Feb 282016
 
 February 28, 2016  Posted by at 9:07 am Finance Tagged with: , , , , , , , , ,  4 Responses »


Harris&Ewing US Weather Bureau kiosque, Pennsylvania Avenue, Washington, DC 1921

Markets At Risk As G20 Proves Investor Hopes Were “Pure Fantasy” (ZH)
Currency Wars Coming In Leaderless World: Citi’s Buiter (CNBC)
G-20 Wants Governments Doing More, and Central Banks Less (BBG)
We’re In Recession And It’s Getting Worse: Ron Paul (CNBC)
PBoC Defends Halting Publication Of Sensitive Financial Data (SCMP)
How Xi Jinping Is Bringing China’s Media To Heel (Guardian)
Mervyn King: New Financial Crisis Is ‘Certain’ Without Reform Of Banks (PA)
Hidden Debt That No One Is Talking About -And It Involves You- (SMH)
North Sea Firms Are ‘Sleepwalking Into Disaster’ As Insolvencies Loom (Tel.)
European Oil Majors Tally $19 Billion In Losses (MW)
Citigroup Faces Fraud Suit Claiming $1.1 Billion in Losses (BBG)
How Land Barons, Industrialists And Bankers Corrupted Economics (Kent)
Alabama Lawmakers To Cities: We Won’t Let You Raise The Minimum Wage (CSM)
The Donald – The Good And Bad Of It (David Stockman)
Switzerland Votes On Expelling Foreigners For Minor Offences (Guardian)
Double Crisis Deepens Despair In Greece’s ‘Warehouse Of Souls’ (Guardian)

As I said yesterday before the communique was out.

Markets At Risk As G20 Proves Investor Hopes Were “Pure Fantasy” (ZH)

Anyone hoping this week’s G-20 meeting would yield some manner of “Shanghai Accord” to revive sluggish global growth, pull the global economy out of the deflationary doldrums and calm jittery markets that have seen harrowing bouts of volatility in the first two months of the year are disappointed on Saturday. The joint communique issued by policymakers at the end of the two-day summit is bland and generic, with officials parroting vacuous promises to avoid competitive currency devaluations and maintain monetary policies aimed at supporting economic activity and price stability. Officials pledged to “consult closely” on FX markets, a reference presumably to China’s “surprise” August 11 deval and the PBoC’s move in December to adopt a trade weighted basket as a reference point for the RMB, a move that telegraphed lots of downside for the currency.

The statement also “acknowledges” the fact that geopolitical risks abound and as Bloomberg noted this morning, “officials added a potential ‘Brexit’ to its long worry list in the communique.” “That’s a win for Chancellor of the Exchequer George Osborne, who had sought to rally international finance chiefs behind the campaign to keep Britain in the European Union,” Bloomberg goes on to point out. “Downside risks and vulnerabilities have risen,” due to volatile capital flows and slumping commodities but – and this was a critical passage – “monetary policy alone cannot lead to balanced growth.” What?! We thought counter-cyclical Keynesian tinkering was the magic elixir. A cure-all that smooths business cycles and creates demand out of thin air.

Now you’re telling us it “can’t lead to balanced growth” and implicitly that Paul Krugman is a snake oil salesman? This can’t be. “The global recovery continues, but it remains uneven and falls short of our ambition for strong, sustainable and balanced growth,” the statment continues, in a rather dour assessment of the economic landscape. “While recognising these challenges, we nevertheless judge that the magnitude of recent market volatility has not reflected the underlying fundamentals of the global economy,” officials added. Right. If markets were “reflecting the underlying fundamentals” of this global deflationary trainwreck, things would probably be even more volatile.

Predictably, everyone called on fiscal policy to save the day, in what amounts to a tacit admission that central banks have failed. “Countries will use fiscal policy flexibly to strengthen growth, job creation and confidence, while enhancing resilience and ensuring debt as a share of GDP is on a sustainable path,” the statement reads. So countries will somehow adopt expansionary fiscal policies without resorting to deficit financing via debt sales. So, magic. Got it. Long story short, there is no “Shanghai Accord” akin to the 1985 Plaza Accord between the United States, France, West Germany, Japan, and the United Kingdom, which agreed to weaken the USD to shore up America’s trade deficit and boost economic growth. All we have here is a generic statement and empty promises.

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Even Buiter agrees.

Currency Wars Coming In Leaderless World: Citi’s Buiter (CNBC)

The global economy is bound to remain leaderless, as G-20 countries meeting in Shanghai on Friday are unlikely to produce anything more than a rhetorical statement, Citigroup’s chief economist Willem Buiter said. Buiter said Friday the global economy truly needs an agreement on exchange rates that will be defended through intervention, as well as expansion of supportive monetary policy, fiscal stimulus modulated according to countries’ needs, and “supply side reforms that sustain animal spirits in the corporate sector.” “You’re not going to get any of that in substance. There is no leadership in the global economy. And there is no willingness to forgo the short-run benefits of beggar-thy-neighbor exchange rate depreciation. Currency wars will be the reality of what we’ll see over the next few years,” he told CNBC’s “Squawk on the Street”.

Buiter and Citigroup analysts said in a note Wednesday the risk of the global economy falling into a recession is rising as fundamentals remain poor. “We are currently in a highly precarious environment for global growth and asset markets after two to three years of relative calm,” Citigroup said, noting that global growth was “unusually weak” in the fourth quarter at around 2 percent. Buiter said central banks are nearly out of ammo when it comes to using conventional and unconventional monetary policy as a means of stimulating demand. “If we have a further slowdown, it will have to be combined more with the fiscal policy, and the world just isn’t ready for that, institutionally, politically and any other way,” he said.

At the same time, the private and public sectors in most advanced economies have become highly leveraged, he noted. Citi is not expecting a U.S. recession, provided no surprises from abroad send the dollar sharply higher. But it does anticipate a further incremental slowing in the absence of a supportive Federal Reserve and as corporations ratchet up debt following a period of “unspectacular, mediocre” growth, he said. Markets have appropriately priced in the risk of recession following last year’s “excessive optimism,” he said. “Markets are ahead of the policymakers here for once,” he said. “People have now rediscovered that, yes, future earnings growth projections on which the stock valuations were based were unrealistic.”

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While knowing that governments won’t.

G-20 Wants Governments Doing More, and Central Banks Less (BBG)

Finance chiefs from the world’s top economies committed their governments to doing more to boost global growth amid mounting concerns over the potency of monetary policy. In a pledge that will prove easier to write than deliver and may disappoint investors looking for a coordinated stimulus plan, the Group of 20 said “we will use fiscal policy flexibly to strengthen growth, job creation and confidence.” After a two-day meeting in Shanghai, finance ministers and central bank governors also doubled down on a line from their last gathering that “monetary policy alone cannot lead to balanced growth.” For those few analysts calling for a 1985 Plaza Accord-type agreement to address exchange-rate tensions, there was no such luck: IMF Managing Director Christine Lagarde said there were no discussions about anything like that.

The G-20 members did reaffirm they will refrain from competitive devaluations, and – in new language – agreed to consult closely on currencies. An increasing sense monetary policy is reaching its limit permeated officials’ briefings during the meetings that ended Saturday. While central banks proved critical in avoiding a global slide into depression last decade, there is now no consensus among the world’s top economic guardians backing stepped-up monetary stimulus. That leaves focus on fiscal polices that are subject to domestic political constraints, and a structural-reform agenda the G-20 said will be gauged through a new indicator system. “Central bankers have done their bit in recent years to stabilize the world economy,” said Frederic Neumann at HSBC in Hong Kong.

“But as their tools are losing their effectiveness, only more aggressive fiscal policy and structural reforms will help to lift growth.” Among those publicly indicating a potentially reduced role for central banks was Lagarde, who said Friday the effects of monetary policies, even innovative ones, are diminishing. Bank of England Governor Mark Carney used a Shanghai speech ahead of the G-20 to voice skepticism over negative interest rates – now in place in continental Europe and Japan – and their ability to boost domestic demand.

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“They’re paid to spin it in a positive manner..” “You can’t expect them to say anything else.”

We’re In Recession And It’s Getting Worse: Ron Paul (CNBC)

Ron Paul wants to deliver a message to the market that he claims the Federal Reserve refuses to do itself. The former U.S. Republican congressman said this week that the Fed has been propping up markets, and the U.S. economy has already entered a recession despite what central bankers might say. “They’re paid to spin it in a positive manner,” the libertarian firebrand told CNBC’s “Futures Now” in an interview. He added: “You can’t expect them to say anything else.” Paul’s warning comes as a growing number on Wall Street have turned pessimistic on the economy. This week, Citigroup analysts cautioned in a note that the risk of the global economy sinking into a full-fledged recession is on the rise, amid a “tightening in financial conditions everywhere.”

Dragging down the economy is a massive load of personal and sovereign debt, Paul said. A 2015 analysis by the McKinsey Global Institute said that global debt had grown by $57 trillion in the last several years, while no major economy has successfully de-leveraged since 2007. According to Paul, the Fed has played a large role in that accumulation of debt by implementing artificially low interest rates for years. This has pushed individuals and companies to spend beyond their means, he added.

“When things get out of kilter from artificially low interest rates…the only correction is the liquidation of the debt, but that is not permissible,” Paul said. Now, Paul warned that the government may be losing control of markets, which will lead to more volatility in stocks. “Everything is designed to keep the stock market alive. At the same time, the employment numbers when you look at them closely aren’t all that great,” he said. In January, the U.S. economy added 151,000 jobs, missing economist expectations and falling well short from the previous month. From here, Paul said growth will continue to deteriorate. “I think that the conditions will get a lot worse,” he said. “The slope is going to be down, for economic growth and prosperity.”

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Lame defense that breaks down confidence instead of building it up.

PBoC Defends Halting Publication Of Sensitive Financial Data (SCMP)

China’s central bank has defended the removal of sensitive data from a regular financial report used by the market to assess the flow of capital in and out of the country. The People’s Bank of China said in a statement that the figures were no longer published as they were misleading and not an accurate reflection of capital flows. The removal of the data comes as huge amounts of cash is flowing out of China as the nation’s economy slows and its currency weakens. China’s foreign exchange reserves fell by a record US$108 billion in December and US$99.4 billion in January. The absence of the regular figures in the report was first reported by the South China Morning Post last week. Analysts had complained that sudden lack of clear information made it hard for markets to draw a clear picture of the financial positions in China’s banking system.

Figures on the “position for forex purchase” for all financial institutions, including the central bank, were regularly published in the PBOC’s monthly report on the “Sources and Uses of Credit Funds of Financial Institutions”. The December reading in yuan was 26.6 trillion yuan. But the data was missing in the central bank’s latest report. The central bank did publish figures for its own purchases of foreign exchange. A central bank statement issued before the start of a G20 finance ministers and central bank leaders meeting in Shanghai said the figures on “commercial banks foreign exchange transactions do not necessarily affect the central bank’s foreign exchange position, nor necessarily reflect capital flows”. The data has “little resemblance to its original meaning and cannot reflect the real condition of capital flows”, the statement said.

The indicator was useful to measure capital flows when almost all foreign exchange at commercial banks was purchased in yuan, but particularly after China joined the World Trade Organisation in 2001 the correlation between foreign exchange and yuan positions at commercial banks was no longer clear, the central bank said. The data removed from the report used to be closely monitored by analysts and the media as a guide to capital flows in and out of China. Chen Xingdong, chief economist at BNP Paribas in Beijing, said: “If China’s capital flows were not so closely watched, the tweak may not stir debate, but as China’s capital flow situation is such a hot issue the central bank’s adjustment is put under the spotlight. China’s central bank has to improve its communications” with the market, he said.

[..] Christopher Balding, an associate professor at Peking University HSBC Business School, said the change in published data was relatively small, but still made it more complicated to track China’s capital flows. “Rather than censoring or redacting, it is better to say obfuscating or making [it] more difficult to track,” said Balding. It showed the central bank was unaware “how sceptical people are of these types of surprises and Chinese data”, he said. The problems with central bank data were similar to figures released by other Chinese government agencies, according to Balding. “They are constantly redefining key data to mean different things, most of the time without telling anyone…you never know if you are making the correct comparison.”

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Great way to create confidence.

How Xi Jinping Is Bringing China’s Media To Heel (Guardian)

It was an astonishing admission from one of the Communist party’s key mouthpieces: with China’s economic star fading, its leaders now urgently needed to strengthen their hold on the media in order to maintain control. “It is necessary for the media to restore people’s trust in the Party,” an editorial in the China Daily argued this week in the wake of a high-profile presidential tour of the country’s top news outlets in which Xi Jinping demanded “absolute loyalty” from their journalists. “The nation’s media outlets are essential to political stability.” China’s government-run media has long been a propaganda tool of the Party with Chairman Mao once famously declaring: “Revolution relies on pens and guns.”

But as Xi Jinping enters his third year as president experts say he is seeking to cement that grip even further, doubling down on the Party’s control of organisations such as state broadcaster CCTV, official news agency Xinhua, and Beijing’s flagship newspaper, the People’s Daily. “They must love the party, protect the party, and closely align themselves with the party leadership in thought, politics and action,” Xi told newsroom staff during a highly choreographed tour of the three outlets last Friday after which he set out his blueprint for the media. In case Xi’s message had been missed, an editorial in the People’s Daily informed news reporters their key role was not as speakers of truth to power but “disseminators of the Party’s policies and propositions”. “Guiding public opinion for the Party is crucial to governance of the country,” the newspaper said.

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‘Lord King’. How odd that sounds.

Mervyn King: New Financial Crisis Is ‘Certain’ Without Reform Of Banks (PA)

Another financial crisis is “certain” and will come sooner rather than later, the former Bank of England governor has warned. Mervyn King, who headed the bank between 2003 and 2013, believes the world economy will soon face another crash as regulators have failed to reform banking. He has also claimed that the 2008 crisis was the fault of the financial system, not individual greedy bankers, in his new book, The End Of Alchemy: Money, Banking And The Future Of The Global Economy, serialised in The Telegraph. “Without reform of the financial system, another crisis is certain, and the failure … to tackle the disequilibrium in the world economy makes it likely that it will come sooner rather than later,” Lord King wrote.

He added that global central banks were caught in a “prisoner’s dilemma” – unable to raise interest rates for fear of stifling the economic recovery, the newspaper reported. A remark from a Chinese colleague who said the west had not got the hang of money and banking was the inspiration for his book. Lord King, 67, said without understanding what caused the crash, politicians and bankers would be unable to prevent another, and lays the blame at the door of a broken financial system. He said: “The crisis was a failure of a system, and the ideas that underpinned it, not of individual policymakers or bankers, incompetent and greedy though some of them undoubtedly were.” Spending imbalances both within and between countries led to the crisis in 2008 and he believes a current disequilibrium will lead to the next.

To solve the problem, Lord King suggests raising productivity and boldly reforming the banking system. He said: “Only a fundamental rethink of how we, as a society, organise our system of money and banking will prevent a repetition of the crisis that we experienced in 2008.” Lord King was in charge of the Bank of England when the credit crunch struck in 2007, leading to the collapse of Northern Rock and numerous other British lenders, including RBS, and has been criticised for failing to see the global financial crisis coming.

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Private debt. Warrants far more attention than it gets. See Steve Keen.

Hidden Debt That No One Is Talking About -And It Involves You- (SMH)

There’s a paradox when it comes to debt in Australia. We have endless debate about the magnitude of the government’s borrowings, even though they are comparatively low by global standards. Meanwhile, the level of household debt gets relatively little attention even though it’s among the highest in the world. In the past two decades the debt owed by households has risen from about 80% of combined income to more than 180%. A fresh surge in borrowing driven by the recent boom in house prices, coupled with slow wage growth, has pushed the debt-to-income ratio to new heights. When economist Kieran Davies last year compared countries using another measure – the ratio of household debt to gross domestic product – he found Australia’s to be the world’s highest, just above Denmark, Switzerland and the Netherlands.

Australians’ household debts may be manageable now, but higher interest rates would stretch many people. Even so, I think Australia’s household debt story gets less scrutiny than it deserves, considering the risks. About 85% of household borrowings – which include mortgages, credit cards, overdrafts and personal loans – are owed to Australian lenders, mostly banks. The Reserve Bank pointed out recently that a small but fast-growing proportion is owed to Australian governments – mostly university-related HECS/HELP debt – and to overseas banks and governments, which is mostly owed by recent migrants. Household surveys by research firm Digital Finance Analytics have found more than one in 10 owner-occupiers would have difficulty meeting their mortgage repayments if interest rates were to rise by just 1 percentage point from their current historic lows.

Martin North, the principal of Digital Finance Analytics, says it’s not just low-income households that are exposed. “My reading is that overall the market is OK but there are some significant pockets of stress even in this low-interest rate environment,” he said. “But those pockets are not necessarily where you would expect the risk to be, it’s not just western Sydney for example. Some quite affluent people who have taken out very large mortgages are more leveraged and therefore more exposed if interest rates were to rise.” One striking trend going largely under the radar is the dramatic shift in customers using short-term loans from so called “payday lenders” following regulatory changes in 2013 and advances in information technology. In the past, payday loans were typically used by those on very low incomes in financial crisis. But a growing share of these loans – now called “small amount credit contracts” – are being taken out by those in higher income groups.

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High time to scrutinize the lenders.

North Sea Firms Are ‘Sleepwalking Into Disaster’ As Insolvencies Loom (Tel.)

The North Sea industry is “sleepwalking” into a wave of insolvencies in the coming months as the full brunt of the collapse in the price of crude causes the finances of many companies to buckle, some of the City’s top restructuring lawyers have said. The majority of North Sea firms have so far endured a punishing 70pc oil price decline since 2014 by relying on loans which were approved based on market hedges secured one to two years before the market crash. But with hedge positions now unwinding firms will be exposed to the full brunt of the oil collapse and the increasingly stressed loan facilities keeping them afloat will be stretched to breaking point. Lenders may have offered firms a stay of execution last year in anticipation of a market recovery, but hopes for significantly higher crude prices are now dashed.

Within weeks, big North Sea lenders will begin a review of the loans that have propped up many Aim-listed explorers through the 18-month oil price rout, prompting a swath of insolvencies later this year.. Stephen Phillips, head of restructuring at Orrick, Herrington & Sutcliffe, said: “There’s a sense that the North Sea may be sleepwalking into a disaster zone.” Simon Tysoe a partner at Latham & Watkins, said half a dozen North Sea explorers were being actively discussed by banks and lenders as firms which will go into restructuring and possibly insolvency. North Sea bankruptcies have been rare in the past but the severity of the current downturn has already forced Iona Energy and First Oil Expro, two smaller oil companies, to call in administrators.

Now larger Aim-listed firms look at risk, which will also leave project partners and oilfield service firms vulnerable as the financial contagion spreads through the embattled sector. Mr Tysoe said: “Most oil companies have in fact not been selling their oil at $30 a barrel, they’ve been selling their oil at prices like $75 a barrel, notwithstanding the spot price of oil, because they’ve had financial hedges in place.” “The impact of this collapse is going to look very bad. In oilfield services, the position is significantly worse. The question is: when will lenders pull the trigger?”

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How much did the banks lose?

European Oil Majors Tally $19 Billion In Losses (MW)

How much has Big Oil in Europe lost in the last quarter? Try $19 billion — or slightly more than Iceland’s entire economy. The culprit is of course an unrelenting decline in crude and Brent prices through the period, when the contracts slid 18% and 24%, respectively. That sparked a round of significant impairment charges, project delays and reduced exploration among Europe’s major energy companies, with the majority of the Stoxx Europe 600’s oil and gas producers reporting losses in the one-billion dollar territory. “It’s been a mixed bag for oil company results — most have been pressured by weaker oil prices,” said Jason Kenney, head of pan-European oil equity research at Banco Santander, in emailed comments.

“Many have had to write down assets given the new oil price environment. The key to weathering the storm is disinvestment in our view — cutting costs, lowering capex, deferring spend, divesting peripheral businesses, offloading capital commitments, restructuring operations, and generally squeezing more from current operations for hopefully a lot less,” he added. Earnings from Europe’s oil majors have trickled out through February and were rounded off with a set of downbeat fourth-quarter numbers from Italian oil giant Eni on Friday. Eni said its quarterly loss more than tripled to 8.5 billion euros ($9.4 billion) in the final three months of the year, bringing the total tally of losses among the European oil majors to $19.3 billion..

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Does Belgium jail people for fraud? How about bankers?

Citigroup Faces Fraud Suit Claiming $1.1 Billion in Losses (BBG)

Citigroup Inc. was sued for fraud by investors and creditors of a bankrupt Mexican oil services firm over claims they were harmed by a loan scheme that also led the bank to cut 2013 profit by $235 million and fire at least a dozen people. Citigroup’s loans led to the 2014 collapse of the Mexican firm Oceanografia, and caused Dutch lender Rabobank, with investors and creditors, to lose at least $1.1 billion, according to the lawsuit filed Friday in Miami federal court. Rabobank and other investors separately filed a negligence suit in Delaware state court against auditor KPMG. Citigroup’s Mexican subsidiary, Banamex, made short-term loans to Oceanografia, which did work for state-run Petroleos Mexicanos, or Pemex. In turn, Pemex repaid the bank.

Citigroup CEO Michael Corbat said in February 2014 that $400 million of accounts receivable from Oceanografia were fraudulent. He said the bank was working with Mexican authorities and would find out “who perpetrated this despicable crime.” Rabobank and the investors claim Citigroup conspired with Oceanografia to accept falsified work estimates even as the oil services firm became increasingly dependent on cash advances to survive. Those Citigroup loans propped up Oceanografia, while Pemex repaid the bank with millions of dollars in interest, according to the complaint. “Intentional misconduct on the part of Wall Street banks – including Citigroup specifically – is far from unfamiliar,” according to the complaint. “Yet again, greed and dishonesty have victimized blameless businesses and investors.”

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Things weren’t always like this.

