Aug 282017
 
 August 28, 2017  Posted by at 9:01 am Finance Tagged with: , , , , , , , , ,  5 Responses »
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Lou Reed New York City 1966

 

Harvey’s Cost Reaches Catastrophe: Only 15% Of Homes Have Flood Insurance (BBG)
Gasoline Surges, Oil Holds Near $48 as Harvey Shuts Refineries (BBG)
Mammoth Flood Disaster in Houston: More Rain Yet to Come (WU)
The Coming Collapse Of China’s Ponzi Scheme Economy (SCMP)
What’s Driving The Growth In US ‘Shadow Banking’ (CBR)
Volatility Makes a Comeback (Rickards)
YouTube “Economically Censors” Ron Paul (ZH)
Should The Rich Be Taxed More? (G.)
The West’s Wealth Is Based On Slavery. Reparations Should Be Paid (G.)
Danone Sends 5,000 Cows to Siberia in Quest for Cheaper Milk (BBG)

 

 

The real tragedy takes place below the surface. Sort of literally. Much more rain to come.

Harvey’s Cost Reaches Catastrophe: Only 15% Of Homes Have Flood Insurance (BBG)

Hurricane Harvey’s second act across southern Texas is turning into an economic catastrophe – with damages likely to stretch into tens of billions of dollars and an unusually large share of victims lacking adequate insurance, according to early estimates. Harvey’s cost could mount to $24 billion when including the impact of relentless flooding on the labor force, power grid, transportation and other elements that support the region’s energy sector, Chuck Watson, a disaster modeler with Enki Research, said by phone on Sunday. That would place it among the top eight hurricanes to ever strike the U.S. “A historic event is currently unfolding in Texas,” Aon wrote in an alert to clients. “It will take weeks until the full scope and magnitude of the damage is realized,” and already it’s clear that “an abnormally high portion of economic damage caused by flooding will not be covered,” the insurance broker said.

[..] Most people with flood insurance buy policies backed by the federal government’s National Flood Insurance Program. As of April, less than one-sixth of homes in Houston’s Harris County had federal coverage, according to Aon. That would leave more than 1 million homes unprotected in the county. Coverage rates are similar in neighboring areas. Many cars also will be totaled. “A lot of these people are going to be in very serious financial situations,” said Loretta Worters, a spokeswoman for the Insurance Information Institute. “Most people who are living in these areas do not have flood insurance. They may be able to collect some grants from the government, but there are not a lot, usually they’re very limited. There are no-interest to low-interest loans, but you have to pay them back.”

The federal program itself is already struggling with $25 billion of debt. The existing program is set to expire on Sept. 30 and is up for review in Congress, which ends its recess Sept. 5. Costs still will likely soar for insurance companies and their reinsurers, biting into earnings. As Harvey bore down on the coastline Friday, William Blair, a securities firm that tracks the industry, said the storm could theoretically inflict $25 billion of insured losses if it landed as a “large category 3 hurricane.” Policyholder-owned State Farm Mutual Automobile Insurance has the largest share in the market for home coverage in Texas, followed by Allstate, which is publicly traded. William Blair estimated that, in that scenario, Allstate could incur $500 million of pretax catastrophe losses, shaving 89 cents off of earnings per share.

Read more …

Most shutdowns so far are precautionary. But…

Gasoline Surges, Oil Holds Near $48 as Harvey Shuts Refineries (BBG)

Gasoline surged to the highest in two years and oil was steady as flooding from Tropical Storm Harvey inundated refining centers along the Texas coast, shutting more than 10% of U.S. fuel-making capacity. Motor fuel prices rose as much as 6.8%, while oil held gains near $48 a barrel. Harvey, the strongest storm to hit the U.S. since 2004, made landfall as a hurricane Friday, flooding cities and shutting plants able to process some 2.26 million barrels of oil a day. Pipelines were closed, potentially stranding some crude in West Texas and starving New York Harbor of gasoline. Gasoline prices are going to continue to rise this week as we expect another three days of rain in the Houston area,” Andy Lipow, president of consultant Lipow Oil in Houston, said by phone.

