peter Strzok and Lisa Page in which Page asks “(Trump’s) not ever going to become president, right? Right?!” to which Strzok replies “No. No he’s not. We’ll stop it.” Nevermind the fact that the FBI Director, who used personal emails for work purposes, tasked Strzok, who used personal emails for work purposes, to investigate Hillary Clinton’s use of personal emails for work purposes. Of course, we know it goes far deeper than that…

The Wall Street Journal’s Kimberley Strassel also had plenty to say in a Twitter thread:
1) Don’t believe anyone who claims Horowitz didn’t find bias. He very carefully says that he found no “documentary” evidence that bias produced “specific investigatory decisions.” That’s different
2) It means he didn’t catch anyone doing anything so dumb as writing down that they took a specific step to aid a candidate. You know, like: “Let’s give out this Combetta immunity deal so nothing comes out that will derail Hillary for President.”
3) But he in fact finds bias everywhere. The examples are shocking and concerning, and he devotes entire sections to them. And he very specifically says in the summary that they “cast a cloud” on the entire “investigation’s credibility.” That’s pretty damning.
4) Meanwhile this same cast of characters who the IG has now found to have made a hash of the Clinton investigation and who demonstrate such bias, seamlessly moved to the Trump investigation. And we’re supposed to think they got that one right?
5) Also don’t believe anyone who says this is just about Comey and his instances of insubordination. (Though they are bad enough.) This is an indictment broadly of an FBI culture that believes itself above the rules it imposes on others.
6) People failing to adhere to their recusals (Kadzik/McCabe). Lynch hanging with Bill. Staff helping Comey conceal details of presser from DOJ bosses. Use of personal email and laptops. Leaks. Accepting gifts from media. Agent affairs/relationships.
7)It also contains stunning examples of incompetence. Comey explains that he wasn’t aware the Weiner laptop was big deal because he didn’t know Weiner was married to Abedin? Then they sit on it a month, either cuz it fell through cracks (wow) or were more obsessed w/Trump
8) And I can still hear the echo of the howls from when Trump fired Comey. Still waiting to hear the apologies now that this report has backstopped the Rosenstein memo and the obvious grounds for dismissal.

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Jun 142018
 
 June 14, 2018  Posted by at 8:42 am Finance Tagged with: , , , , , , , , , , , , ,  


Wassily Kandinsky Free Curve to the Point – Accompanying Sound of Geometric Curves 1925

 

This Fed Grows Relentlessly More Hawkish (WS)
ECB Gets Ready To Pull The Plug On Stimulus Scheme (R.)
The ECB, Not The Fed, Is The Match That Will Spark Bond Market Volatility (MW)
China Holds Fire On Rates, Posts ‘Shockingly Weak’ Activity Growth (R.)
Riskiest Junk Bonds Completely Blow Off the Fed, Face “Sudden” Reckoning (WS)
Cryptocurrency Bloodbath Continues, Tether Accused Of Manipulating Bitcoin (MW)
The Tories’ Chaotic Brexit Has Lost The Trust Of Business – Jobs Will Go (G.)
The North Korea Summit Through the Looking Glass (Jacobin)
Italy-France Relations Collapse Amid North-African Migrant Spat (ZH)
Apple Steps Up Encrytion To Thwart Police Cracking of iPhones (AFP)
FYROM and Greece Fail To Resolve Bitter Naming Dispute (G.)
Antarctic Ice Melting Faster Than Ever (G.)

 

 

Is there anyone alive who thinks that the US, EU, global economies are strong enough to withstand large scale liquidity withdrawal?

This Fed Grows Relentlessly More Hawkish (WS)

“The economy is in great shape,” Fed Chairman Jerome Powell said today at the press conference after the FOMC meeting. Inflation as measured by the Fed’s preferred low-ball measure “core PCE” has hit the Fed’s target of 2%, and the Fed expects it to hit 2.1% by year-end. Inflation as measured by CPI jumped to 2.8%. “Job gains have been strong,” today’s statement said. The “unemployment rate has declined,” while “growth of household spending has picked up,” and “business fixed investment has continued to grow strongly.” This is no longer the crisis economy of yore. But the interest rates are still low and stimulative, befitting for a crisis economy. So something needs to be done, and it’s getting done, if “gradually.”

There were all kinds of intriguing elements in the FOMC’s increasingly hawkish but “gradual” hoopla today. By unanimous vote, the FOMC raised its target for the federal funds rate by a quarter percentage point to a range between 1.75% and 2.0%. This was expected; what’s intriguing is the unanimous vote, unlike prior rate hikes. Four rate hikes in 2018 (two more this year) are now gradually being baked in, according to the median expectation of the 15 members of the FOMC, per the infamous “dot plot” with which the Fed tries to communicate potential rate moves: One member expects 5 rate hikes in 2018; seven members expect 4 hikes; five members expect 3 hikes, and two members expect no more hikes.

At the March meeting, four rate hikes had appeared in the dot plot as a real but more distant possibility. Two more hikes this year would bring the top end of the target range to 2.5% by year-end. This shows the 2018 section of the dot plot:

Rates are expected to continue to rise, three times in 2019 and once in 2020, nudging the federal funds rate to nearly 3.5%. A presser after every meeting – oh boy. During the press conference, Powell said that, starting next January, there will be a press conference after every FOMC meeting. This idea has been mentioned a couple of times recently to prepare markets for it. Now it’s official. As in every Fed announcement, it’s no biggie, really, trust us. The move is designed to “explain our actions and answer your questions,” Powell said. It was “only about improving communications.” It didn’t mean at all that the Fed would be speeding up its rate hikes, he said.

[..] Interest paid to the banks on excess reserves gets a makeover. Banks have about $1.89 trillion in “excess reserves” on deposit at the Fed. The Fed has been paying banks interest on these excess reserves at a rate that was equal to the top of the Fed’s target range – so 1.75% since the last rate hike, which amounts to an annual rate of $33 billion of easy profits for the banks. In theory with today’s rate hike, the FOMC would also have increased the rate it pays on excess reserves to 2.0%.

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But the European economy is not ready. What now, accelerate Target2 even more?

ECB Gets Ready To Pull The Plug On Stimulus Scheme (R.)