How Land Barons, Industrialists And Bankers Corrupted Economics (Kent)

The Corruption of Economics by Mason Gaffney and Fred Harrison, while free online, is hardly known; as of December 2015 only three New Zealand university libraries and the Auckland Public Library held copies. Yet in it is a very important story. Fred Harrison describes the phenomenon of Henry George, the San Francisco journalist who took the world by storm with his book Progress and Poverty in 1879, in which he argues that the benefits of land ownership must be shared by all and that a single tax is needed to fund government – a land tax. The factors of production are land, capital and labour. Untax labour and tax land was the cry. Poverty could be beaten. Social justice was possible! Of Henry George influential economic historian John Kenneth Galbraith writes,

“In his time and even into the 1920s and 1930s Henry George was the most widely read of American economic writers both at home and in Europe. He was, indeed, one of the most widely read of Americans. Progress and Poverty… in various editions and reprintings… had a circulation in the millions.” Unlike many writers, Henry George didn’t stop there. He took his message of hope everywhere he could travel – across America and to England, New Zealand, Australia, Scotland and Ireland. He turned political. Seven years after his book came out in remote California, in 1886 he narrowly missed out on being elected Mayor of New York, outpolling Teddy Roosevelt. During the 1890s George, Henry George was the third most famous American, after Mark Twain and Thomas Edison. Ten years after Progress and Poverty he was influencing a radical wing of the British Liberal Party.

He was read by semi-literate workers from Birmingham, Alabama to Liverpool, England. His Single Tax was understood by peasants in the remotest crofts of Scotland and Ireland. Gaffney’s section of the book outlines how certain rich land barons, industrialists and bankers funded influential universities in America and proceeded to change the direction of their economics departments. He names names at every turn, wading through presidents and funders of many prestigious universities. In particular, Gaffney, an economist himself, names the economists bought to discredit his theories, their debates with George and their papers written over many decades.

“George’s ideas were carried worldwide by such towering figures as Lloyd George in England, Leo Tolstoy and Alexander Kerensky in Russia, Sun Yat-sen in China, hundreds of local and state and a few power national politicians in both Canada and the USA, Billy Hughes in Australia, Rolland O’Regan in New Zealand, Chaim Weizmann in Palestine, Francisco Madero in Mexico, and many others in Denmark, South Africa and around the world. In England Lloyd George’s budget speech of 1909 reads in part as though written by Henry George himself. Some of Winston Churchill’s speeches were written by Georgist ghosts.” When he died there were 100,000 at his funeral.

The wealthy and influential just couldn’t let the dangerous ideas spread. Their privileged position was gravely threatened. Henry George must be stopped. But the strategy had to be subtle. What better route than by using their money to influence the supposed fount of all knowledge, the universities? That would then indoctrinate journalists and the general public. Nice one! The story explains how, for their wealthy paymasters, academics corrupted the language to subsume it under capital. They redefined rent, and created a jargon to confuse public debate. Harrison says, ‘For a century they have taken people down blind alleys with abstract models and algebraic equations. Economics became detached from the real world in the course of the twentieth century.’ Yes, the wealthy paid money to buy scholars to pervert the science.

Gaffney’s rich, whimsical language is a joy to read. He writes to Harrison, ‘Systematic, universal brainwashing is the crime, tendentious mental conditioning calculated to mislead students, to impoverish their mental ability, to bend their minds to the service of a system that funnels power and wealth to a parasitic minority.’

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“..we’re talking about a legislature … that says we don’t care about y’all.”

Alabama Lawmakers To Cities: We Won’t Let You Raise The Minimum Wage (CSM)

While major demonstrations have led to a $15 minimum wage in San Francisco, Seattle, New York Los Angeles, and 10 other cities in the past year, Birmingham’s plans to boost local wages have been thwarted by state legislation. The city council of Birmingham, Ala., voted 7 to 0 (with one abstention) to become the first city in the deep South to enact a minimum wage above the current federal level of $7.25. The ordinance planned an increase to $8.50 per hour by July 2016, with a second increase to $10.10 set for July 2017. But the Alabama legislature this past week fired back, passing a bill that prevents cities and counties from mandating their own benefits, including minimum wage, vacation time, or set work schedules. The bill passed easily in both houses and Gov. Robert Bentley signed it into law on Thursday.

Supporters argued that a “patchwork” of varying wages would devastate businesses, cost jobs, and send the regional economy into a slump. “We want businesses to expand and create more jobs – not cut entry-level jobs because a patchwork of local minimum wages causes operating costs to rise,” said State Sen. Jabo Waggoner (R) after the bill’s passage. Critics of the new law countered that higher wages lift families out of poverty and inject new spending into the regional economy. “We’re talking about the bare survival of people,” said Sen. Rodger Smitherman (D), reported the Montgomery Advertiser. “And we’re talking about a legislature … that says we don’t care about y’all.” “When you lift a person on the bottom, everybody above them is lifted up,” he added.

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No space here for the whole thing, but very much worth the time.

The Donald – The Good And Bad Of It (David Stockman)

[..] Once upon a time, by contrast, the GOP actually stood for free markets, fiscal rectitude, hard money and minimalist government. Calvin Coolidge did a pretty good job of it. And even the unfairly besmirched Warren G. Harding got us out of the foreign intervention business—-a path that the great Dwight D. Eisenhower pretty consistently hewed to under the far more challenging conditions of the cold war. But these were sons of America’s old school interior – Massachusetts, Ohio and Kansas. As temporary sojourners in Washington, they remained incredulous and chary of grand state missions either at home or abroad. Harding called it returning to “normalcy”. Coolidge said Washington’s business was to get out of the way.

And Ike actually shrank the Warfare state by one-third, ended Truman’s wars and started no new ones, resisted much of the Dulles’ brother’s interventionist agenda, balanced the budget and froze the New Deal as hard in place at he had the votes to achieve. Today’s Republican crowd bears no resemblance. They live in the capital, fully embrace its projects and pretensions and visit the provinces as sparingly as possible. And that’s why The Donald has them so rattled, even petrified. To be sure, there is much that is ugly, superficial and stupid about Donald Trump’s campaign platform, if you can call it that, or loose cannon oratory to be more exact. More on that below, but at the heart of his appeal are two propositions which strike terror in the hearts of the Imperial City’s GOP operatives.

To wit, he is loudly self-funding his own campaign and bombastically insisting that America is getting a bad deal everywhere in the world. The first of these propositions explicitly tells the legions of K-Street lobbies to take a hike, thereby posing a mortal threat to the fund raising rackets which are the GOPs lifeblood. And while the “bad deal” abroad is superficially about NAFTA and our $500 billion trade deficit with China, it is really an attack on the American Imperium The American people are sick and tired of the Lindsay Graham/John McCain/George Bush/neocon wars of intervention and occupation; and they resent the massive fiscal burdens of our outmoded but still far-flung alliances, forward bases and apparatus of security assistance and economic aid. They especially have no patience for the continued huge cost of our commitments to cold war relics like NATO, the stationing of troops in South Korea and the defense treaty with the incorrigible Japanese, who still blatantly rig their trade rules against American exports.

In short, The Donald is tapping a nationalist/isolationist impulse that runs deep among a weary and economically precarious main street public. He is clever enough to articulate it in the bombast of what sounds like a crude trade protectionism. Yet if Pat Buchanan were to re-write his speech, it would be more erudite and explicit about the folly of the American Imperium, but the message would be the same. That’s why the War Party is so desperate, and why its last great hope is the bantam weight Senator from Florida. In truth, Marco Rubio is an obnoxious kid who wants to be President so he can play with guns, planes, ships and bombs. He is a pure creature of the Imperial City, even if at his young age he has idled there only since 2010.

Yet down to the last nuance of his insipid neocon worldview and monotonous recitation of the American Exceptionalism catechism, he might as well have been born in Washington of GS-16 parents, not Cuban refugees, raised as a Congressional page, and apprenticed to the Speaker of the US House rather than serving as the same in the backwaters of Tallahassee. What Marco Rubio is all about is Warfare State republicanism. When he talks about restoring American Greatness it is through the agency of Imperial Washington. He has no kinship with Harding, Coolidge or Eisenhower. None of them were intent on searching the earth for monsters to destroy, as does Rubio in every single speech.

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Traffic violations?! Gives a whole new meaning to ‘two strikes you’re out’.

Switzerland Votes On Expelling Foreigners For Minor Offences (Guardian)

Switzerland votes in a referendum Sunday on whether foreigner citizens who commit two minor offences, like traffic violations, in the space of 10 years should be automatically deported. The referendum asks whether any foreign national found guilty of two lower-level infractions, including fighting, money laundering, giving false testimony and indecent exposure, should be expelled. The vote comes at a time when many European countries are hardening their attitudes to migrants after more than a million arrived on the continent last year. A quarter of the people living in Switzerland have a foreign passport, the majority of them from European countries.

More than half of Swiss voters backed strengthening rules to automatically expel foreign nationals convicted of violent or sexual crimes in a referendum on the same topic six years ago. But the populist right-wing Swiss People’s Party (SVP), which won the biggest share of the vote in parliamentary elections last October, has accused parliament of dragging its feet on writing the text into law and watering it down when it did so last March. Known for its virulent campaigns against immigration, the European Union and Islam, the party has proposed tougher rules, calling for “a real deportation of criminal foreigners”. The initiative faces stiff opposition, including from the government, parliament and all the other major political parties, who have warned it circumvents the “fundamental rules” of democracy.

If passed, it would dramatically increase the number of offences that could get foreign nationals automatically kicked out of Switzerland, including misdemeanours usually punishable with fines or short prison sentences. It would also remove a judge’s right to refrain from deportation in cases where it would cause the foreign national “serious personal hardship”. More than 50,000 people including hundreds of celebrities have signed a petition against the proposals. [..] Opponents warn that if the text passes, people born to foreign parents in Switzerland risk being deported to countries they have never lived in, for petty offences.

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Getting worse fast.

Double Crisis Deepens Despair In Greece’s ‘Warehouse Of Souls’ (Guardian)

There are more than 25,000 refugees and migrants stuck in Greece, police sources have told the Observer. The borders leading out have closed down one by one, leaving the country in danger of becoming what the Greek prime minister, Alexis Tsipras, described last week as a “warehouse of souls”. Tsipras has threatened to block future EU agreements and has withdrawn the Greek ambassador to Austria from Vienna in protest at the lack of support being offered by other nations during the refugee crisis. Austria is accepting only 80 migrants a day. The Hungarian prime minister, Viktor Orbán, plans to hold a referendum on compulsory migrant quotas. Macedonia, Croatia, Serbia and Slovenia are refusing to accept Afghans and other refugees deemed not to be from conflict zones and are accepting a maximum of 580 migrants a day. The German chancellor, Angela Merkel, appears to be staking everything on a crucial EU-Turkey summit, scheduled to take place on 7 March.

[..] The convergence of two crises – the refugee influx and the debt drama that has plagued the country for the past six years – has caused the rhetoric of catastrophe to be ratcheted up in Athens and abroad. After the announcement by the European commission on Friday that, in the wake of border closures, it had been forced to put together a humanitarian aid plan for Greece, there is an inescapable sense of impending doom. “It was difficult for the government to manage Greece’s own domestic economic crisis,” said Dirk Reinermann, project manager for southern Europe at the World Bank. “The new exogenous challenge of having to deal with refugees and migrants is such that the overall task at hand borders on the impossible.” While EU diplomats spoke of the nightmare scenario of seeing hundreds of thousands of people trapped in the country by May, analysts predicted that Europe’s southern flank could soon become embroiled in scenes of chaos and immense social hardship.

“It’s going to get a lot worse before it gets better,” said Thanos Dokos, who heads Eliamep, a leading Greek thinktank. He told the Observer: “We are at risk of seeing an economy without any hope of recovery, and the country being flooded by people who have no intention of staying in camps but instead [will be] making their way to borders where there will be no shelter or facilities to host them.” Anger at the influx has mounted on Aegean islands close to the Turkish coast, where tourism has been hard hit. In an interview, Constantine Michalos, president of the Athens chamber of commerce and industry, said pre-bookings in Kos, Rhodes and Lesbos, the islands that have borne the brunt of the refugee and migrant arrivals, were down by 60%.

[..] Dimitra Koutsavli is working for Doctors of the World – Greece. The organisation is having constantly to move its operations to follow the ever-changing makeshift camps opening and closing on political orders across the country. She said she had never seen the situation as bad in Athens as over the past few days. “The situation here is worsening. Refugees are all over the city, in squares, in the port. According to our emergency mission in Piraeus port on Friday, we saw thousands of refugees there, among them many children.” To say that Greeks think the rest of Europe could do more is an understatement. There were peaceful protests in Athens and Piraeus last week by Greeks and refugees, and on Saturday there was a protest by 300 people outside the Austrian embassy in Athens. Not many of those in Victoria Square went to the demonstration. “It’s for Europe to decide if it can help us. We just say, ‘Please open the borders.’ We don’t want to sit here,” said Sharzai..

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Sep 272015
 
 September 27, 2015  Posted by at 10:16 am Finance Tagged with: , , , , , , , , ,  1 Response »


John Collier Workmen at emergency office construction job, Washington, DC Dec 1941

As Very “Grim” Earnings Season Unfolds, All Eyes Will Be On Bank of America (ZH)
Monetary Stimulus Doesn’t Work The Way You Think It Does, Redux (FT)
Britain Has One Booming Market That Could Do With A Crash (Economist)
Forty Years Of Greenwashing – The Well-Travelled Road Taken By VW (Bloomberg)
Volkswagen Scandal: The Cost Of A Car Crash Like No Other (Telegraph)
VW Scandal Exposes Cozy Ties Between Industry And Berlin (Reuters)
UK Government Tried To Block Tougher EU Car-Emissions Tests (Guardian)
Volkswagen Scandal Costs Qatar’s Sovereign Wealth Fund $5 Billion (Telegraph)
Volkswagen Managed Faked US Test Results From Germany (Bloomberg)
While EU Governments Demur, Refugees Find A Welcome On The Web (Guardian)
Catalonia Vote Opens With Separatists Tipped To Win (AFP)
Scientists Are Worried About A Cold ‘Blob’ In The North Atlantic Ocean (WaPo)
Humans Have Caused Untold Damage To The Planet (Gaia Vince)

“..if BofA has some major and unexpected litigation provision or some “rogue” loss as a result of marking its deeply underwater bond portfolio [..], the drop in the S&P will increase by a whopping 30%, and all due to just one company.”

As Very “Grim” Earnings Season Unfolds, All Eyes Will Be On Bank of America (ZH)

[..] it isn’t AAPL that everyone will be looking at this quarter – the company that will make or break the Q3 earnings season is not even a tech company at all, but a financial: it’s Bank of America. The reason, as Factset points out, is that thanks to a base effect from a very weak Q3 in 2014, Bank of America is not only projected to be the largest contributor to year-over-year earnings growth for the Financials sector, but it is also projected to be the largest positive contributor to year-over-year earnings for the entire S&P 500! The positive contribution from Bank of America to the earnings for the Financials sector and the S&P 500 index as a whole can mainly be attributed to an easy comparison to a year-ago loss. The mean EPS estimate for Bank of America for Q3 2015 is $0.36, compared to year-ago EPS of -$0.01.

In the year-ago quarter, the company reported a charge for a settlement with the Department of Justice, which reduced EPS by $0.43. Bank of America has only reported a loss in two (Q1 2014 and Q3 2014) of the previous ten quarters. This is how big BofA’s contribution to Q3 earnings season will be: if Bank of America is excluded from the index, the estimated earnings growth rate for the Financials sectors would fall to 0.7% from 8.2%, while the estimated earnings decline for the S&P 500 would increase to -5.9% from -4.5%. In other words, if BofA has some major and unexpected litigation provision or some “rogue” loss as a result of marking its deeply underwater bond portfolio to market as Jefferies did last week pushing its fixed income revenue (not profit) negative, the drop in the S&P will increase by a whopping 30%, and all due to just one company.

Finally, if the market which has been priced to perfection for years finally cracks – and by most accounts it will be on the back of bank earnings which have not been revised lower to reflect a reality in which the long awaited recovery was just pushed back to the 8th half of 2012, and where trading revenues are again set to disappoint – then the recently bearish David Tepper will once again have the final laugh because not only will the new direction in corporate revenues and earnings by confirmed, but a very violent readjustment in the earnings multiple would be imminent. As a reminder, Tepper hinted that the new fair multiple of the S&P 500 would drop from 18x to 16x. Applying a Q3 EPS of 114 and, well, readers can do their own math…

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“..foreign euro-denominated bond issuance has dwarfed the borrowing of the domestic non-financial private sector for years..”

Monetary Stimulus Doesn’t Work The Way You Think It Does, Redux (FT)

Once upon a time people thought central banks could boost business investment by lowering interest rates. Thus America had its Large-Scale Asset Purchase programmes, which, according to the Fed, lowered longer-term Treasury yields. Again, according to the Fed, part of the appeal of these purchases was the impact they would have on investors with fixed income liabilities. Unable to hit their return targets with safer bonds they would be forced to buy riskier instruments, which, in theory, should improve the flow of credit to businesses and households and therefore spending. The plan worked, from a certain point of view. Most of the US government bonds bought by the Fed were sold by foreigners, and for the most part they used their proceeds to buy newly issued dollar-denominated corporate bonds.

The problem was that these new bonds overwhelmingly funded companies outside the US, often firms based in emerging market countries that wanted to exploit the yield spread between local currency financial assets and dollar liabilities. (This shouldn’t have been too surprising, since researchers have found borrowing costs are irrelevant for investment decisions.) It turns out something similar has happened in Europe. First, consider who has been borrowing since 2012, when Mario Draghi uttered his priestly incantation to narrow credit spreads. It turns out basically all of the euro-denominated bonds issued by the private non-financial sector were issued by companies outside the euro area. The share of euro-denominated corporate issuance has soared from about one fifth of the total to about half. Via a recent presentation by Citi’s Hanz Lorenzen:

Some of this can probably be explained by the incredible shrinkage of European bank balance sheets, but as the chart below shows, foreign euro-denominated bond issuance has dwarfed the borrowing of the domestic non-financial private sector for years:

We’ve previously noted the eagerness of American firms to borrow in euros — which, counterintuitively, has encouraged European banks to increase their borrowing in dollars. (Unlike the offshore dollar bonds issued by many emerging market companies, Americans and Europeans don’t seem to be borrowing to finance unhedged cash holdings in higher-yielding foreign currency.) [..] we have at least two significant examples of central bank stimulus, ostensibly meant to encourage borrowing and capital expenditure by domestic businesses, instead encouraging foreign firms to borrow from foreign investors using local currency. No wonder people are so hungry for alternatives to the existing monetary transmission mechanism.

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Even the Economist wakes up to the perversity of UK housing policies.

Britain Has One Booming Market That Could Do With A Crash (Economist)

As house prices rise globally, in Britain they are soaring. In the past 20 years they have increased by more than in any other country in the G7; by some measures British property is now the most expensive in the world, save in Monaco. It is particularly dear in the south-east, where about one-quarter of the population lives. According to Rightmove, a property website, at today’s rate of appreciation the average London property will cost £1m ($1.5m) by 2020. The booming market weighs heavily on the rest of the economy. People priced out of the capital take jobs in less productive places or waste time on marathon commutes. Young Britons have piled on mortgage debt—those born in 1981 have one-half more of it than those born in 1961 did at the same age—making them vulnerable to rises in interest rates, which are coming. Some will retire before they pay it off.

Who is to blame? One oft-cited culprit is rich foreign buyers, who are said to see London property as a tax-efficient investment, or even a way to launder ill-gotten gains. Having bought plum properties, they often leave them empty. Transparency International (TI), a pressure group, identified 36,342 London properties held by offshore companies. Polls by YouGov show that the most popular explanation for high prices is “rich people from overseas buying top-end London property”. The argument does not stand up. For one, the number of vacant houses in England has fallen, from 711,000 in 2004 to 610,000 in 2014. And foreign ownership of houses is rare beyond a tiny corner of the capital. TI says that in Westminster one-tenth of all property is owned by firms in tax havens. But outside the centre things look different; the rate is just 1.3% in posh Islington, for instance, and beyond London it is even lower.

Demand from within Britain exerts a much bigger effect. In the past 20 years the population has grown by 11%, twice the average in the European Union. As in other countries, people are marrying later and divorcing more readily than they did in previous decades, meaning that one in ten Britons now lives alone, boosting the demand for homes. Despite stagnant incomes, buyers have more bite in the housing market. The Bank of England’s base rate of interest has been 0.5% since 2009; in real terms, rates have been below their historical peacetime average since 2004 and in nominal terms they are at their lowest ever. Demand has been stoked by “Help to Buy”, a mortgage-subsidy scheme launched in 2013.

Britons have thus taken on masses of cheap debt. In the 1970s it took the average mortgage-holder eight years to pay off his loan, estimates Neal Hudson of Savills, an estate agent. These days it will take 20 years. Small wonder: the average loan-to-income ratio has jumped from 1.8 in 1981 to 3.2 in 2014. And many are not just buying houses for their own use. Outstanding “buy-to-let” mortgages for landlords are now worth £190 billion, more than 20 times their value at the turn of the century. The National Housing and Planning Advice Unit, a former public body, found that 7% of a total increase in house prices of 150% between 1996 and 2007 was accounted for by increased lending to landlords.

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“On 23 July 1973, the EPA accused it of installing defeat devices in cars it wanted to sell in the 1974 model year.”

Forty Years Of Greenwashing – The Well-Travelled Road Taken By VW (Bloomberg)

Almost as soon as governments began testing vehicle emissions, carmakers found ways to cheat. In the 1970s, some vehicles were found to be rigged with “defeat devices” that turned off the emission systems when the air-conditioning was on. Others had sensors that activated pollution controls only at the temperature regulators used during the tests. “The concept of a defeat device has always been there, because there s such an incentive for the manufacturers to cheat on the emissions tests, said Clarence Ditlow at Washington s Center for Auto Safety. Volkswagen “took it to another level of sophisticated deception we’ve never seen before”.

