Feb 242017
 
 February 24, 2017  Posted by at 10:41 am Finance Tagged with: , , , , , , , , ,  2 Responses »


Marion Post Wolcott Works Progress Administration worker’s children, South Charleston, West Virginia 1938

 

France Scrapping The Euro Could Go Beyond A ‘Lehman Moment’ (CNBC)
Le Pen Says French Foreign Policy Must Be Decided in Paris (BBG)
Obamacare Just Hit Its Highest Popularity Ever (BI)
Former IMF Chief, Dozens of Former Bank Execs Sentenced to Jail in Spain (DQ)
Analyzing the Emerging World Order: The Future of Globalism (GR)
Increasingly Unhinged Russia Rhetoric From A Long-Standing US Playbook (GG)
What Does Russia Produce? (Humor)
Career Politicians Aren’t Qualified To Run The Country (Hewson)
Turkish Commandos Ask For Asylum In Greece (K.)
Synthetic Clothing And Tires Could Be Polluting The Oceans In A Big Way (CNBC)
Arctic ‘Doomsday’ Seed Vault Receives 50,000 New Deposits (AP)
Plan To Save Great Barrier Reef Set Back Decades (AFP)

 

 

Fear mongering goes into overdrive.

France Scrapping The Euro Could Go Beyond A ‘Lehman Moment’ (CNBC)

Past performance is no guide to future returns, as investors are so often told, but the French electorate runs the risk of creating a crisis worse than the fall of Lehman Brothers if it follows the U.K. in instigating a referendum on EU membership, according to analysts at Deutsche Bank. As the French presidential race heats up ahead of the first round of voting in April, the German bank has warned of the pitfalls of using the U.K.’s Brexit vote as a model for a potential “Frexit”, as touted by nationalist candidate Marine Le Pen. Le Pen, who is currently leading the race according to the latest BVA-Salesforce opinion poll, has vowed to hold a French referendum on EU membership if she is successful in winning France’s two-round leadership race.

Pointing to the U.K., which has – so far – felt a relatively benign impact from its Brexit vote, Le Pen has relied on it as a basis for rallying support during her campaigning, saying: “They told us that Brexit would be a catastrophe, that the stock markets would crash … The reality is that none of that happened.” However, Deutsche Bank has warned of the inconsistencies of likening the two votes. An EU referendum in France, one of the founding members of the economic bloc, runs the risk of undermining the euro, the currency shared by 19 of the EU’s 28 member states. “Make no mistake, there is the world of difference between tearing up bilateral and multilateral trade agreements, and, unwinding a monetary union as far reaching in scope as the EMU (economic and monetary union) project,” Deutsche Bank said in a note Tuesday.

“It is the difference between a benign global risk event and something that has the potential to go beyond a ‘Lehman’s moment’.” The frictionless interaction enjoyed by countries within the European Monetary Union would turn into it a “nightmare”, says Deutsche Bank, as a lack of a currency hedge would make all EMU members vulnerable to currency weakness. The bank estimates that assets shared between the economic bloc plus liabilities totaled €46 trillion at the end of the third quarter 2016. This it describes as an “upper bound estimate of EMU exposure that would have no hedge, and be exposed to currency risk in the event of an EMU break-up.”

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And many people all over Europe will say she’s damn right.

Le Pen Says French Foreign Policy Must Be Decided in Paris (BBG)

French foreign policy should be decided solely in Paris, French presidential candidate Marine Le Pen said, calling for a reversal of her country’s quest over past decades for tighter ties with European Union allies. Laying out her foreign-policy vision in a speech in Paris, Le Pen spoke of a world based on nation states that pursue their own interest and preserve their own cultures without interference. “To assure the freedom of the French, there is no price too high too pay,” Le Pen said. “The foreign policy of France will be decided in Paris, and no alliance, no ally, can speak in her place.” Her first move as president would be to renegotiate EU treaties as an initial step toward creating a “Europe of Nations,” she said. She saluted Britain’s vote to leave the EU, and said she’d withdraw from NATO’s military command.

“I rejoice in Europeans claiming back their freedom against the attempts to create an artificial super-state,” she said. “The European Union is not the solution, it’s the problem.” Polls show that Le Pen would win the most votes in the April 23 first round of the elections, but would lose the May 7 run-off against whoever she faces. On the U.S., she said she was hopeful President Donald Trump would reverse what she described as interventionist policies of President Barack Obama. She listed support for rebels in Libya and Syria as “mistakes” that have undermined world peace. “The U.S. is an ally but sometimes an adversary,” she said, adding that she was encouraged by Trump’s early days in office.

She said Russia has an “essential balancing role to keep world peace” and “has been badly treated by the European Union.” In Africa, French policy would be one of “non-intervention, but not indifference.” Le Pen said communism and liberal capitalism have both been delusions, and that “people are trying to escape, and find in the nation the best way to protect themselves. Each country should be free to follow its interests, choose its allies, preserve its culture, and France supports that right for all nations.”

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Hornets nest.

Obamacare Just Hit Its Highest Popularity Ever (BI)

Americans are learning to love the Affordable Care Act, better known as Obamacare. As the law faces possible repeal and replacement by Republicans, a new poll from the Pew Research Center shows that the ACA’s popularity is soaring and has hit its highest point since it was passed. 54% of respondents in Pew’s survey said they approve of the law, with just 43% disapproving. This is better than the 48% approve, 47% disapprove margin from December 2016. Additionally, of the 43% against the law, only 17% of people the total surveyed want Republicans to repeal the way entirely while 25% want the law modified instead, according to Pew.

Every age group, ethnic group, and education level saw increased support for Obamacare between Pew’s current poll and one conducted in October 2016. The result also matches up with other recent polls from a variety of outlets that show President Barack Obama’s signature health law becoming ever-more popular with Americans. House Speaker Paul Ryan said that the GOP plans to introduce a repeal and replace bill for the ACA soon after the week-long President’s Day break. Dissent among Republicans and recent pushback from constituents at town halls, however, has indicated that a repeal may be less than smooth than originally anticipated. Even former GOP House Speaker John Boehner said Thursday that repeal is “not going to happen.”

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A 6-year sentence but no hard time?

Former IMF Chief, Dozens of Former Bank Execs Sentenced to Jail in Spain (DQ)

The unimaginable just happened in Spain: two former bank CEOs, Miguel Blesa (CEO of Caja Madrid) and Rodrigo Rato (CEO of Bankia) were just awarded prison sentences of six years and four-and-a-half years, respectively, for misappropriation of company funds. Rato was also Managing Director of the IMF from 2003 to 2007. He was succeeded by another luminary, Dominique Strauss Kahn. Now, the question on everyone’s mind is will Blesa and Rato actually serve the sentence (more on that later). Dozens more former Caja Madrid senior executives, most of whom are closely connected to either, or both, of the country’s two main political parties and/or unions also face three to six years in prison. They were found guilty by Spain’s National High Court of misusing company credit cards.

Those cards drained money directly from the scarce funds of Caja Madrid, which at the height of Spain’s banking crisis was merged with six other failed savings banks into Bankia, which shortly thereafter collapsed and ended up receiving the biggest bail out in Spanish history, costing taxpayers over €20 billion, to date. Between 2003 and 2012 Caja Madrid (and its later incarnation, Bankia) paid out over €15 million to its senior management and executive directors through its “tarjeta negra” (black card) scheme. According to accounts released by Spain’s bad bank, FROB, much of that money went on restaurants, cash withdrawals, travel and holidays, and the like. The amounts – which did not show up on any bank documents, job contracts, or tax returns – may be small, given the magnitude of the misdeeds that led to the Spanish bank fiasco, but it’s the principle that counts.

Only 4 out of 90 Caja Madrid senior managers, executives, and board members had the basic decency to turn down the offer of undeclared expenses. For the rest, it was an offer they could not refuse. In his last few months at Caja Madrid – just before the whole edifice came crumbling down – Blesa went on a mad spending binge. In one month alone he made purchases on his black card worth €19,000 – more than many Spaniards’ annual salary. This is a man who pocketed over €20 million in salaries and bonuses while at the helm of the bank that he helped destroy. On his departure in 2010, he was awarded a €2.5 million golden parachute. Yet even after his ouster he, like many other Caja Madrid executives, continued making liberal use of his tarjeta negra.

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“The unsolvable problem here is that this debt based system is really just an elaborate pyramid scheme predicated on ever increasing amounts of debt in a world where sources of real wealth are finite.”

Analyzing the Emerging World Order: The Future of Globalism (GR)

We live in a world subdivided by societies: nations and their respective subdivisions. As a matter of fact, there are over 200 nations recognized by the United Nations (UN). We are taught that a society must conform to a binary label such as “free” or “unfree”, “democratic” or “non-democratic” and so on. This is done principally for two reasons – to provide a tautological definition, also for easier control of the masses via manipulation. The current overarching narrative provides that we are divided between the “western” and “eastern” worlds. What does this really mean? We can distill this down to one principal root: economics. What do we mean by economics? We can say that in it’s purest form, it is simply the structured allocation of finite resources.

Today we are observing the transition from a so called unipolar world, one in which a single nation (or group of allied nations) dictates the terms of life for all global citizens, to a more balanced and natural multipolar world. The current dominating group, the “western” bloc of nations, is led by the United States along with numerous vassal states; this order has persisted since the end of the Second World War. This construct is held together using a combination of supranational organizations (UN,WTO,World Bank, IMF, et cetera), propaganda (mainstream media complex), armed might (MIC,NATO, private mercenary forces) and chiefly economics (central banks, corporations). The true “rulers” of this bloc are a cabal of very wealthy and powerful oligarchs that work in the background (shadow banking, dark pool finance, shadow governments, think tanks, NGO’s) to subvert the various sovereignties to their advantage.