The ECB will debate on Thursday whether to end its huge asset purchases by year-end, in what would be its biggest step towards dismantling crisis-era stimulus credited with pulling the euro zone economy out of recession. Financial investors are coming to terms with the end of a decade of easy money from the world’s top central banks, with the Federal Reserve on Wednesday raising interest rates for a seventh time in 3-1/2 years in a further shift from policies used to battle the 2007-2009 financial crisis and recession. Meeting as growth is slowing and political populism threatens to set off market turbulence, the ECB is expected to argue that its 2.55 trillion euro bond-buying scheme has done its job in bringing the 19-member currency bloc back from the brink of collapse.

Whether policymakers take the actual decision at their meeting in Riga on Thursday or hold off until July appears secondary as they have long argued that the scheme, commonly known as quantitative easing (QE), should be concluded and the policy focus shift to the expected path of interest rates. The biggest complication could be the increasingly murky economic outlook, weighed down by a developing trade war with the United States, a populist challenge from Italy’s new government and softening export demand. But these factors could actually hasten the ECB’s decision rather than hold it back as the bank has little policy firepower left and a further weakening of the outlook could make a later exit more difficult.

“We believe the ECB may be in a hurry to close the QE chapter,” Bank of America Merrill Lynch said in a note to clients. “We think this is essentially political, as the ECB would not want its monetary policy to be affected by claims of supporting or conversely impairing the new policy course in Italy.”

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Don’t forget the BOJ and China.

The ECB, Not The Fed, Is The Match That Will Spark Bond Market Volatility (MW)

Rising real interest rates haven’t yet made for a sustained pickup in Treasury volatility, leaving some investors to ask what it would take to spark some turbulence. Danielle DiMartino Booth of Quill Intelligence said the European Central Bank, and not the Federal Reserve, holds the key as it looks to set a timetable for winding down its ultra-accommodative policies. With the Federal Reserve’s shrinking balance sheet unable to offset easy global financial conditions on its own, investors should closely watch the ECB at Thursday’s meeting where the central bank is expected to discuss the end of quantitative easing, though the actual wind-down almost certainly remains several months away at the earliest. “The culmination of ECB QE will remove a bond-volatility governor,” said Booth, in a note published on Tuesday.

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And there comes China. Xi fighting the shadows is like Don Quixote and the windmills.

China Holds Fire On Rates, Posts ‘Shockingly Weak’ Activity Growth (R.)

China’s economy is finally starting to cool under the weight of a multi-year crackdown on riskier lending that is pushing up borrowing costs for companies and consumers, with data on Thursday pointing to a broad slowdown in activity in May. China’s central bank sparked concerns over the health of the economy earlier in the day when it left short-term interest rates unchanged, surprising markets which had expected it to follow a hike by the Federal Reserve, as it has tended to do. Industrial output, investment and retail sales all grew less than expected, suggesting further weakness ahead if Beijing perseveres with its crackdowns on pollution, questionable local government spending and off-balance sheet “shadow” financing.

The data, which showed the slowest investment growth in over 22 years, “was all shockingly weak by Chinese standards,” economists at Rabobank said, adding that the readings may explain the central bank’s decision to keep rates on hold. “Get ready for headlines talking about Chinese deleveraging hitting the economy – except it isn’t even deleveraging yet! China is walking more of a tightrope than markets believe – and the data underline that issue clearly,” they said. China has been walking a fine line between rolling out measures to curb financial risks and pollution and tapping the brakes so hard that business activity slows sharply.

Much of their effort so far has focused on the banking sector rather than corporate debt reduction or deleveraging – possibly explaining why China’s headline growth has been so surprisingly solid. GDP has expanded at a steady 6.8 percent for three straight quarters. But official and unofficial gauges are now showing the regulatory crackdown is starting to filter through to the broader economy, with companies complaining it is harder to get financing and a growing number of firms defaulting on bonds.

Read more …

In a world of their own.

Riskiest Junk Bonds Completely Blow Off the Fed, Face “Sudden” Reckoning (WS)

High-grade corporate bonds are “gradually” – the key word in everything the Fed says – and reluctantly coming to grips with the new era: Yields are rising and bond prices are falling. The Fed has been laboring to accomplish that. With high-grade debt, the Fed’s plan is working “gradually.” But investors in the riskiest corporate junk debt are totally blowing off the Fed. They’re floating around in their own dream world, facing a very rude awakening. In terms of high-grade corporate bonds, the sell-off has been significant, even if it’s just the beginning. The S&P index for AA-rated bonds is down 2.7% so far this year. As prices have declined, yields have surged, with the average AA yield now at 3.51%, up from around 2.2% in mid to late-2016 (data via ICE BofAML US AA Effective Yield Index):

These are the types of bonds that Apple and other large companies hold in their “cash or cash equivalent” accounts that are registered overseas, and that are now being “repatriated” and sold, and the proceeds from the sales are now being plowed into mega-share buyback programs. These corporations, once avid buyers of this high-grade corporate debt, have turned into sellers.

[..] at the riskiest end of the corporate bond spectrum, with bonds rated CCC or below (deep junk), the party that started at the end of the oil bust in February 2016 simply continued. The S&P bond index for CCC-rated bonds has risen 4.5% so far this year (compared to a 2.7% decline for AA-rated index). Since February 2016, when Wall Street decided to plow new money into junk-rated energy companies, the CCC-rated index has skyrocketed 82%. The average yield of bonds rated CCC or lower is now at 9.56%, down from 12.5% in December 2016, when the Fed got serious, and down from 22% during the peak of the oil bust. This is the lowest yield since the bygone era of “QE Infinity” in June 2014:

Read more …

“Less than 1% of hours with such heavy Tether transactions are associated with 50% of the meteoric rise in bitcoin and 64% of other top cryptocurrencies..”

Cryptocurrency Bloodbath Continues, Tether Accused Of Manipulating Bitcoin (MW)

The bloodbath in the digital currency market showed no sign of abating, with all major coins trading in the red Wednesday. In the past 24-hours, a further $25 billion has been wiped off the total value of all cryptocurrencies, led by bitcoin, the world’s biggest digital currency, which reached its lowest level since Feb. 5. A single bitcoin traded to an intraday low of $6,133.31 and has since bounced to $6,280.18, down 3.8%, since Tuesday 5 p.m. Eastern Time on the Kraken Exchange. The total value of all cryptocurrencies dipped below $270 billion in late afternoon New York trading, the lowest level since April 11, according to data from CoinMarketCap. The move lower came after a research report found data that it said suggested the price of bitcoin may have been manipulated in late 2017.