The scandal now engulfing VW, which has admitted to fitting cars with software designed to give false readings in emissions tests, is unique both for its size and digital complexity. But it’s not the first emissions-cheating case, even for the German giant itself. On 23 July 1973, the EPA accused it of installing defeat devices in cars it wanted to sell in the 1974 model year. VW then admitted it had sold 1973 models with the devices, which consisted of temperature-sensing switches that cut out pollution controls at low temperatures. The EPA suspected that VW had sold 25,000 vehicles with the cheating technology. The US took the company to court for violating the Clean Air Act. It settled with a $120,000 fine without admitting any wrongdoing.

In 1995 General Motors agreed to pay $45m after being accused of circumventing pollution controls on 470,000 Cadillac luxury sedans. The cars 4.9-litre V8 engines were tuned to turn off pollution controls when the air-conditioning ran, the EPA said at the time. The government alleged that the engines, installed for the model years from 1991 to 1995, ended up releasing 100,000 tons of excess carbon monoxide into the atmosphere. GM disagreed, saying it was paying the fine as part of a conciliatory approach inn order to dispose of enforcement cases more quickly. Besides agreeing to cover $25m in recall costs, GM paid an $11m fine and agreed to spend $9m in corporate community service . To help the cause of cleaner air, the Detroit-based carmaker agreed to buy back older, more polluting cars and provide school districts with buses powered by batteries or natural gas.

The EPA says VW has admitted to using defeat devices in the 482,000 cars now under investigation in the US. The agency says the devices sensed when they were being tested on a dynamometer. In these circumstances, the car uses an emission control system that traps nitrogen oxide, a key ingredient in smog. When the car senses it is on the road, it cuts back on the emission control releasing from 10 to 40 times the permissible amount of nitrogen oxide. “It takes a very savvy program to fool the computer and detect the sophisticated test cycle, said Stanley Young, at the California Air Resources Board, which is also investigating VW. “This was clearly well thought-out and took a lot of programming. Engines these days are very complicated”, he added. “So there is a sophisticated and powerful computer inside all cars, and that was where this algorithm, this second routine, was embedded”.

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“Our members don’t know if they’re coming or going,” said Luke Bosdet of the AA.”

Volkswagen Scandal: The Cost Of A Car Crash Like No Other (Telegraph)

VW represents 12.9pc of the global passenger car market, but its reach is even broader than that. The firm also generated 13pc of earnings per share for the entire DAX index of large-value German stocks, Deutsche Bank figures suggest, and its reputation is tied up with that of Germany’s manufacturing clout. The company also buys 12pc of the world’s semi-conductors, according to UBS, and even if the producers of this technology are not implicated in the scandal their sales could suffer as the market recalibrates. After Toyota’s massive recall in 2009-10, suppliers to Hyundai benefited. “As such, we think a switch to US/Japanese vendors needs to be monitored going forwards,” said the UBS analysts. The worst-case scenario for VW includes an $18bn fine in the United States – or $37,500 for each of the half a million diesel cars it has sold there – along with class actions lawsuits, a criminal investigation and further penalties around the world.

Previous fines in the US for such transgressions have been much smaller. Caterpillar and others were in 1998 handed an $83.4m penalty for defeat devices on industrial diesel engines. General Motors recently agreed to pay $935m for covering up an ignition problem linked to 169 deaths. VW has felt some of this pain already. A sum greater than the possible fine has already been wiped from its market value, angering some shareholders, including Nordea Bank, which said it will retain its 2.2bn kronor stock and debt holdings but has banned its fund managers from buying any more VW stock. Other manufacturers including BMW, Daimler, Jaguar Land Rover and Renault have said they do not use defeat devices, although the listed carmakers have also been caught up in the sell-off of car stocks around the world in the past week. For drivers of diesel cars of all marques, this news is particularly shocking.

“The central point is that from a driver’s point of view, they were told they had to reduce their CO2 and many of them have gone to diesel as a result and as a way to deal with high fuel costs. Now they’ve been told they’ve done the wrong thing. Our members don’t know if they’re coming or going,” said Luke Bosdet of the AA. More than half of European motorists use diesel – compared to less than 3pc in the United States – following tax breaks and other cost benefits designed to reduce Europe’s emissions of carbon dioxide under the Kyoto Protocol agreed in the 1990s. “The move against VW is going to act as a catalyst to speed up the fall in diesel market share in Europe and halt it in the US,” Bernstein told clients. “In fact, regulators will now be much more conservative about what they permit and much tougher real-world tests may prove either too difficult or too expensive for diesel to meet.”

The UK, already struggling to meet European targets on air quality, might now accelerate measures to reduce the use of diesel cars. London, Birmingham and Leeds are forecast to exceed EU air pollution limits until 2030, and local governments are examining levies and even bans on certain disel vehicles to ensure that pollution readings fall. A study by King’s College London published last year found that nearly 9,500 people a year were dying prematurely in London every year as a result of air pollutants including nitrogen oxide. Given the health implications of the scandal, the cost – both financially and in terms of reputation – remains incalculable, but what is clear is that it will be a long time before Volkswagen is able to fulfil its long-held desire to expand further into the lucrative US market, or anywhere else for that matter.

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Revolving doors.

VW Scandal Exposes Cozy Ties Between Industry And Berlin (Reuters)

There are good reasons why Berlin stands by its car companies. The industry employs over 750,000 people in Germany, has been a poster child for German engineering prowess and dwarfs other sectors of the economy. In 2014, the big three carmakers, Volkswagen, Daimler and BMW, hauled in revenues of €413 billion, far bigger than the German federal budget, which stood at just under €300 billion. This has bred a cozy relationship between the industry and politicians. Top auto lobbyist Wissmann is a veteran of Merkel’s Christian Democratic Union (CDU) who, despite their cabinet clash 20 years ago, uses the familiar “Du” with the chancellor.

Daimler’s chief lobbyist is Eckart von Klaeden, a senior CDU politician who worked under Merkel in the chancellery and whose abrupt switch to the Mercedes manufacturer in 2013 prompted an investigation by Berlin prosecutors and new rules on “cooling off” periods. His predecessor at Daimler was Martin Jaeger, now spokesman for Finance Minister Wolfgang Schaeuble. The ties cross party lines. Thomas Steg, a former spokesman under Social Democrat (SPD) chancellor Gerhard Schroeder, heads up government affairs at Volkswagen. Even former foreign minister Joschka Fischer of the environmentalist Greens has done ads for BMW in recent years. The political connections are particularly strong at Volkswagen, whose arcane shareholder structure is laid out in the “Volkswagen Law” which dates back to 1960 and has faced repeated legal challenges at the European level.

The law effectively shields the company from takeovers and bestows hung influence on Lower Saxony, a state in central Germany that owns a 20 percent stake in VW and has been a stepping stone to national power for countless politicians. Premiers of Lower Saxony who have sat on VW’s board include Schroeder, nicknamed the “Auto Chancellor”, current Vice Chancellor Sigmar Gabriel and former president Christian Wulff. When Schroeder launched his far-reaching reform of the German labor market in 2003, he turned to Peter Hartz, the human resources chief of VW, to steer it. Years later, Hartz was at the center of another major scandal to hit VW, a tale of corruption involving lavish company trips for employee representatives, including visits to prostitutes. He received a suspended sentence and a fine.

The VW scandal has also exposed the toothlessness of Germany’s regulatory regime, opposition parties and industry experts say. The main oversight agency for the car sector, the Federal Motor Transport Authority, falls under the Transport Ministry in Berlin, raising questions about its independence and readiness to police the sector. “The worst of all is that the automobile industry was left to do these tests themselves, there was no control,” Oliver Kirscher, a lawmaker for the Greens said in a debate in the German parliament on Friday. Industry group the VDA rejects the idea that controls were lax and says it has been pressing for reform of the test regime for emissions “intensively and constructively” for years.

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What a surprise.

UK Government Tried To Block Tougher EU Car-Emissions Tests (Guardian)

The British government sought to block EU legislation that would force member states to carry out surprise checks on the emissions of cars, raising fresh questions over ministers’ attitude to air pollution and their conduct in the Volkswagen scandal. A document obtained by the Observer reveals that the Department for Environment, Food and Rural Affairs has been advising British MEPs to vote against legislation that would oblige countries to carry out “routine and non-routine” inspections on vehicles’ “real-world” emissions. The revelation will add to the growing concerns over the government’s commitment to tackling air pollution. It follows the admission last week that the Department for Transport had ignored significant evidence of the fraudulent practices being employed by the car industry when this was sent to it a year ago.

Around 29,000 deaths in the UK are hastened by inhalation of minute particles of oily, unburnt soot emitted by all petrol engines, and an estimated 23,500 by the invisible but toxic gas nitrogen dioxide (NO2) discharged by diesel engines. Volkswagen has been engulfed in a scandal after it emerged that some of its diesel cars had been fitted with devices that could detect when they were being tested, concealing the real level of pollutants being emitted by them when on the road. Now it has emerged that Defra has also been lobbying against part of a proposed EU directive that would force member states to establish national testing regimes to catch out those who tried to conceal the damage they were doing. The proposed legislation – the national emissions ceiling directive – is designed to “ensure that policies and measures are effective in delivering emission reductions under real operating conditions”, according to the European commission.

A Defra briefing document circulated among European parliamentarians in July, and seen by the Observer, says that, while the British government agrees in principle to the need for tough checks to enforce emission limits of NO2, MEPs should vote against the imposition on member states of “market surveillance and environmental inspections” as the legislation is unclear and legally unnecessary. The British government has also been seeking to water down legislation in the directive which seeks to limit the emission of a series of pollutants other than NO2, including methane and ammonia. Officials claim that some of the measures proposed would unnecessarily increase the “administrative burden for industry and government”, according to the briefing paper. The European parliament is due to vote on the proposals at the end of October.

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I see a lawsuit in your future.

Volkswagen Scandal Costs Qatar’s Sovereign Wealth Fund $5 Billion (Telegraph)

The collapse in Volkswagen’s share price as a result of the widening emissions scandal has cost Qatar’s sovereign wealth fund more than £3.3bn, according to calculations seen by The Telegraph. Qatar Holdings – a subsidiary of the Qatar Investment Authority (QIA) – is the third largest shareholder in the German car manufacturer, with a 17pc stake, after Porsche and the German state of Lower Saxony. As a result of VW’s 34pc share price fall last week, more than €20bn (£14.7bn) has been wiped off the value of the car company. In the last week alone Qatar Holdings has seen almost £2.8bn wiped off the value of its portfolio mainly due to losses in Volkswagen following the revelations that it had allegedly cheated US emissions tests for its diesel cars.

Qatar Holdings now holds a mixture of ordinary shares and preference shares in VW. Preference shares offer a higher return but have no voting rights in company management. Combined they have lost £3.3bn in Volkswagen so far this year, according to calculations. The Qataris initially bought into the company through a complex deal in 2009 with Porsche, which involved the carmaker transferring most of its VW share options to Qatar Holdings. The problems at VW are not Qatar’s only problems – the fund is sitting on paper losses approaching £7bn as a result of its variety of investments.

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“If any vehicle failed to meet emissions targets, a team of engineers from Volkswagen headquarters or luxury brand Audi’s base in Ingolstadt was flown in..”

Volkswagen Managed Faked US Test Results From Germany (Bloomberg)

Volkswagen executives in Germany controlled the key aspects of emissions tests whose results the carmaker now admits were faked, according to three people familiar with the company’s U.S. operations. The criteria, outcomes and engineering of cars that missed emissions targets were overseen by managers at Volkswagen’s base in Wolfsburg, according to the people who asked not to be identified because they weren’t authorized to speak publicly. Their accounts show the chain of command and those involved in the deception stretched to Volkswagen headquarters. While the company has asked German prosecutors to open an investigation, the executive committee of the supervisory board has backed former CEO Martin Winterkorn’s statement that he knew nothing about the malfeasance.

Emissions testers at the company’s site in Westlake Village, California, evaluated all the cars involved according to criteria sent from Germany and translated into English, and all results were sent back to Germany before being passed to the EPA, one of the people said. If any vehicle failed to meet emissions targets, a team of engineers from Volkswagen headquarters or luxury brand Audi’s base in Ingolstadt was flown in, the person said. After the group had tinkered with the vehicle for about a week, the car would then pass the test. VW had no engineers in the U.S. able to create the mechanism that cheated on the test or who could fix emissions problems, according to two other people. Audi development chief Ulrich Hackenberg and Porsche development head Wolfgang Hatz are among those who will leave the company in the wake of Winterkorn’s resignation two days ago. The two previously ran units at the heart of the affair – Hackenberg, a Winterkorn confidant, was responsible for VW brand development from 2007 to 2013, while Hatz ran the group’s motor development from 2007 to 2011.

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Politicians have too much to lose, or so they think.

While EU Governments Demur, Refugees Find A Welcome On The Web (Guardian)

With one million people expected to seek asylum in Europe this year and governments arguing over how to cope, thousands of volunteers are taking to the Internet to offer refugees shelter free of charge. In France, the Netherlands and other European countries, private individuals are proposing free lodging via Web-based platforms inspired by Airbnb, the home rental venture that has flourished with the rise of smartphones. Some fear private endeavors may complicate government efforts to direct the refugee flow, or simply prove too short-lived as the strains of sharing a home take their toll. “It’s laudable symbolically but it’s not the model favored by the state,” said an official at the interior ministry of France, where arrivals are despatched to accommodation centers or state-paid hotel rooms.

But refugees, many of whom relied heavily on mobile phone maps and communications during their journey to Europe from Syria, Iraq or Africa, will find plenty of offers online. On one Irish website, more than 1,000 people “pledged a bed” for refugees within three hours. In Germany, “Refugees Welcome” offers a matching service to put people with lodgings in touch with refugees. One French venture, Singa, has registered 10,000 offers of free lodgings since it started up in June and now has 10 volunteers working full time to match refugees with hosts. “We’re overwhelmed. We had no idea there would be such an enthusiastic response,” said founder Nathanael Molle. So far, Singa has put 47 refugees in homes around Paris.

Civil servant Clara de Bort, 40, used to rent a spare room to paying tourists. Now she shares her home for free with Aicha, a woman who fled ethnic conflict and forced marriage in Chad and who has been through 14 different state-funded accommodation centers and hotels since she arrived two years ago. Aicha, 25, recently equipped with a book to help her learn French, hopes for a convivial living arrangement and eventual stability. “What I need now is to speak French properly, get a job and find a HLM (long-term social housing),” said the Arabic-speaker. She asked not to have her family name published. Dutch-based Refugee Hero, whose founders describe it as a “mobile-friendly website with similar functionality to Airbnb”, says 50 refugees have made contact since it started a few days ago.

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This could go completely off the rails. Madris threatens with the army. The army itself does too.

Catalonia Vote Opens With Separatists Tipped To Win (AFP)

Polls opened Sunday in a regional election in Catalonia seen as the most important in Spain’s recent history, with separatists tipped to win. Polling stations opened under cloudy skies in Barcelona, where red- and yellow-striped Catalan flags hung from buildings, AFP reporters saw. More than 5.5 million of Catalonia’s 7.5 million inhabitants were eligible to vote at nearly 2,700 polling stations across the region. A pro-independence alliance led by regional president Artur Mas has vowed to proceed towards a declaration of independence by 2017 if it secures a majority in the regional parliament, even if it manages to do so without a majority of votes. Spain’s central government brands secession illegal and has called for the country to stay united as the eurozone’s fourth-biggest economy recovers from recession.

Madrid says Catalonia would drop out of the European Union and eurozone if it broke away from Spain. “Catalonia decides its future in Europe,” ran Sunday’s front-page headline in the centre-right national daily El Mundo. “The future of Catalonia is at stake,” said Catalan daily La Vanguardia. Centre-left national El Pais declared the ballots “historic” on its front page. Nationalists in Catalonia, which has its own language and cultural traditions, complain that they get less back from Madrid than they pay in taxes. Separatist demands have surged in the recent years of economic crisis. Mas wants Catalonia to follow the example of Scotland and Quebec in Canada by holding a vote on independence – though in both those cases most voters rejected a breakaway. Since Madrid has blocked Mas’s efforts to hold a straight referendum, he has framed Sunday’s election for the regional parliament as an indirect vote on secession.

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The end of the conveyor belt?!

Scientists Are Worried About A Cold ‘Blob’ In The North Atlantic Ocean (WaPo)

It is, for our home planet, an extremely warm year. Indeed, last week we learned from the National Oceanic and Atmospheric Administration that the first eight months of 2015 were the hottest such stretch yet recorded for the globe’s surface land and oceans, based on temperature records going back to 1880. It’s just the latest evidence that we are, indeed, on course for a record-breaking warm year in 2015. Yet, if you look closely, there’s one part of the planet that is bucking the trend. In the North Atlantic Ocean south of Greenland and Iceland, the ocean surface has seen very cold temperatures for the past eight months: What’s up with that? First of all, it’s no error.

I checked with Deke Arndt, chief of the climate monitoring branch at NOAA’s National Centers for Environmental Information, who confirmed what the map above suggests — some parts of the North Atlantic Ocean saw record cold in the past eight months. As Arndt put it by email: “For the grid boxes in darkest blue, they had their coldest Jan-Aug on record, and in order for a grid box to be “eligible” for that map, it needs at least 80 years of Jan-Aug values on the record.” Those grid boxes encompass the region from “20W to 40W and from 55N to 60N,” Arndt explained. And there’s not much reason to doubt the measurements — the region is very well sampled. “It’s pretty densely populated by buoys, and at least parts of that region are really active shipping lanes, so there’s quite a lot of observations in the area,” Arndt said.

“So I think it’s pretty robust analysis.” Thus, the record seems to be a meaningful one — and there is a much larger surrounding area that, although not absolutely the coldest it has been on record, is also unusually cold. At this point, it’s time to ask what the heck is going on here. And while there may not yet be any scientific consensus on the matter, at least some scientists suspect that the cooling seen in these maps is no fluke but, rather, part of a process that has been long feared by climate researchers — the slowing of Atlantic Ocean circulation. In March, several top climate scientists, including Stefan Rahmstorf of the Potsdam Institute for Climate Impact Research and Michael Mann of Penn State, published a paper in Nature Climate Change suggesting that the gigantic ocean current known as the Atlantic Meridional Overturning Circulation, or AMOC, is weakening.

It’s sometimes confused with the “Gulf Stream,” but, in fact, that’s just a southern branch of it. The current is driven by differences in the temperature and salinity of ocean water (for a more thorough explanation, see here). In essence, cold salty water in the North Atlantic sinks because it is more dense, and warmer water from farther south moves northward to take its place, carrying tremendous heat energy along the way. But a large injection of cold, fresh water can, theoretically, mess it all up — preventing the sinking that would otherwise occur and, thus, weakening the circulation.

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Our destiny.

Humans Have Caused Untold Damage To The Planet (Gaia Vince)

We live in epoch-making times. Literally. The changes humans have made in recent decades have been on such a scale that they have altered our world beyond anything it has experienced in its 4.5bn-year history. Our planet is crossing a geological boundary and we humans are the change-makers. Millions of years from now, a stripe in the accumulated layers of rock on Earth’s surface will reveal our human fingerprint, just as we can see evidence of dinosaurs in rocks of the Jurassic, or the explosion of life that marks the Cambrian or the glacial retreat scars of the Holocene. Our influence will show up as a mass of species going extinct, changes in the chemistry of the oceans, the loss of forests and the growth of deserts, the retreat of glaciers and the sinking of islands.

Geologists of the far future will note in the fossil records the extinctions of wild animals and the abundance of domesticates, the chemical fingerprint of materials such as aluminium drinks cans and plastic carrier bags, and the footprint of projects such as the Syncrude mine in the Athabasca oil sands of north-west Canada, which moves 30bn tonnes of earth each year – twice the amount of sediment that flows down all the rivers in the world in that time. Geologists are calling this new epoch the Anthropocene, recognising that humanity has become a geophysical force on a par with the earth-shattering asteroids and planet-cloaking volcanoes that defined past eras. Earth is now a human planet. We decide whether a forest stands or is razed, whether pandas survive or become extinct, how and where a river flows, even the temperature of the atmosphere.

We are now the most numerous big animal on Earth, and the next in line are the animals we have created through breeding to feed and serve us. 40% of the planet’s land surface is used to grow our food. Three-quarters of the world’s fresh water is controlled by us. It is an extraordinary time. In the tropics, coral reefs are disappearing, ice is melting at the poles, and the oceans are emptying of fish because of us. Entire islands are vanishing under rising seas, just as naked new land appears in the Arctic. During my career as a science journalist, it has become my business to take special interest in reports on how the biosphere was changing. There was no shortage of research.

Study after study came my way, describing changes in butterfly migrations, glacier melt rate, ocean nitrogen levels, wildfire frequency … all united by a common theme: the impact of humans. Scientists I spoke to described the many and varied ways humans were affecting the natural world. Climate scientists tracking global warming told of deadly droughts, heatwaves and metres of sea-level rise. Conservation biologists were describing biodiversity collapse to the extent of a mass extinction; marine biologists were talking of “islands of plastic garbage” in the oceans; space scientists were holding conferences on what to do about all the junk up there threatening our satellites; ecologists were describing deforestation of the last intact rainforests; agro-economists were warning about deserts spreading across the last fertile soils.