“With pipeline operators beginning to shut down their crude oil and refined product infrastructure, I expect to see further curtailment of refinery operations. A spike in gasoline and diesel prices will drag up crude oil prices.” Oil has traded this month in the tightest range since February as investors weigh rising global supply against output cuts by members of OPEC and its allies. As Harvey led to widespread flooding, Shell shut its Deer Park plant, while Magellan Midstream suspended its inbound and outbound refined products and crude pipeline transportation services in the Houston area. Gasoline for September delivery climbed as much as 11.33 cents to $1.7799 a gallon on the New York Mercantile Exchange, the highest intraday price for a front-month contract since July 2015.

It traded at $1.7621 at 12:36 p.m. in Hong Kong. West Texas Intermediate oil for October delivery fell 16 cents to $47.71 a barrel after advancing 0.9% on Friday. Brent crude’s premium to WTI widened to the largest in two years with the global benchmark trading at as much as $4.96 above the U.S. marker. Brent for October settlement gained 18 cents, or 0.3%, to $52.59 a barrel on the London-based ICE Futures Europe exchange.

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Waether Underground is probably the best source.

Mammoth Flood Disaster in Houston: More Rain Yet to Come (WU)

Harvey’s winds are expected to remain modest, and it could become a tropical depression at any point, but winds are not the problem here. The NOAA/NWS National Hurricane Center now predicts that Harvey will inch its way into the Gulf of Mexico—though just barely—by Monday night, then arc northeast and make a second landfall just west of Houston on Wednesday. The 12Z GFS and 00Z European model runs agree on a general northward motion for Harvey across eastern Texas, beginning around midweek. At this point it may make little difference whether Harvey stays just inland or moves just offshore, since rainbands would continue to be funneled toward Houston either way. The fine-scale particulars of this outlook may shift over time, but the overall message is consistent: Harvey will be a devastating rainmaking presence in southeast Texas for days to come.

Harvey’s circulation is located in a near-ideal spot for funneling vast amounts of moisture from the Gulf of Mexico toward the upper Texas coast. Here, converging winds at low levels have been concentrating the moisture into north-south-oriented bands of intense thunderstorms with torrential rain. Since Harvey is barely moving, these bands are creeping only slowly eastward as individual cells race north along them—a “training” set-up that is common in major flood events. Mesoscale models, our best guidance for short-term, small-scale behavior of thunderstorms, show little sign of relief for southeast Texas anytime soon. Convection-resolving mesoscale models, which have a tight enough resolution to depict individual thunderstorms, are an invaluable tool in situations like this. The mesoscale nested NAM model predicts that 20” – 30” of additional rainfall is likely through Tuesday across the Houston metro area, with even larger totals at some points.

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Hmm. But what if China manages to unload all its overcapacity on the Belt Road, and makes other countries pay?

The Coming Collapse Of China’s Ponzi Scheme Economy (SCMP)

Friends who have a greater interest than I do in reading the tea leaves in Beijing tell me that the emphasis in relations with Hong Kong from now on will be on one country rather than two systems. I think this phrases things the wrong way. The one country bit was never in issue. What they actually mean to say is that Beijing’s system of state command of the economy will become dominant and Hong Kong’s more freewheeling system will fade away. I don’t think it will happen. In my view human society is so dynamic that no command system can last long in charge of an economy. Attempts at this particular form of hubris inevitably end in either war or financial crisis. For the Soviet Union it was financial crisis. I think the same fate awaits Beijing.

Consider crude steel production, a test-tube example of how command economies get it wrong. In the mainland this stood in June at an all time monthly record of 73 million tonnes, five times the total production in all of Europe. Steel was recently targeted for a reduction in capacity but then a regime of easy money intended to help the industry overcome a difficult period of contraction instead stimulated production. It has happened across the mainland’s rust belt industries. Why is so much steel needed? Simple. It is needed to build more steel mills so as to build more shipyards, ports, railways and bridges so that more ships can be built to carry more iron ore to more ports and thence along more rails and bridges to more steel mills so as to build more shipyards, ports, railways …

What we have here, in short, is a giant Ponzi scheme. In a Ponzi scheme you pay out the winnings of the first entrants with what others later pay into it. As long as it keeps growing everything is fine. When it stops growing it collapses. In this case you justify production with demand based purely on more production. As long as you keep pushing production up everything looks fine. At its peak in 2014 China turned out 30 times more cement than the United States, and the latest production figures are only a smidgen less than 2014’s.

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What do you think? A good sign? It isn’t in China….