These oligarchs are the principal owners of, not just the industries and corporations that front for them, but the governments that rule over the masses. Most importantly this cabal owns the means by which real wealth extraction is carried out: fiat currency, chiefly the “worlds reserve currency”- the United States dollar and it’s derivatives. These currencies are backed not by equitable assets; such as natural resources, precious metals or productive capacities; instead they are backed by the creation of debt. Debt that represents a claim on real assets that virtually all participants in global commerce must pay. How did this cabal come into power? This is a complex question that is subject to many possible answers and interpretations. Briefly, we know from historical fact that a global empire is a central part of this construct, today the United States empire holds that role (previously British, French so on…). This provides the controlling force behind such a cabal.

The privately owned quasi-governmental western central banks are at the heart of this operation. They form the crucial nexus between sovereign governments and the financial world in which they derive their revenue stream, and by extension, their power. The current seat of this construct (United States) was founded as a Constitutional Republic. Unfortunately, the United States Constitution is quite amorphous. Using many acts of legislative, executive and even judicial fiat, this cabal has been able to effectively take over the reigns of the nation. With that feat accomplished, near world domination was made possible. A complex web of regulations, laws, and rules; coupled with a financial system few fully comprehend has been put into place across the west. This became the mechanism by which this “new world order” has been enforced.

The unsolvable problem here is that this debt based system is really just an elaborate pyramid scheme predicated on ever increasing amounts of debt in a world where sources of real wealth are finite. At present, the growth rate and the total amount of debt issuance, is outpacing the extraction rate and amount of available reserves of resources on the planet.

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Glenn Greenwald has been vocal about the Putin hysteria.

Increasingly Unhinged Russia Rhetoric From A Long-Standing US Playbook (GG)

For aspiring journalists, historians, or politically engaged citizens, there are few more productive uses of one’s time than randomly reading through the newsletters of I.F. Stone, the intrepid and independent journalist of the Cold War era who became, in my view, the nation’s first “blogger” even though he died before the advent of the internet. Frustrated by big media’s oppressive corporatized environment and its pro-government propaganda model, and then ultimately blacklisted from mainstream media outlets for his objections to anti-Russia narratives, Stone created his own bi-monthly newsletter, sustained exclusively by subscriptions, and spent 18 years relentlessly debunking propaganda spewing from the U.S. government and its media partners. What makes Stone’s body of work so valuable is not its illumination of history but rather its illumination of the present.

What’s most striking about his newsletters is how little changes when it comes to U.S. government propaganda and militarism, and the role the U.S. media plays in sustaining it all. Indeed, reading through his reporting, one gets the impression that U.S. politics just endlessly replays the same debates, conflicts, and tactics. Much of Stone’s writings, particularly throughout the 1950s and into the 1960s, focused on the techniques for keeping Americans in a high state of fear over the Kremlin. One passage, from August 1954, particularly resonates; Stone explained why it’s impossible to stop McCarthyism at home when — for purposes of sustaining U.S. war and militarism — Kremlin leaders are constantly being depicted as gravely threatening and even omnipotent. Other than the change in Moscow’s ideology — a change many of today’s most toxic McCarthyites explicitly deny — Stone’s observations could be written with equal accuracy today.

[..] Few foreign villains have been vested with omnipotence and ubiquity like Vladimir Putin has been — at least ever since Democrats discovered (what they mistakenly believed was) his political utility as a bogeyman. There are very few negative developments in the world that do not end up at some point being pinned to the Russian leader, and very few critics of the Democratic Party who are not, at some point, cast as Putin loyalists or Kremlin spies. Putin — like al Qaeda terrorists and Soviet Communists before him — is everywhere. Russia is lurking behind all evils, most importantly — of course — Hillary Clinton’s defeat. And whoever questions any of that is revealing themselves to be a traitor, likely on Putin’s payroll.

As The Nation’s Katrina vanden Heuvel put it on Tuesday in the Washington Post: “In the targeting of Trump, too many liberals have joined in fanning a neo-McCarthyite furor, working to discredit those who seek to deescalate U.S.-Russian tensions, and dismissing anyone expressing doubts about the charges of hacking or collusion as a Putin apologist. … What we don’t need is a replay of Cold War hysteria that cuts off debate, slanders skeptics and undermines any effort to explore areas of agreement with Russia in our own national interest.” That precisely echoes what Stone observed 62 years ago: Claims of Russian infiltration and ubiquity are “the thesis no American dare any longer challenge without himself becoming suspect” (Stone was not just cast as a Kremlin loyalist during his life but smeared as a Stalinist agent after he died).

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Turns out, a lot.

What Does Russia Produce? (Humor)

This past September, in one of his regular interviews with the newspaper Parlamentní Listy, retired Czech Major General Hynek Blasko commented on the possibility of a conflict between Russia and NATO with a following anecdote: “I have seen a popular joke on the Internet about Obama and his generals in the Pentagon debating on the best timing to attack Russia. They couldn’t come to any agreement, so they decided to ask their allies. The French said: ” We do not know, but certainly not in the winter. This will end badly. ” The Germans responded: “We do not know, either, but definitely not in a summer. We have already tried.” Someone in Obama’s war room had a brilliant idea to ask China, on the basis that China is developing and always has new ideas.

The Chinese answered: “The best time for this is right now. Russia is building the Power of Siberia pipeline, the North Stream Pipeline, Vostochny Cosmodrome Spaceport, the MegaProject bridge to Crimea; also Russian is upgrading the Trans-Siberian railroad with a new railway bridge across Lena River and the Amur-Yakutsk Mainline. Russia is also building new sports facilities for the World Cup and athletics, and has in development over 150 production projects in the Arctic … Well, now they really need as many POWs as possible!” So, now, even NATO members’ generals have noticed something peculiar about Russia. According to the myth that is being peddled by Western media, Russia has an underdeveloped economy based on the exchange of raw mineral resources for glass beads… I mean Western produced hi-tech products. Any barber would tell you that even Asians can make iPhones, but Russians can’t.

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View from Australia that applies everywhere.

Career Politicians Aren’t Qualified To Run The Country (Hewson)

When I was leader of the opposition, concerned about the standing of our politicians and failing confidence in our political processes, John Howard used to chip me about the need to recognise politics as a “profession”, and politicians as “professionals”. Now, some 25 years on, the dissatisfaction with our career politicians and the political system is of paramount importance, and fundamental to the drift away from the major parties, whereby now almost one in three direct their votes elsewhere. Politics has become a daily “conflict game”, dominated by career politicians concentrated on winning points on the other side, rather than on developing and delivering good public policy, and good government.

Important issues have been left to drift, or in some cases have been compounded by short-term, populist responses, so that important problems remain unresolved, all having a negative impact on the wellbeing of the average voter, let alone the legacies being left to their children. Minor parties and independents are attracting support in protest, or in the now desperate hope that they will at least shake things up, perhaps even drive governments and oppositions to better economic and social outcomes. But they too are mostly opportunistic, and populist, and often “extreme”, knowing they will never be in a position to have to deliver. Moreover, without experience and the requisite skills, they too may soon be “absorbed” or “defeated” by the system. Unfortunately, the skill sets and experience required of a career politician essentially make them incompetent to govern effectively.

Their career path is often from university, community or union politics, through local government/party engagement, perhaps serving as a ministerial staffer, to pre-selection, then election, and so on. Politics has become the end in itself. Those that make it are mostly qualified just to play the “game”, but not to govern. Increasingly, fewer have ever had a “real job”, or a significant career, before entering politics, and even then that may not qualify them to be a competent minister. It is also not easy to come from outside, as both Trump and Turnbull are finding. Yet, many end up as ministers responsible for significant government portfolios, and large budgets, with little or no relevant experience or skills or commitment to that area, let alone in management. Clearly, if we were to advertise the ministerial posts to attract those with the necessary competence – with the abilities, commitments, knowledge, experience and skills to do the job well – very few indeed, if any, of the current lot would be appointed.

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These guys were allegedly directly involved the coup?! Hard to protect.

Turkish Commandos Ask For Asylum In Greece (K.)

Two Turkish servicemen believed to have been involved in the plot to assassinate Turkish President Recep Tayyip Erdogan during the July coup attempt in the neighboring country, are being held in custody in Alexandroupoli, it was revealed Thursday. The two men, former members of Turkey’s special forces, entered Greece illegally through the Evros border crossing a few days ago and turned themselves in to police authorities in Orestiada. Through a local lawyer, the two commandos applied for political asylum on February 20.They had eluded arrest for months until they entered Greece. The pair are believed to have told Greek investigators that they were indeed involved in a plot to assassinate Erdogan. So far, there has been no Turkish request for their extradition.

Meanwhile, Ankara has submitted a fresh extradition request for the eight Turkish servicemen who Ankara have accused of being involved in the coup attempt. The initial request for their extradition was rejected in January by Greece’s Supreme Court, which said that regardless of whether they were guilty or not, the servicemen would not receive a fair trial in Turkey. In the new request, Ankara provided reassurances that they would receive a fair trial. It also includes what Turkish authorities describe as new incriminating evidence. The request sent to the Greek Foreign Ministry further includes two additional charges, on top of the four included in the first extradition request. The Foreign Ministry has passed on the request to the Justice Ministry.

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The curse of carbon comes in many forms. But it’s free, so we can’t resist.

Synthetic Clothing And Tires Could Be Polluting The Oceans In A Big Way (CNBC)

A new report from the International Union for Conservation of Nature (IUCN) has found that as much as 31 percent of the estimated 9.5 million tonnes of plastic that enters the ocean annually could be from sources such as tires and synthetic clothing. These products can release “primary microplastics”, which are plastics that directly enter the environment as “small particulates”. According to the IUCN, which released the report on Wednesday, they come from a range of sources. These include synthetic textiles, which deposit them due to abrasion when washed, and tires, which release them as a result of erosion when driving.

