Aug 192017
 
 August 19, 2017  Posted by at 10:00 am Finance Tagged with: , , , , , , , , ,  5 Responses »
Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedInShare on TumblrFlattr the authorDigg thisShare on RedditPin on PinterestShare on StumbleUponEmail this to someone


Fred Stein Man in pushcart, New York 1944

 

We’re Racing Towards Another Private Debt Crisis (Graeber)
China Moves To Curb Overseas Acquisitions As Firms’ Debt Levels Rise (G.)
Wells Fargo Troubles Shift From Phony Bank Accounts To Real Ones (R.)
Total Eclipse (Jim Kunstler)
A House Divided Against Itself Cannot Stand (Paul Craig Roberts)
The Truth Will Not Be Googled (Connelly)
Greek Pensioners Set For Another Blow (K.)
The Super Gangs Behind Africa’s Poaching Crisis (G.)
Want To Fight Climate Change? Don’t Invest In Tesla (MW)

 

 

David Graeber on the all too obvious. So yeah, let’s have that inquiry.

We’re Racing Towards Another Private Debt Crisis (Graeber)

This is a call for a public inquiry on the current situation regarding private debt. For almost a decade now, since 2007, we have been living a lie. And that lie is preparing to wreak havoc on our economy. If we do not create some kind of impartial forum to discuss what is actually happening, the results might well prove disastrous. The lie I am referring to is the idea that the financial crisis of 2008, and subsequent “Great Recession,” were caused by profligate government spending and subsequent public debt. The exact opposite is in fact the case. The crash happened because of dangerously high levels of private debt (a mortgage crisis specifically). And – this is the part we are not supposed to talk about—there is an inverse relation between public and private debt levels.

If the public sector reduces its debt, overall private sector debt goes up. That’s what happened in the years leading up to 2008. Now austerity is making it happening again. And if we don’t do something about it, the results will, inevitably, be another catastrophe. These graphs show the relationship between public and private debt. They are both forecasts from the Office for Budget Responsibility, produced in 2015 and 2017. This is what the OBR was projecting what would happen around now back in 2015:

This year the OBR completely changed its forecast. This is how it now projects things are likely to turn out:

First, notice how both diagrams are symmetrical. What happens on top (that part of the economy that is in surplus) precisely mirrors what happens in the bottom (that part of the economy that is in deficit). This is called an “accounting identity.” As in any ledger sheet, credits and debits have to match. The easiest way to understand this is to imagine there are just two actors, government, and the private sector. If the government borrows £100, and spends it, then the government has a debt of £100. But by spending, it has injected £100 more pounds into the private economy. In other words, -£100 for the government, +£100 for everyone else in the diagram. Similarly, if the government taxes someone for £100 , then the government is £100 richer but there’s £100 subtracted from the private economy (+£100 for government, -£100 for everybody else on the diagram).

So what implications does this kind of bookkeeping have for the overall economy? It means that if the government goes into surplus, then everyone else has to go into debt. We tend to think of money as if it is a bunch of poker chips already lying around, but that’s not how it really works. Money has to be created. And money is created when banks make loans. Either the government borrows money and injects it into the economy, or private citizens borrow money from banks. Those banks don’t take the money from people’s savings or anywhere else, they just make it up. Anyone can write an IOU. But only banks are allowed to issue IOUs that the government will accept in payment for taxes. (In other words, there actually is a magic money tree. But only banks are allowed to use it.)

There are other factors. The UK has a huge trade deficit (blue), and that means the government (yellow) also has to run a deficit (print money, or more accurately, get banks to do it) to inject into the economy to pay for all those Chinese trainers, American iPads, and German cars. The total amount of money can also fluctuate. But the real point here is, the less the government is in debt, the more everyone else must be. Austerity measures will necessarily lead to rising levels of private debt. And this is exactly what has happened. Now, if this seems to have very little to do with the way politicians talk about such matters, there’s a simple reason: most politicians don’t actually know any of this. A recent survey showed 90% of MPs don’t even understand where money comes from (they think it’s issued by the Royal Mint). In reality, debt is money. If no one owed anyone anything at all there would be no money and the economy would grind to a halt.

Read more …

It’s getting serious.

China Moves To Curb Overseas Acquisitions As Firms’ Debt Levels Rise (G.)