What’s Driving The Growth In US ‘Shadow Banking’ (CBR)

In the wake of the 2007–10 financial crisis, there’s been sizeable growth of “shadow banking”— companies without banking charters entering lines of business traditionally associated with deposit-taking banks. Hedge funds that make direct loans to midsize businesses, online mortgage originators, peer-to-peer lending platforms, and payday lenders have all been on the rise. What’s behind this? According to Chicago Booth’s Gregor Matvos, Booth PhD candidate Greg Buchak, Columbia’s Tomasz Piskorski, and Stanford’s Amit Seru, much of the growth is due to regulations that have pushed banks out of traditional lending businesses. The researchers also attribute some growth to online technology that has lowered the barrier to entry in markets where lenders once needed networks of physical branches to have any hope of building business.

The researchers focus on the US residential lending market, the largest consumer loan market in the country—and the market that drew the most attention from regulators after 2008. Between 2007 and 2015, shadow banks nearly tripled their market share, from 14% to 38%. They gained the most in the Federal Housing Administration (FHA) mortgage market, which serves lower-quality borrowers and is where shadow banks’ share rose from 20% to 75%. Traditional banks retreated from sectors of the mortgage market where the regulatory burden grew the most, the researchers note. Traditional banks have been particularly hindered by rules that increased monitoring of balance-sheet holdings and constrained what banks could hold in their own accounts.

Their retreat helped shadow banking succeed in the riskier FHA market and in more-traditional, conforming mortgages. The researchers also separated shadow banks into those that did and didn’t originate loans online. During the study period, lenders that originated loans online (fintech lenders) saw market share rise from 4% to 13%—but that remains less than half of the shadow-banking sector.

Read more …

Super spikes.

Volatility Makes a Comeback (Rickards)

Volatility has languished near all-time lows for months on end. That’s about to change. For almost a year, one of the most profitable trading strategies has been to sell volatility. Since the election of Donald Trump stocks have been a one-way bet. They almost always go up, and have hit record highs day after day. The strategy of selling volatility has been so profitable that promoters tout it to investors as a source of “steady, low-risk income.” Nothing could be further from the truth. Yes, sellers of volatility have made steady profits the past year. But the strategy is extremely risky and you could lose all of your profits in a single bad day. Think of this strategy as betting your life’s savings on red at a roulette table. If the wheel comes up red, you double your money. But if you keep playing eventually the wheel will come up black and you’ll lose everything.

That’s what it’s like to sell volatility. It feels good for a while, but eventually a black swan appears like the black number on the roulette wheel, and the sellers get wiped out. I focus on the shocks and unexpected events that others don’t see. Right now looks like one of those highly favorable windows when the purchase of volatility is the right move. You could collect huge winnings as the short sellers scramble to cover their bets before they are wiped out completely. The chart below shows a 20-year history of volatility spikes. You can observe long periods of relatively low volatility such as 2004 to 2007, and 2013 to mid-2015, but these are inevitably followed by volatility super-spikes. During these super-spikes the sellers of volatility are crushed, sometimes to the point of bankruptcy because they can’t cover their bets.

The period from mid-2015 to late 2016 saw some brief volatility spikes associated with the Chinese devaluation (August and December 2015), Brexit (June 23, 2016) and the election of Donald Trump (Nov. 8, 2016). But, none of these spikes reached the super-spike levels of 2008 – 2012. In short, we have been on a volatility holiday. Volatility is historically low and has remained so for an unusually long period of time. The sellers of volatility have been collecting “steady income,” yet this is really just a winning streak at the volatility casino. The wheel of fortune is about to turn and luck is about to run out for the sellers. It will soon be time for the buyers of volatility to collect their winnings, big time.

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Sliding scales. One step before large tech is declared utility?!

YouTube “Economically Censors” Ron Paul (ZH)

Former US Congressman Ron Paul has joined a growing list of independent political journalists and commentators who’re being economically punished by YouTube despite producing videos that routinely receive hundreds of thousands of views. In a tweet published Saturday, Wikileaks founder Julian Assange tweeted a screenshot of Paul’s “Liberty Report” page showing that his videos had been labeled “not suitable” for all advertisers by YouTube’s content arbiters. Assange claims that Paul was being punished for speaking out about President Donald Trump’s decision to increase the number of US troops in Afghanistan, after Paul published a video on the subject earlier this week. The notion that YouTube would want to economically punish a former US Congressman for sharing his views on US foreign policy – a topic that he is unequivocally qualified to speak about – is absurd.