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May 152015
 
 May 15, 2015  Posted by at 10:04 am Finance Tagged with: , , , , , , , , , , , ,  1 Response »


G. G. Bain Police machine gun, New York 1918

Every Speculative Bubble Rests On Some Kind Of A Fairy Tale (G&M)
Banks Seek Waivers Ahead Of Forex Guilty Pleas (Reuters)
How China’s Banks Hide Trillions In Credit Risk – Full Frontal (Zero Hedge)
Max Keiser: ‘Britain Is The Epicentre Of Financial Fraud’ (Newsweek)
EU Prevents Greece From Implementing Reforms: Varoufakis (EFE)
Varoufakis Refuses Any Bailout That Would Send Greece In ‘Death Spiral’ (Guar.)
Greece To Privatize Port, Airports In Concession To Creditors (Bloomberg)
Varoufakis Says Debt Swap Fills Draghi’s ‘Soul With Fear’ (Reuters)
Greek Government Defends Itself Over Central Bank Tensions (Reuters)
Syriza Highlights ‘Red Lines’ In Negotiations, Calls On People (Kathimerini)
Syriza and Greece: Dancing with Austerity (Village.ie)
Greece Signs EBRD Deal Worth €500 Million A Year (Reuters)
You Can’t Read The TPP, But These Huge Corporations Can (Intercept)
Secrets, Betrayals and Merkel’s Risky Silence in the NSA Scandal (Spiegel)
Flash Crash Patsy Complained Over 100 Times About Real Market Manipulators (ZH)
Monsanto’s Syngenta Gambit Hinges On Sale Of Seed Businesses (Reuters)
A Third Of Europe’s Birds Is Under Threat (Guardian)
Your Attention Span Is Now Less Than That Of A Goldfish (OC)

“Every speculative bubble rests on some kind of a fairy tale.. And now it is the faith in the central-planning capabilities of global central bankers. When the loss of confidence in the Fed, the ECB etc. begins, the stampede out of stocks and bonds will start.”

Every Speculative Bubble Rests On Some Kind Of A Fairy Tale (G&M)

Government bonds regarded as among the safest in the developed world have become subject to violent price swings typically associated with more speculative assets. Yields on German 10-year bunds, the benchmark for the euro zone, shot up more than 20% at one point Tuesday, in a selloff described by Goldman Sachs analysts as “vicious.” As recently as last month, the same debt reached a record-low yield of 0.05%. At the other end of the confidence scale, Greek bonds strengthened slightly, reflecting renewed optimism that the embattled leftist government could cobble together a deal with euro-zone finance ministers that would get the bailout cash flowing again into its nearly empty coffers. But deal or no deal, the chances of a Greek default remain high. And despite the efforts of European authorities to contain any fallout and safeguard the euro, a spillover to other battered members of the euro club can’t be ruled out.

“There are a lot of rotten assets out there, and ultimately you have to have a reckoning,” warned Alex Jurshevski at Recovery Partners, who advises governments and corporations on debt restructuring. Although most analysts doubt this would trigger a seismic global financial shock, the risk of contagion is more than trivial, as underscored by the current sovereign-bond rout – with a loss in value of about $450-billion across global markets in just three weeks. “There’s a lot of risk in any of the markets that have been subjected to artificial downward pressure on interest rates,” Mr. Jurshevski said. Worries about sovereign debt have been around since European nations first latched on to this instrument as a relatively low-cost way of meeting the high costs of waging wars and undertaking other expensive projects.

Within four years after the newly minted Bank of England issued such bonds in 1694, government debt ballooned to £16-million from £1.25-million. By the middle of last year, government-related debt around the world totalled $58-trillion (U.S.), a 76% increase since the end of 2007, according to a report by McKinsey Global Institute aptly titled “Debt and (not much) deleveraging.” The ratio of all debt to GDP jumped 17 %age points to a whopping 286%. Since the Great Recession, debt has been expanding faster than the economy in every developed nation on the planet, led by a huge expansion of public-sector borrowing.

“Every speculative bubble rests on some kind of a fairy tale, a story the bubble participants believe in and use as rationalization to buy extremely overvalued stocks or bonds or real estate,” Mr. Vogt argued. “And now it is the faith in the central-planning capabilities of global central bankers. When the loss of confidence in the Fed, the ECB etc. begins, the stampede out of stocks and bonds will start. I think we are very close to this pivotal moment in financial history.”

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Commit to crimes and demand BAU in the same breath.

Banks Seek Waivers Ahead Of Forex Guilty Pleas (Reuters)

Banks want assurances from U.S. regulators that they will not be barred from certain businesses before agreeing to plead guilty to criminal charges over the manipulation of foreign exchange rates, causing a delay in multibillion-dollar settlements, people familiar with the matter said. In an unprecedented move, the parent companies or main banking units of JPMorgan Chase, Citigroup, RBS, Barclays and UBS are likely to plead guilty to rigging foreign exchange rates to benefit their transactions. The banks are also scrambling to line up exemptions or waivers from the Securities and Exchanges Commission and other federal regulators because criminal pleas trigger consequences such as removing the ability to manage retirement plans or raise capital easily.

In the past, waivers have generally been granted without a hitch. However, the practice has become controversial in the past year, particularly at the SEC, where Democratic Commissioner Kara Stein has criticized the agency for rubber stamping requests and being too soft on repeat offenders. Negotiating some of the waivers among the SEC’s five commissioners could prove challenging because many of these banks have broken criminal or civil laws in the past that triggered the need for waivers. Many of the banks want an SEC waiver to continue operating as “well-known seasoned issuers” so they can sell stocks and debt efficiently, people familiar with the matter said.

Such a designation allows public companies to bypass SEC approval and raise capital “off the shelf” – a process that is speedier and more convenient. Several of the people said another waiver being sought by some banks is the ability to retain a safe harbor that shields them from class action lawsuits when they make forward-looking statements. The banks involved are also seeking waivers that will allow them to continue operating in the mutual fund business, sources said. At least some of the waivers at issue in the forex probe will need to be put to a vote by the SEC’s five commissioners. No date has been set yet..

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“..loan loss reserves aren’t even sufficient to cover NPLs + special mention loans, let alone defaults on a portion of the 38% of credit risk carried off the books..”

How China’s Banks Hide Trillions In Credit Risk – Full Frontal (Zero Hedge)

There are several takeaways here. First – and most obvious – is the fact that accurately assessing credit risk in Chna is extraordinarily difficult. What we do know, is that between forced roll-overs, the practice of carrying channel loans as “investments” and “receivables”, inconsistent application of loan classification norms, and the dramatic increase in off balance sheet financing, the ‘real’ ratio of non-performing loans to total loans is likey far higher than the headline number, meaning that as economic growth grinds consistently lower, the country’s lenders could find themselves in deep trouble especially considering the fact that loan loss reserves aren’t even sufficient to cover NPLs + special mention loans, let alone defaults on a portion of the 38% of credit risk carried off the books.

The irony though is that while China clearly has a debt problem (282% of GDP), it’s also embarking on a concerted effort to slash policy rates in an effort to drive down real rates and stimulate the flagging economy, meaning the country is caught between the fallout from a shadow banking boom and the need to keep conditions loose because said boom has now gone bust, dragging credit growth down with it. In other words, the country is trying to deleverage and re-leverage at the same time. A picture perfect example of this is the PBoC’s effort to facilitate a multi-trillion yuan refi program for China’s heavily-indebted local governments. The idea is to swap existing high yield loans (accumulated via shadow banking conduits as localities sought to skirt borrowing limits) for traditional muni bonds that will carry far lower interest rates.

So while the program is designed to help local governments deleverage by cutting hundreds of billions from debt servicing costs, the CNY1 trillion in new LGB issuance (the pilot program is capped at 1 trillion yuan) represents a 150% increase in supply over 2014. Those bonds will be pledged as collateral to the PBoC for cheap cash which, if the central bank has its way, will be lent out to the real economy. So again, deleveraging and re-leveraging at the same time. This is just one of many ‘rock-hard place’ dynamics confronting the country as it marks a difficult transition from a centrally planned economy based on credit and investment to a consumption-driven model characterized by the liberalization of interest and exchange rates.

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‘If you see me walking the streets of your town, then you’re probably screwed’.

Max Keiser: ‘Britain Is The Epicentre Of Financial Fraud’ (Newsweek)

A general election, Benjamin Disraeli once observed, “inflames the passions of every class of the community. Even the poor,” he added, “begin to hope.” In 2015, Max Keiser argues, the power of global markets has rendered election fever something of an anachronism: “Tony Blair personified the shift away from democracy, towards control by bankers.” In modern politics, the prime minister “is really taking orders from finance”. “What if Miliband had won?” “There’s an impending scheme called TTIP (Transatlantic Trade and Investment Partnership, a proposed EU-US agreement) whereby all complaints – against US companies fracking in Britain, say – would go to a global tribunal, moderated by corporations. They don’t care who the prime minister is. “Why should we?” David Cameron’s role, “is being eroded to the point of insignificance”.

Keiser, 55, is a New York University graduate and former high-achieving Wall Street trader whose mischievous wit and renegade instincts have made him one of the most widely viewed broadcasters on the planet. His flagship show, Keiser Report, is carried by Russian state-funded channel RT; for that alone, some fellow-Americans consider him a traitor. But Keiser connects with a predominantly youthful audience otherwise indifferent to economics. “Rage against kleptocrats is building incrementally,” says Keiser, a tireless scourge of JP Morgan, Lehman Brothers and HSBC. “All over the world, people have had enough.” Untroubled by controversy, Keiser conducted the 2011 interview with Roseanne Barr during which she explained that a fitting reward for “banksters” would be to bring back the guillotine.

He once advised Cameron to “go back to Eton and get some of that back-stall shower pleasure”. When we first met, three years ago, just after Keiser moved to London with co-presenter and wife Stacy Herbert, he told me that the modern voter was worse off than a medieval serf. “Back then,” he said, “at least the process of theft was transparent. The barons whacked you over the head, then took all your money. The mode of larceny has changed, that’s all.” What he calls “the Thatcher-Reagan market model” has, he says, “been consigned to the dustbin. There’s no growth. There’s quantitative easing, which causes deflation. The global economy is collapsing.”

The EU, as Keiser likes to describe it, “poses as an elite club; actually it’s a leper colony where everyone’s comparing who has the most fingers left”. “Could France, say, go bankrupt?” “Absolutely. The forces killing Greece are active in France, Italy and Spain.” The EU, he says, “could be viewed as The Fourth Reich. Germany is a superpower. The Greek crisis is great for them – it keeps the euro low and German exports cheap. When countries like France go broke, EU federalisation will proceed through Berlin.”

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“So far, none of the many planned reforms have been implemented because the partners first wanted a broad and comprehensive agreement..”

EU Prevents Greece From Implementing Reforms: Varoufakis (EFE)

Greek Finance Minister Yanis Varoufakis said on Thursday that its European partners have prevented the Greek government from legislating many necessary reforms, and stressed that he would only sign an agreement that aims at economic sustainability, Efe news agency reported. So far, none of the many planned reforms have been implemented because the partners first wanted a broad and comprehensive agreement, and believed that any legislation would constitute a unilateral act, Varoufakis argued at a conference organised in the Greek capital by The Economist weekly.

The minister said that from the beginning, creditors rejected proposals to negotiate and regulate in parallel, an action that, in his view, would have helped to create confidence between Greece and its partners. Varufakis stressed that Greece was determined to reform everything in the country, noting that if Greece did not reform, it would sink. However, he stressed that he would not sign any agreement inconsistent with macroeconomics or unsustainable, and accepting conditions that cannot be met, such as had been down in the past. The error of the past, he explained, was that every negotiation looked only for what to do to make the next bailout payment instead of seeking solutions to pursue economic recovery.

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Oh boy: “[Draghi] received a rapturous welcome from Christine Lagarde, who introduced him as “maestro” – the nickname once given to Alan Greenspan. “Those who know you understand that you are a man of outstanding insight, fierce determination, and above all, courage.”

Varoufakis Refuses Any Bailout That Would Send Greece In ‘Death Spiral’ (Guar.)

Greece’s embattled finance minister, Yanis Varoufakis, stepped up his war of words with eurozone policymakers on Thursday, saying he wished his country still had the drachma, and would not sign up to any bailout plan that would send his country into a “death spiral”. With Greece facing a severe cash crisis as it struggles to secure a rescue deal from its creditors, Varoufakis – who has been officially sidelined from the debt negotiations – told a conference in Athens that he would reject any agreement in which “the numbers do not add up”. Greek GDP figures, published on Wednesday, revealed that the economy has already returned to recession. “I wish we had the drachma, I wish we had never entered this monetary union,” Varoufakis said.

“And I think that deep down all member states with the eurozone would agree with that now. Because it was very badly constructed. But once you are in, you don’t get out without a catastrophe”. He also warned that a mooted proposal for a bond swap, to ease Athens’ cash-crunch, was likely to be rejected, because it struck “fear into the soul” of European Central Bank president Mario Draghi. Despite his comments Greece on Thursday offered a concession to its international lenders by pushing ahead with the sale of its biggest port, Piraeus. Greece has asked three firms to submit bids for a majority stake in the port, a senior privatisation official told Reuters, unblocking a major sale of a public asset as creditors demand economic reforms from Athens.

Draghi, who was in Washington on Thursday to deliver a lecture on monetary policy, pointedly failed to mention the ongoing Greek crisis. He received a rapturous welcome from Christine Lagarde, the managing director of the International Monetary Fund, who introduced him as “maestro” – the nickname once given to Federal Reserve chairman Alan Greenspan. “Those who know you understand that you are a man of outstanding insight, fierce determination, and above all, courage. You can call a spade a spade without putting any of your cards on the table,” she said.

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“It’s “definite” that Greece won’t proceed with selling other state assets on a list that had been agreed on by the previous government..”

Greece To Privatize Port, Airports In Concession To Creditors (Bloomberg)

Greece will continue with efforts to privatize the country’s largest port and regional airports as it seeks ways to attract investment for other state assets, Economy Minister George Stathakis said, in a government concession in talks with its creditors. The privatization process that is already underway for the Piraeus Port Authority, operator of Greece’s largest harbor, and for 14 regional airports will continue, Stathakis said today in an interview in Tbilisi, Georgia. “We’re trying to revise some elements of these privatizations in order to improve them and I think we’ll get a sensible agreement for both.” A sale of the Piraeus Port would be a reversal on the part of Greece’s Syriza party-led government, which had earlier pledged to block such moves.

As part of ongoing negotiations to unlock aid to Europe’s most-indebted nation, Greek’s European creditors have asked for more specific policy proposals in areas including labor market deregulation, a pension-system overhaul, sales tax reform and privatization of state-held assets. Still, Stathakis said the government doesn’t plan to sell other assets at the moment.The Piraeus Port sale “is part of the bailout negotiations,” and the fact that the government “agrees to privatize the port is a compromise to creditors,” government spokesman Gabriel Sakellaridis told reporters in Athens Thursday. A venture led by Fraport won the right in November 2014 to use, operate and manage the 14 regional airports after it offered €1.2 billion for 40 years and promised to pay an annual, guaranteed leasing fee of €22.9 million.

Fraport also pledged to make €330 million in investments over the next four years. Greece is talking to Fraport and a decision should be reached “very soon.” It’s “definite” that Greece won’t proceed with selling other state assets on a list that had been agreed on by the previous government such as water companies, the post office or Public Power Corp, Stathakis said. “We’re trying to work on a different model than privatizing to attract capital and investment such as for the country’s railways and other ports” and Greece is looking at “alternative options to 100% privatization.” The sale of land at Hellenikon, site of Athens’s old airport that is Europe’s largest unused tract of urban real estate, “is an issue under discussion,” Stathakis said. A venture led-by Lamda Development last year agreed to buy the property for €915 million while also committing to spend €1.2 billion on infrastructure at the site.

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“..such a swap of our own new bonds with these bonds … would feed Mr. Weidmann with excuses to create problems with the ECB’s QE.”

Varoufakis Says Debt Swap Fills Draghi’s ‘Soul With Fear’ (Reuters)

Repayment of what Greece owes to the ECB should be pushed into the future, but it is not an option because it fills ECB chief Mario Draghi’s “soul with fear”, Greece’s finance minister said on Thursday. Yanis Varoufakis said Draghi, president of the ECB, cannot risk irritating Germany with such a debt swap because of Berlin’s objection to his bond-buying program. Varoufakis first raised the idea of swapping Greek debt for growth-linked or perpetual bonds when his leftist government came to power earlier this year, But Athens has since dropped the proposal after it got a cool reception from eurozone partners.

The outspoken minister, who has been sidelined in talks with EU and IMF lenders, brought it up again on Thursday, saying €27 billion of bonds owed to the ECB after €6.7 billion worth are repaid in July and August should be pushed back. “What must be done (is that) these €27 billion of bonds that are still held by the ECB should be taken from there and sent overnight to the distant future,” he told parliament. “How could this be done? Through a swap. The idea of a swap between the Greek government and the ECB fills Mr. Draghi’s soul with fear. Because you know that Mr. Draghi is in a big struggle against the Bundesbank, which is fighting against QE. Mr. Weidmann in particular is opposing it.”

Varoufakis was referring to the ECB’s quantitative easing (QE) or bond-buying plan and Bundesbank President Jens Weidmann’s unabashed criticism of it. Varoufakis said the bond-buying plan is “everything for Mr. Draghi” but that “allowing such a swap of our own new bonds with these bonds … would feed Mr. Weidmann with excuses to create problems with the ECB’s QE.” Prime Minister Alexis Tsipras’s government stormed to power in January promising it would end austerity and demand a debt writeoff from lenders to make the country’s debt manageable. It has spoken little about debt relief in recent months as it tries to focus on reaching a deal with lenders on a cash-for-reforms deal, which has proved difficult amid a deadlock on pension and labor issues.

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I have the impression Syriza is being very polite on this issue.

Greek Government Defends Itself Over Central Bank Tensions (Reuters)

Greece’s leftist government on Thursday sought to deflect criticism over tensions with the Bank of Greece, saying it respected the bank’s independence but was free to castigate the governor for actions he took as finance minister. Governor Yannis Stournaras’s relations with the government have come under scrutiny in recent days after a newspaper accused him of undermining Greece’s talks with creditors and government officials openly criticized him on other issues. “The Greek government hasn’t opened any issue with Mr. Stournaras. If issues have surfaced, it wasn’t due to the government’s initiative,” government spokesman Gavriil Sakellaridis told reporters. “The issue of the central bank’s independence, which is fully respected by the Greek government, is above all an issue for the central bank to defend.” [..]

Stournaras was appointed central bank governor last June. Before that he was finance minister in the conservative-led government, where he spearheaded Greece’s return to the bond markets in April 2014 after a four-year exile. But he also drew criticism from anti-bailout groups for implementing harsh spending cuts demanded by the EU and IMF. Energy Minister Panagiotis Lafazanis this week was quoted as saying Stournaras’s role in winding down ATEbank – a small lender that gave loans to farmers – in 2012 was a “scandal.” “The criticism by Mr. Lafazanis towards Mr. Stournaras refers to the period that he was finance minister,” Sakellaridis said. “Obviously, today he is a central banker but there can be and should be political criticism over the period that he was a finance minister.”

Interior Minister Nikos Voutsis this week also questioned why Stournaras – who suggested Greece tap an IMF holding account to repay €750 million to the fund this week and avoid default – had not mentioned the funds earlier. The latest tensions flared when the Efimerida ton Syntakton newspaper reported over the weekend the Bank of Greece in an e-mail to journalists leaked economic data including deposit outflows during Tsipras’s first 100 days in power. Hours later, officials at Tsipras’s office called on the central bank to deny the report, saying the report, if true, “constitutes a blow to the central bank’s independence.” The Bank of Greece has denied that either Stournaras’s office or the bank’s press office sent such an e-mail.

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“Now is the time for the people to join the battle..”

Syriza Highlights ‘Red Lines’ In Negotiations, Calls On People (Kathimerini)

Even as negotiations with Greece’s creditors enter a critical phase, the political secretariat of SYRIZA has indicated that the party will not back down from its so-called red lines, reaffirming pre-election promises to protect pensioners and workers. In a statement issued late on Thursday after a stormy session of senior party cadres, the secretariat said, “the red lines of the government are also red lines of the Greek people, expressing the interests of workers, the self-employed, pensioners, farmers and young people.” Underlining the need for the debt-racked country to return to a path of growth and social justice, the statement referred to “the persistence of creditors on enforcing the memorandum program of the Samaras government” whom it accused of exercising pressure through politics and by restricting liquidity.

The fixation on austerity was “paving the way for the far-right,” it added. The secretariat stressed that the demands of creditors “cannot be accepted, adding that SYRIZA MPs and officials would continue efforts to inform the Greek people and to invite them to join “a mobilization toward the victory of democracy and dignity.” “Now is the time for the people to join the battle,” it said. The statement followed a feverish session during which Deputy Prime Minister Yiannis Dragasakis is said to have come under fire by many SYRIZA officials for making concessions to creditors. Senior SYRIZA MP and Parliament Speaker Zoe Constantopoulou was said to be among those who claimed the government has ceded too much ground from its pre-election pledges.

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Excellent longish essay. “We come with arguments, they reject them, then they say, ‘you’re wasting time’. What does that mean? It’s just saying, agree with us. You’re wasting time between getting elected and doing what we say”.

Syriza and Greece: Dancing with Austerity (Village.ie)

Dimitrios Tzanakopoulos is Alexis Tsipras’ Chief of Staff. A serious Marxist theorist with an utterly coherent anti-capitalist worldview, he is at the very heart of the new government, directing the affairs of the Prime Minister’s office. He remains “optimistic that there will be a deal” with the partners. “Europe needs to ask if austerity is the future. If not, there must be a solution to these social catastrophes. SYRIZA has promised to find one and this is what we will do”. In many ways the government’s line in negotiations mirrors his Althusserian politics. It views instability as the most important threat for the ruling class and capital accumulation. The election of SYRIZA brought such instability, inserting an unpredictable and politically divergent player into decision-making in Europe.

So, the logic goes, the number one goal of European elites will be to overthrow the government. Not by violent means but by a soft coup, which they are currently attempting to execute by combination of economic strangulation and political humiliation. This instability thesis is a profound challenge to the dominant narrative of capitalism today, which sees it as a system based on risk and reward. But actually it has a long history as a critique, with even moderate figures like Keynes noting instability’s effects on the “animal spirits” of the economy. The prevalence of the word “confidence” in contemporary discourse evidences the degree to which economic and financial players value security. Therefore if they cannot overthrow SYRIZA, and if no capitulation is forthcoming, the team around Alexis Tsipras believe that European elites and the IMF will compromise.