The report identified seven “major sources” of primary microplastics: Tires, synthetic textiles, marine coatings, road markings, personal care products, plastic pellets and city dust. “Our daily activities, such as washing clothes and driving, significantly contribute to the pollution choking our oceans, with potentially disastrous effects on the rich diversity of life within them, and on human health,” Inger Andersen, director general of the IUCN, said in a statement on Wednesday. “These findings indicate that we must look far beyond waste management if we are to address ocean pollution in its entirety,” he added.

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Are they implying changing the seeds when they talk about reconstituting them, developing climate-resilient crops for generations?

Arctic ‘Doomsday’ Seed Vault Receives 50,000 New Deposits (AP)

Nearly 10 years after a “doomsday” seed vault opened on an Arctic island, some 50,000 new samples from seed collections around the world have been deposited in the world’s largest repository built to safeguard against wars or natural disasters wiping out global food crops. The Svalbard Global Seed Vault, a gene bank built underground on the isolated island in a permafrost zone some 1,000 kilometers (620 miles) from the North Pole, was opened in 2008 as a master backup to the world’s other seed banks, in case their deposits are lost. The latest specimens sent to the bank, located on the Svalbard archipelago between mainland Norway and the North Pole, included more than 15,000 reconstituted samples from an international research center that focuses on improving agriculture in dry zones.

They were the first to retrieve seeds from the vault in 2015 before returning new ones after multiplying and reconstituting them. The specimens consisted of seed samples for some of the world’s most vital food sources like potato, sorghum, rice, barley, chickpea, lentil and wheat. Speaking from Svalbard, Aly Abousabaa, the head of the International Center for Agricultural Research, said Thursday that borrowing and reconstituting the seeds before returning them had been a success and showed that it was possible to “find solutions to pressing regional and global challenges.” The agency borrowed the seeds three years ago because it could not access its gene bank of 141,000 specimens in the war-torn Syrian city of Aleppo, and so was unable to regenerate and distribute them to breeders and researchers.

“The reconstituted seeds will play a critical role in developing climate-resilient crops for generations,” Abousabaa said.The 50,000 samples deposited Wednesday were from seed collections in Benin, India, Pakistan, Lebanon, Morocco, Netherlands, the U.S., Mexico, Bosnia and Herzegovina, Belarus and Britain. It brought the total deposits in the snow-covered vault — with a capacity of 4.5 million — to 940,000.

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“Given the severity of the damage and the slow trajectory of recovery, the overarching vision of the 2050 Plan… is no longer attainable for at least the next two decades..”

Plan To Save Great Barrier Reef Set Back Decades (AFP)

Australia’s plan to rescue the beleaguered Great Barrier Reef has been set back at least two decades after the fragile ecosystem suffered its worst-ever bleaching last year, experts said Friday. The vast coral reef – which provides a tourism boon for Australia – is under pressure from agricultural run-off, the crown-of-thorns starfish, development and climate change. Last year swathes of coral succumbed to devastating bleaching, due to warming sea temperatures, and the reef’s caretakers have warned it faces a fresh onslaught in the coming months. Canberra updated the UN’s World Heritage committee on its “Reef 2050” rescue plan in December, insisting the site was “not dying” and laying out a strategy for incremental improvements to the site.

But an independent report commissioned by the committee concluded that the government had little chance of meeting its own targets in the coming years, adding that the “unprecedented” bleaching and coral die-off in 2016 was “a game changer”. “Given the severity of the damage and the slow trajectory of recovery, the overarching vision of the 2050 Plan… is no longer attainable for at least the next two decades,” the report said. Last year’s bleaching killed two-thirds of shallow-water corals in the north of the 2,300-kilometre (1,400-mile) long reef, although central and southern areas escaped with less damage. The government has pledged more than Aus$2.0 billion (US$1.5 billion) to protect the reef over the next decade, but researchers noted a lack of available funding, with many of the plan’s actions under-resourced.

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Feb 232017
 
 February 23, 2017  Posted by at 9:53 am Finance Tagged with: , , , , , , , , , ,  5 Responses »


Jack Delano Colored drivers entrance, U.S. 1, NY Avenue, Washington, DC 1940

 

The Absolute Dominance Of The US Economy, In One Chart (MW)
Trump Scorns the IMF’s Globalism, and Now He Gets to Vote on It
The Problem with Gold-Backed Currencies (CHS)
What’s So Great About Europe? (BBG)
Italy Warned by EU Over High Public Debt With Spillover Risk (BBG)
‘Spain Is Ruined For 50 Years’ (Exp.)
Why Greece’s Crisis Has Broken All Previous Records (K.)
Millions In UK Are Just One Unpaid Bill Away From The Abyss (G.)
Oz Reserve Bank Interest Rate Moves Limited By High Debt, House Prices (AbcAu)
Exxon Wiped A Whopping 19.3% Of Its Oil Reserves Off Its Books In 2016 (Q.)
Turkish Provocations Test Greek Resolve (K.)
Greece Okays Asylum Requests Of 10,000 Refugees (K.)

 

 

Not sure that’s what I get from the graph.

The Absolute Dominance Of The US Economy, In One Chart (MW)

Despite the bleak picture painted by President Donald Trump of the U.S. as a country in disarray, America’s status as an economic superpower is still very much intact, even as China steadily closes the gap. The U.S. economy, as measured by GDP, is by far the largest in the world at $18.04 trillion. China, the closest thing the U.S. has for a competitor, is No. 2 with a GDP of $11 trillion, while Japan is a distant third with $4.38 trillion. As the chart by HowMuch.net illustrates, the U.S. accounts for about a quarter of the global economy, nearly 10 percentage points more than China’s 14.84%. Put another way, the U.S. economy is roughly equivalent to the combined GDPs of the eight next-biggest countries after China — Japan, Germany, the U.K., France, India, Italy, Brazil and Canada.

However, the narrative shifts when countries are grouped by geography, with Asia clearly in the lead. The region, denoted in yellow in the chart, contributed 33.84% to the global GDP. “Asia’s economic center of gravity is in the east, with China, Japan and South Korea together generating almost as much GDP as the U.S.,” said Raul Amoros at HowMuch.net. North America follows Asia at 27.95%, and Europe trails at 21.37%. The three blocs combined represent about 83% of the world’s economic activity. The chart also highlights the chasm between wealthy and poor countries. South America’s four largest economies — Brazil, Argentina, Venezuela and Colombia — only add up to 4% of the global GDP, while Africa’s three biggest — South Africa, Egypt and Nigeria — account for around 1.5%.

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I picked the last bit of the article.

Trump Scorns the IMF’s Globalism, and Now He Gets to Vote on It

The IMF has already survived one major mission-change. It’s known today as the lender of last resort to countries facing balance-of-payments crises. But in its first three decades, the Fund managed the world’s currency order. That was the role assigned at Bretton Woods in 1944, when the IMF and World Bank were set up. Forty-five nations attended the summit, but two men dominated it: John Maynard Keynes and America’s Harry Dexter White. From the back of her car in Uganda, Lagarde calls them the “founding fathers.” Their goal was to avoid a repeat of the 1930s, when competitive devaluations and tariff wars led to the collapse of world trade. Keynes wanted the IMF to act as a central bank of central banks, denominating their accounts in a new global currency. It would let members devalue or borrow with relative ease. Both creditors and debtors would pay interest on their holdings, discouraging large trade surpluses as well as deficits.

White’s plan was more creditor-friendly, reflecting the U.S. position as world lender. There would be no new currency: IMF members would tie their money to the dollar. They couldn’t devalue without consulting the Fund, and were only supposed to borrow short-term to close balance-of-payments gaps. “The British wanted an automatic source of credit, the Americans a financial policeman,” wrote Keynes’s biographer Robert Skidelsky. The English economist was one of the 20th century’s sharpest thinkers, but it was the U.S. Treasury official who got his way. The system turned out to have a flaw: It depended on the supply of U.S. dollars backed by gold. That link came under pressure as America, financing social programs at home and war in Vietnam, slipped into persistent deficit. In 1971, President Richard Nixon took the dollar off the gold standard, ending phase one at the IMF.

Today there’s a patchwork of floating rates, pegs and currency unions like the euro. It’s not working to everyone’s satisfaction – notably Trump’s. His team has called out several countries, from China to Germany, for gaming the system. Money courses around that system on a scale that would have been unimaginable at Bretton Woods. Massive trade imbalances built up. The dollar remains central. The risks were laid bare in 2008, when a collapsed U.S. housing bubble led to world recession. Since then, some financial leaders – among them the governor of the People’s Bank of China, Zhou Xiaochuan, and his U.K. counterpart Mark Carney – have gently hinted that something more like Keynes’s plan might be in order, to reduce the world’s dollar dependency.

Lagarde doesn’t see that happening on her watch. “It didn’t happen in 1944, when the world had destroyed itself,” she said. “I’m not a dreamer.” She argues instead that what the IMF is doing today will remain useful tomorrow. Countries will always be getting in a financial mess. Someone has to clean it up. Ukraine needed money in 2015: without the IMF, “where would the $17.5 billion come from? Whose pocket would it be?”

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The curse of the reserve currency. And if you look a bit deeper, any gold-backed currency.

The Problem with Gold-Backed Currencies (CHS)

There is something intuitively appealing about the idea of a gold-backed currency –money backed by the tangible value of gold, i.e. “the gold standard.” Instead of intrinsically worthless paper money (fiat currency), gold-backed money would have real, enduring value–it would be “hard currency”, i.e. sound money, because it would be convertible to gold itself. Many proponents of sound money identify President Nixon’s ending of the U.S. dollar’s gold standard in 1971 as the cause of the nation’s financial decline. If our currency was still convertible to gold, the thinking goes, the system would never have allowed the vast pile of debt to accumulate. The problem with this line of thinking is that it is disconnected from the real-world mechanisms of capital flows and the way money is created in our financial system.