In the University of Texas paper, researchers said they uncovered data that they believe shows Tether, a stable coin that is pegged to the U.S. dollar, was used to artificially push up the price of bitcoin during its late 2017 rally towards $20,000. “Less than 1% of hours with such heavy Tether transactions are associated with 50% of the meteoric rise in bitcoin and 64% of other top cryptocurrencies,” wrote John M. Griffin, a finance professor and Amin Shams, a graduate student. Questions have surrounded Tether and crypto exchange Bitfinex, which were both subpoenaed by the Commodity Futures Trading Commission in 2017 seeking data on Tether and its backing of U.S. dollars. Today’s findings will bring the 11th most traded cryptocurrency back into the spotlight.

“Overall, we find that Tether has a significant impact on the cryptocurrency market. Tether seems to be used both to stabilize and manipulate bitcoin prices,” they said.

Read more …

Losing business support may prove fatal for May.

The Tories’ Chaotic Brexit Has Lost The Trust Of Business – Jobs Will Go (G.)

[..] away from parliament, and far from the tabloid front pages, a serious breach is opening up in British politics. Last week some of the most senior business leaders in Britain came out of a Brexit meeting at No 10, and promptly tore the prime minister to shreds. “We’re playing economics; [the politicians] are playing politics,” said Paul Drechsler, president of the bosses’ organisation, the Confederation of British Industry. “In the world of business, we’re frustrated. We’re angry.” An extraordinary statement, especially from an executive invited to tea and biscuits with May. If supposedly tame industrialists now talk like this, you have to wonder what sounds come out of the feral lot.

Yet the CBI’s impatience is shared by many. Once the long-haul arm of the Tory movement, the Freight Transport Association lashed out at May last week for “playing chicken with crucial parts of the British economy and the livelihoods of … 7 million Britons”. These are close friends of the Conservative party.As one senior representative of a leading business organisation says: “Over the past two years, most company bosses would never risk saying openly that Brexit is turning out to be a disaster, in case it scared off their best staff.” With fewer than 290 days before Britain formally leaves the EU, their caution is running out.

This is a far bigger story than the one on the front pages about who promised which amendment to which band of Tories. One of the fundamental relationships in the establishment is fracturing – and the consequences for government and economy could prove to be historic.

Read more …

“Not Trump” is not an identity.

The North Korea Summit Through the Looking Glass (Jacobin)

On Tuesday, as Donald Trump and Kim Jong-un shook hands for their much-anticipated summit in Singapore, one Korean reporter observed a curious episode. Koreans watching the scene unfold on a TV screen at a railway station in Seoul began applauding. Meanwhile, some nearby Western tourists, perturbed by this development, scratched their heads in confusion. “I am actually baffled to see them clapping here,” said one British tourist. There’s perhaps no better symbol of the gulf in worldwide reactions to the summit than this episode. While South Koreans cautiously celebrated a historic step in the thawing of hostilities that have hung over them for almost seventy years, the Western media seemed to look on with alarm — even anger.

Hostility to the summit, much of it from Democrats and liberals, had been a staple of press coverage in the months leading up to it, often from commentators who just a few months earlier had been panicking about exactly the opposite outcome. But it reached a fever pitch over the last few days. There was, for example, the collective hyperventilation over a symbolic arrangement of North Korean and US flags. There was MSNBC’s Nicole Wallace, who warned that the whole summit was actually a “Trumpian head fake,” a mere artifact of Trump’s “midterm strategy” and his “get out of sitting with Bob Mueller strategy.” Sue Mi Terry of the defense contractor–funded Center for Strategic and International Studies cautioned that “a peace treaty is not okay” and should “come at the end of the process” because it “undermines the justification of our troops staying in South Korea.”

Read more …

Let’s see what happens when the next ship comes.

Italy-France Relations Collapse Amid North-African Migrant Spat (ZH)

Italy has postponed high-level discussions with France on Wednesday after French President Emmanuel Macron criticized Rome for refusing to take in a migrant rescue ship full of 629 shipwrecked North Africans – forcing it to divert to Valencia, Spain. After the ship ran out of supplies, the Italian Navy agreed to escort them across the Mediterranean. “Italy’s new Economy Minister Giovanni Tria said he was cancelling a meeting with his French counterpart Bruno le Maire in Paris. The French economy ministry later said the ministers had “agreed that Mr Tria will come to Paris in the coming days”. -AFP

Italy’s decision to refuse the migrants came after their new Interior Minister, Matteo Salvini, said in early June that “the good times for illegals are over” – writing an urgent letter ordering Malta to accept the 629 migrants picked up by the non-governmental organization (NGO) ship MV Aquarius, run by the group SOS Mediterranee. Salvini called Malta the “safest port” for the passengers, advising that Rome would not offer refuge. After Malta refused leading to several days in limbo, Spain agreed to take the passengers. In response to the ordeal, French President Emmanuel Macron accused Italy of “cynicism and irresponsibility,” adding that their EU neighbor is “playing politics” with the refugees.

Meanwhile Gabriel Attal, the spokesman for Macron’s party, called Italy’s actions “nauseating”. Italian Interior Minister Matteo Salvini responded – saying on Tuesday that he would not “accept hypocritical lessons from countries that have preferred to look the other way on immigration,” and adding on Wednesay that unless France issues an “official apology” for Macron’s inflammatory comments, a Friday meeting between Italian Prime Minister Guiseppe Conte and Macron should be canceled.

Read more …

What will the police do when quantum computing gets involved?

Apple Steps Up Encrytion To Thwart Police Cracking of iPhones (AFP)

Apple said Wednesday it was strengthening encryption on its iPhones to thwart police efforts to unlock handsets without legitimate authorization. The move by Apple, the latest in an ongoing clash with law enforcement, comes amid reports of growing use of a tool known as GrayKey which can enable police to bypass iPhone security features. Apple said the new features are not designed to frustrate law enforcement but prevent any bypassing of encryption by good or bad actors. “At Apple, we put the customer at the center of everything we design,” the company said in a statement.