This is because the third option, the last on the table, brings about an explosion of instability: the threat of Grexit from the eurozone. This opinion is shared by Loudovikos Kotsonopoulos, party intellectual and senior advisor in the Economy Ministry. “My prediction is that there will be a compromise. European elites fear a geopolitical realignment. It is very difficult for the European Union to suffer a defeat of such magnitude as a departure of one of its members. Until now the only direction was countries coming into the EU. If this ceased to be the only option it would have significant ramifications. I’m not sure that they can manage such a defeat, and neither are they. But they know as well that we are in trouble if we exit the euro. So it is tense. What are the sides going to give? And how can this be presented as a victory for both?”.

Dimitris Ioannou, writer for party publication Enthemata, is more sceptical about a compromise. “We come with arguments, they reject them, then they say, ‘you’re wasting time’. What does that mean? It’s just saying, agree with us. You’re wasting time between getting elected and doing what we say”.

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Peanuts, but nice peanuts.

Greece Signs EBRD Deal Worth €500 Million A Year (Reuters)

Greece signed an investment deal worth up to €500 million a year with the European Bank for Reconstruction and Development (EBRD) on Thursday, gaining a rare financial endorsement from the region for its attempts to remain solvent.The EBRD and Greece formally signed the five-year agreement at the development bank’s annual meeting in Georgia. It was approved by the bank’s shareholders in March.“It could help the country’s economic recovery significantly,” Greece’s Economy Ministry said in a statement.The ministry added it should boost the funding options of Greek businesses, especially the small and medium-sized ones that have been hit the hardest by the country’s economic crisis.

The EBRD’s decision to start lending in Greece comes after years of debate at the bank about whether a member of the world’s most advanced monetary union fits with the bank’s role of helping countries make the transition to market economies.The head of the bank, Suma Chakrabarti, has said he hopes to have the first Greek projects in place in coming months but admits Athens leaving the euro would complicate things.New EBRD forecasts on Thursday predicted Greece’s economy would stagnate this year and the bank’s staff warned if it left the euro, the situation would be far worse both for itself and the countries around it.

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Congress can’t even read it unhindered. But GE, Apple, Nike and Walmart can.

You Can’t Read The TPP, But These Huge Corporations Can (Intercept)

[..] who can read the text of the TPP? Not you, it’s classified. Even members of Congress can only look at it one section at a time in the Capitol’s basement, without most of their staff or the ability to keep notes. But there’s an exception: if you’re part of one of 28 U.S. government-appointed trade advisory committees providing advice to the U.S. negotiators. The committees with the most access to what’s going on in the negotiations are 16 “Industry Trade Advisory Committees,” whose members include AT&T, General Electric, Apple, Dow Chemical, Nike, Walmart and the American Petroleum Institute. The TPP is an international trade agreement currently being negotiated between the US and 11 other countries, including Japan, Australia, Chile, Singapore and Malaysia.

Among other things, it could could strengthen copyright laws, limit efforts at food safety reform and allow domestic policies to be contested by corporations in an international court. Its impact is expected to be sweeping, yet venues for public input hardly exist. Industry Trade Advisory Committees, or ITACs, are cousins to Federal Advisory Committees like the National Petroleum Council that I wrote about recently. However, ITACs are functionally exempt from many of the transparency rules that generally govern Federal Advisory Committees, and their communications are largely shielded from FOIA in order to protect “third party commercial and/or financial information from disclosure.” And even if for some reason they wanted to tell someone what they’re doing, members must sign non-disclosure agreements so they can’t “compromise” government negotiating goals. Finally, they also escape requirements to balance their industry members with representatives from public interest groups.

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Angela needs to be careful.

Secrets, Betrayals and Merkel’s Risky Silence in the NSA Scandal (Spiegel)

The world of politics abounds with tales of secrets and betrayals, of collective silence and the indiscretion of individuals. Tales of trust and mistrust. The shadowy world of espionage is no different — its secrets and betrayals legendary. But Sigmar Gabriel’s treachery stands out nonetheless. The German vice chancellor recently announced that Angela Merkel had twice assured him that the NSA and Germany’s foreign intelligence agency, the Bundesnachrichtendienst (BND), had never spied on German companies. In fact, in 2008 the Americans began reneging on agreements and going too far – much too far. They spied on aviation giant Airbus, among others. In August 2013, Angela Merkel had her then Chief of Staff Ronald Pofalla announce that the NSA was doing “nothing that damaged German interests.”

In fact, the Chancellery knew better. But Merkel refrained from taking action, opting instead to navigate her way through the situation by saying nothing. Nearly two years ago, after the information leaked by Edward Snowden first surfaced, she said she didn’t really know what it was all about. The message she’s been conveying ever since is that it’s all terribly technical and not all that important, really. The chancellor’s strategy had the desired effect. The public saw her as a victim. The general election in 2013 should have been dominated by the NSA spying scandal, but Merkel emerged unscathed, triumphant. Newspapers like the conservative Frankfurter Allgemeine Zeitung naively wrote that secret services just happen to spy — and, after all, we need intelligence, so what is one to do?

But the intelligence services and the US had overreached. Merkel could have told them exactly how far was too far. She could have backed their activities and at the same time made sure they didn’t get out of hand. In other words, she could have taken charge. When Merkel assumed office in 2005, she took an oath vowing to protect the German people from harm. It’s her job to protect German companies and the public when US secret services act as though Germany is not a sovereign nation. But people in power often fail to notice when the very quality that brought about their rise to the top turns into a weakness, a danger and even their ultimate undoing.

Merkel tends to lead by stealth. She doesn’t care for rhetoric and confrontation and she avoids quick decisions. These might not be bad qualities, but they don’t suit a head of government. Many of her predecessors loved nothing more than decisiveness and debate. It was why they sought power in the first place. But Merkel seems to worry that she will make enemies with plain speaking, so she chooses to remain close-lipped in crises such as this one.

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“As for Sarao’s complaints going anywhere else: fear not, they will – just as soon as the market crashes.”

Flash Crash Patsy Complained Over 100 Times About Real Market Manipulators (ZH)

Several weeks ago, when the CFTC and DOJ’s laughable attempt to scapegoat the May 2010 flash crash on the actions of a live-in-his-parents-basement UK trader, we explained “Why Sarao Is The Flash Crash Patsy: He Threatened To Expose The “Mass Manipulation Of High Frequency Nerds.” It now turns out that he not only threatened to expose the real market manipulators, but he acctually did it. More than 100 times.

Navinder Singh Sarao, the trader arrested last month on U.S. charges he manipulated futures prices and contributed to the May 2010 “flash crash,” leveled claims of similar misconduct against other traders before his arrest. Mr. Sarao complained to the Chicago Mercantile Exchange, where he traded futures contracts, more than 100 times over the past several years about traders he believed were engaging in manipulative conduct, people familiar with the matter said. His last complaint came just weeks before he was arrested on Justice Department charges, one of the people said.

Previously released documents have shown Mr. Sarao urging exchanges to target high-frequency trading practices he viewed as manipulative, but the frequency and extent of his complaints weren’t known. His complaints underscore the extent to which Mr. Sarao viewed his own trading as a legitimate counter to other high-speed traders. Mr. Sarao appears to have filed an unusually large volume of complaints. “That would be considered a high number,” said Ray Cahnman, a longtime futures trader and chairman of the proprietary trading firm Transmarket. “Most people would break down before they get to 100 because they realize the complaints aren’t going anywhere,” he said.

Sarao’s complaints got him somewhere: straight to prison. And now we know why. As for Sarao’s complaints going anywhere else: fear not, they will – just as soon as the market crashes. Because not only will the next market crash be epic, it will be blamed entirely on the same HFTs that for the past 7 years worked in tandem with the central banks – the source of all capital misallocation decisions – in the creation of the biggest asset bubble of all time.

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You may know Syngenta under any one of these names: Imperial Chemical Industries, Novartis, AstraZeneca, Geigy, Sandoz, Ciba.

Monsanto’s Syngenta Gambit Hinges On Sale Of Seed Businesses (Reuters)

U.S. seeds giant Monsanto is trying to line up buyers for assets worth up to $8 billion to appease competition authorities before making a fresh takeover approach for Swiss Syngenta, possibly within three weeks, industry sources said. Monsanto is expected to tap German chemicals group BASF, an existing joint venture partner, as it seeks a buyer for the U.S. seeds business of Syngenta, which can’t be part of its proposed takeover, sources said. The St. Louis-based group is after Syngenta for its industry-leading crop chemicals, driven by the idea that seeds and pesticides will be better sold and developed together.

Monsanto produces glyphosate, or Roundup, the world’s most widely used broad-spectrum herbicide, and has engineered a range of proprietary crops that resist it. Syngenta closely integrated its seeds and crop chemicals operations in 2011 and Monsanto is expected to unravel some of the main strategic decisions that shaped the group over the last four years – selling off seeds and merging Syngenta’s crop chemicals with Monsanto’s seeds. Global antitrust authorities are expected to demand remedies to reshape the balance of power in the crop protection industry before any combination is allowed.

Syngenta’s management will not want to be seen backing a deal that is then shot down by antitrust watchdogs, two industry sources said. Monsanto commands about a quarter of the $40 billion global seeds market while Syngenta’s own seeds business has a global market share of 8%. The Swiss group’s seeds business could be worth between $6 billion and more than $8 billion, according to analysts. It will have to be sold because authorities are expected to block Monsanto from entrenching its dominance of the U.S. soy and corn seeds market.

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“Of 804 natural habitats assessed by the European Environment Agency for the report, 77% were deemed to be in a poor condition..”

A Third Of Europe’s Birds Under Threat (Guardian)

One in three European birds is endangered, according to a leaked version of the most comprehensive study of Europe’s wildlife and natural habitats ever produced. The EU State of Nature report, seen by the Guardian, paints a picture of dramatic decline among once common avian species, and also warns that ecosystems are struggling to cope with the impact of human activity. Turtle dove populations have plunged by 90% or more since 1980 and could soon be placed on the International Union for the Conservation of Nature’s (IUCN) ‘red list’ of threatened species. Numbers of skylark and ortolan bunting, a songbird illegally hunted and eaten whole in France, have fallen by around half.

Of 804 natural habitats assessed by the European Environment Agency for the report, 77% were deemed to be in a poor condition, with almost a third having deteriorated since a study in 2006. Just 4% were found to be improving. The wide-ranging technical survey made use of data compiled by 27 EU countries between 2007-2012, and will be released by the European Commission later this year. “The report clearly shows that Europe’s wildlife and natural habitats are in crisis,” said Andreas Baumueller, the head of WWF Europe’s natural resources unit. “Our habitats are slowly dying and our natural capital – reflected by species such as birds and butterflies – is being put under enormous pressure from unsustainable agriculture and land use policies.”

The study finds that intensive farming and changes to natural terrain pose the greatest threat to Europe’s flora and fauna, even though biodiversity loss costs the EU an estimated €450bn per year, or 3% of GDP. Agriculture accounts for two-thirds of EU land use. The destruction or conversion of grasslands, heathlands and scrub to grow more crops – often using pesticides – has decimated many bird populations. Monoculture farming, changes in grazing regimes, and the removal of natural vegetation and landscape have added to the pressure. The report also lists changes to waterways, fragmentation of habitats and human activities such as hunting, trapping, poisoning and poaching as specific threats to birdlife.

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Ha!

Your Attention Span Is Now Less Than That Of A Goldfish (OC)

People now have shorter attention spans than goldfish — and our always-on portable devices may be to blame, a new study suggests. The study from Microsoft draws on surveys of more than 2,000 Canadians who played games online in order to determine the impact that pocket-sized devices and the increased availability of digital media and information are having on everyday life. Researchers also did in-lab monitoring, using electroencephalograms (EEGs) to monitor brain activity of 112 people. Among the findings of the 54-page study was that, thanks to our desire to always be connected, people can multi-task like never before. However, our attention spans have fallen from an average of 12 seconds in the year 2000 to just eight seconds today.

A goldfish is believed to have a nine-second attention span on average, the study says. “Canadians with more digital lifestyles (those who consume more media, are multi-screeners, social media enthusiasts, or earlier adopters of technology) struggle to focus in environments where prolonged attention is needed,” reads the study. “While digital lifestyles decrease sustained attention overall, it’s only true in the long-term. Early adopters and heavy social media users front load their attention and have more intermittent bursts of high attention. They’re better at identifying what they want/don’t want to engage with and need less to process and commit things to memory.”

Microsoft’s data is supported by similar findings released by the National Centre for Biotechnology Information and the National Library of Medicine in the U.S. Among the most concerning findings of the study is our declining ability to sustain our focus during repetitive activities: 44% of respondents said they had to concentrate really hard to stay focused on tasks, while 37% said they were unable to make the best use of their time, forcing them to work late evenings and or weekends.

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Mar 072015
 
 March 7, 2015  Posted by at 11:28 am Finance Tagged with: , , , , , , ,  4 Responses »


Wyland Stanley Bulletin press car: Mitchell auto at Yosemite National Park 1920

A Fair Hearing For Sovereign Debt (Stiglitz/Guzman)
Berlin Alarmed by Aggressive NATO Stance on Ukraine (Spiegel)
Week of Milestones for US Stocks Spoiled by Fed Rate Anxiety (Bloomberg)
Dear Janet Yellen: We’re Nowhere Close To Full Employment (MarketWatch)
‘A Conspiracy Of Silence’: HSBC, Guardian And The Defrauded British Public (ML)
Almost 100 Families Evicted Daily In Spain (RT)
It Might Be Time To Panic About Greek Government Bonds (John Dizard)
Greek And German Bruisers Limber Up For ‘Rumble In The Eurozone’ (AFP)
Europe Holds ‘Noose Around Greek Necks’ Says PM Tsipras (Telegraph)
Time For Greece To Plan Its Exodus From The Euro (MarketWatch)
Greece Sends Proposals, But No Decision Due At Monday’s Eurogroup (Kathimerini)
Cash-Strapped Greece Repays First Part Of IMF Loan Due In March (Reuters)
Greece Wants Immediate Talks With Troika On Bailout, Eyes Follow-up Deal (Reuters)
The Noise From Brazil? An Economy On The Brink (Guardian)
Brazil Supreme Court Clears Probe of Top Lawmakers Amid Petrobras Scandal (WSJ)
Petrobras Has a $13.7 Billion Yard Sale (Bloomberg)
RBS Top Bankers Received Millions Despite £3.5 Billion Loss (Guardian)
EU To Hold Immigrants At Bay With Third-Country Asylum Centers (RT)
ISIS Generates Up To $1 Billion Annually From Trafficking Afghan Heroin (RT)

“..simple modifications like contract amendments will not overcome the system’s deficiencies.”

A Fair Hearing For Sovereign Debt (Stiglitz/Guzman)

Last July, when United States federal judge Thomas Griesa ruled that Argentina had to repay in full the so-called vulture funds that had bought its sovereign debt at rockbottom prices, the country was forced into default, or “Griesafault”. The decision reverberated far and wide, affecting bonds issued in a variety of jurisdictions, suggesting that US courts held sway over contracts executed in other countries. Ever since, lawyers and economists have tried to untangle the befuddling implications of Griesa’s decision. Does the authority of US courts really extend beyond America’s borders? Now, a court in the UK has finally brought some clarity to the issue, ruling that Argentina’s interest payments on bonds issued under UK law are covered by UK law, not US judicial rulings.

The decision – a welcome break from a series of decisions by American judges who do not seem to understand the complexities of global financial markets – conveys some important messages. First and foremost, the fact that the Argentinian debt negotiations were pre-empted by an American court – which was then contradicted by a British court – is a stark reminder that market-based solutions to sovereign-debt crises have a high potential for chaos. Before the Griesafault, it was often mistakenly assumed that solutions to sovereign-debt repayment problems could be achieved through decentralised negotiations, without a strong legal framework. Even afterwards, the financial community and the IMF hoped to establish some order in sovereign-bond markets simply by tweaking debt contracts, particularly the terms of so-called collective-action clauses (which bind all creditors to a restructuring proposal approved by a supermajority).

But simple modifications like contract amendments will not overcome the system’s deficiencies. With multiple debts subject to a slew of sometimes-contradictory laws in different jurisdictions, a basic formula for adding the votes of creditors – which supporters of a market-based approach have promoted – would do little to resolve complicated bargaining problems. Nor would it establish the exchange rates to be used to value debt issued in different currencies. If these problems are left to markets to address, sheer bargaining power, not considerations of efficiency or equity, will determine the solutions. The consequences of these deficiencies are not mere inconveniences. Delays in concluding debt restructurings can make economic recessions deeper and more persistent, as the case of Greece illustrates.

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Finally some sense?

Berlin Alarmed by Aggressive NATO Stance on Ukraine (Spiegel)

It was quiet in eastern Ukraine last Wednesday. Indeed, it was another quiet day in an extended stretch of relative calm. The battles between the Ukrainian army and the pro-Russian separatists had largely stopped and heavy weaponry was being withdrawn. The Minsk cease-fire wasn’t holding perfectly, but it was holding. On that same day, General Philip Breedlove, the top NATO commander in Europe, stepped before the press in Washington. Putin, the 59-year-old said, had once again “upped the ante” in eastern Ukraine – with “well over a thousand combat vehicles, Russian combat forces, some of their most sophisticated air defense, battalions of artillery” having been sent to the Donbass. “What is clear,” Breedlove said, “is that right now, it is not getting better. It is getting worse every day.”

German leaders in Berlin were stunned. They didn’t understand what Breedlove was talking about. And it wasn’t the first time. Once again, the German government, supported by intelligence gathered by the Bundesnachrichtendienst (BND), Germany’s foreign intelligence agency, did not share the view of NATO’s Supreme Allied Commander Europe (SACEUR). The pattern has become a familiar one. For months, Breedlove has been commenting on Russian activities in eastern Ukraine, speaking of troop advances on the border, the amassing of munitions and alleged columns of Russian tanks. Over and over again, Breedlove’s numbers have been significantly higher than those in the possession of America’s NATO allies in Europe. As such, he is playing directly into the hands of the hardliners in the US Congress and in NATO.

The German government is alarmed. Are the Americans trying to thwart European efforts at mediation led by Chancellor Angela Merkel? Sources in the Chancellery have referred to Breedlove’s comments as “dangerous propaganda.” Foreign Minister Frank-Walter Steinmeier even found it necessary recently to bring up Breedlove’s comments with NATO General Secretary Jens Stoltenberg. But Breedlove hasn’t been the only source of friction. Europeans have also begun to see others as hindrances in their search for a diplomatic solution to the Ukraine conflict. First and foremost among them is Victoria Nuland, head of European affairs at the US State Department. She and others would like to see Washington deliver arms to Ukraine and are supported by Congressional Republicans as well as many powerful Democrats.

Indeed, US President Barack Obama seems almost isolated. He has thrown his support behind Merkel’s diplomatic efforts for the time being, but he has also done little to quiet those who would seek to increase tensions with Russia and deliver weapons to Ukraine. Sources in Washington say that Breedlove’s bellicose comments are first cleared with the White House and the Pentagon. The general, they say, has the role of the “super hawk,” whose role is that of increasing the pressure on America’s more reserved trans-Atlantic partners.

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Not too much sense, though.

EU To Prepare Possible New Sanctions On Russia Over Ukraine (Reuters)

Britain’s foreign minister said on Friday the European Union would prepare possible new sanctions on Russia for its involvement in the Ukraine conflict that could be imposed quickly if the Minsk ceasefire agreement is broken. Both Kiev and pro-Russia separatists have accused each other of violence since last month’s peace deal that calls for heavy weapons to be withdrawn from the frontline in east Ukraine. “The European Union will remain united on the question of sanctions, sanctions must remain in place until there is full compliance (with the Minsk agreement),” Philip Hammond said. “We will prepare possible new sanctions, which could be imposed quickly if there is further Russian aggression or if the Minsk agreement is not complied with,” he said.

Hammond also said Britain does not have immediate plans to supply Kiev with weapons, but it is “not ruling anything out for the future” as the situation in east Ukraine remains “dynamic”. At a joint conference with his British counterpart in Warsaw, Polish Foreign Minister Grzegorz Schetyna said new sanctions could be imposed if, for example, separatists attack Ukraine’s port city of Mariupol, but a move such as excluding Russia from the SWIFT payments system was an extreme option. “(Exclusion) from SWIFT is the ‘nuclear’ option, this is an extreme option and there is a long list of sanctions that may be used before that,” he said. “Also, the truth is that it is a ‘double-edged sword’.”

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What comes up…

Week of Milestones for US Stocks Spoiled by Fed Rate Anxiety (Bloomberg)

The specter of the Federal Reserve raising interest rates spoiled a week of milestones for U.S. equities. The Standard & Poor’s 500 Index capped a sixth year of the bull market, the Nasdaq Composite Index topped 5,000 for the first time in 15 years and Apple Inc., the world’s largest company by market value, gained admission to the Dow Jones Industrial Average. None of that stopped benchmarks from notching their worst week since January, as concern mounted that the monetary stimulus that helped equities triple from March 2009 will soon end, after a surge in hiring fueled speculation the Fed will raise borrowing costs this year.

The S&P 500 lost 1.6% in the five days, trimming its gain in 2015 to 0.6%, worst among 24 developed-nation markets. “It’s definitely been a week of milestones,” Russ Koesterich, the New York-based chief investment strategist at BlackRock, said in a phone interview. “People are obviously taking a pause as valuations aren’t cheap. This is all about rates. The ultra-dovish view that it won’t happen until next year is much less likely.” The S&P 500 tumbled 1.4% in the final session of the week after data showed employers added 295,000 workers to payrolls in February, more than forecast, and the unemployment rate dropped to 5.5%, the lowest in almost seven years.