This article explains why Nixon took the USD off the gold standard: since the U.S. was running trade deficits, all of America’s gold would have been transferred to the exporting nations. America’s gold reserves would have disappeared, leaving nothing to back the dollar. The U.S. Empire Would Have Collapsed Decades Ago If It Didn’t Abandon The Gold Standard. The problem to sound-money proponents is trade deficits: if the U.S. only had trade surpluses, then the gold would not drain away. But Triffin’s Paradox explains why this doesn’t work for a reserve currency: a reserve currency has two distinct sets of users: domestic users and global users. Each has different needs, so there is a built-in conflict between the two sets of users.

Global users of the USD need enormous quantities of dollars to use as reserves, to pay debts denominated in USD and to facilitate international trade. The only way the issuing nation can provide enough currency to meet this global demand is to run large, permanent trade deficits–in effect, “exporting” dollars in exchange for goods and services. This is the paradox: to maintain the “exorbitant privilege” of a reserve currency, a nation must “export” its currency in size; a nation that runs trade surpluses cannot supply the world with enough of its currency to act as a reserve currency.

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That is one damning set of numbers.

What’s So Great About Europe? (BBG)

A woman said that maybe the problem with the European Union – or at least the common currency, the euro – was that it was too advantageous to Germany. “Because we have a common currency, we get an edge in exports,” she said. “I profit from this. Thanks!” “Do you think this is harming our neighbor countries?” Armbruster asked. “Yes, definitely,” she responded. “Germany was always a problem in Europe,” interjected Andre Wilkens, a Berlin-based policy wonk who was one of the evening’s featured speakers but mostly sat and listened. “The EU was formed to solve that problem.” Others got up to say that Europe needed more solidarity, with Germans leading the way. It needed more of a sense of community. More attention needed to be paid to the millions of jobless young people in Greece, Italy, Portugal and Spain.

Then things shifted to straight-out Euroenthusiasm. “To be totally honest, I think Europe is super,” said a woman sitting in the front row. Added a man a few rows back: “There are problems that we Germans alone can’t solve.” By working together with the rest of Europe, he went on, Germany had a better shot at fighting climate change and preventing war. It isn’t exactly news that a bunch of people gathered in a theater in downtown Stuttgart support the idea of Europe and even, for the most part, the reality of the European Union. The home of Daimler, Porsche and Robert Bosch is one of the continent’s great economic success stories – and its residents’ political views aren’t necessarily shared by other Germans. On the whole, Germans see the EU in a more positive light than the citizens of most other European countries (I’ve included the 10 most populous EU member countries in the chart below), but they’re still pretty negative about it.

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All Italy can do is pretend. And Brussels likes it that way.

Italy Warned by EU Over High Public Debt With Spillover Risk (BBG)

The European Commission warned that Italy faces excessive economic imbalances as the country’s shaky center-left government struggles to control public debt, boost sluggish growth and mend ailing banks. Troubles including soured bank loans risk spilling into other euro-area countries, the commission said on Wednesday. Italy’s public debt is projected to rise to 133.3% of gross domestic product this year from an estimated 132.8% in 2016. “High government debt and protracted weak productivity dynamics imply risks with cross-border relevance looking forward, in a context of high non-performing loans and unemployment,” the European Union’s executive arm in Brussels said in a set of annual policy recommendations to EU governments. Italy is struggling to maintain government stability amid infighting in the ruling Democratic Party, where some members are pushing for early elections.

The country also faces sluggish GDP growth of 0.9% this year and lingering issues at domestic banks, which are weighed down by €360 billion of bad loans that have eroded profitability, undermined investor confidence and curtailed new lending. “The stock of non-performing loans has only started to stabilize and still weighs on banks’ profits and lending policies, while capitalization needs may emerge in a context of difficult access to equity markets,” the commission said. In May it plans to recommend whether Italy should be subject to a stricter oversight regime – one with fines as a last resort – for failing to keep public debt on a trajectory toward the EU limit of 60% of GDP. The assessment will take into account final economic data for 2016 and Italian government pledges to adopt by the end of April budget-austerity measures worth 0.2% of GDP.

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“We have a third world production model of speculators and waiters, with a labour market where the majority of jobs created are temporary and with remunerations of €600, the largest wage decline in living memory..”

‘Spain Is Ruined For 50 Years’ (Exp.)

A leading Spanish economist has hit out at the ECB saying “crazy” loans will ruin the lives of the population for the next 50 years.And it is only a matter of time before the Government is forced to default as a debt bubble and low wages effectively forge the worst declines in “living memory”. Leading economist Roberto Centeno, who was an advisor to US president Donald Trump’s election team on hispanic issues, says the country has borrowed €603 billion that it cannot conceivably pay back. And he says Spanish politicians including Minister of Economy Luis de Guindos are “insulting their intelligence” after doing back door deals with the ECB. In a blog post Mr Centeno says there needs to be audits so the country can understand the magnitude of its debt mountain.

He said Spain was “moving steadily towards the suspension of payments which is the result of out of control public waste, financed with the largest debt bubble in our history, supported by the ECB with its crazy policy of zero interest rate expansion and without any supervision.” The expert added the doomed situation will “lead to the ruin of several generations of Spaniards over the next 50 years”. And that current Prime Minister Rajoy has employed 2500 special advisors in his central government as opposed to other leaders. He said: ”Our economic future requires drastic decisions to cut public waste, such as eliminating thousands of useless public companies, thousands of useless advisers, [Prime Minister Mariano] Rajoy has 2,500 in Moncloa, compared to Obama’s 600, Merkel’s 400 or the 250 working for Theresa May.

“There’s disastrous management of Health and Education, the cost of which has skyrocketed 60 per cent since they were transferred to the Autonomous Communities while the quality plummeted.” Mr Centento also said the Government and the European Union’s estimations of GDP are completely wrong and has presented them with figures he claims are accurate. He said the country is currently suffering from a “third world production model”. He added: “We have a third world production model of speculators and waiters, with a labour market where the majority of jobs created are temporary and with remunerations of €600, the largest wage decline in living memory, “And all this was completed with a broken pension system and an insolvent financial system.”

Forecasting an unprecedented shock to the European financial model, Mr Centento is calling for an immediate audit despite a recent revelation that the ECB is failing in its supervisory role over Europe’s banks. He also claimed the Spanish government and European Union leaders have been manipulating figures since 2008. Mr Centento said: “We will require the European Commission and Eurostat to audit and audit the Spanish accounting system for serious accounting discrepancies that may jeopardise stability. “The gigantic debt bubble accumulated by irresponsible governments, and that never ceases to grow, will be the ruin of several generations of Spaniards. “The Bank of Spain’s debt to the Eurosystem is the largest in Europe. “The day that the ECB minimally closes the tap of this type of financing or markets increase their risk aversion, the situation will be unsustainable.”

Read more …

A feature not a bug.

Why Greece’s Crisis Has Broken All Previous Records (K.)

How unique is the Greek crisis? Two charts tell the tragic tale. The first – from the International Monetary Fund’s recent Article IV report on Greece – compares four major economic crises that took place in the developed world in the last 100 years: the Great Depression in the United States, the Asian financial crisis of the late 1990s, the eurozone recession and Greece’s long collapse. Greece’s performance is by far the worse. The East Asian countries caught in the hurricane of 1997-8 returned to pre-crisis real GDP within three years. The eurozone needed six years, and today its real GDP is only 2% higher than the pre-crisis high point. The output of the US economy had shrunk by a quarter three years after the Wall Street Crash of 1929, but by 1936 it had recovered to pre-crisis levels. The Greek economy contracted by 26% in real terms between 2007 and 2013, and at the end of 2016 – nine years after the start of its own Great Depression – it remained stuck at the bottom.

The second chart, from the analysis service Macropolis, compares the performance of eight countries that have sought assistance from the IMF since 1997 seven years after the start of their programs. The Fund’s best student was Turkey, which doubled its GDP in real terms between 2000 and 2007. Russia was a close second, largely thanks to growth fueled by climbing oil and gas prices. South Korea comes next, with growth well above 50% from its baseline year, while Indonesia, Brazil and Thailand are hovering around 25%. The only countries which remained below their pre-crisis GDP levels seven years after seeking the Fund’s assistance are Argentina (in the aftermath of the 1998-2002 crisis) and Greece. At its low point, three years into its crisis, Argentina’s dollar-denominated GDP – largely because of the devaluation of the peso after the abolition of convertibility – had fallen by two-thirds compared to pre-crisis highs. At the seven-year mark, Argentina, unlike Greece, was experiencing a robust recovery.

Focusing on the comparison with the Great Depression in the United States, US unemployment peaked in May 1933 at 26%, to be cut by more than half by the end of 1936. In Greece it reached 28% in July 2013, and has since fallen to 23%. The Dow Jones Industrial index lost 85% of its value between August 1929 and May 1932, but it rose fourfold in the three-and-a-half years to the end of 1936 (another 23 years would pass, however, before it got back to pre-crisis levels).

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No, it’s not just the EU, or the euro.

“..an economic climate that is normalising low-income families having to live hand to mouth..”

Millions In UK Are Just One Unpaid Bill Away From The Abyss (G.)