The Chinese government has served notice on the country’s foreign investment spree in football clubs, skyscrapers and Hollywood as it moves to curb rising levels of debt among domestic companies. The announcement of restrictions in a range of sectors follows a buying spree around the globe during which Chinese firms and business tycoons have taken control of assets including Legendary Entertainment, the US film producer behind Jurassic World and Warcraft, buildings such as the Cheesegrater in London, and English football clubs including Southampton and Aston Villa. The curbs were announced in a document released on Friday by the state council, China’s cabinet, in the latest move to halt a string of foreign acquisitions. This week the IMF described China’s credit-fuelled economic strategy as dangerous, in a strongly worded statement warning that the country’s approach risks financial turmoil.

Raising concerns that some of the companies involved may be taking on too much debt, the council said: “There are great opportunities for our nation’s companies to embark on foreign investment, but they also face numerous risks and challenges.” It added that through the new guidance, the government hopes to promote the “rational, orderly and healthy development of foreign investment while effectively guarding against risks”. The document limits overseas investments in areas such as hotels, cinemas, the entertainment industry, real estate and sports clubs. It also bans outright investments in enterprises related to gambling and the sex industry. The Chinese government had already flagged hotels as an area of concern, having reportedly asked the insurance group Anbang to sell the Waldorf Astoria hotel in New York.

One of China’s biggest conglomerates, Wanda Group, also bowed to pressure from the government when it abandoned the $1bn (£780m) purchase of the entertainment company Dick Clark Productions earlier this year. In 2016 Wanda bought Legendary Entertainment for $3.5bn, having become the world’s biggest cinema operator in 2012 with its purchase of a majority stake in US chain AMC for $2.6bn. At the same time, the document encourages companies to plough money into projects related to the “Belt and Road” project, President Xi Jinping’s signature foreign policy initiative that seeks to link China with other parts of Asia and eastern Europe through multibillion-dollar investments in ports, highways, railways, power plants and other infrastructure.

Read more …

Why is Wells Fargo a going concern? Close it.

Wells Fargo Troubles Shift From Phony Bank Accounts To Real Ones (R.)

After paying customers millions of dollars for opening phony accounts they did not want, Wells Fargo has said it is now grappling with the possibility it harmed customers by closing real accounts they needed, leaving them without access to funds. Wells, the third-largest U.S. bank, disclosed in a regulatory filing on Aug. 4 that the Consumer Financial Protection Bureau (CFPB) is looking into the matter, one of many regulatory probes the bank faces over its treatment of depositors and borrowers. A Reuters review of the regulator’s complaints database found several instances of customers reporting financial hardship in recent years after Wells Fargo unexpectedly froze or closed their accounts. Some of the complaints described fraudulent deposits of unknown origin.

Others said they were victims of identity theft and Wells Fargo closed their accounts and refused to reopen them or open new ones. One customer said the bank closed an account after a hacker changed personal information, and then Wells Fargo improperly sent funds to the wrong address. The complaints had consistent themes of confusion about why accounts were frozen or closed, and reflected desperation over being unable to access money, as well as frustration over not getting help from Wells Fargo’s customer service. “I moved money from my mother’s savings account into her checking account the day before she passed away,” one Wells Fargo customer wrote. “This checking account has been ‘locked’ by the fraud department for almost 3 months … Now her debts are delinquent and mortgage about to go into foreclosure.”

Read more …

Rename the capital!

Total Eclipse (Jim Kunstler)

I’d like to hear to hear an argument as to why the Washington Monument should remain dedicated to that vicious slave-driver and rebellious soldier, and indeed the name of the city that is the federal seat of government. Or the District of Columbia (after Columbus, who initiated the genocide of Native Americans). Or America, cribbed out of Amerigo Vespucci, the wicked Florentine cartographer who ascertained that the place called Brazil today was not the east coast of Asia but actually a New World — and so all our troubles began![..] Just as empires tend to build their most grandiose monuments prior to collapse, our tottering empire is concocting the most monumentally ludicrous delusions before it slides down the laundry chute of history.