The jobless rate has now reached the Fed’s range for what it considers full employment, keeping policy makers on course to raise interest rates this year as persistent job growth sets the stage for a pickup in wages. Three rounds of Fed bond-buying and near-zero interest rates have helped the S&P 500 rally more than 200% since its bear-market low on March 9, 2009. The current bull market, lasting almost 2,200 days, is about two months away from overtaking the 1974-1980 run as the third longest since 1929. The gauge hasn’t had a 10% drop since 2011.

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She doesn’t care. She wants the narrative, not reality.

Dear Janet Yellen: We’re Nowhere Close To Full Employment (MarketWatch)

The unemployment rate fell to 5.5% in February, dropping to a level that some might call “full employment.” The Federal Reserve has said that, in the long run, the unemployment rate can’t go much below 5.2% to 5.5% without fostering a lot of unwanted inflation. With the February report, we’ve crossed that line. Already, the Fed is under a lot of pressure to raise interest rates this summer to make sure inflation doesn’t get too high. The February jobs report adds to that pressure. There’s just one problem: Inflation isn’t too high, and there’s no sign that inflation will suddenly accelerate. In fact, the main concern right now is that the inflation rate is too low. The Fed has long operated under a theory that there’s a limit to how low unemployment can safely go. This rate is known as the “non-accelerating inflation rate of unemployment,” or NAIRU.

The Fed has pegged this number at 5.2% to 5.5%. The argument goes like this: At low levels of unemployment, companies can’t find the workers they need without offering more pay. Once companies get into a bidding war for skilled workers, everyone’s pay goes up. And to pay those wages, companies need to raise their selling prices. Voilà! Inflation. It’s a tidy argument that might have made a lot of sense in 1979, but in today’s economy, there’s no sign that the labor market is so tight that wages are being bid up, even though lots of policy makers and private-sector economists are positive that inflationary wages are coming any day now, that they are right around the corner, just you wait. They’ve been saying that for months.

Here are the facts. According to the Bureau of Labor Statistics, average hourly earnings (wages) for all private-sector workers are up 2% in the past 12 months, about the same wage growth we saw last year and the year before that and the year before that. Average hourly wages for the 80% of workers who aren’t supervisors are up 1.6% in the past year, down from the 2.5% growth reported a year ago. The Employment Cost Index, which is a little more sophisticated than the average hourly wages report, tells a similar story: Wages and benefits are up 2.3% in the past year, up from 2% in the year before that. The ECI shows a little acceleration in compensation, but Fed Chair Janet Yellen has said that workers’ compensation can grow at about 3% to 4% without engendering any inflationary pressures. We’re still a long way from there.

Does anyone really think we’re close to full employment today? Officially, there are 8.7 million people who were actively searching for work last month, plus another 6.5 million people who didn’t look last month but who say they want a job. Plus another 6.6 million who want to work full-time but can only get a part-time job. That’s nearly 22 million people who are unemployed or underemployed. They deserve a shot at a job that pays a living wage. The Fed should think about them, rather than pay attention to a phantom inflation problem.

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Go Nafeez!

‘A Conspiracy Of Silence’: HSBC, Guardian And The Defrauded British Public (ML)

The corporate media have swiftly moved on from Peter Oborne’s resignation as chief political commentator at the Telegraph and his revelations that the paper had committed ‘a form of fraud’ on its readers over its coverage of HSBC tax evasion. But investigative journalist Nafeez Ahmed has delved deeper into the HSBC scandal, reporting the testimony of a whistleblower that reveals a ‘conspiracy of silence’ encompassing the media, regulators and law-enforcement agencies. Not least, Ahmed’s work exposes the vanity of the Guardian’s boast to be the world’s ‘leading liberal voice’.

Last month, the corporate media, with one notable exception, devoted extensive coverage to the news that the Swiss banking arm of HSBC had been engaged in massive fraudulent tax evasion. The exception was the Telegraph which, as Oborne revealed, was desperate to retain advertising income from HSBC. But now Ahmed reports another ‘far worse case of HSBC fraud totalling an estimated £1 billion, closer to home’. Moreover, it has gone virtually unnoticed by the corporate media, for all the usual reasons. According to whistleblower Nicholas Wilson, HSBC was ‘involved in a fraudulent scheme to illegally overcharge British shoppers in arrears for debt on store cards at leading British high-street retailers’ including B&Q, Dixons, Currys, PC World and John Lewis. Up to 600,000 Britons were defrauded.

Wilson uncovered the crimes while he was head of debt recovery for Weightmans, a firm of solicitors acting on behalf of John Lewis. But when he blew the whistle, his employer sacked him. He has spent 12 years trying to expose this HSBC fraud and to help obtain justice for the victims. The battle has ‘ruined his life’, he said during a brief appearance on the BBC’s The Big Questions, the only ‘mainstream’ coverage to date.

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Europe’s recovery symbol.

Almost 100 Families Evicted Daily In Spain (RT)

At least 95 families were evicted every day in Spain in 2014, fresh statistics say as Spaniards struggle to meet mortgage payments. Home foreclosures have become a stark symbol of the 7-year economic crisis, with 2014 seeing a further rise in numbers. The number of foreclosures on all types of residences, including holiday homes, offices and farms, reached 119,442 last year, almost 10% higher than in 2013, according to data from the National Statistics Institute. Foreclosure procedures on main residences rose to 34,680 families in 2014, an increase of 7.4% over the previous year.

Andalusia, Catalonia and Valencia were the worst-affected regions. Evictions have become a symbol of the economic crisis Spain has been struggling with since 2008. Most of them were connected to mortgages taken out during property booms in 2006 and 2007. The situation has provoked nationwide protest. Campaigners often rally outside homes in an attempt to prevent residents from having to spend the night in the street. They are calling on the country’s authorities to make more housing available, or allow vacant housing following developers’ bankruptcies to be used.

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“The problem with taxing the shipowners is that it would take only 24 hours for them to reflag their entire fleet..”

It Might Be Time To Panic About Greek Government Bonds (John Dizard)

Judging by the prices of Greek government bonds, the investing community seems to have overcome its blind, unreasoning panic about the Syriza-led government that took office in January. In the past five weeks, the 10-year benchmark yield has dropped from a peak of about 11.2% to just over 9.5%. This is good. Blind, unreasoning panic is wrong. I think it might be time for open-eyed, reasoned panic about traded Greek Government bonds. They might look cheap compared to negative yield German bonds, or zero yield GDF Suez bonds, but they will get even cheaper later this year. If you own them, sell them. Bond investors have been lulled too quickly by the truce declared between Greece and its European creditors.

Not that Greece will necessarily default on the already-haircut issues held by the private sector. The principal payments will not be due for another eight years or so, and the interest payments are not very burdensome. Those bonds are now governed by English law, which makes them rather more enforceable than the old “local law” Greek debt. The Syriza cabinet recognises these facts. The problem is that the Greek government will run out of cash to pay its operating expenses in full by the summer, or even sooner, and neither the Europeans nor anyone else will give them enough new money to pay its bills. That means the Syriza cabinet will have to tell public sector employees and pensioners that part of their income will be paid in (transferable) IOUs, which will plunge to a steep discount.

The leaders can blame Germans, oligarchs, neoliberal economists or Martians, but a lot of their core supporters will be unhappy, and quite open about their feelings. The eurogroup political leadership and the eurocracy are prepared for this. Their recent civil exchange of letters represents a truce, not a peace. The eurogroupies know that there is no mutually acceptable deal to be had with the Syriza government. So their silent intention is to negotiate with the next government, whoever that might be, after the Greek government is forced to call for an early election. Things have to get pretty bad for that to happen; after all, Syriza just won fair and square less than two months ago, and their policies are supported by a majority of the Greek public. Bad enough for those 9.5% yields to look a bit thin on a risk-adjusted basis. And they will.

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Greece does good cop bad cop pretty well.

Greek And German Bruisers Limber Up For ‘Rumble In The Eurozone’ (AFP)

They are both tough men of a certain age used to getting their way. In one corner stands Wolfgang Schaeuble, the dry 72-year-old German Finance Minister and self-appointed guardian of the European Union’s fiscal orthodoxy. And at the opposite end of Europe’s austerity divide glowers former Communist Panagiotis Lafazanis, Greece’s obdurate new energy and output minister. Schaeuble and Lafazanis, 63, have not yet sat down together around a negotiating table in Brussels, but a clash between them is unavoidable nonetheless as Athens and Berlin square up for another bail-out showdown. Lafazanis is responsible for some of Greece’s main state companies that were slated to be privatized under the rescue plan agreed with the EU and the International Monetary Fund.

These include dominant electricity provider PPC, state gas distributor DEPA and leading refiners HELPE. State stakes in all three were to be sold to private investors as part of the Greece’s bail-out deal until January, when the new hard-left Syriza government pulled the plug on the plan. “No privatisation will be held in the energy sector – neither at PPC, nor at DEPA nor at HELPE,” Lafazanis said at the time. When electricity workers were given a pay rise this week – to general consternation – the ministry did not object. Schaeuble, however, insists on the new Greek government honoring the country’s existing pledges, and he has castigated Syriza for making promises they cannot afford to keep.

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Juncker will need to act.

Europe Holds ‘Noose Around Greek Necks’ Says PM Tsipras (Telegraph)

Greece’s prime minister has accused the ECB of holding a noose around the country’s neck as his government rushes to assure creditors it can avert bankruptcy this month. Speaking in an interview with Der Spiegel magazine, Alexis Tsipras appealed to the ECB to alleviate pressure on the cash-strapped country. The ECB “is still holding the rope which we have around our necks” said Mr Tsipras, referring to the central bank’s reluctance to resume ordinary lending to Greek banks at a meeting in Cyprus on Thursday. The central bank has also rebuffed Greek appeals to raise the limit on short-term debt issuance, as it faces €6.5bn in payments over the next three weeks. Should the ECB continue to resist Greek pleas for assistance, “the thriller we saw before February 20 will return” warned Mr Tsipras, referring to the market turmoil which gripped the country as it carried out protracted negotiations with its creditors.

Greece made its first €300m payment to the International Monetary Fund on Friday. It faces another €1.2m in loan redemptions to the Fund before the end of the month. But the government is scrambling to find the funds it needs to meet its obligations to creditors in March. Athens is not due to receive €7.2bn of bail-out money before April. ECB president Mario Draghi said a collateral waiver on Greek bonds would only be reinstated once “a successful completion of the bail-out review be put in place”. Greek banks are having to rely on an a form of expensive emergency funding to stay afloat as capital has rushed out of the country. Ahead of a meeting of European ministers on Monday, Greece’s Yanis Varoufakis submitted an 11-page list of reforms his government intends to carry out to unlock the vital cash it needs from its creditors.

The proposals include measures to fight tax evasion using students, tourists and housekeepers as undercover tax inspectors. The “rock-star” finance minister also made an appearance on the cover of the Greece’s Esquire magazine for March. Following the ECB’s hostility to Greece’s woes, Mr Tsipras asked to meet with the European Commission’s Jean-Claude Juncker but was turned down, according to a Greek government source. A meeting between the two could now take place next week to “discuss how Greece will utilise European funds to address the humanitarian crisis and unemployment”, said a Syriza spokesman. Amid fears that the country will not come good on its election promises, Mr Varoufakis has promised his Leftist government has “alternative plans” to plug its financing gap over the next 21 days. “We go into the negotiations with optimism, with especially good preparation”, said the finance minister.

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Be sure the plan is there. They just can’t talk about it.

Time For Greece To Plan Its Exodus From The Euro (MarketWatch)

Greece must now plan on a way to exit the euro if it is to have any chance of staying. This is not a conundrum; it is the way negotiation works. The new government of Prime Minister Alexis Tsipras was forced to backtrack last month on its election pledges to get its foreign debt reduced and reverse austerity because it had no plausible alternative to European Union intransigence on extending the bailout. The only viable alternative would be to exit the euro, default on the debt and suffer the consequences, and Athens was not ready to do that. This “Plan B” cannot be a bluff and at this point it is better than even odds it will be the plan Greece will have to follow.

Tsipras and his finance minister, Yannis Varoufakis, have so far argued in their “Plan A” that Greece can stay in the euro, but pinned that belief on Germany and other EU members being reasonable. Germany — as well as the European Commission, the European Central Bank, and the International Monetary Fund — made it amply clear in the initial round of negotiations that they have no intention of being reasonable in the way Tsipras and Varoufakis believe they should. It was always a fairly delusional assumption that German leaders would suddenly see the light and embrace an enlightened Keynesian solution to the economic and social crisis in Greece. Berlin and Brussels remain pitiless and more convinced than ever of the rightness of their destructive neoliberal policies.

The only way Greece can regain its sovereignty — which is essentially what Tsipras’s Syriza party pledged to voters in its rise to power — is to reclaim its sovereign rights, and especially control of its currency and banking system. The consequences of defaulting on the country’s debt would be dramatic, but relatively short-lived compared to the guaranteed long-term misery of the EU austerity program.

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Finance ministers are out of their league, they need third-party advisers.

Greece Sends Proposals, But No Decision Due At Monday’s Eurogroup (Kathimerini)

Greece submitted to Eurogroup chief Jeroen Dijsselbloem Friday an outline of seven reform proposals to form the basis for discussion at Monday’s meeting of eurozone finance ministers, but the signs from Brussels are that Athens is no closer to securing the release of its next tranche of bailout funding. The 11-page document sent by Finance Minister Yanis Varoufakis sets out several proposals that have already been made public as well as some that were only made known Friday. The suggestion that caused the most surprise was to fight tax evasion by enlisting non-professional inspectors, including tourists, on a two-month basis during which they would collect audiovisual data that could be used to target evaders. Varoufakis also outlined plans to activate a fiscal council to generate budget savings and update licensing of gaming and lotteries to boost state revenues by an estimated €500 million.

He also gave details of the government’s plan to ease the social impact of the crisis, which will cost some €200 million, and to introduce a new payment plan for tax debtors, which the coalition estimates could raise €3 billion in revenues. In his letter to Dijsselbloem, Varoufakis calls for technical discussions regarding the proposals to begin as soon as possible. “We envisage that… the majority of the items on our first list can be further specified as soon as possible so that the resulting agreement can be ratified by the Eurogroup, and Greece’s Parliament, and become the basis for the review,” wrote the Greek finance minister, who added that the government proposes all technical discussions and fact-finding or fact-exchange sessions should take place in Brussels.

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It’s about what comes after.

Cash-Strapped Greece Repays First Part Of IMF Loan Due In March (Reuters)

Greece repaid on Friday the first €310 million instalment of a loan from the International Monetary Fund that falls due this month, as it scrambles to cover its funding needs. Prime Minister Alexis Tsipras’s newly elected government must pay a total of €1.5 billion to the IMF this month, but it is rapidly depleting its cash. The payments fall due over two weeks starting on Friday. The next three instalments are due on March 13, 16 and 20. “The payment of €310 million has been made, with a Friday value date,” a government official told Reuters, requesting anonymity. The Tsipras government has said it will make the payments, but uncertainty has been growing over Greece’s cash position. It faces a decline in tax revenues, while aid from EU/IMF lenders remains on hold until Athens completes promised reforms.

Athens sent an updated list of reforms to Brussels on Friday, before a meeting of euro zone finance ministers on Monday, a Greek government official said. The list expanded on an earlier set of proposals, he said. The reforms include measures to fight tax evasion and red tape and facilitate repayment of tax and pension fund arrears owed by millions of Greeks, the official said. It also proposes a “fiscal council” to generate savings for the state. In the letter to the Eurogroup, Greek Finance Minister Yanis Varoufakis says Athens aims to save €200 million by cuts in public-sector spending, offseting an estimated €200 million cost to tackle what it calls the country’s “humanitarian crisis.” It also aims to collect €500 million in extra revenues annually from new gaming licences and taxing online gaming operators.

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Keep up the pressure, see if they make mistakes.

Greece Wants Immediate Talks With Troika On Bailout, Eyes Follow-up Deal (Reuters)

Greece asked euro zone countries on Friday for an immediate start of technical talks with international creditors on the first batch of reforms that would help conclude its current bailout programme and allow the disbursement of more loans. The request marks a softening of Greece’s stance. Until now, it has rejected talks with the three institutions that have supervised it so far on implementing reforms. But Greece, which faces loan repayments over the coming weeks and months, is running out of cash and needs more euro zone credit to avoid bankruptcy. If it concludes the bailout, which means implementing reforms the previous government had agreed to, but which the current government rejects, it could get €1.8 billion of loans remaining from the existing 240 billion-euro bailout.

It would also be eligible to get €1.9 billion that the ECB made in profits on buying Greek bonds. And Greek banks would again become eligible to finance themselves at the ECB’s open market operations. “I am now writing to you … to convey the Greek government’s view that it is necessary to commence immediately the discussions between our technical team and that of the institutions,” Greek Finance Minister Yanis Varoufakis said in a letter to the chairman of euro zone finance ministers, Jeroen Dijsselbloem. Varoufakis proposed that discussions with the institutions take place in Brussels – avoiding the connotation of a loss of sovereignty that visits to Athens by Troika representatives over the past five years have had for the Greek public.

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Bye bye Rousseff.

The Noise From Brazil? An Economy On The Brink (Guardian)

The more you look at Brazil’s fundamentals, the more shaky the country looks. And we are not talking about the defensive prowess of David Luiz here. It is the country’s economic backline that risks tumbling down like a set of dominoes. When a Latin American economy is in trouble a good place to start is its inflation rate. Brazil’s is today running at 7.5%. While this is nowhere near the 2,000-3,000% of the early 1990s, when the price of everything went up several times a week, it is far higher than the central bank’s mid-point target of 4.5%. On Wednesday, in an effort to bring inflation down, Brazil’s central bank raised interest rates to 12.75%, a six-year high.

The problem is that the country is hiking interest rates – and trying to curb high prices – at a time in which its economy is on the brink of recession. Between 2002 and 2008, Brazil’s economy expanded at 4% a year. It has since averaged less than 2%. GDP is expected to contract 0.5% this year. High inflation makes matters worse in at least two ways. First, high prices hinder shoppers’ purchasing power. The Economist calculates that about half of the country’s growth over the past decade was driven by consumption. A drop in purchases will not only dampen economic prospects but would lead to a recession that would freeze the pay of millions because the minimum wage is linked to GDP and inflation.

Elsewhere, salaries in both the public and private sector have grown above GDP for the past decade and are now unlikely to keep pace with inflation. Tax hikes and fare rises will not help either. It is therefore not surprising that consumer confidence is at its lowest since records began in 2005. Second, next to rising prices, the real is sinking. Despite the rate increase, Brazil’s currency hit R$3 to the US dollar on Wednesday for the first time in more than a decade. This puts further pressure on prices: the cost of imported goods goes up – more bad news for shoppers.

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Cats in a sack.

Brazil Supreme Court Clears Probe of Top Lawmakers Amid Petrobras Scandal (WSJ)

A corruption dragnet that has jailed dozens of executives and erased billions from Brazil’s state-controlled oil giant has now snared some of the nation’s top lawmakers, deepening a crisis that is weighing on South America’s largest economy. Brazil’s Supreme Court on Friday gave the go-ahead to federal prosecutors to investigate close to 50 politicians, including Senate President Renan Calheiros and Eduardo Cunha, head of the Chamber of Deputies, as part of a widening corruption probe of Petróleo Brasileiro S.A., known as Petrobras. Both men are members of the PMDB party, Brazil’s largest and a key partner in President Dilma Rousseff ’s effort to pass austerity measures to narrow a yawning budget gap. With the economy skidding and Brazil in danger of losing its investment-grade sovereign rating, the investigation could push top legislators away from strict measures and toward populism.

“What’s going to prevail is the survival instinct,” said Ricardo Ismael at Rio’s Pontifical Catholic University. “The big problem I think is with the economy because the government was really counting on fast votes from Congress, so they could share the cost of the fiscal adjustment.” Fear that fallout from the scandal would threaten budget cuts has weighed on Brazil’s stocks and currency. The IBOVESPA stock index declined by 3.1% this week, while the real plunged about 7%. On Tuesday, hours after rumors emerged that his name was on “Janot’s list,” Mr. Calheiros torpedoed an executive order from Ms. Rousseff that would have raised payroll taxes to fill government coffers. Local press characterized the move as retaliatory, though it followed a period of heightened tension between the two politicians. The attorney general is independent of the government.

“What happened this week is that the risks, which were already there, became more visible,” says Carlos Melo, a professor at São Paulo business school Insper. “After Renan´s move, it is clear the government will not be able to push any kind of fiscal adjustment through Congress without negotiating first.” In practice, analysts say, that stretches the odds of the government meeting its 1.2% target for the primary budget surplus, seen by many as a make-or-break goal in the effort to avoid a sovereign downgrade. Prosecutors say the PMDB, Ms. Rousseff’s Workers’ Party, and other government-aligned parties suggested executives to run major divisions at Petrobras.

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“The devourers of capitalism had become the devourers of Petrobras.”

Petrobras Has a $13.7 Billion Yard Sale (Bloomberg)

Staggered by $135 billion in debt and scandal, Brazilian state-run oil giant Petroleo Brasileiro SA has announced plans to offload some $13.7 billion in assets. Officials claim this is not a plan to raffle the jewel of the government crown. Instead think fire sale, a maneuver to raise cash and keep creditors at bay. The move plays like a scene in a script coming full circle. Luiz Inacio Lula da Silva once joked that back in the 1990s, when he was still the country’s ranking lefty and not its president, “people trembled” whenever he passed by the door of the Sao Paulo stock exchange. “There goes that devourer of capitalism,” they’d say.

Yet scarcely more than a decade later, Lula, a self-described “walking metamorphosis,” was at Bovespa as president of Brazil, hosting the feast as the state-run oil giant went on the bloc in one of the world’s biggest public stock offerings. “Capitalization,” he beamed in 2010, “is one of the safeguards the government has to assure that this wealth doesn’t get lost to the labyrinths of waste and dubious interests.” Tell that to prosecutor general Rodrigo Janot, who just handed the Supreme Court a list of 54 lawmakers and government officials suspected of looting the country’s flagship multinational for political gain. So labyrinthine is waste and corruption that the new management – the old one resigned in disgrace – has yet to file the 2014 balance sheet, which is one reason why Moody’s Investor Services recently downgraded Petrobras paper to junk.