“We’re constantly strengthening the security protections in every Apple product to help customers defend against hackers, identity thieves and intrusions into their personal data. We have the greatest respect for law enforcement, and we don’t design our security improvements to frustrate their efforts to do their jobs. Apple said it was working a fix to mitigate the possibility of accessing data from GrayKey or similar tools. Apple said that it has a team that responds to law enforcement and national security requests 24 hours a day. But the company has been a target of some in law enforcement for rejecting efforts to allow easy access to iPhones.

Two years ago, Apple went to court to block an FBI effort to force it to weaken iPhone encryption on the device of a mass shooter in San Bernardino, California, but officials dropped the case after finding a tool to unlock the phone.

Read more …

As square pegs and round holes go, this one will linger… Greeks don’t want the name Macedonia used in any way, Skopje wants nothing else.

FYROM and Greece Fail To Resolve Bitter Naming Dispute (G.)

Governments in Skopje and Athens have faced a furious backlash as the challenge of solving one of the world’s most bitter diplomatic feuds hit home just a day after Macedonia announced it was willing to change its name. Hours after the two neighbours declaring they had reached a landmark accord that would see the tiny Balkan state rename itself the Republic of North Macedonia, the nation’s president refused point-blank to sign the deal. “My position is final and I will not yield to any pressure, blackmail or threats,” president Gjorge Ivanov, who is backed by the nationalist opposition, told a news conference in Skopje. The agreement had conceded far too much to Greece – even if its ultimate aim was the country’s future membership of Nato and the EU, he said.

The backlash came despite officials in Brussels, London and Washington reacting with unbridled enthusiasm to the breakthrough. Nato secretary general, Jens Stoltenberg welcomed the accord, saying: “This is really an historical agreement by [politicians] who have shown courage and great political leadership.” Greece has long argued that the state’s name – adopted when it broke away from Yugoslavia in 1991 – conveys thinly disguised irredentist claims on its own northern province of Macedonia. The appropriation of figures associated with ancient Greek history – not least Alexander the Great – had reinforced fears in a region prone to shifting borders.

But opposition to the deal was also pronounced in Greece. As in Skopje – where prime minister Zoran Zaev’s leftist coalition was accused of leading the country to national humiliation – prime minister Alexis Tsipras and his leftist Syriza party was also charged with surrendering cherished national rights. One newspaper ran a front-page graphic showing Tsipras, the Greek foreign minister and president being shot by firing squad for treason.

Read more …

84 scientists from 44 international organisations..

Antarctic Ice Melting Faster Than Ever (G.)

Ice in the Antarctic is melting at a record-breaking rate and the subsequent sea rises could have catastrophic consequences for cities around the world, according to two new studies. A report led by scientists in the UK and US found the rate of melting from the Antarctic ice sheet has accelerated threefold in the last five years and is now vanishing faster than at any previously recorded time. A separate study warns that unless urgent action is taken in the next decade the melting ice could contribute more than 25cm to a total global sea level rise of more than a metre by 2070. This could lead eventually to the collapse of the entire west Antarctic ice sheet, and around 3.5m of sea-level rise.

Prof Andrew Shepherd, from Leeds University and a lead author of the study on accelerating ice loss, said: “We have long suspected that changes in Earth’s climate will affect the polar ice sheets. Thanks to our satellites our space agencies have launched, we can now track their ice losses and global sea level contribution with confidence.” He said the rate of melting was “surprising.” “This has to be a cause for concern for the governments we trust to protect our coastal cities and communities,” Shepherd added. The study, published in Nature, involved 84 scientists from 44 international organisations and claims to be the most comprehensive account of the Antarctic ice sheet to date.

It shows that before 2012, the Antarctic lost ice at a steady rate of 76bn tonnes per year – a 0.2mm per year contribution to sea-level rise. However since then there has been a sharp increase, resulting in the loss of 219bn tonnes of ice per year – a 0.6mm per year sea-level contribution. The second study, also published in Nature, warns that time is running out to save the Antarctic and its unique ecosystem – with potentially dire consequences for the world. The scientists assessed the probable state of Antarctica in 2070 under two scenarios. The first in which urgent action on greenhouse gas emissions and environmental protection is taken in the next few years, the second if emissions continue to rise unabated and the Antarctic is exploited for its natural resources.

Read more …

Jun 092018
 
 June 9, 2018  Posted by at 12:37 pm Finance Tagged with: , , , , , , , , , ,  


Dorothea Lange Children and home of cotton workers at migratory camp in southern San Joaquin Valley, CA 1936

 

My long time pal Jesse Colombo, now at Real Investment Advice, recently linked on Twitter to a Zero Hedge article, which quoted CoreLogic as saying more than half of American homes are overvalued. CoreLogic calls itself “a leading provider of consumer, financial and property data, analytics and services to business and government.”

Well, CoreLogic is way off. All American homes are overvalued. How can we tell? It’s easy. It’s so easy it’s perhaps no wonder that people overlook the reasons why. But we all know them: The Fed has pushed some $20 trillion down the throats of the financial system. It has also lowered interest rates to near zero Kelvin. Then the government added a “relaxation” of lending standards and an upward tweak of credit scores. And Bob’s your uncle.

These measures haven’t influenced just half of US homes, they’ve hit every single one of them. Some more than others, not every bubble is as big as San Francisco’s, but the suggestion that nearly half of homes are not overvalued is simply misleading. It falsely suggests that if you buy a home in the ‘right’ place, you’ll be fine. You won’t be. The Washington-induced bubble will and must pop, and precious few homes will be ‘worth’ what they are ‘worth’ today.

Here’s what Jesse tweeted along with his link to the Zero Hedge article:

“Almost half of the US housing market is overvalued” – this is why U.S. household wealth is also overvalued/in an unsustainable bubble.

He followed up with:

U.S. household wealth is in a bubble thanks to Fed-inflated asset prices. This is creating a “wealth effect” that is helping to drive our spurious economic recovery. This economy is nothing but a sham. It’s smoke and mirrors. Wake the F up, everyone!!!

My reaction to this:

Sorry, my friend Jesse, but every single US home is overvalued. It just depends on the vantage point you look from. All prices have been distorted by the Fed’s policies, not just half of them. Arguably some more than others, but can that be the core argument here?