As the cocktail of long-term austerity, rising living costs and a slumping post-Brexit economy hits, what’s really frightening is the crisis that is brewing but is barely being noticed. Look at this week’s finding that one in four families now have less than £95 in savings. That’s staggering, not simply because it gives an insight into how large swaths of families in Britain are clinging on financially in a climate of low wages, cut benefits and high rents, but also because it offers us a warning of how little it will take to push them over the edge. There are now 19 million people in this country living below the minimum income standard (an income required for what the wider public view as “socially acceptable” living standards), according to figures released by the Joseph Rowntree Foundation (JRF) this month.

Around 8 million of them could be classed as Theresa May’s “just about managing” families: those who can, say, afford to put food on the table and clothe their children but are plagued by financial insecurity. The other 11 million live far below the minimum income standard and are, the JRF warns, “at high risk of falling into severe poverty”. We are entering a period not simply of growing hardship in this country but of what I would call precarious poverty: the sort that isn’t characterised by the traditional image of lifelong, deep-seated deprivation, but which can hit in a matter of days: a broken washing machine, a late child tax credit payment, an injury that leads to time off work. In an economic climate that is normalising low-income families having to live hand to mouth, increasingly, for a whole economic class, one small unexpected cost can trigger a spiral into debt.

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And now they’re stuck. This is where it gets risky.

Oz Reserve Bank Interest Rate Moves Limited By High Debt, House Prices (AbcAu)

Fears of inflating housing bubbles in Sydney and Melbourne are stopping the Reserve Bank from cutting interest rates to boost the economy, the central bank governor conceded today. The stark admission by Reserve Bank governor Phillip Lowe about the RBA’s dilemma comes as soaring house prices in the eastern states have Australians carrying “more debt than they ever have before”. Dr Lowe delivered the reality check at the Australia Canada Economic Leadership Forum, where he said low interest rates made it attractive for borrowers in both countries to invest in real estate, making further rate cuts an undesirable option. “We are trying to balance multiple objectives at the moment,” he said in response to questions after the speech.

“We’d like the economy to grow a bit more quickly and we’d like the unemployment rate to come down a bit more quickly than is currently forecast. “But if we were to try and achieve that through monetary policy it would encourage people to borrow more money and it probably would put more upward pressure on housing prices and, at the moment, I don’t think either of those two things are really in the national interest.” For the moment, it looks like the Reserve Bank feels content — or locked in — to leaving official interest rates on hold at a record low 1.5%. However, Dr Lowe expressed optimism that this level of rates was low enough to spark business investment and stronger economic growth, and therefore there would be no need to lower rates further.

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That’s a lot of (not) oil.

Exxon Wiped A Whopping 19.3% Of Its Oil Reserves Off Its Books In 2016 (Q.)

ExxonMobil has taken a big hit to one of the pillars underlying its decades of braggadocio: its oil reserves. In an announcement today, Exxon said it had written down its proven oil reserves by a massive 19.3%, a stinging reduction to what is a primary measure of any oil company’s value. As of the end of 2016, Exxon had 20 billion barrels in proven reserves, compared with 24.8 billion a year earlier. This includes the erasure of all 3.5 billion barrels of Exxon’s proven oil sands reserves at Canada’s Kearl field. Last year’s low oil prices made it uneconomical to drill at Kearl, which had been at the core of Exxon’s growth strategy. In addition, for the second straight year, Exxon failed to replace all the reserves it pumped—in 2016, it replaced just 65% of its produced reserves. In 2015, it replaced just 67%.

Prior to these years, Exxon had replaced at least 100% of its production every year since 1993. As bad as that was, it was expected: Exxon had signaled that it would write down reserves in 2016, and analysts had expected the company not to replace what it pumped. What wasn’t anticipated was the impact on Exxon’s vaunted longer-term performance. Almost every year, when Exxon announces its earnings, dividend payouts, reserve replacement results—and nearly any other important annual result—it throws in its 10-year record in the respective category to demonstrate its steady, reliable hand on the tiller. This time, bringing up the 10-year record backfired: The replacement failures of the last two years and the 2016 writedown punched a hole in Exxon’s vaunted 10-year reserves replacement average—it plunged to 82% in 2016, from 115% a year earlier.

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Simmering conflict.

Turkish Provocations Test Greek Resolve (K.)

The recent spike in Turkish provocations in the Aegean and incendiary comments emanating from Ankara are aimed at testing Greece’s resolve, according to Greek analysts. In what was seen as its latest transgression, Turkey dispatched its Cesme research vessel to conduct surveys on Wednesday in international waters between the islands of Thasos, Samothrace and Limnos, but within the area of responsibility of the Hellenic Search and Rescue Coordination Center. The night before, Turkish coast guard vessels conducted patrols in the region around the Imia islets. At the same time, the Cyprus talks are being undermined over what Greeks believe is a minor detail – the decision by the Cyprus Parliament for schools to commemorate a 1950 referendum calling for union with Greece.

Greeks say it is an attempt to shift attention from the fundamental issues of the peace talks, namely post-settlement security and guarantees. In response, Athens has pursued the principle of proportionality by countering the presence of Turkish military and coast guard vessels with an equivalent number of Greek ones, while embarking on a diplomatic campaign at international organizations and in major capitals. Analysts also attribute the spike in tension to the Supreme Court’s refusal to extradite the Turkish servicemen that Ankara says were involved in the July coup attempt. But they also note that it serves as a convenient pretext for Turkey to up the nationalistic rhetoric ahead of the April 16 referendum called by President Recep Tayyip Erdogan in a bid to expand his powers.

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Think maybe rich Europe has slipped Tsipras a few bucks?

Greece Okays Asylum Requests Of 10,000 Refugees (K.)

At least 10,000 refugees, including around 2,000 minors, are expected to remain in Greece over the coming three years as their asylum applications have been approved. The approved asylum claims account for about a sixth of more than 60,000 migrants who are currently stranded in Greece following the decision last year by a series of Balkan states to close their borders amid a massive influx of refugees from Syria and other war-torn states. The arrival of migrants in Greece has slowed significantly following an agreement between the European Union and Turkey in March last year to crack down on human smuggling across the Aegean.

However, boatloads of migrants continue to arrive on Greek shores from neighboring Turkey. On Wednesday, another 145 migrants arrived on the eastern Aegean island of Chios alone. Authorities attribute the sudden spike in arrivals to the unseasonably good weather. According to the Greek Asylum Service, a total of 1,912 migrants lodged asylum applications in January of this year. Last year, when hundreds of thousands of migrants flooded through Greece toward other parts of Europe, a total of 51,091 people applied for asylum in Greece, compared to 13,195 in 2015, 9,432 in 2014 and 4,814 in 2013.

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Dec 072016
 


Arthur Gerlach Children point towards Christmas toys at The Fair Department Store, Chicago 1940

 

The world is facing the “first lost decade since the 1860s”, said Bank of England governor Mark Carney this week. Arguably good for soundbite of the day, but the buck stops there. The only way that buck could have kept rolling would have been for Carney to take a critical look at himself and his employer(s), but there was none of that.

The Canadian import governor has no doubts about anything he’s done, or if he does he shows none. Instead he puts the blame for all that’s gone awry, on some -minor- elements of what he think globalization means, not with the phenomenon itself, or his enduring support for, and belief in, it. The problem with that is it’s indeed belief only; he can’t prove an inch of what he says.

Globalization is an act of faith inside a politico-economic belief system, and all it needs according to Carney and many others in his ‘church’ is a little tweaking. That globalization itself could be the driving force behind Brexit, Trump and the defeat of Italian PM Renzi does not enter into the faith’s ‘thought’ system.

Neither does the possibility that globalization is what it is, in and of itself, a process that in the end cannot be tweaked. That globalization is simply yet another form of centralization that follows the same rules and laws all other forms do, where power and wealth always, of necessity, wind up in the hands of a few, through pretty basic centrifugal forces.

Carney Lays Out Vision to Revive Benefits of Globalization

Mark Carney launched a defense of globalization and set out a manifesto for central bankers and governments to boost growth and make the world economy more equal. The Bank of England Governor said they must acknowledge that gains from trade and technology haven’t been felt by all, improve the balance of monetary and fiscal policy, and move to a more inclusive model where “everyone has a stake in globalization.” Carney’s speech in Liverpool, England, comes amid rising disquiet about the state of the world economy and political status quo that helped propel Donald Trump to victory in the U.S. presidential election and boost support for the U.K.’s exit from the European Union.

Trump isn’t right to favor more protectionist policies in response to globalization , Carney said in a television interview broadcast after his speech. The answer is to “redistribute some of the benefits of trade” and ensure that workers are able to acquire new skills. “Weak income growth has focused growing attention on its distribution,” Carney said in the speech.

“Inequalities which might have been tolerated during generalized prosperity are felt more acutely when economies stagnate.” Describing the world as facing the “first lost decade since the 1860s,” the BOE governor said public support for open markets is under threat and rejecting them would be a “tragedy, but is a possibility.”

Carney also defended the central bank’s current policy stance. The BOE has faced criticism from politicians after officials took measures including cutting interest rates and expanding asset purchases in August to support the economy after Britain’s June vote to leave the EU. “Low rates are not the caprice of central bankers, but rather the consequence of powerful global forces, including debt, demographics and distribution,” he said, adding that they helped to prevent a deeper economic downturn.

People like Carney will insist that globalization spurs growth, right up to the moment where they’re either voted out or fired. And they’ll probably keep on insisting until their dying days. But why are we in that “first lost decade since the 1860s” then? Is that really only because ‘we’ failed to “redistribute some of the benefits of trade”, something that can allegedly be easily rectified by enabling workers to ‘acquire new skills’?

Where is the proof for that? And why have economies stagnated in the middle of the entire process of globalization? Is that solely because ‘some of’ the benefits were not distributed well enough? If that is so, and wealth distribution is the only problem with globalization, at what point do we redistribute ourselves into the realm of communism? Where’s the dividing line? It all feels mighty vague and unsatisfactory, and not a little goal-seeked.