The fire sale Petrobras is planning may prove difficult. With crude prices slumping, it’s a buyer’s market for rigs and refineries. Meanwhile, the ruling Working Party and union rank and file, who see a plot to privatize Petrobras by stealth, have called for a mass protest March 13 to defend the company and roll back austerity measures announced by Lula’s successor, President Dilma Rousseff. Leading the charge, strangely enough, is Lula himself, who exhorted companheiros to stand up to bottom-feeding “neoliberals.” This was wagging the dog. It’s not the market-friendly opposition that threatens Brazil’s biggest brand, but repeated government attempts – first by Lula, then Rousseff — to suspend the basic rules of economic gravity. The devourers of capitalism had become the devourers of Petrobras.

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New normal.

RBS Top Bankers Received Millions Despite £3.5 Billion Loss (Guardian)

Royal Bank of Scotland paid 128 of its top bankers more than €1m (£720,000) in 2014, a year when it reported its seventh consecutive year of losses since being bailed out by the taxpayer and was punished by regulators for rigging foreign exchange markets. Three bankers, whose identities are protected because only the pay deals of boardroom directors have to be published, received up to €6m. The disclosures are likely to reignite the controversy over the pay handed out by the bank, which has incurred losses on a par with the £45bn ploughed in by taxpayers to prevent it going bust. None of the 79% stake has yet to been sold off although George Osborne has promised to sell it as “quickly as we can” if he remains chancellor after the 7 May election.

Chief executive Ross McEwan was paid £1.8m in salary, pension and benefits in 2014 and was handed £1.5m in shares to buy him out of his previous employer in Australia when he was recruited to run the retail bank. He was awarded £1.5m of shares under a long-term plan that will pay out in the future. The pay of the New Zealander, though, was eclipsed by a number of colleagues. The newly recruited finance director Ewen Stevenson received £3.1m after being bought out of his previous employer, Credit Suisse, and Rory Cullinan, who runs the non-core division of the bank, received £2.2m from bonuses handed out in previous years. Cullinan, who has been promoted to help wind down the investment banking arm, cashed in £1.2m of shares and was awarded £2m in a new pay deal.

The bank published share payouts and awarded to the members of the executive management team who do not sit on the board. When share awards to McEwan and Stevenson are included, eight senior managers were awarded shares worth £11m which will payout in the future. In total more than £5m of shares were cashed in from previous years. The bank said the 128 paid more than €1m compares with 149 a year ago when the staff who have relocated to the US through its Citizens Financial arm, in the process of being floated in the US stock market, are included.

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Too little too late.

EU To Hold Immigrants At Bay With Third-Country Asylum Centers (RT)

Opening processing centers in transit countries in the hope that it will curb the number of illegal immigrants is Brussels’ answer to the inflow of refugees, who risk their lives to cross the Mediterranean in search of a better life. The measure is part of the new European Agenda on Migration, which will be published later in mid-May. At a media conference this week, Dimitris Avramopoulos, the European Commissioner for Migration and Home Affairs, said amending the way the EU deals with illegal immigration is an urgent issue that requires complex solutions. “When presenting a comprehensive European Agenda on Migration we have to think about all dimensions of migration – this is not about quick fixes; this is about creating a more secure, prosperous and attractive European Union,” he said.

Last year, over 276,000 people entered the EU illegally, which is 155% more than in 2013, according the EU borders agency Frontex. Some 220,000 arrived via the Mediterranean, with at least 3,500 and possibly more than 4,000 people dying en route. The passage is considered the most dangerous in the world. “We need to be effective, as Europeans, on the immediate response and at the same time to address the root causes, starting from the crises spreading at our borders, most of all in Libya,” said EU foreign policy chief Federica Mogherini. “That’s why we are increasing our work with origin and transit countries to provide protection in conflict regions, facilitate resettlement and tackle trafficking routes.”

Establishing processing centers in countries like Niger, Egypt, Turkey or Lebanon represents a U-turn in EU policies as the idea is gaining traction among the more affected members. Southern European countries including Italy and Malta are among those members of the union that pay the greatest price dealing with the inflow. France and Germany also favor the idea. Strong opposition to the idea remains among national governments less eager to welcome refugees from countries like Libya and Syria on their soil, such as Denmark and the UK. Part of the reluctance is because some EU members don’t want to relinquish authority over immigration policies to Brussels.

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How’s the CIA supposed to make a living now?

ISIS Generates Up To $1 Billion Annually From Trafficking Afghan Heroin (RT)

Drug money is a massive source of profit for ISIS, who makes up to $1 billion annually from sales throughout its conquered lands, according to the Russian Federal Drug Control Service (FSKN). “The area of poppy plantations is growing. This year, I think, we’ll hear news about a record-high poppy harvest, therefore a high yield of opium and heroin. So this issue should be raised not only in Moscow, but also in the UN in general, because this is a threat not only to our country, but also European security. Over the past five years the Balkan route has been split – heroin traffic now also goes through Iraqi territory,” TASS quotes FSKN head Viktor Ivanov as saying. What makes profits especially huge is that, despite not operating in Afghanistan, large quantities of poppy are being transported through those parts of Iraq the Islamic State (IS, formerly ISIS) controls.

To Ivanov, this makes possible a “huge financial sponsorship.” “According to our estimates, IS makes up to $1 billion annually on Afghan heroin trafficked through its territory,” he added. The FSKN in November said that the sale of Afghan heroin in Europe could generate upwards of $50 billion for the militants. What’s more, over half of Europe’s heroin now comes from the IS, according to Ivanov. Indeed, drug money has been high on the IS’s list of profit generators, together with oil and conquest. A recent report by the Financial Action Task Force talked of how the IS has been branching out into all manner of finance-generating activities, though it is the reliance on oil that makes them a truly unique terrorist group, unlike others before it.

It remains unclear whether IS can hold its drugs though, let alone run a smuggling business. One British ex-soldier who joined the Peshmerga Kurdish fighters in November 2014 to fight the IS describes the majority of Islamist militants as a disorganized bunch of “office workers and villagers” on drugs. “They do not have a choice, and they don’t have any information, or even any clear leadership. Many of them are heavily involved in taking drugs they are so terrified,” Jamie Read said.

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Apr 232014
 
 April 23, 2014  Posted by at 2:12 pm Finance Tagged with: , , , ,  3 Responses »


Arthur Rothstein Planting beans near Belle Glade, Florida January 1937

QE Is A Fraud Perpetrated By Made Men

A lot of words are being spent again these days on deflation and the QE measures that are supposed to “cure” it. Paul Krugman, who when it comes to stimulus is a hammer seeing nails only, now has it in for Sweden’s central bank, which he labels monetary sadists for not opening the spigots. But it’s all a hugely deceptive false flag; it’s not an issue of whether you launch QE or not. There’s a third, and much more valid, way of looking at this.

First of all, one should wonder if QE is the right kind of stimulus, if growth and recovery in the real economy is the objective. Which in present circumstances is a very big IF ,that is surprisingly, hardly ever questioned. But if the real economy is the target area, it’s highly likely that something like Steve Keen’s version of a debt jubilee, where every citizen receives an X amount, first to be used to pay off any debts, would be far more effective. Or the Positive Money ideal, in which central banks, not commercial banks, have the ability to create fresh credit.

However that may be, what everybody should realize is that QE or another form of stimulus MIGHT work, but only if they’re executed in the proper fashion, that is, if debts are restructured at the same time stimulus is unleashed, i.e. the financial system is purged, which is the only way to restore trust and confidence. Debt restructuring must be a core element of any stimulus, and if it’s not, wherever you live, you know you’re being screwed.

In essence, what central banks have done so far, first in Japan, then in the US and EU, is to cordon off the debts residing in their banks (e.g. in the form of swaps and not-so-securities), and then flood these same banks with money/credit, in order to make them look healthy. Since all these nations’ banks have the same debt issues, they all agreed to ignore each other’s obvious sleight of hand. And anyone can understand that if these banks are still sitting on huge amounts of debt, any and all stimulus must and will at some point disappear into a bottomless black hole, albeit only after first having pumped up asset markets to new bubble heights and creating a temporary and entirely false impression of growth and recovery, with one more round of fat profits for the zombified financial system, and eventually leaving behind an economic landscape for which the term scorched earth would be sheer flattery.

If one thing should be clear, it’s that this does nothing to either fight deflation, induce growth or launch a recovery. It paints rosy pictures on a shiny and alluring screen, behind which present and future generations are being robbed blind. And even if it might be too much to ask, it would be good if it also became clear that QE has never been intended to heal the real economy, other than perhaps as a secondary side-effect. The purpose of QE is, and always has been, to keep banking systems standing as long as is deemed desirable, after which point the insiders clear out with their gains and the public at large will be left with the losses. QE is merely another way to transfer losses from “them” to you.

A stinging rebuttal of Krugman and his ilk comes, via Tyler Durden, from Phoenix Capital Research, where Kool-Aid is not a favorite in the vending machine.

Japan Has Proven That Central Banks Cannot Generate Growth With QE

The Keynesian economists managing or advising the world’s Central Banks have always averred that they could pull us out of the weakest recovery in the post-WWII era if they were allowed to have their way. Their “way” involves rampant debt monetization, also called Quantitative Easing or QE. Indeed, the primary argument from the Keynesians as to why QE has thus far failed to generate a rip-roaring recovery is that none of the QE programs in place were large enough. Japan is where the Keynesian economic model rubber hit the road. In April 2013, the Bank of Japan announced a staggering $1.4 trillion QE program. In today’s world of Central Banking madness, $1.4 trillion no longer sounds like an insane amount. So let me put this number into perspective… $1.4 trillion is…

  1. The equivalent of 24% of Japan’s total annual economic output.
  2. Enough to fly every human being in Japan to California for a 2-week vacation.
  3. The equivalent of writing a check for $11,200 to every man, woman, and child in Japan.

Moreover, with $1.4 trillion, you could…

  1. Buy Australia’s entire economy for a year.
  2. Fund NASA for the next 82 years.
  3. Treat every person on the planet to a $200 five star dinner at one of New York’s top restaurants.

For the US to engage in an equivalent amount of QE, it would have to announce a $3.7 trillion QE program. If Europe engaged in a QE program of this magnitude, it could buy back ALL of Spain and Greece’s debt outstanding. Suffice to say, Japan’s QE was large enough that no one, not even the most stark raving mad Keynesian on the planet, could argue that it wasn’t big enough. Which is why the results are extremely disconcerting for Central Bankers at large.

[..] Abenomics has failed to revitalize Japan. Just as importantly, this failure [..] is costing Abe his popularity (his ratings have fallen from 75% at re-election to roughly 50% now). Thus, the Bank of Japan’s massive QE campaign has revealed:

  1. That QE does not generate economic growth
  2. There will be political consequences for its failure

As much as I appreciate Phoenix Capital’s input, I also find some crucial points missing in this analysis. While I’m no fan of either Krugman or his Keynesianism on steroids, I don’t think they irrevocably refute the potential of QE as a ways to stimulate an economy. I’ve already said that I don’t think QE is the best way to accomplish that, but I think it’s more important to note that QE without debt restructuring cannot possibly work, because A) the debt is likely to swallow up all QE and more, and B) no confidence is restored. And what I find yet more important than that is that QE as it has been executed thus far is not a failure, as Phoenix contends, but a multi-trillion dollar fraud. Because central bankers are very aware of both points A) and B).

Racking up deficits and balance sheets for governments and central banks in order to prop up the zombified corpses of financial institutions that have wagered big and lost bigger, without making sure the debts and losses are purged that made them need the stimulus in the first place, is nothing but the biggest heist in human history. Moreover, if you could fight deflation with stimulus, this certainly wouldn’t be the way to go. If Japan, instead of handing it to its banks, would simply actually have given $11,200 to every man, woman, and child in Japan, the chances of raising the velocity of money, a crucial element of in/deflation, would have been much higher.

And I’m supposed to think that central bankers don’t understand this? I’m sorry, but that’s something I can’t get through my head. From where I’m sitting, people like Greenspan and Bernanke and Kuroda look far more like wise guys or made men than they look like oracles or wise old academic types who unfortunately got things wrong on occasion.

And before I forget, the fact that QE has been implemented as it has doesn’t only tell us something about the political power of the financial system, which can do this simply because they can, it also gives an indication of how vast the losses truly are, how foul the smell emanating from the paper hidden in the bank vaults truly is by now, 7-odd years into this Kabuki meets ancient tragedy performance for which ticket prices keep rising exponentially.

Yeah, the US economy is doing oh so great, isn’t it?

America’s Consumers Are Dropping, Not Shopping (Alhambra)

McDonald’s latest results confirm that something is very much amiss on the consumer side. Total global revenue grew only 1% Y/Y, including new store launches and acquisitions. However, as has been the pattern since 2012, US comparable store sales lagged markedly. The rate of contraction in Q1 was actually the worst in more than a decade.

ABOOK Apr McD Same Store US

Even if you believe that the cold and snow of January and February played a role, it could not have explained that comparison. There is simply no way that anything other than consumer exhaustion can create the chart above. One need only glance at the revenue history of companies in the S&P 500 to see that in full effect. If McDonald s persistent travails are limited to the company, or even the fast food industry, there is no way that the revenue pattern for MCD would so match closely that of the entire S&P 500. The commonality screams macro.

ABOOK Apr McD SP 500 Revenue

Current projections for the first quarter add up to about 2.5% revenue expansion across S&P 500 companies, but, as last quarter showed, that is likely overly optimistic (fourth quarter revenue was believed to be expanding at near 3% at the outset of earnings season in January 2014, only to be revised lower to almost 0%).

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I think they already figured that out.

The American Middle Class Is No Longer the World’s Richest (NY Times)

The American middle class, long the most affluent in the world, has lost that distinction. While the wealthiest Americans are outpacing many of their global peers, a New York Times analysis shows that across the lower- and middle-income tiers, citizens of other advanced countries have received considerably larger raises over the last three decades. After-tax middle-class incomes in Canada — substantially behind in 2000 — now appear to be higher than in the United States. The poor in much of Europe earn more than poor Americans. The numbers, based on surveys conducted over the past 35 years, offer some of the most detailed publicly available comparisonsfor different income groups in different countries over time.

They suggest that most American families are paying a steep price for high and rising income inequality. Although economic growth in the United States continues to be as strong as in many other countries, or stronger, a small percentage of American households is fully benefiting from it. Median income in Canada pulled into a tie with median United States income in 2010 and has most likely surpassed it since then. Median incomes in Western European countries still trail those in the United States, but the gap in several — including Britain, the Netherlands and Sweden — is much smaller than it was a decade ago.

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The weather?

Sales of Existing U.S. Homes Fall for a Third Month (Bloomberg)

Sales of previously owned homes fell in March for a third consecutive month as rising prices and a lack of inventory discouraged would-be buyers. Closings, which usually take place a month or two after a contract is signed, fell 0.2% to a 4.59 million annual rate, the lowest level since July 2012, the National Association of Realtors reported today in Washington. Purchases were down 8.5% compared with the same month last year before adjusting for seasonal patterns. Property values have climbed faster than wages, putting ownership out of reach for some Americans. Harsh winter weather in January and February also probably kept some properties off the market, contributing to a lack of supply that has further stoked price increases.

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David Stockman is on the right track.

America’s Housing Fiasco Is On You, Alan Greenspan (Stockman)

In truth, America’s baby-boom generation was robbing its own future retirement years, but the Maestro was oblivious. Instead, he was busy tracking the quarterly rate of MEW (“mortgage equity withdrawal”) and crowing about how it was contributing to unprecedented prosperity on Main Street. It ended up in a conflagration of exploitive lending, fraud, default and trillions of financial losses, of course, but not until $5 trillion of cumulative MEW during the decade through 2007 had ruined the financial well-being of America’s middle class for a generation to come.

Under a regime of free market interest rates $5 trillion of MEW—that is, robbing from the future to party today—could not have happened. Long before the 2003-2006 blow-off top, mortgage interest rates would have soared to double digit levels, causing monthly debt service requirements to double or triple. Moreover, in an environment of market-set interest rates there would have been no Greenspan Put or ultra cheap wholesale financing that enabled Wall Street to fund mortgage boiler shops with warehouse credit lines and buyers of its toxic securitization products with cheap repo.

In short, free market interest rates are the vital check and balance mechanism which prevents runaway spirals of debt issuance and frenzied bidding-up of asset prices. Yet it was Greenspan’s “wealth effects” doctrine that destroyed the mechanism of honest price discovery once and for all. The carnage that has ensued in the nation’s credit and housing markets, therefore, is on you, Alan Greenspan.

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“More Policy” is needed?

China Factory Activity Shrinks For Fourth Month

China’s factory activity shrank for the fourth straight month in April, signaling economic weakness into the second quarter, a preliminary survey showed on Wednesday, although the pace of decline eased helped by policy steps to arrest the slowdown. Analysts see initial signs of stabilization in the economy due to the government’s targeted measures to underpin growth, but believe more policy support may be needed as structural reforms put additional pressure on activity. The HSBC/Markit flash Purchasing Managers Index (PMI) for April rose to 48.3 from March’s final reading of 48.0, but was still below the 50 line separating expansion from contraction.

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Wham! Don’t miss the video.

China ‘A Ticking Time Bomb And A Big Shock’s Coming’ (Saxo Bank)


(Roll over for video)

Markets are massively underestimating the deflationary fallout that’s going to come from a big decline in China and other emerging markets. That’s according to Michael Ingram, Market Strategist at BGC Partners. China’s manufacturing sector continues to shrink. On Tuesday, the HSBC PMI index for April came in at 48.3. Anything below 50 shows a contraction. China’s yuan hit a 16-month low on the news. Michael says China’s efforts to re-balance its economy is taking its toll and he’s not sure it can be managed effectively. He says that we’re not seeing “risk off” right now, we’re seeing “growth off”. Any suggestion that emerging markets have decoupled from developed economies is “nonsense”, according to Michael and China’s a “ticking time bomb” that’s about to explode.

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I like Shilling, but seeing him quote Lagarde to get his point across makes me queasy.

Deflation Is About to Wallop Europe (A. Gary Shilling)

The euro has been defying gravity for years. Europe’s Teutonic North and Club Med South were joined under one monetary policy. But the 18-member euro area has no common fiscal policy and probably never will, given its vast cultural and economic differences. This hardly makes the euro a safe-haven currency. After dropping from 1.60 per U.S. dollar to 1.20 during the global recession, the euro has risen to 1.38. And that’s despite Europe’s follow-on recession, which began in the fourth quarter of 2011 and lasted six quarters. Real gross domestic product growth since then has averaged only 0.9% annually, well below the 2.3% in the U.S. Does the euro really deserve to be strong against the greenback?

It is true that the financial crisis has abated since European Central Bank President Mario Draghi said in July 2012 that the central bank was “ready to do whatever it takes” to preserve the euro. Since then, the yield on 10-year Spanish government issues dropped from a junk-bond level of 7.6% to 3.1%, close to the 2.6% yield on the 10-year U.S. Treasury note. Italian sovereigns, meanwhile, have fallen from a 6.6% yield to 3.1%. The days of euro strength may be numbered, however, because of mushrooming fears of deflation in Europe.

Average house prices in the euro area have dropped 5% since the second quarter of 2011. More important, inflation increased a mere 0.5% in March from a year earlier. Since January 2013, inflation has been below the ECB’s target of “just under 2.0%.” In the 28-country European Union, inflation was just 0.6% in March versus a year earlier. Bankers and policy makers worldwide are deeply worried about trivial inflation in the euro area turning into chronic deflation. Christine Lagarde, the chairman of the International Monetary Fund, said in a January speech: “We see rising risks of deflation, which could prove disastrous for the recovery. If inflation is the genie, then deflation is the ogre that must be fought decisively.”

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All roads lead to ruin.

QE From ECB? May Not Be The Panacea Many Hope (CNBC)

Amid hopes that the ECB will undertake a move to stimulate the economy that will revive sluggish growth and low inflation levels, while simultaneously easing the euro’s stubborn strength and boosting equity and bond prices, Capital Economics said there are potential routes it could take if easing takes on the form of QE. “If the main concern is that the weakness of the banking sector is holding back economic growth, it would make sense to focus additional purchases on private sector assets,” said Jessop. This option, the economist said, would have the largest positive impact on the euro zone equity and corporate debt prices. However, it could have the undesirable impact of strengthening the euro as the relative strength of the region’s riskier financial assets increase, which would be negative for core government debt.

A second option would involve the ECB specifically targeting the risk of deflation by boosting the money supply. This could prompt the ECB to focus on the purchase of government bonds. However, this could have the adverse effect of strengthening the euro if it undermines the fiscal discipline of the Southern European countries where yields have already fallen to levels hard to justify in terms of the outlook for public finances, Jessop pointed out. The third scenario would involve the purchases of higher-rated German or French bonds, which Jessop said might go furthest in weakening the euro. But the impact could be limited as yields on these instruments are already very low as investors have priced in the risk of deflation.

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Krugman Slamming Riksbank Fuels Deflation Anxiety (Bloomberg)

The Riksbank, the world’s oldest central bank, has become a sadist in its use of monetary policy, according to Nobel Laureate Paul Krugman. He says the Stockholm-based central bank’s bias toward tight policy during the financial crisis was a “terrible mistake” that now risks creating a Japan-style deflationary spiral. The criticism has the potential to weaken the exchange rate as international investors “question the Swedish economic development,” according to SEB AB, the Nordic region’s biggest currency trader. Krugman’s comments go to the heart of a debate that’s splitting policy makers at Sweden’s central bank.