Jesse’s reply:

Yes, that’s a good point.

Another long time pal, Dave Collum, chimed in with a good observation:

I think even us bunker monkeys start recalibrating, no matter how hard we try to maintain what we believe to be perspective.

Yes, we’ve been at this for a while. Even if Jesse was still a student when he started out. We’ve been doing it so long that he recently wrote an article named: Why It’s Right To Warn About A Bubble For 10 Years. And he’s right on that too.

Let’s get to the article the conversation started with:

 

More Than Half Of American Homes Are Overvalued, CoreLogic Warns

CoreLogic reports that residential real estate prices nationwide increased 6.9% year over year from April 2017 to April 2018. The firm’s Home Price Index (HPI) also shows a 1.2% rise on the month-over-month basis from March to April 2018. This has certainly sparked the debate of housing affordability across the nation with many millennials struggling to achieve the American dream.

CoreLogic Market Condition Indicators showed that 40% of the 100 largest metropolitan areas were overvalued in April, compared to 28% undervalued, and 32% in line with valuations. The report uncovers a shocking discovery that of the nation’s top 50 largest residential real estate markets, 52% were overvalued in April.

CoreLogic’s methodology behind overvalued housing markets “as one in which home prices are at least 10% higher than the long-term, sustainable level, while an undervalued housing market is one in which home prices are at least 10% below the sustainable level.”

The CoreLogic people probably mean well, but they also probably don’t want to rattle the cage. It’s not really important. As soon as someone starts talking about a ‘sustainable level’ for home prices, you can tune out. Because no such thing exists. Unless you first take those $20 trillion out of the ‘market’, free up interest rates, tighten lending standards and lower credit scores. Only then MAY you find a ‘sustainable level’ for prices.

Historically a house in the US cost around 3 to 4 times the median annual income. During the housing bubble of 2007 the ratio surpassed 5 – in other words, the median price for a single-family home in the United States cost more than 5 times the US median annual household income. According to Mike Maloney, this ratio is heavily influenced by interest rates. When interest rates go down the affordability of a house goes up, so people spend more money on a house. Interest rates have now been falling since 1981 when they peaked at 15.32% (for a 10-year US treasury bond).

Mike Maloney, another longtime friend of the Automatic Earth, is dead on. Price to income is a useless point unless you include interest rates in the calculation. And then you can get large differences. Since interest rates have been falling for 37 years, count on them to rise. And see what that does to your model.

“The best antidote for rising home prices is additional supply,” said Dr. Frank Nothaft, chief economist for CoreLogic. “New construction has failed to keep up with and meet new housing growth or replace existing inventory. More construction of for-sale and rental housing will alleviate housing cost pressures,” Nothaft added.

Right, yeah. Now we know the CoreLogic mindset. The more you build, the better home prices will be. Just one of many problems with that is that if you really expect prices to fall once you build, people will build fewer houses, because profit margins fall too. The whole idea that we can save housing markets by simply building ever more has never rung very true. But that’s for another day.

In a recent op-ed piece via The Wall Street Journal, Paul Kupiec and Edward Pinto place the blame on the government for creating another real estate bubble through “loose mortgage terms pushing home prices up.” They claim that mortgage underwriters need to tighten standards.

“Home prices are booming. So far, 2018 has posted the strongest growth since 2005. “About 60% of all U.S. metros saw an acceleration in the rate of price increases through February this year,” according to Housing Wire. Since mid-2012, real home prices have increased 28%, according to data from the American Enterprise Institute. Entry-level home prices are up about double that rate. In contrast, over the same period household income has barely kept pace with inflation. The current pace of home-price inflation is increasing the risk of another housing bubble.

The Fed is raising rates -finally- and home prices grow at the fastest rate in 13 years. Over the past 6 years prices are up 28%. Entry level homes are up more than 50% in that time frame. That is just profoundly scary. It’s like Dante’s descent into hell. And no, it’s not true that “The current pace of home-price inflation is increasing the risk of another housing bubble”. We’re already caught up head first in a new housing bubble.

“The root of the problem is declining underwriting standards. In April Freddie Mac announced an expansion of its 3% down-payment mortgage, the better to compete with the Federal Housing Administration and Fannie Mae . Such moves propel home prices upward. Because government agencies guarantee about 80% of all home-purchase mortgages, their underwriting standards guide the market.

Making lending even more dangerous, CNBC recently reported that “credit scores may go up” because new regulatory guidance allows delinquent taxes to be excluded when calculating credit scores. These are only some of the measures that “expand the credit box” and qualify ever-shakier borrowers for mortgages.”

As I said before: if you lower lending -and underwriting- standards and artificially raise credit scores, then yes, you can keep the bubble going for a while longer. But it overvalues properties. You’re just moving goalposts.

“During the last crisis, easy credit led home prices to rise at an unsustainable pace, leading marginally qualified borrowers to stretch themselves thin. Millions of Americans’ dreams became nightmares when the housing market turned. The lax underwriting terms that helped borrowers qualify for a mortgage haunted many households for the next decade.”

No, it’s not just homes. Stocks and bonds as just as overvalued. Because of a behemoth attempt at making the economy look good, even though it’s entirely fake. No price discovery, no market, just central banks and tweaking standards and surveys. C’mon, we all know where this must go. We just don’t want to know. So this Marketwatch piece gets a wry smile at best:

 

America Is House-Rich But Cash-Poor

The housing market has not only recovered from the Great Recession, it’s heated up. According to an analysis from Attom Data, nearly 14 million Americans are now “equity rich” – meaning they have at least 50% equity in their homes. It bears repeating that many owners and communities are not so lucky: over a million Americans are underwater, and some cities and towns are still reeling under the weight of abandoned and vacant homes and stagnant micro-economies. But for most of the country, rapidly rising home prices and a dearth of anything else to buy means people are staying in their homes longer, allowing them to accrue more and more equity: $15 trillion worth, to be exact.