Furthermore, the “review requested” marking on one of Paul’s videos reveals that they were initially flagged by users before YouTube’s moderators confirmed that the videos were unsuitable for a broad audience. Other political commentators who’ve been censored by YouTube include Paul Joseph Watson and Tim Black – both ostensibly for sharing political views that differ from the mainstream neo-liberal ideology favored by the Silicon Valley elite. Last week, Google – another Alphabet Inc. company – briefly banned Salil Mehta, an adjunct professor at Columbia and Georgetown who teaches probability and data science, from using its service, freezing his accounts without providing an explanation. He was later allowed to return to the service. Conservative journalist Lauren Southern spoke out about YouTube’s drive to stifle politically divergent journalists and commentators during an interview with the Daily Caller.

“I think it would be insane to suggest there’s not an active effort to censor conservative and independent views,” said Southern. “Considering most of Silicon Valley participate in the censorship of alleged ‘hate speech,’ diversity hiring and inclusivity committees. Their entire model is based around a far left outline. There’s no merit hiring, there’s no support of free speech and there certainly is not an equal representation of political views at these companies.” Of course, Google isn’t the only Silicon Valley company that’s enamored with censorship. Facebook has promised to eradicate “fake news,” which, by its definition, includes political content that falls outside of the mainstream. Still, economically punishing a former US Congressman and medical doctor is a new low in Silicon Valley’s campaign to stamp out dissent.

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The most prosperous times of our societies coincide with the highest tax levels for the rich.

Should The Rich Be Taxed More? (G.)

The past four decades have been extremely kind to those at the top. They have seen their incomes grow faster than the rest of the population and hold a far bigger share of wealth in the form of property and financial investments than the rest of the population. Over the years a bigger slice of national income has gone to capital at the expense of labour, and the rich have been the beneficiaries of that, because they are more likely to own shares and expensive houses. The trend has been particularly strong in the US, where labour’s share of income has fallen from a recent peak of 57% at the end of Bill Clinton’s presidency to 53% by 2015. The Gini coefficient – a measure of inequality – has been steadily rising since 1970 and is now at levels normally seen in developing rather than advanced economies.

Hatgioannides, Karanassou and Sala seek to take account of these profound changes in the distribution of income and wealth. They do so by dividing the average income tax rate of a particular slice of the US population by the%age of national income commanded by that same group and by their share of wealth. They then look at whether by this measure – the fiscal inequality coefficient – the US tax system has become more or less progressive over time. The findings show quite clearly that it has become less progressive. In terms of income, the poorest 99% of the US population paid nine times as much income tax as the richest 1%, both when John F Kennedy was president in the early 1960s and when Ronald Reagan beat Jimmy Carter in the 1980 race for the White House. By 2014, they paid 21 times as much.

Similarly, the bottom 99.9% in the US paid 28 times as much tax as the elite 0.1% in the early 1960s and the early 1980s, but by 2014 they were paying 76 times as much. The same trend applies – although it is not pronounced – when income tax is divided by the share of wealth. The bottom 99% paid 22 times as much income tax as the wealthiest 1% in 1980 but were paying 47 times as much in 2014. The bottom 99.9% paid 58 times as much income tax as the top 0.1% before the onset of Reaganomics; by 2014 they were paying 175 times as much. [..] As the authors note, since 1980, economic policy making has been dominated by the idea that deregulation, less generous welfare and tax cuts will stimulate higher investment, higher productivity, higher growth and higher living standards for all. None of this has occurred and, what’s more, the social mobility in the decades after the second world war has been thrown into reverse. The great American dream – the notion that anybody can strike it rich – is dead.

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They won’t be.

The West’s Wealth Is Based On Slavery. Reparations Should Be Paid (G.)

Malcolm X explained that “if you stick a knife in my back nine inches and pull it out six inches, that’s not progress. If you pull it all the way out, that’s not progress. The progress comes from healing the wound that the blow made”. Instead of attempting to fix the damage, we are completely unable to progress on issues of equality because countries such as Britain “won’t even admit the knife is there”. It is the height of delusion to think that the impact of slavery ended with emancipation, or that empire was absolved by the charade of independence being bestowed on the former colonies.