It’s as if the Marx Brothers colluded with Alfred Hitchcock to dream up a melodramatic climax to the American Century that would be the most ridiculous and embarrassing to our posterity. In the meantime, many citizens await Monday’s spectacle of a total solar eclipse in parts of the country. They apparently don’t realize that another eclipse has been underway for months: the total eclipse of reality across the entire landscape of the USA. Now that has been an event to behold, not just some twenty-minute freak of astronomy. What’s being blacked out is the perilously fragile condition of the financial system — a great groaning Rube Goldberg contraption of accounting fraud, grift, statistical deceit, and racketeering that pretends to support the day-to-day activities of our national life.

For months, the recognition of this oncoming financial monster has been blocked by the hallucination of gremlins from the Kremlin infiltrating the recent presidential election. But just as that mirage was dissolving, along comes the treacherous invasion of the Confederate statues. It begins to look like the final piece of the puzzle in the Deep State’s quest to eject Donald Trump from the oval office. His response to the deadly statue situation (“…why not Washington and Jefferson…?”) was deemed so obtuse and unfeeling that even the rodents of his own nominal Republican Party want to jump his ship of state.

So, the set-up could not be more perfect! The country will now get down to the business of a months-long 25th Amendment circle-jerk at the very moment that the financial system flies apart. The damage from the financial clusterfuck will be much more real, and much worse, than anything that might be spun out of the anti-statue crusade hogging the headlines today. It will be interesting to see whether the old legacy media even reports on it as it happens, or whether they will cook up new and more bizarre entertainments to distract the public from what might be the ultimate swindling of a lifetime.

Read more …

The echo chamber causes hearing damage.

A House Divided Against Itself Cannot Stand (Paul Craig Roberts)

The liberal/progressive/left are enjoying their drunkfest of denunciation. I can’t say I have ever witnessed anything like it. These are the people who sat on their hands for 16 years while Washington destroyed in whole or part seven countries. Not being satisfied with this level of warmongering and crimes against humanity, Washington orchestrated a conflict situation with Russia. Americans elected a president who said he would defuse this dangerous conflict, and the liberal/progressive/left turned on him. In contrast, one person is killed after the hated Charlottesville protest event was over, and there is endless absurd outrage against the president of the US. Three New York Times presstitutes yesterday blamed the crisis on Trump, declaring him “increasingly isolated in a racial crisis of his own making.”

Apparently, Trump is responsible for the crisis because he blamed both protest groups for the violence. But isn’t that what happened? Wasn’t there violence on both sides? That was the impression I got from the news reporting. I’m not surprised that Trump got the same impression. Indeed, many readers have sent emails that they received the same impression of mutual violence. So Trump is being damned for stating the truth. Let’s assume that the impression Trump and many others got from the news is wrong. That would make Trump guilty of arriving at a mistaken conclusion. Yet, he is accused of instigating and supporting Nazi violence. How is it possible to transform a mistake into evil intent? A mistaken impression gained from news reporting does not constitute a “defense of white nationalist protesters.”

An assertion by the New York Times cannot turn the absence of intent into intent. What the Establishment is trying to do is to push Trump into the arms of white supremacists, which is where they want him. Clearly, there is no basis for this charge. It is a lie, an orchestration that is being used to delegitimize President Trump and those who elected him. The question is: who is behind this orchestration? The orchestration is causing people to run away from Trump or is being used as an excuse by them to further the plot to remove him from office. Trump’s Strategic and Policy Forum headed by Stephen A. Schwarzman ran away, just as members of the Carter Center’s board deserted President Jimmy Carter when he criticized Israel for its apartheid policy toward the Palestinians. The New York Times says that the armed services chiefs are running away. And the entire Republican Party.

The hypocrisy is stunning. For 16 years the armed services chiefs, the New York Times and the rest of the presstitute media, both political parties and the liberal/progressive/left have participated actively or passively in massive crimes against humanity. There are millions of dead, maimed, and displaced people. Yet one death in Charlottesville has produced a greater outpouring of protest. I don’t believe it is sincere. I don’t believe that people who are insensitive to the deaths of millions at the hands of their government can be so upset over the death of one person. Assume that Trump is responsible for the death of the woman. How much blood is it compared to the blood on the hands of Bill Clinton, George W. Bush, and Obama?

Read more …

Too much monopoly, too much power.