 

 

Jun 072018
 
 June 7, 2018  Posted by at 8:17 am Finance Tagged with: , , , , , , , , , , ,  


Ivan Aivazovsky Stormy Night at Sea 1850

 

Is Draghi Risking Everything To Teach Rome A Lesson? (ZH)
The Next Economic Crisis Begins in the European Union (Bruno)
David Stockman: Stocks Will Plunge 50% In This ‘Daredevil Market’ (CNBC)
Euro Recovers On Rising Bets ECB May Unwind Stimulus (R.)
Indonesia Joins India In Begging Fed To Stop Shrinking Its Balance Sheet (ZH)
Fed Clambers Back To Positive Real Rates, Now Debate Is When To Stop (R.)
Social Security To Tap Into Trust Fund For First Time In 36 Years (MW)
Opioids Are Responsible For 20% Of US Millennial Deaths (ZH)
The ‘Doomsday Brexit Plan’ Document Should Frighten Us All (TP)
Nearly 4 Million UK Adults Forced To Use Food Banks (Ind.)
How We Created The Anthropocene (BBC)

 

 

“..watch as the EUR and bond yields tumble, and the dollar resumes its relentless push higher.”

Is Draghi Risking Everything To Teach Rome A Lesson? (ZH)

[..] as Bloomberg’s Lisa Abramowicz said in a podcast today, it was the ECB “basically just giving the finger to Italy.” Confirming as much, Anne Mathias, Global Rates and FX strategist for Vanguard, responded that “part of the vocal nature of the ‘talking about the talking about’ [the end of QE] probably has something to do with Italy, especially as they’ve been paring their purchases of Italian debt. What the ECB is trying to say is hey, “this is our party, and you’re welcome to it, but if you’re going to leave it’s not going to be easy for you.” The ECB is trying to show Italy a future without the ECB as backstop.”

A spot-on follow up question from Pimm Fox asked if this is “a situation in which the ECB is cutting off its nose to spite its face, because you can stick to rules for the sake of sticking to rules, but when you have a potential crisis, why wait for it to be a real crisis such as Italy, which the new government has pledged to spend a lot of money, to lower taxes, while they still have a huge government deficit. Why would the ECB do this.” The brief answer is that yes, it is, because sending the Euro and yields higher on ECB debt monetization concerns, only tends to destabilize the market, and sends a message to investors that the happy days are ending, in the process slamming confidence in asset returns, a process which usually translates into a sharp economic slowdown and eventually recession, or even depression if the adverse stimulus is large enough.

As for the punchline, it came from Abramowicz, who doubled down on Pimm Fox’ question and asked if the “European economy can withstand the shock” of the ECB’s QE reversal, which would send trillions in debt from negative to positive yields. While the answer is clearly no, what is curious is that the ECB is actually tempting fate with the current “tightening” scare, which may send the Euro and bond yields far higher over the next few days, perhaps even to a point where Italy finds itself in dire need of a bailout… from the ECB. Then again, don’t be surprised if during next Thursday’s ECB press conference, Mario Draghi says that after discussing the end of QE, no decision has been made or will be made for a long time. At that moment, watch as the EUR and bond yields tumble, and the dollar resumes its relentless push higher.

Read more …

Downsize Germany or else.

The Next Economic Crisis Begins in the European Union (Bruno)

Mercantilism is a practice of conducting economic affairs that Europe practiced especially during the period between the 16th and 17th centuries. It’s the progenitor of colonialism and favors the idea that a state’s—or nation’s—power increases in direct proportion to its ability to export. The more a nation exports, producing a trade surplus, the stronger it becomes. The current “imperfection” of the euro stems from this concept. Germany has become a mercantilist power within a union of nation states (the EU) that had agreed to pursue common as well as national interests. The result has not only been an imbalance of trade; rather, it’s been a complete political and economic disparity.

Some EU countries, of which Germany represents the best example, have also used their surplus to lower their inflation rate below the eurozone-accepted two-percent standard. Indeed, Germany’s trade surplus formula was predicated on a minimal increase in salaries—and reduced government spending on infrastructure and other public services. The result has been the accumulation of significant competitive advantages. Ironically, whenever the euro drops in value, Germany gains with respect to the PIGS. The products that make up the core of its surplus become even more competitive within and beyond the EU.

That explains President Donald Trump’s ever more vociferous suggestions to ban the import of German cars in the United States. It’s no accident that Trump launched a literal trade war, focusing on Germany and China, just days before the start of the G7 Summit in Canada. Germany’s accumulated gains from the low inflation and the more competitive conditions allow it to literally “colonize” (financially speaking) the so-called less virtuous or “deficit” nations. Germany can buy up their best businesses and services. In the meantime, Germany has also acquired a political dominance to match its surplus within the EU itself.

It can control the rules of the EU economy and influence their evolution. That’s why there are few options for the PIGS. And that’s why society and political discourse have deteriorated. The rise of the so-called populist—I prefer the term “protest”—parties, Left or Right, in countries like Italy is a trend destined to expand throughout the EU and cause irreparable fissures. If the EU does not change (and by change, I mean a downsizing of Germany’s stature), the fissures will be irreparable, and one or more states will leave, breaking the union.

Read more …

“It’s all risk and very little reward in the path ahead..”

David Stockman: Stocks Will Plunge 50% In This ‘Daredevil Market’ (CNBC)

David Stockman is intensifying his bear case. President Ronald Reagan’s Office of Management and Budget director blames a bull market that’s getting longer in the tooth — paired with headwinds ranging from President Donald Trump’s leadership to fiscal policy decisions to questionable earnings. “I call this a daredevil market. It’s all risk and very little reward in the path ahead,” Stockman said Tuesday on CNBC’s “Futures Now.” “This market is just way, way over-priced for reality.” His thoughts came as the Nasdaq was reaching all-time highs again, while S&P 500 rose slightly but the Dow failed to extend its win streak to three days in a row.

“The S&P 500 could easily drop to 1,600 because earnings could drop to $75 a share the next time we have a recession,” Stockman warned. “We’re about eight or nine years into this expansion. Everything is crazily priced. I mean the S&P 500 at 24 times at the end, tippy top of a business cycle.” One of his biggest gripes with the bulls is the notion that President Donald Trump’s tax cuts are providing a fundamental lift to stocks. “These tax cuts are going to add to the deficit in the 10th year of an expansion. It’s just irresponsible crazy,” he said. “It’s all going to stock buybacks and M&A deals anyway. That doesn’t cause the economy to grow. It’s just a short-term boost to the stock market that doesn’t last.”

Read more …

All it takes is some hollow words.