[..]It is not just governments that owe a debt; some of the biggest institutions and corporations built their wealth on slavery. Lloyds of London is one of Britain’s most successful companies and its roots lie in insuring the merchant trade in the 17th century. The fact that this was the slave trade has already led to civil action being taken by African Americans in New York. The church, many of the biggest banks, much of the ironworks industry and port cities gorged themselves on the profits from human flesh. It is clear that it would be just to pay reparations, and it is also possible to calculate the amount that Britain and other nations owe. A lot of work has been done in the United States to determine the damages owed to African Americans. The figure owed comes to far more than the “forty acres and a mule” that were promised to some African Americans who fought in the civil war.

The latest calculations from researchers estimates that for unpaid labour, taking into account interest and inflation, African Americans are owed anywhere between $5.9tn and $14.2tn. It would not be prohibitively complicated to work out the debts owed by the western powers, or the companies that enriched themselves off exploitation. The obviousness of the issue is such that a federation of Caribbean countries (Caricom) is now demanding reparations, as is the Movement for Black Lives in America and Pan-Afrikan Reparations Coalition in Europe. In many ways the calls for reparatory justice do not take go far enough. Caricom includes a demand to cancel third world debt, and the Movement for Black Lives for free tuition for African Americans.

Both of these are examples of removing the knife from our backs, rather than healing the wound. Third world debt was an unjust mechanism for maintaining colonial economic control and; allowing free access to a deeply problematic school system will not eradicate the impacts of centuries of oppression. In order to have racial justice we need to hit the reset button and have the west account for the wealth stolen and devastation caused. Nothing short of a massive transfer of wealth from the developed to the underdeveloped world, and to the descendants of slavery and colonialism in the west, can heal the deep wounds inflicted.

Read more …

Cows to Qatar, cown to SIberia: the new backpackers?!

Danone Sends 5,000 Cows to Siberia in Quest for Cheaper Milk (BBG)

President Vladimir Putin’s ban on European Union cheese imports has driven up milk prices in Russia by so much that French yogurt maker Danone is transporting almost 5,000 cows to a farm in Siberia to ensure it has an affordable supply. The Holstein cows are traveling as many as 2,800 miles (4,500 kilometers) in trucks from the Netherlands and Germany, boosting the herd on a farm near the city of Tyumen, according to Charlie Cappetti, head of Danone’s Russian unit. That should protect the company from the increase in raw milk prices, which are up 14% this year, he said. “Milk prices have been going up steadily,” Cappetti said in an interview in Moscow. “That puts products such as yogurt under pressure.” While the French dairy company doesn’t normally invest in agriculture, it made an exception for Russia.

After Putin’s ban on dairy imports took hold in 2014, demand for milk surged as local cheesemakers rushed to replace French camembert and Italian pecorino. That has exacerbated the inflationary effects of the ruble’s weakness. Danone invested in the 60-hectare (150-acre) farm with local producer Damate, Cappetti said. The first cows started to provide milk for Danone in May, and a final shipment of cattle is due to arrive in September. “We hope that Russian milk inflation will slow down next year,” the executive said. The difference between supply and demand is narrowing as new milk is coming to the market, including from the Siberian farm. While easing milk inflation may help the Russian dairy market rebound in volume terms, Danone isn’t expecting a fast economic recovery in the country, according to Cappetti. Sales in Russia have been growing in line with inflation in the first half and should rise in 2018, he said.

Read more …

May 162017
 
 May 16, 2017  Posted by at 8:25 am Finance Tagged with: , , , , , , , , , ,  1 Response »
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Fred Stein Chinatown 1944

 

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

 

 

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

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

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

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

Read more …

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

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

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

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

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

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

Read more …

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

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

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

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

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

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

Read more …

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

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

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

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

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

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We’ll believe it when the bankruptcies start accumulating.

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

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

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

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Useless numbers from Goldman Sachs.

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

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

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

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Chelsea Manning is free as of tomorrow.

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

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

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

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

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They know something you don’t.

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

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

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

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Lean and efficient, and losing sales.

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

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

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

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FEMA rules!

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

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

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

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

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

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

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

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

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

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

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

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

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The illusion that the ECB can manage the EU economy.

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

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

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

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

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

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

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

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