 

Like a large part of the Brexit voters in Britain, millions of Italians have been on the losing side of globalism’s ‘benefits distribution’. And this weekend they found an outlet for their frustration about it. Like Brexiteers voted against Cameron and Osborne much more than they voted for anything in specific, and Trump won because Americans are fed up with the Obama/Clinton/GOP model, Italians voted against PM Renzi and his idea to take power away from parliament and give it to him.

Judging from poll numbers, they also seem to have gained confidence in Beppe Grillo’s, and the Five Star Movement’s, ability to do something real in politics. It has taken a while, and that makes sense because the movement doesn’t fit the model of politics as they’ve known it all their lives.

 


Wikipedia

 

Also, there are many Italians who have largely agreed with much of what Grillo has been saying all along, but were deterred by the way he delivered it. Ask an Italian and they’re likely to say “too angry, too rude” when it comes to Grillo. And it’s true, his style doesn’t seem to fit in with the rest. But then that’s also exactly his forte. Because there comes a point when everything that does fit in, becomes suspect.

The old guard, from Renzi to Berlusconi to the socialists, will double their efforts to keep Grillo out of the center of power now. President Mattarella is in on it: he asked Renzi to stay on as PM until after the budget has been pushed through, and is then likely to install another technocrat government, tasked with changing laws with the express intent of making it harder for Grillo to get into power.

And Renzi, of course, is on the same wavelength as Carney, and the entire EU -and global- cabal: globalize, reform, re-distribute ‘some benefits’, execute more austerity, rinse and repeat.

What’s particular about Italy in this sense is what it has been able to preserve, unlike most other nations. That is, Italy has a lot of small enterprises, often family owned, with highly skilled workers. That doesn’t fit today’s globalization model, since it’s deemed not competitive enough when you’re forced to fight for market share.

But if globalization, and the entire growth model, is over anyway, as I’ve often asserted, it’s a whole different story. If that is true, the country had better save what’s left of its business model, because it’s ideal for a post-centralized world. ‘Workers’ wouldn’t have to ‘acquire new skills, and leave old and proven skills to be forgotten and gather dust.

 

The world is changing rapidly and that will become even a lot more evident in 2017. The incumbent economic and political systems, as well as their proponents and cheerleaders, are on the way out. They have all failed miserably. What comes next will be profoundly chaotic for quite a while, and that will be perilous. There is not one single (belief) system to replace them, there will be many and they will often clash.

In some places, the political right will prevail, in others the left. In most, from the look of things, neither will, if only because at the end of the day both left and right are still part of incumbent systems. Europe has a number of elections coming up and in at least some of these, parties from outside the incumbent systems will come out on top.

Whether they can then go on to form governments is perhaps another story; the system will not give up easily. But it is done. Carney’s recipe of ‘some’ redistribution of wealth and acquiring new skills is widely shared in power circles, and that will be the system’s undoing. All it has to offer is more talk about more growth and more globalization, and while people protest only the latter, neither is on offer.

One of the tools the media use to discredit anything that comes from outside the system is to label it all ‘populist’. It’s a miracle it hasn’t become a honor label yet. In Europe, all new rightwing parties (a label in itself) get called populist, Le Pen, Wilders, Frauke Petry in Germany, the Lega Nord in Italy. But so does someone like Beppe Grillo, who politically has nothing in common with these people.

Moreover, many of their ideas are not to the right of existing parties at all. Despite some of his views, new French Republican candidate François Fillon is not called a populist, ostensibly because he’s from a large incumbent party, but so are Trump and Sanders in the US, and they do get called populist.

 

Empty labels, fake news and oceans of debt keep the systems -somewhat- going for now. But the genie’s long left the bottle. The ‘incumbents’ have failed their people for far too long, most of all economically. And they keep on claiming that everything will be alright, everyone will be better off if only we execute more globalization, and give them all a few pennies more.

It really is too silly to be true that that is what existing systems and their servants are still trying to make everyone believe. While it is so obvious that so many have long stopped believing. You would think they’d change their messages to reflect that change in society. But they don’t know how. And it’s that very inability that feeds those pesky ‘populists’.

The same François Fillon could be a contender in France against anti-EU Le Pen because he’s expressed doubts on Brussels. Dutch PM Rutte has cautiously critiqued the union too. But those shifts in words if not real opinions come far too late. Britain has said No and there’s zero chance that more nations will not do the same. Just give them the option, give them a vote.

The only way to keep Europe from descending into chaos is to abandon the EU, lock the doors and throw away the keys. The same is true on a global scale, with all the globalist trade agreements that most people have long lost faith in. We will either see a peaceful transition to a system not based on centralization, or we will not see peace, period.

And to think economic meltdown hasn’t even truly started yet, has been kept hidden behind a wall of debt, and so many people are already so fed up with the whole shebang.

Jul 152016
 
 July 15, 2016  Posted by at 9:01 am Finance Tagged with: , , , , , , , , ,  1 Response »


Dorothea Lange Farm boy at main drugstore, Medford, Oregon 1939

(Nobody Believes) China’s Q2 GDP Growth Stable at 6.7% (ET)
Asian Shares Rise To Eight-Month Highs (R.)
US Exporters’ Gains From Chinese Economic Growth Shrink Further (WSJ)
Could Italy Bring Down The Euro? (Kern)
EU Finance Ministers Get Tough With Italian Bank Trying For Third Bailout (G.)
Who’s Buying It? (Roberts)
Canada New Home Prices Grow At Fastest Pace In Nearly 9 Years (R.)
UK MPs Decry ‘Failed’ Effort To Stop London Property Money Laundering (G.)
McKinsey Slams Globalization: “The Resentment Will Explode” (ZH)
Globalism vs. “Populism” (Smith)
President of Belgian Magistrates: Neoliberalism Is A Form Of Fascism (DDP)
In New Zealand, Lands and Rivers Can Be People -Legally Speaking- (NYT)
Obama Expected to Sign Industry-Backed GMO Label Bill Into Law (EW)
Biodiversity Is Below Safe Levels Across More Than Half Of World’s Land (G.)
Gleaning: Harvesting Spain’s Unwanted Crops To Feed The Hungry (G.)

 

 

I know, what does any of it mean with 100 people dying in Nice? Still, as many died in Syria.

“The speed of growth that it points to is increasingly hard to believe given the clear structural drags that the economy is facing..”

(Nobody Believes) China’s Q2 GDP Growth Stable at 6.7% (ET)

China’s GDP grew at 6.7% year on year in the second quarter of 2016, at least officially. However, most analysts don’t believe the official figures. “The official figure is still around 7%, but those data are made in the statistical kitchen,” says Willem Buiter, the chief economist of Citigroup. He thinks China is not growing at more than 4%. After reporting 6.7% growth over the year in the first quarter of 2016, analysts were looking for 6.6% growth in the second quarter compared to the second quarter of 2015, so China managed to engineer a small beat and create the illusion of stability. Quarterly growth even picked up from 1.1% in the first quarter to 1.8% in the second quarter.

“The speed of growth that it points to is increasingly hard to believe given the clear structural drags that the economy is facing,” research firm Capital Economics writes in a note. The analysts think China grew 4.5% based on a proprietary activity index, roughly the same as in the first quarter. Private investment was the biggest drag on growth, it just expanded 1% in May, down from 15% in early 2015. State companies have picked up the slack. A survey of thousands of companies by the China Beige Book (CBB) released earlier in July paints a similar picture. CBB says most indicators improved in the second quarter, although activity is roughly flat over the year. In most cases, less than 50% of survey respondents report an improvement in sales, hiring, capital expenditure, or bank lending.

Read more …

The harder they come…

Asian Shares Rise To Eight-Month Highs (R.)

Asian shares extended gains to eight-month highs on Friday, on track for a solid weekly rise, as better-than-expected economic data from China lifted risk sentiment that was already buoyant after record highs on Wall Street. China’s economy grew 6.7% in the second quarter from a year earlier, steady from the first quarter and slightly better than expected as the government stepped up efforts to stabilize growth in the world’s second-largest economy.

Industrial output and retail sales also beat forecasts, which helped alleviate fears of slowing momentum, though fixed-asset investment growth slipped and missed market expectations. “The data showed the signs of stabilisation, which is very encouraging,” said Julian Wang, economist for Greater China at HSBC. “However, public sector investment and housing market are slowing down. So the challenges still loom quite large in the second half of the year.”

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Well, that’s a surprise….

US Exporters’ Gains From Chinese Economic Growth Shrink Further (WSJ)

China’s economic roller coaster is taking a bite out of American exporters, hurting U.S. industries ranging from mining equipment to cotton producers and adding to criticism that China is getting more than it gives in trade with the U.S. The U.S. shipped just $42.4 billion to China in the first five months of the year, or 8.2% less than the year-earlier period and 13.8% below the peak export year of 2014, according to the Census Bureau. The export drop comes as China’s economy, while slowing, is still officially expanding at more than 6% a year. That growth is driven in part by the mountain of goods—worth $174 billion so far this year—the U.S. imports from China. That is quadruple the size of its exports to China during those months, and only slightly less than 2014 levels.

The slowdown in U.S. exports could exacerbate accusations in the 2016 presidential campaign that China is engaged in unfair trade practices. Donald Trump, the presumptive Republican nominee, has cited the trade gap with China in threatening to slap new tariffs on the country if he becomes president. U.S. companies have grown increasingly vocal in criticizing Beijing for allegedly dumping subsidized steel and other products on world markets and for refusing to open major parts of its economy to foreign investment—a roadblock that almost certainly hinders two-way trade.

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No doubt it could. But Brussels will first try and turn it into Greece….