Euro Recovers On Rising Bets ECB May Unwind Stimulus (R.)

The euro stayed near two-week highs against many of its rivals on Thursday, on rising bets the ECB may soon announce it will start winding down its massive bond purchase program. Jens Weidmann, the head of Germany’s central bank, said expectations the ECB would taper its bond-buying program by the end of this year were plausible while his Dutch counterpart, Klaas Knot, said there was no reason to continue a quantitative easing program. The trio of comments drove the euro to a two-week high of $1.1800 sharp. The common currency last traded at $1.1781, extending its gains so far this week to 1.15%.

“In the near term, we are likely to see event-driven trading on the euro. We should expect the euro to jump 100 pips (one cent) quite easily on comments from key officials,” said Kyosuke Suzuki, director of forex at Societe Generale. The ECB has been debating whether to end the unprecedented 2.55 trillion euro ($2.99 trillion) bond purchase program this year as the threat of deflation has passed. Still many market players were surprised by the flurry of comments as they had thought uncertainty caused by a political crisis in Italy could make policymakers cautious about indicating an end to stimulus at its policy meeting on June 14.

Indeed, the yield spread of Italian debt to German Bunds widened on Wednesday as Italian bonds are seen as the biggest beneficiary of the ECB’s buying. “This euro buying is essentially short-term trade. People don’t know when Italian debt problems will be solved but they do know when the ECB might announce an exit from stimulus,” said Mitsuo Imaizumi, chief currency strategist at Daiwa Securities.

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But then Europe and Japan signal they’ll do the same.

Indonesia Joins India In Begging Fed To Stop Shrinking Its Balance Sheet (ZH)

On the same day that the governor of Malaysia’s central bank quit, and just days after Urjit Patel, governor of the Reserve Bank of India, took the unprecedented step of writing an oped to the Federal Reserve, begging the US central bank to step tightening monetary conditions, and shrinking its balance sheet, thereby creating a global dollar shortage which has slammed emerging markets (and forced India into an unexpected rate hike overnight), Indonesia’s new central bank chief joined his Indian counterpart in calling on the Federal Reserve to be “more mindful” of the global repercussions of policy tightening amid the ongoing rout in emerging markets.

As Bloomberg reports, in his first interview with international media since he took office two weeks ago, Bank Indonesia Governor Perry Warjiyo echoed what Patel said just days earlier, namely that the pace of the Fed’s balance sheet reduction was a key issue for central bankers across emerging markets. As a reminder, the RBI Governor made exactly the same comments earlier this week, arguing that slowing the pace of stimulus withdrawal at a time when the US Treasury is doubling down on debt issuance, would support global growth, as the alternative would be an emerging markets crisis that would spill over into developed markets.

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Get the hell out. Take their powers away.

Fed Clambers Back To Positive Real Rates, Now Debate Is When To Stop (R.)

The Federal Reserve will likely raise its target interest rate to above the rate of inflation for the first time in a decade next week, igniting a new debate: when to stop. The Fed has been gradually hiking rates since late 2015 with little sign of tighter conditions hampering economic recovery. The expected June increase will raise the stakes as the Fed seeks to sustain the second-longest U.S. expansion on record while continuing to edge rates higher. With inflation still tame, policymakers are aiming for a “neutral” rate that neither slows nor speeds economic growth. But estimates of neutral are imprecise, and as interest rates top inflation and enter positive “real” territory, analysts feel the Fed is at higher risk of going too far and actually crimping the recovery.

The Fed is “gradually entering a new world when rates are at 2 percent,” nearing zero on a real basis and approaching where they are no longer felt to be stimulating economic activity, said Thomas Costerg, senior U.S. economist at Pictet Wealth Management. The last time rates moved into positive real territory on a sustained basis was the spring of 2005 when the Fed began tightening rapidly after a period of arguably too-lax monetary policy, ending just months before the start of the 2007-2009 financial crisis. The debate over the current cycle’s end point “came earlier than I expected,” Costerg said, with the Fed facing imminent calls on where the neutral rate of interest lies.

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Opaque topic, but this is obviously not good.

Social Security To Tap Into Trust Fund For First Time In 36 Years (MW)

Medicare’s finances were downgraded in a new report from the program’s trustees Tuesday, while the projection for Social Security’s stayed the same as last year. Medicare’s hospital insurance fund will be depleted in 2026, said the trustees who oversee the benefit program in an annual report. That is three years earlier than projected last year. This year, like last year, Social Security’s trustees said the program’s two trust funds would be depleted in 2034. For the first time since 1982, Social Security has to dip into the trust fund to pay for the program this year. It should be stressed that the reports don’t indicate that benefits disappear in those years.

After 2034, Social Security’s trustees said tax income would be sufficient to pay about three-quarters of retirees’ benefits. Congress could at any time choose to pay for the benefits through the general fund. Medicare beneficiaries also wouldn’t face an immediate cut after the trust fund is depleted in 2026. The trustees said the share of benefits that can be paid from revenues will decline to 78% in 2039. That share rises again to 85% in 2092. The hospital fund is financed mainly through payroll taxes. Social Security trustees said that reserves for the fund that pays disability benefits would be exhausted in 2032. Combined with the fund that pays benefits to retirees, all Social Security reserves would be exhausted by 2034, they said.

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Better start acting.

Opioids Are Responsible For 20% Of US Millennial Deaths (ZH)

The opioid crisis has become a significant public health emergency for many Americans, especially for millennials, so much so that one out of every five deaths among young adults is related to opioids, suggested a new report. The study is called “The Burden of Opioid-Related Mortality in the United States,” published Friday in JAMA. Researchers from St. Michael’s Hospital in Toronto, Ontario, found that all opiate deaths — which accounts for natural opiates, semi-synthetic/ humanmade opioids, and fully synthetic/ humanmade opioids — have increased a mindboggling 292% from 2001 through 2016, with one in every 65 deaths related to opioids by 2016. Men represented 70% of all opioid-related deaths by 2016, and the number was astronomically higher for millennials (24 and 35 years of age).