Governor Stefan Ingves has consistently warned that low rates risk fueling a credit bubble. The bank’s pro-easing lobby – two of its six board members – argue too-tight policy is keeping people out of work and making the 2% inflation target harder to reach. Some economists even warn that Ingves risks undermining his debt fight if prices continue to fall. “The closer you get to deflation, the worse the debt problems get, unless you lower rates,” Par Magnusson, an economist at Royal Bank of Scotland Group Plc in Stockholm, said in a phone interview. “That is fatal. Then you have to do everything in your power to get inflation going, because that’s the only thing that can hollow out the debt and help households pay off their loans.”

Ingves, who is also chairman of the Basel Committee on Banking Supervision that Krugman describes as a “sadomonetarist stronghold,” said in an interview this month he expects inflation to return. Yet he was soon wrong-footed by a report that showed prices fell 0.6% in March from a year earlier, twice as much as the bank had predicted. “Whatever their motives, sadomonetarists have already done a lot of damage,” Krugman wrote in his April 21 New York Times column. “In Sweden they have extracted defeat from the jaws of victory, turning an economic success story into a tale of stagnation and deflation as far as the eye can see.”

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Leave it to the Telegraph to miss already in the headline.

Swedish Lessons Show Even Deflation Can’t Cure The Housing Bubble (Guardian)

Last week Sweden became the first northern European country to report that it had fallen into outright price deflation, a state of affairs that worries economists because if consumers and companies expect falling prices, they tend to postpone purchases, investment and hiring, potentially leading to a downward spiral in demand. The reason Stockholm’s plight is attracting more attention than the rest of Europe, where eight countries are now in price deflation, is because Sweden came through the financial crisis relatively unscathed. Unlike others, it also still has its own currency and therefore retains control over monetary policy.

Yet, despite these apparent advantages, Sweden now finds itself in much the same boat as the depressed periphery countries of the eurozone, at least in terms of price inflation. How did this come about and what lessons does it hold for Britain, where some of the pressures on monetary policy – including fast inflating house prices and relatively high levels of household indebtedness – look remarkably similar to those of Sweden? The standard script goes something like this. Having had its own very deep banking and economic crisis back in the early 1990s, Sweden was much better prepared for the latest one than most other European countries. In the early stages of the crisis, it also did many of the right things.

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Draghi Gauges Ukraine Effect as ECB Tackles Low Inflation (Bloomberg)

Mario Draghi can look for clues from euro-area companies this week on whether the region needs more stimulus to counter economic risks from low inflation to geopolitical tension. Purchasing managers’ indexes tomorrow are forecast to show growth in manufacturing activity holding at the weakest pace this year. Figures the following day may show declining business confidence in Germany, the region’s biggest economy, in a survey published shortly before the European Central Bank president speaks in Amsterdam.

A territorial dispute between Russia and Ukraine, which supply much of Europe’s energy, is undermining confidence in a recovery already threatened by a strengthening currency and subdued pricing power. That raises the prospect of ECB officials being called on their promise to ease monetary policy if needed, including with unconventional tools such as quantitative easing. Tension in eastern Europe “could easily spark turbulences big enough to temporarily halt the euro-zone recovery,” said Christian Schulz, senior economist at Berenberg Bank in London. “It is the biggest risk to our optimistic growth forecasts for the euro zone at the moment.”

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Japan Has Proven That Central Banks Cannot Generate Growth With QE (Phoenix)

The Keynesian economists managing or advising the world’s Central Banks have always averred that they could pull us out of the weakest recovery in the post-WWII era if they were allowed to have their way. Their “way” involves rampant debt monetization, also called Quantitative Easing or QE. Indeed, the primary argument from the Keynesians as to why QE has thus far failed to generate a rip-roaring recovery is that none of the QE programs in place were large enough.

Japan is where the Keynesian economic model rubber hit the road. In April 2013, the Bank of Japan announced a staggering $1.4 trillion QE program. In today’s world of Central Banking madness, $1.4 trillion no longer sounds like an insane amount. So let me put this number into perspective… $1.4 trillion is…

1) The equivalent of 24% of Japan’s total annual economic output.
2) Enough to fly every human being in Japan to California for a 2-week vacation.
3) The equivalent of writing a check for $11,200 to every man, woman, and child in Japan.

Moreover, with $1.4 trillion, you could…

1) Buy Australia’s entire economy for a year.
2) Fund NASA for the next 82 years.
3) Treat every person on the planet to a $200 five star dinner at one of New York’s top restaurants.

For the US to engage in an equivalent amount of QE, it would have to announce a $3.7 trillion QE program. If Europe engaged in a QE program of this magnitude, it could buy back ALL of Spain and Greece’s debt outstanding. Suffice to say, Japan’s QE was large enough that no one, not even the most stark raving mad Keynesian on the planet, could argue that it wasn’t big enough. Which is why the results are extremely disconcerting for Central Bankers at large. To whit, since announcing this program Japan has seen:

1) GDP growth accelerate for only two quarters before turning down again.
2) Prices rise for nine straight months… pushing Japan’s cost of living to a five year high.
3) Household spending crater 2.5% year over year in real terms.
4) The Yen lose an astounding 25% of its purchasing power.
5) Multiple new record trade deficits, with January being the worst ever January on record… ditto for October, November and December last year.
6) Over 77% of Japanese citizens not feeling as though Japan’s economy is improving.

In simple terms, Abenomics has failed to revitalize Japan. Just as importantly, this failure is being noticed by the press (articles regarding the failure of Abenomics have emerged in Forbes, the Financial Times, and CNBC) and is costing Abe his popularity (his ratings have fallen from 75% at re-election to roughly 50% now). Thus, the Bank of Japan’s massive QE campaign has revealed:

1) That QE does not generate economic growth
2) There will be political consequences for its failure

Now, Central Bankers will never openly admit that they or their policies have failed. But Japan has proved that they have. It’s only a matter of time before the world catches on.

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Hussman’s a good analyst but he sees the Fed as a charity organization.

The Federal Reserve’s Two Legged Stool (John Hussman)

In her first public speech on monetary policy, Janet Yellen made it clear that the Fed intends to pursue a more rules-based, less discretionary policy. This is good news. The bad news, however, is that Yellen focused only on employment and inflation. In that same speech, not a single word was said about attending to speculative risks or financial instability (which are inherent in Fed-induced, yield-seeking speculation). Without attending to that third leg, the Fed is resting the fate of the U.S. economy on a two-legged stool.

The problem is this. In viewing the Fed’s mandate as a tradeoff only between inflation and unemployment, Chair Yellen seems to overlook the feature of economic dynamics that has been most punishing for the U.S. economy over the past decade. That feature is repeated malinvestment, yield-seeking speculation, and ultimately financial instability, largely enabled by the Federal Reserve’s own actions. To overlook yield-seeking speculation as a central element connected to the Federal Reserve’s mandate is to invite a repeat of dismal economic consequences over and over again.

The Fed’s mandate need not explicitly refer to financial stability – it is enough to recognize that the failure to take speculation, malinvestment, and financial stability seriously has been one of the primary causes of economic and financial crises that prevent the Fed from achieving that mandate. Indeed, the Fed has again baked such consequences into the cake as a result of its policy of quantitative easing, and an associated lack of appreciation for how equity valuations work (particularly the need to consider valuation multiples and profit margins jointly, whenever one uses earnings-based measures). Nearly every argument that stocks are not in a “bubble” begin with an appeal to 2000, as if the most extreme valuations in history should be a upside objective, below which anything else is acceptable. As long as conditions are not as extreme as 2000, the word “bubble” presumably cannot be applied.

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Thing is, Bill, will the US be first to blow up? If not, how will that change outstanding bets?

America’s Empire And Credit Bubble Are Reaching Their “Sell-By” Date (Bonner)

We made an observation last week: The US empire and its credit bubble will probably come to an end at the same time. Each depends on the other. If the US were not so big and powerful, it could not impose its money as the world’s reserve currency. Without its position as the issuer of the world’s reserve currency (dollars instead of gold), the US wouldn’t be able to flood the world with its cash. Without the rest of the world’s need for dollars, the credit bubble couldn’t continue growing. And without the credit growth there would be no way to pay the expense of maintaining a worldwide empire. This does not explain the miracle of “growth without savings” we discussed last week, but it gives us a hint as to what will happen when the trick no longer works.

All bubbles… and all empires… eventually blow up. An empire that depends on a credit bubble is doubly explosive. All it takes is a turn in the credit cycle, and the fuse is lit. We wrote a book on the subject, along with co-author Addison Wiggin, in 2006. From the invasion of the Philippines to the Vietnam War… the US empire was financed by the rich, productive power of the US economy. But as the war in Vietnam was winding down, the source of imperial finance changed from current output to future output. The US switched to a purely paper money system… and turned to borrowing to finance its military adventures.

Today’s blockhead puffs out his chest and enjoys feeling like a big shot. He passes the bill on to tomorrow’s taxpayer. The argument for heavy security spending collapsed between 1979 (when China took the capitalist road) and 1989 (when Russia abandoned communism). But by then, the “military-industrial complex” (or the military-industrial-congressional complex) President Eisenhower warned us about was already firmly in control of Washington. Presidents – Democrat and Republican – came and went. Nothing nor nobody could keep resources from the security industry.

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“Enrollment in the plans – which allow students to rack up big debts and then forgive the unpaid balance after a set period – has surged nearly 40% in just six months”. Wow.

US Student-Debt Forgiveness Plans, Costs, Skyrocket (WSJ)

Government officials are trying to rein in increasingly popular federal programs that forgive some student debt, amid rising concerns over the plans’ costs and the possibility they could encourage colleges to push tuition even higher. Enrollment in the plans—which allow students to rack up big debts and then forgive the unpaid balance after a set period—has surged nearly 40% in just six months, to include at least 1.3 million Americans owing around $72 billion, U.S. Education Department records show. The popularity of the programs comes as top law schools are now advertising their own plans that offer to cover a graduate’s federal loan repayments until outstanding debt is forgiven.

The school aid opens the way for free or greatly subsidized degrees at taxpayer expense. At issue are two federal loan repayment plans created by Congress, originally to help students with big debt loads and to promote work in lower-paying jobs outside the private sector. The fastest-growing plan, revamped by President Barack Obama in 2011, requires borrowers to pay 10% a year of their discretionary income—annual income above 150% of the poverty level—in monthly installments. Under the plan, the unpaid balances for those working in the public sector or for nonprofits are then forgiven after 10 years.

Private-sector workers also see their debts wiped clean—after a longer period of 20 years—reflecting a government aim to have no one, wherever they work, paying down student debt their entire working life. An independent study estimates the future cost of the 2011 program, known as Pay As You Earn, could hit $14 billion a year. The Obama administration has proposed in its latest budget released last month to cap debt eligible for forgiveness at $57,500 per student. There is currently no limit on such debt.

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In California, this is truly sad. In Guatemala, it’s life.

Number Of Middle Age Californians Living With Their Parents Soars (LA Times)

At a time when the still sluggish economy has sent a flood of jobless young adults back home, older people are quietly moving in with their parents at twice the rate of their younger counterparts. For seven years through 2012, the number of Californians aged 50 to 64 who live in their parents’ homes swelled 67.6% to about 194,000, according to the UCLA Center for Health Policy Research and the Insight Center for Community Economic Development. The jump is almost exclusively the result of financial hardship caused by the recession rather than for other reasons, such as the need to care for aging parents, said Steven P. Wallace, a UCLA professor of public health who crunched the data.

“The numbers are pretty amazing,” Wallace said. “It’s an age group that you normally think of as pretty financially stable. They’re mid-career. They may be thinking ahead toward retirement. They’ve got a nest egg going. And then all of a sudden you see this huge push back into their parents’ homes.” Many more young adults live with their parents than those in their 50s and early 60s live with theirs. Among 18- to 29-year-olds, 1.6 million Californians have taken up residence in their childhood bedrooms, according to the data. Though that’s a 33% jump from 2006, the pace is half that of the 50 to 64 age group. The surge in middle-aged people moving in with parents reflects the grim economic reality that has taken hold in the aftermath of the Great Recession.

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That only voice in America that goes against the grain. What if he’s no longer there?

Ron Paul 2008 Speech On Disbanding NATO (Ron Paul)

Mr. Speaker, I rise in opposition to this resolution calling for the further expansion of NATO to the borders of Russia. NATO is an organization whose purpose ended with the end of its Warsaw Pact adversary. When NATO struggled to define its future after the Cold War, it settled on attacking a sovereign state, Yugoslavia, which had neither invaded nor threatened any NATO member state. This current round of NATO expansion is a political reward to governments in Georgia and Ukraine that came to power as a result of US-supported revolutions, the so-called Orange Revolution and Rose Revolution.

The governments that arose from these street protests were eager to please their US sponsor and the US, in turn, turned a blind eye to the numerous political and human rights abuses that took place under the new regimes. Thus the US policy of “exporting democracy” has only succeeding in exporting more misery to the countries it has targeted. NATO expansion only benefits the US military industrial complex, which stands to profit from expanded arms sales to new NATO members. The “modernization” of former Soviet militaries in Ukraine and Georgia will mean tens of millions in sales to US and European military contractors.

The US taxpayer will be left holding the bill, as the US government will subsidize most of the transactions. Providing US military guarantees to Ukraine and Georgia can only further strain our military. This NATO expansion may well involve the US military in conflicts as unrelated to our national interest as the breakaway regions of South Ossetia and Abkhazia in Georgia. The idea that American troops might be forced to fight and die to prevent a small section of Georgia from seceding is absurd and disturbing. Mr. Speaker, NATO should be disbanded, not expanded.

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Sort of good, but …

Russia Postpones Planting Of GMO Seeds By 3 Years (RT)

Russia will not start certifying GM seeds for at least three more years due to delays in creating the necessary infrastructure, Prime Minister Dmitry Medvedev told MPs. Earlier Russia had expected to allow planting such seeds from June. The delay comes amid the general GMO-skeptic mood that the Russian government adopted recently. The country may even ban the cultivation and import of genetically modified foodstuffs. Last year, the government allowed the planting of GM seeds starting July 2014 as part of Russia’s accession to the World Trade Organization. Now the deadline will have to change, Medvedev told Russian MPs.

“The government decree will be amended. Not because it was wrong, but because the deadline stipulated in it was too optimistic,” he said, explaining that at the moment there are not enough gene laboratories to meet the demand for certification in Russia. “But even if the certification starts in three years or after some time, it doesn’t mean that we will allow the use of genetically modified material,” Medvedev said. He added that the labs and the entire system of certification will still be needed, considering that even with strict regulation of the sale of GM seeds, some of them have found their way into Russia. “The problem is that GM material is already everywhere,” Medvedev said. “We need to know where and how it is being used. The labs’ task would be to do that. That’s what we are planning to invest in.”

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China’s undoubtedly the worst environmental nightmare in history. We ain’t seen nothing yet.

Even China’s Dirt Is Dirty (Bloomberg)

Even the most choking of Beijing smogs eventually gives way to blue skies. The very impermanence of air pollution encourages optimism that it can be solved one day. The poisoning of China’s land and water is another matter altogether. Unlike smog, which can be seen the moment it leaves a smokestack, chemicals leaking from pipes into China’s soil and rivers may not be discovered for years or decades. By then, the damage may be incalculable and permanent. Last week’s release of data collected during a nearly nine-year national soil survey finally gave Chinese a chance to evaluate the devastating toll that 30 years of rapid industrial development has had on them, their food supply, and their country.

The numbers are astonishing. More than 16% of China’s 3.7 million square miles of soil is contaminated. Even worse, nearly a fifth of the country’s arable land is polluted. While the report doesn’t specify how badly, hints exist. In December, a senior Chinese official conceded that 2% of China’s arable land – an area the size of Belgium – had become too polluted to grow crops at all. According to the report, the most common soil pollutants are inorganic in nature. They include nickel, arsenic, and highly toxic cadmium – all metals associated with industrial activity. Unfortunately, the report doesn’t reveal the benchmarks used to decide whether a soil sample qualifies as “polluted,” so it’s impossible to perform a comparative analysis with soil contamination in other countries.

Nonetheless, the fact that the Chinese government was willing to publicize these numbers is significant. As recently as last spring the Ministry of Environmental Protection denied a request to release the very same data to the public. No doubt authorities were concerned about how ordinary Chinese might react to the data, given already rampant fears about the safety of Chinese crops. They may also have feared that the real situation could be worse than that documented in the survey, which built its data set by taking one sample per every 6,400 hectares of land. Needless to say, it’s easy to miss contamination hot spots using such a methodology (likewise, it’s possible to oversample).

Unfortunately, the government’s change of heart only has only gone so far. The report does not reveal the specific locations of the many thousands of pollution hotspots identified over the last eight-and-a-half years. That’s the kind of information that can help an individual or community make life-extending decisions. Instead authorities have only offered broad stroke data that starts a conversation about soil pollution, but doesn’t offer any immediate benefit to anyone except local bureaucrats, who might otherwise be vilified for having allowed their districts to be polluted.

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You need 100,000 of these guys.

Spain’s ‘Robin Hood’ Swindled Banks To Help Fight Capitalism (Guardian)

They call him the Robin Hood of the banks, a man who took out dozens of loans worth almost half a million euros with no intention of ever paying them back. Instead, Enric Duran farmed the money out to projects that created and promoted alternatives to capitalism. After 14 months in hiding, Duran is unapologetic even though his activities could land him in jail. “I’m proud of this action,” he said in an interview by Skype from an undisclosed location. The money, he said, had created opportunities. “It generated a movement that allowed us to push forward with the construction of alternatives. And it allowed us to build a powerful network that groups together these initiatives.”

From 2006 to 2008, Duran took out 68 commercial and personal loans from 39 banks in Spain. He farmed the money out to social activists, funding speaking tours against capitalism and TV cameras for a media network. “I saw that on one side, these social movements were building alternatives but that they lacked resources and communication capacities,” he said. “Meanwhile, our reliance on perpetual growth was creating a system that created money out of nothing.” The loans he swindled from banks were his way of regulating and denouncing this situation, he said. He started slowly. “I filled out a few credit applications with my real details. They denied me, but I just wanted to get a feel for what they were asking for.”

From there, the former table tennis coach began to weave an intricate web of accounts, payments and transfers. “I was learning constantly.” By the summer of 2007, he had discovered how to make the system work, applying for loans under the name of a false television production company. “Then I managed to get a lot.” €492,000 (£407,000), to be exact. [..] His actions, he said, were at the vanguard of a worldwide debate on the economic crisis. The timing pushed the anti-capitalist movement into the light, just as many Spaniards were seeking alternatives to a system that had wreaked havoc on their lives.

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When David Hughes and Art Berman pop up at Bloomberg, you know something is moving.

Is the U.S. Shale Boom Going Bust? (Bloomberg)

It’s not surprising that a survey of energy professionals attending the 2014 North American Prospect Expo overwhelmingly identified “U.S. energy independence” as the trend most likely to gain momentum this year. Like any number of politicians and pundits, these experts are riding high on the shale boom — that catch-all colloquialism for the rise of hydraulic fracturing and horizontal drilling that have unleashed a torrent of hydrocarbons from previously inaccessible layers of rock. But this optimism belies an increasingly important question: How long will it all last?

Among drilling critics and the press, contentious talk of a “shale bubble” and the threat of a sudden collapse of America’s oil and gas boom have been percolating for some time. While the most dire of these warnings are probably overstated, a host of geological and economic realitiesincreasingly suggest that the party might not last as long as most Americans think. For the better part of two centuries, the American oil and gas industry drew its treasure from porous underground formations where hydrocarbons moved comparatively easily to the surface. The best of those resources began to dry up in the 1970’s and imports began to rise. Enter hydraulic fracturing and horizontal drilling, technologies that allow developers to extract oil and gas from much deeper, tighter and far-less-porous rock formations, including shale.

The problems arise when you look at how quickly production from these new, unconventional wells dries up. David Hughes — a 32-year veteran with the Geological Survey of Canada and a now research fellow with the Post Carbon Institute, a sustainability think-tank in California — notes that the average decline of the world’s conventional oil fields is about 5% per year. By comparison, the average decline of oil wells in North Dakota’s booming Bakken shale oil field is 44% per year. Individual wells can see production declines of 70% or more in the first year.

Shale gas wells face similarly swift depletion rates, so drillers need to keep plumbing new wells to make up for the shortfall at those that have gone anemic. This creates what Hughes and other critics consider an unsustainable treadmill of ever-higher, billion-dollar capital expenditures chasing a shifting equilibrium. “The best locations are usually drilled first,” Hughes said, “so as time goes by, drilling must move into areas of lower quality rock. The wells cost the same, but they produce less, so you need more of them just to offset decline.”

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Canada’s native peoples have views that are so different from predatory capitalism you need to fear for their safety and their futures.

Canadian Aboriginals See No Compromise On Oil Sands Pipeline (Reuters)

Just a few miles from the spot where Enbridge Inc plans to build a massive marine terminal for its Northern Gateway oil pipeline, Gerald Amos checks crab traps and explains why no concession from the company could win his support for the project. Amos, the former chief of the Haisla Nation on the northern coast of British Columbia and a community leader, has argued for years that the risk – no matter how small – of an oil spill in these waters outweighs any reward the controversial project might offer. That resolve is shared by many in the aboriginal communities along the proposed pipeline and marine shipping route who see the streams, rivers and oceans in their traditional territories as the lifeblood of their culture.

“Our connection to this place that we call home is really important,” says Amos as he pulls three Dungeness crabs from his trap, tossing two in a bucket and holding the third up for his two young granddaughters, who shriek and giggle as the crustacean wriggles its legs. “If these little ones can’t witness us doing what we’ve done for generations now, if we sever that tie to the land and the ocean, we’re no longer Haisla.” The Northern Gateway pipeline would carry diluted bitumen 1,177 kilometers (731 miles) from Alberta’s oil sands to the deepwater port in Kitimat, in northwest British Columbia, where it would be loaded on supertankers and shipped to Asia. It is expected to cost C$7.9 billion ($7.17 billion).

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