Could Italy Bring Down The Euro? (Kern)

[..] M5S’s Luigi Di Maio, who, polls show, has a very good chance of succeeding Renzi as prime minister, has reiterated his party’s long-standing call for a referendum on the euro: “We want a consultative referendum on the euro. The euro as it is today does not work. We either have alternative currencies or a ‘euro 2.’ We entered the European Parliament to change many treaties. The mere fact that a country like Great Britain even held a referendum on whether to leave the EU signals the failure of the European Union.” A referendum on the euro would be “consultative” because Italian law does not allow such plebiscites to change international treaties, including those that involve Italy’s relations with the European Union.

But Grillo is seeking a legislative change to allow an “ad hoc” exception, similar to the one in June 1989, when Italy held a consultative referendum on whether to transfer certain powers to the European Parliament. The exception would presumably be approved if M5S wins the prime minister’s office. Meanwhile, analysts are warning that the turmoil in Italy could spread to the rest of the eurozone. The risk of contagion is due to the so-called “doom loop” that exists between European governments and European banks, which have more than doubled the holdings of their own governments’ debt from a low of €355 billion in September 2008 to €791 billion today. International banks have lent Italy more than €500 billion, according to Die Welt, which reports that French banks alone hold €250 billion of Italian debt.

German banks hold €84 billion of Italian bonds. The only question, according to analysts, is whether taxpayers or bondholders will be left holding the tab. Wolfgang Münchau warned of the consequences of a disorderly Italian exit from the euro: “An Italian exit from the single currency would trigger the total collapse of the eurozone within a very short period. It would probably lead to the most violent economic shock in history, dwarfing the Lehman Brothers bankruptcy in 2008 and the 1929 Wall Street crash.” As Ambrose Evans-Pritchard of the Telegraph has pointed out, however, Italy must choose between the euro and its own economic survival. Leaving the euro “may be the only way to avert a catastrophic deindustrialization of the country before it is too late.”

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…like here.

EU Finance Ministers Get Tough With Italian Bank Trying For Third Bailout (G.)

The idea of modern banking was born in Siena in 1624, when the Medici Grand Duke decided to guarantee accounts held at Monte dei Paschi, the world’s oldest bank, with the proceeds of pasture he held in the Maremma in south-western Tuscany. Nearly 400 years later, the principle established by the Tuscan ruler – that account holders and investors are protected by the state – lies at the heart of a crisis at Monte dei Paschi di Siena (MPS) that is worrying financial markets around the world. The country’s third-largest lender has already been bailed out twice in modern Italian history but is likely to need a third multibillion-euro intervention by the Italian government – a move that would need Brussels to break new rules designed to prevent such taxpayer bailouts after the 2008 global financial crisis.

So the question of who will pay for the inevitable rescue of MPS, whose share value has fallen 80% over the past year, has yet to be answered. Three weeks after the news that Britain has voted to leave the European Union shocked the markets, a debate over the fate of MPS and the economic and political repercussions of inaction is raging from Rome to Brussels and Paris to Berlin. The welfare of thousands of Italian households is at stake, as well as the political fortune of Italy’s prime minister, Matteo Renzi, who is facing the toughest political challenge of his career. It is also testing Italy’s credibility among foreign investors. “There is no way they will let the bank go and create a systemic effect,” said Wolfango Piccoli, co-president of Teneo Intelligence. “The mechanics are still unclear but there will be a third bailout of Monte dei Paschi.”

[..] Unlike the US, Spanish and Irish financial crises, the Italian banking crisis is not the result of a speculative property bubble. While other issues have exacerbated the turmoil at Monte dei Paschi’s – including a poorly judged €9bn acquisition – the primary reason the bank is in trouble is because it doled out billions of euros in loans to small businesses at a time when the scale of the recession facing Italy was gravely underestimated. From 2007 to 2013, Italy lost about a quarter of its industrial production and tens of thousands of companies collapsed. In 2013 more than 150 shops closed every day. Construction and home sales slumped and none of the sectors has recovered fast enough.

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Central banks are the only buyers left.

Who’s Buying It? (Roberts)

With the market breaking out to all-time highs, the media has started to once again reach for their party hats as headlines suggest clear sailing for investors ahead. While I certainly do not disagree the breakout is indeed bullish, and signals a continuation of the long-term bullish trend, there are more than sufficient reasons to remain somewhat cautious. Earnings are still weak, there is little evidence of economic resurgence and inflationary pressures globally remain nascent. But, for now, a rash of global Central Banks continue to support asset prices by increasing accommodative policies either through additional reductions in interest rates or direct injections of liquidity. As Matt King from Citi recently noted: “It has been a surge in net global central bank asset purchases to their highest level since 2013.”

With the ECB in full QE mode, the BOC now using $300 billion in Pension Funds to prop up prices, and the BOJ now moving towards an additional $130 billion in QE as well, the liquidity push continues. Interestingly, despite the push by Central Banks to loft asset prices higher, individual market participants as measured by the Investment Company Institute (ICI) have a different idea. As shown in the chart below, despite asset prices ringing all-time highs, net equity inflows have turned decisively negative. This was much the same case following the 2012 market rout and it wasn’t until the launch of QE3 in 2013 that investors began to once again chase the markets.

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Trudeau needs to act, and very fast, or he’ll be staring a monster in the face.

Canada New Home Prices Grow At Fastest Pace In Nearly 9 Years (R.)

Canadian new home prices in May grew at their fastest pace in almost nine years, soaring 0.7% from April on strength in the booming markets of Toronto and Vancouver, Statistics Canada said on Thursday. Analysts polled by Reuters had predicted a 0.2% advance. May’s increase was the largest since the 1.0% jump recorded in July 2007. The Liberal government is concerned about rapidly rising prices in Toronto and Vancouver and is mulling more restrictions on mortgages. The combined region of Toronto and Oshawa – which accounts for 27.92% of the entire Canadian market – posted a 1.9% gain, the highest in 27 years.

Builders cited market conditions and the price of land. Market conditions also helped drive up new home prices in Vancouver by 1.1%. Overall, housing prices increased by 2.7% from May 2015, the largest year-on-year rise since the 2.7% advance seen in September 2010. The new housing price index excludes apartments and condominiums, which the government says are a particular cause for concern and which account for one-third of new housing.

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A feature, not a bug.

UK MPs Decry ‘Failed’ Effort To Stop London Property Money Laundering (G.)

Government attempts to stop the UK property market being exploited by international money launderers are “totally inadequate” and the country has instead “laid out a welcome mat” to criminals, the House of Commons home affairs committee has said. The influential panel of MPs, chaired by the Labour backbencher Keith Vaz, said it was disgraceful that at least £100bn was being laundered through the UK every year and astonishing that just 335 out of 1.2m property transactions last year were deemed to be suspicious by law enforcement officials. That means only 0.01% of the 2.4 million buyers and sellers in the UK generated suspicious activity reports at the National Crime Agency (NCA), whose system, Vaz said, was not fit for purpose.

“The proceeds of crime legislation has failed,” Vaz said. “London is a centre for money laundering, and its standing as a global financial centre is dependent on proactively and effectively tackling money laundering. Investment in London properties is a major route which tarnishes the image of the capital. Supervision of the property market is totally inadequate.” The NCA’s system gathers suspicious activity reports from lawyers, accountants, bankers and other professionals but is overwhelmed with more than 380,000 reports per year, when it is designed to handle 20,000. [..] The MPs said it remained “far too easy for someone intent on laundering money to buy a property with their ill-gotten gains, and rent it out in a very buoyant and robust letting market and take in clean money in perpetuity”.

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As I said many times before: when growth goes, so does centralization. It seems hard to make that connection.

McKinsey Slams Globalization: “The Resentment Will Explode” (ZH)

The IMF is getting nervous, and what it appears to be most concerned about, is a collapse of the status quo. Moments ago, in a speech in Washington, IMF head Christine Lagarde said that “The greatest challenge we face today is the risk of the world turning its back on global cooperation—the cooperation which has served us all well. We know that globalization – and increased integration – over the past generation has yielded many economic benefits for many people.” The IMF is not alone: for years, consultancy giant McKinsey towed the party line as well saying in 2010 that “the core drivers of globalization are alive and well” and adding as recently as 2014 that “to be unconnected is to fall behind.”

That appears have changing, and cracks are starting to form behind the cohesive push for globalization, at least among those who benefit the most from globalization. In a stunning study released today, one which effectively refutes all its prior conclusions on the matter, McKinsey slams the establishment’s status quo thinking and admits that the economic gains of changes in the global economy have not been widely shared lately, especially in the developed world. In the report titled “Poorer Than Their Parents? Flat or Falling Incomes in Advanced Economies” it finds that prospects for income growth have deteriorated significantly since the financial crisis, and that the benefits from globalization are now over:

This overwhelmingly positive income trend has ended. A new McKinsey Global Institute report finds that between 2005 and 2014, real incomes in those same advanced economies were flat or fell for 65 to 70% of households, or more than 540 million people. And while government transfers and lower tax rates mitigated some of the impact, up to a quarter of all households still saw disposable income stall or fall in that decade.

As Bloomberg reports, Britain’s vote to exit the European Union exemplifies what happens when people feel like the system is letting them down, Richard Dobbs, the co-leader of the research, said in an interview Wednesday, ahead of the report’s release. He likened the buildup of resentment over globalization to a dangerous natural gas leak in a row of houses. “One of them will explode. I did not think that it would be the U.K. first,” said Dobbs, a senior partner of McKinsey and a member of the McKinsey Global Institute Council in London. “When we launch a new policy, let’s think about the impact on those groups” who have been left behind, Dobbs said. Sometimes the goals of fairness and efficiency can conflict, he said. “Are we prepared to damage competitiveness a bit to reduce the risk of an explosion?”