According to the study, one out of every five deaths among millennials in the United States is related to opioids. In contrast, opioid-related deaths for the same cohort accounted for 4% of all deaths in 2001. Moreover, it gets worse; the second most impacted group was 15 to 24-year-olds, which suggests, the opioid epidemic is now ripping through Generation Z (born after 1995). In 2016, nearly 12.4% of all deaths in this age group were attributed to opioids. “Despite the amount of attention that has been placed on this public health issue, we are increasingly seeing the devastating impact that early loss of life from opioids is having across the United States,” said Dr. Tara Gomes, a scientist in the Li Ka Shing Knowledge Institute of St. Michael’s.

“In the absence of a multidisciplinary approach to this issue that combines access to treatment, harm reduction and education, this crisis will impact the U.S. for generations,” she added. Over the 15-year period, more than 335,000 opioid-related deaths were recorded in the United States that met the study’s criteria. Researchers said this number is an increase of 345% from 9,489 in 2001 (33.3 deaths per million population) to 42, 245 in 2016 (130.7 deaths per million population).

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“At what stage of their hapless fiddling, constant arguing and pitiful attempts to administer the kiss of life to the corpse that Brexit has turned out to be, does a politician officially earn the title of – stupid idiot?”

The ‘Doomsday Brexit Plan’ Document Should Frighten Us All (TP)

This is the first paragraph of The Times article (paywall) regarding Britain’s now famous Doomsday Brexit plan. “Britain would be hit with shortages of medicine, fuel and food within a fortnight if the UK tries to leave the European Union without a deal, according to a Doomsday Brexit scenario drawn up by senior civil servants for David Davis.” The Times confirms that the port of Dover will collapse “on day one” if Britain crashes out of the EU, leading to critical shortages of supplies. This was the middle of three scenarios put forward by senior advisors. A type of best guestimate if you like. You simply do not want to know the outcome of the worst of those three scenarios. Indeed, we have been spared from such details.

The article states that the RAF would have to be deployed to ferry supplies around Britain. And yes, we’re still on the middle scenario here. “You would have to medevac medicine into Britain, and at the end of week two we would be running out of petrol as well,” a contributing source said. The report continues to describe matters such as cross-channel disruption for heavy goods vehicles, which would also be catastrophic. Massive carparks will be required. A senior official said in the ‘Doomsday’ Brexit plan: “We are entirely dependent on Europe reciprocating our posture that we will do nothing to impede the flow of goods into the UK. If for whatever reason, Europe decides to slow that supply down, then we’re screwed.”

Let’s not worry about the fact that French borders are often left in chaos due to the all too familiar strikes that appear almost monthly during holiday season for one reason or another. Home secretary Sajid Javid makes an unconvincing comment stating he’s ‘confident’ a deal will be done. That’s hardly the type of assurance we need is it? UK officials emphasised that the June EU summit due on the 28th was heading for a “car crash” because “no progress has been made since March” to devise plans for a long-term deal. If your confidence in Brexit is starting to wane, don’t worry, half the nation are not just anxious but downright fearful – mainly because, neither in or out has given any concreate evidence of likely outcomes. This is probably because Brexit hasn’t been done before – and was designed that way. Deliberately.

At what stage of their hapless fiddling, constant arguing and pitiful attempts to administer the kiss of life to the corpse that Brexit has turned out to be, does a politician officially earn the title of – stupid idiot? “Just bloody get on with it” shout the Brexiteers, except both they and the UK government still can’t decide what ‘it’ is.

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I’ve asked it before: where will Britain be 10 years from now?

Nearly 4 Million UK Adults Forced To Use Food Banks (Ind.)

Nearly 4 million adults in the UK have been forced to use food banks due to ”shocking” levels of deprivation, figures have revealed for the first time. An exclusive poll commissioned by The Independent reveals one in 14 Britons has had to use a food bank, with similar numbers also forced to skip meals and borrow money as austerity measures leave them “penniless with nowhere to turn”. The findings come as a major report by the Joseph Rowntree Foundation (JRF) shows more than 1.5 million people were destitute in the UK last year alone, a figure higher than the populations of Liverpool and Birmingham combined. This includes 365,000 children, with experts warning that social security policy changes under the Tory government were leading to “destitution by design”.

Destitution is defined as people lacking two “essential needs”, such as food or housing. The polling on food poverty, from a representative sample of 1,050 UK adults carried out for The Independent by D-CYFOR, suggests that 7 per cent of the adult population – or 3.7 million people – have used a food bank to receive a meal. A million people have decreased the portion size of their child’s meal due to financial constraints, the survey says. The results come after it emerged in April that the number of emergency meals handed out at food banks had risen at a higher rate than ever, soaring by 13 per cent in a year, with more than 1.3 million three-day emergency food supplies given to people in crisis in the 12 months to March.

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I haven’t read the book -and it’s not out yet- but this seems, let’s say, naive. If you figure that a constant increase in energy use is the culprit, how can you say renewable nergy is the solution, and not call for using less energy?

How We Created The Anthropocene (BBC)

Factories and farming remove as much nitrogen from the atmosphere as all of Earth’s natural processes, and the climate is changing fast because of carbon dioxide emissions from fossil fuel use. Beyond these grim statistics, the critical question is: will today’s interconnected mega-civilisation that allows 7.5 billion people to lead physically healthier and longer lives than at any time in our history continue from strength to strength? Or will we keep using more and more resources until human civilisation collapses? To answer this, we re-interpret human history using the tools of modern science, to provide a clearer view of the future.

Tracing the ever-greater environmental impacts of different human societies since our march out of Africa, we found that there are just five broad types that have spread worldwide. Our original hunter-gatherer societies were followed by the agricultural revolution and new types of society beginning some 10,500 years ago. The next shift resulted from the formation of the first global economy, after Europeans arrived in the Americas in 1492, which was followed in the late 1700s by the new societies following the Industrial Revolution. The final type is today’s high-production consumer capitalist mode of living that emerged after WWII.

A careful analysis shows that each successive mode of living is reliant on greater energy use, greater information and knowledge availability, and an increase in the human population, which together increase our collective agency. These insights help us think about avoiding the coming crash as our massive global economy doubles in size every 25 years, and on to the possibilities of a new and more sustainable sixth mode of living to replace consumer capitalism. Seen in this way, renewable energy for all takes on an importance beyond stopping climate breakdown; likewise free education and the internet for all has a significance beyond access to social media – as they empower women, which helps stabilise the population.

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