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Brandon Smith on one of my ‘hobby horses’. More good stuff in the article.

Globalism vs. “Populism” (Smith)

The globalists have used the method of false dichotomies for centuries to divide nations and peoples against each other in order to derive opportunity from chaos. That said, the above dichotomy is about as close to real as they have ever promoted. As I explained [earlier], the recent passage of the Brexit referendum in the U.K. has triggered a surge of new propaganda from establishment media outlets. The thrust of this propaganda is the notion that “populists” are behind the fight against globalization and these populists are going to foster the ruin of nations and the global economy. That is to say – globalism good, populism bad. There is a real fight between globalists and those who desire a free, decentralized and voluntary society.

They have just changed some of the labels and the language. We have yet to see how effective this strategy will be for the elites, but it is very useful for them in certain respects. The wielding of the term “populist” is about as sterilized and distant from “freedom and liberty” as you can get. It denotes not just “nationalism,” but selfish nationalism. And the association people are supposed to make in their minds is that selfish nationalism leads to destructive fascism (i.e. Nazis). Therefore, when you hear the term “populist,” the globalists hope you will think “Nazi.” Also, keep in mind that the narrative of the rise of populism coincides with grave warnings from the elites that such movements will cause global economic collapse if they continue to grow.

Of course, the elites have been fermenting an economic collapse for years. We have been experiencing many of the effects of it for some time. In a brilliant maneuver, the elites have attempted to re-label the liberty movement as “populist” (Nazis), and use liberty activists as a scapegoat for the fiscal time bomb THEY created. Will the masses buy it? I don’t know. I think that depends on how effectively we expose the strategy before the breakdown becomes too entrenched. The economic collapse itself has been handled masterfully by the elites, though. There is simply no solution that can prevent it from continuing. Even if every criminal globalist was hanging from a lamp post tomorrow and honest leadership was restored to government, the math cannot be changed and decades of struggle will be required before national economies can be made prosperous again.

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By Manuela Cadelli, President of the Magistrates’ Union of Belgium. Bit older, but interesting reasoning.

President of Belgian Magistrates: Neoliberalism Is A Form Of Fascism (DDP)

Every totalitarianism starts as distortion of language, as in the novel by George Orwell. Neoliberalism has its Newspeak and strategies of communication that enable it to deform reality. In this spirit, every budgetary cut is represented as an instance of modernization of the sectors concerned. If some of the most deprived are no longer reimbursed for medical expenses and so stop visiting the dentist, this is modernization of social security in action! Abstraction predominates in public discussion so as to occlude the implications for human beings. Thus, in relation to migrants, it is imperative that the need for hosting them does not lead to public appeals that our finances could not accommodate. Is it In the same way that other individuals qualify for assistance out of considerations of national solidarity?

Social Darwinism predominates, assigning the most stringent performance requirements to everyone and everything: to be weak is to fail. The foundations of our culture are overturned: every humanist premise is disqualified or demonetized because neoliberalism has the monopoly of rationality and realism. Margaret Thatcher said it in 1985: “There is no alternative.” Everything else is utopianism, unreason and regression. The virtue of debate and conflicting perspectives are discredited because history is ruled by necessity. This subculture harbours an existential threat of its own: shortcomings of performance condemn one to disappearance while at the same time everyone is charged with inefficiency and obliged to justify everything. Trust is broken. Evaluation reigns, and with it the bureaucracy which imposes definition and research of a plethora of targets, and indicators with which one must comply. Creativity and the critical spirit are stifled by management.

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In general, everywhere native people get an actual say, things improve.

In New Zealand, Lands and Rivers Can Be People -Legally Speaking- (NYT)

Can a stretch of land be a person in the eyes of the law? Can a body of water? In New Zealand, they can. A former national park has been granted personhood, and a river system is expected to receive the same soon. The unusual designations, something like the legal status that corporations possess, came out of agreements between New Zealand’s government and Maori groups. The two sides have argued for years over guardianship of the country’s natural features. Chris Finlayson, New Zealand’s attorney general, said the issue was resolved by taking the Maori mind-set into account. “In their worldview, ‘I am the river and the river is me,’” he said. “Their geographic region is part and parcel of who they are.”

From 1954 to 2014, Te Urewera was an 821-square-mile national park on the North Island, but when the Te Urewera Act took effect, the government gave up formal ownership, and the land became a legal entity with “all the rights, powers, duties and liabilities of a legal person,” as the statute puts it. “The settlement is a profound alternative to the human presumption of sovereignty over the natural world,” said Pita Sharples, who was the minister of Maori affairs when the law was passed. It was also “undoubtedly legally revolutionary” in New Zealand “and on a world scale,” Jacinta Ruru of the University of Otago wrote in the Maori Law Review.

Personhood means, among other things, that lawsuits to protect the land can be brought on behalf of the land itself, with no need to show harm to a particular human. Next will be the Whanganui River, New Zealand’s third longest. The local Maori tribe views it as “an indivisible and living whole, comprising the river and all tributaries from the mountains to the sea — and that’s what we are giving effect to through this settlement,” Mr. Finlayson said. It is expected to clear Parliament and become law this year.

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How crazy is this? ‘Misinformation is also information’.

Obama Expected to Sign Industry-Backed GMO Label Bill Into Law (EW)

Looks like we’re finally getting GMO labels on food products—just not the kind you can actually read. President Obama is expected to throw his weight behind a controversial bill that allows businesses to use a smartphone scannable QR code instead of clear, concise wording that informs consumers if a product contains genetically modified ingredients. The bill would also nullify state-by-state GMO labeling mandates such as Vermont’s landmark law that took effect on July 1. “While there is broad consensus that foods from genetically engineered crops are safe, we appreciate the bipartisan effort to address consumers’ interest in knowing more about their food, including whether it includes ingredients from genetically engineered crops,” White House spokeswoman Katie Hill told Bloomberg in an e-mail.

“We look forward to tracking its progress in the House and anticipate the president would sign it in its current form.” The House of Representatives is voting today on legislation from the Senate, which voted 63 to 30 in favor of the bill on July 7, less than a week after Vermont enacted its GMO label law. The bipartisan “compromise” bill was conceived after years of negotiations by Democrat Sen. Debbie Stabenow and Republican Sen. Pat Roberts and is supported by the very industry that produces and profits from such products, including the powerful Grocery Manufactures Association and world’s largest seed producer and pesticide giant Monsanto. UPDATE: The U.S. House of Representatives passed the bill by a 306-117 vote Thursday. The bill now heads to President Obama’s desk.

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Can’t stop the brilliance of the human brain.

Biodiversity Is Below Safe Levels Across More Than Half Of World’s Land (G.)

The variety of animals and plants has fallen to dangerous levels across more than half of the world’s landmass due to humanity destroying habitats to use as farmland, scientists have estimated. The unchecked loss of biodiversity is akin to playing ecological roulette and will set back efforts to bring people out of poverty in the long term, they warned. Analysing 1.8m records from 39,123 sites across Earth, the international study found that a measure of the intactness of biodiversity at sites has fallen below a safety limit across 58.1% of the world’s land. Under a proposal put forward by experts last year, a site losing more than 10% of its biodiversity is considered to have passed a precautionary threshold, beyond which the ecosystem’s ability to function could be compromised.

“It’s worrying that land use has already pushed biodiversity below the level proposed as a safe limit,” said Prof Andy Purvis, of the Natural History Museum, and one of the authors. “Until and unless we can bring biodiversity back up, we’re playing ecological roulette.” Researchers said the study, published in the journal Science on Thursday, was the most comprehensive examination yet of biodiversity loss. The decline is not just bad news for the species but in the long term could spell problems for human health and economies. “If ecosystem functions don’t continue, then yes it affects the ability of agriculture to sustain human populations and we simply don’t know at which point that will be reached,” said Dr Tim Newbold, lead author of the work and a research associate at University College London. “We are entering the zone of uncertainty.”

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There’s a man and then there’s ‘a mensch’.

Gleaning: Harvesting Spain’s Unwanted Crops To Feed The Hungry (G.)

Under a blazing Catalan sun, Abdelouahid wipes the sweat from his brow in a cabbage patch full with clouds of white butterflies. “It’s really not warm today,” he says. “It’s only hot if you stop working.” Around him, unemployed workers and environmentalists squat in green bibs, black gloves and hats, plucking cabbages that would otherwise be threshed, to distribute at food banks around Barcelona. A 39-year-old Moroccan emigré with two small children, Abdelouahid began “gleaning” – harvesting farmers’ unwanted crops – with the Espigoladors (gleaners) after losing his job in the construction industry four years ago. It is Ramadan and he is fasting but still smiling as he cuts at the green jewels.

“I don’t like to spend my days at home, sending CVs to employers, waiting for their rejection letters, or going around the restaurants trying to find food,” he says. “I prefer to do something positive. A lot of people need this food. It is better to collect it than to leave it.” Europe wastes some 88m tonnes of food each year – around 173 kg per person – with costs estimated at €143bn (£113bn). Advocates of the new gleaning movements say that its collection could reduce pressure on land use, improve diets, feed the hungry and provide work for the socially excluded.

For now, most of its recovered foods go to food banks, but the Espigoladors social enterprise has launched an “Es Imperfect” (is imperfect) brand of jams, soups and sauces made from recovered produce. The line is growing so fast that the day after the cabbage picking, the project’s founder, Mireia Barba, was called to a meeting of Cotec, King Felip VI’s national development foundation. Another fruit of the gleaning project has been an “I’m imperfect too” advertising campaign which challenges conventional ideas of food and beauty, by using photos of ordinary people holding painted fruit. The idea was to change misconceptions about browned, soft or unusually shaped fruit and veg being any less tasty.

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