The Truth Will Not Be Googled (Connelly)

While web-hosting services have been criticised for cancelling the registration of neo-Nazi website, Daily Stormer, progressive left-leaning sites are losing Google ranking and traffic because of a deliberate move to censor “fake” news by the internet search giant. New data released by World Socialist Websites (WSWS) revealed that sites such as Wikileaks, The Intercept, Electronic Frontiers Foundation, the American Civil Liberties Organisation, CounterPunch and many other organisations with the audacity to provide context about the activities of federal governments not reported in mainstream publications have experienced a significant drop in traffic after Google altered its algorithm. (WSWS is an online news and information service founded by the International Committee of the Fourth International, the leadership of the world socialist movement).

Earlier this week, internet hosting provider, GoDaddy, announced it had cancelled US neo-Nazi website, Daily Stormer, for posting an attack on Heather Heyer, the protester who was murdered at the Klan rally in Charlottesville last week. Google and CloudFlare likewise cancelled its registration after the site tried to move its hosting over to their respective services. But while these hosting services are being congratulated by some – and condemned by others on free-speech grounds – for ensuring that those looking to commit violence have to work slightly harder to get access to their like-minded Nazi communities, those who own the means of transmission – namely Google, Facebook and Twitter – are still preventing the rest of us from accessing information that allows people to make sense of the world around us.

Earlier this month, Google altered its algorithm – allegedly in an attempt to address the ‘fake news’ problem – and in doing so, a broad array of anti-establishment news organisations, whistleblower, civil-rights and anti-war websites were censored from its search listings. But most people were too distracted by the opinions of some low-level engineer on Google’s diversity hiring policies and its intolerance of conservative views in the workplace to take notice. The data released by WSWS shows that since Google altered its algorithm, Wikileaks experienced a 30% decline in traffic from Google searches. Democracy Now fell by 36%. Truthout dropped by 25%. Its own traffic dropped by 67% percent over the same period. Alternet saw a 63% decline in traffic. Media Matters saw a 36% drop in traffic. Counterpunch.org fell by 21%. The Intercept fell by 19%.

Read more …

Ongoing.

Greek Pensioners Set For Another Blow (K.)

Pension applications submitted after May 13, 2016 – after the so-called Katrougalos law was legislated – reveal significant cuts in pension payments. According to the relevant data, five categories of pensioners will suffer cuts due to the new way pensions are calculated. Overall, experts estimate that by the year 2020 some 200,000 retirees will receive pensions that do not correspond to the amount of money they contributed to the funds during their working lives. In some cases, pensioners will receive 30% less than what they would have received had the Katrougalos law not come into effect. The overall reduction is estimated at 12 to 16%. The hardest hit will be civil servants, especially those who have worked for more than 30 years and belong to the categories of University and Technological Education. Other categories of pensioners that will be negatively impacted are those who made above-average contributions to the IKA social security foundation for more than 30 years.

Meanwhile, those who made medium or large contributions to the TEVE fund for the self-employed will also lose out. Others who can expect to be affected by pension cuts are people who contributed for 30 years to the retailer’ insurance fund (TAE) or the professional drivers’ pension fund (TSA). The new pension system, however, will favor retirees with monthly gross earnings below €700 and less than 30 years of insurance – in line with the declaration made by former labor minister Giorgos Katrougalos that the new system would be classless and favor people with low incomes. This category includes people insured for 20 to 30 years with IKA, who will retire with a gross remuneration of around €1,000, or the former social security fund for professional drivers (TSA). Those insured at several public enterprises (DEKO) and bank funds will also be entitled to an increase in their pension because they pay very high contributions.

Read more …

Man is losing the world to his own greed. Selling mother earth.

The Super Gangs Behind Africa’s Poaching Crisis (G.)

“It’s not hundreds of groups involved in ivory trafficking – there are just a handful of networks operating across Africa,” says Paula Kahumbu, a conservationist and elephant expert who runs Wildlife Direct, a Kenyan organisation working to stop the ivory trade and which deploys teams to closely observe trials such as Ali’s. lose scrutiny of cases – including making copies of court documents and video recording proceedings – keeps courts and judges honest and prevents the disappearance of files that so often scuppers trials. Wildlife Direct’s pressure was instrumental in ensuring Ali’s case went the distance. At the end, says Kahumbu, there was “a phenomenal sense of achievement”. “It was a huge surprise,” says Ofir Drori, an Israeli wildlife activist and co-founder of the Eagle Network, a group responsible for the prosecution of hundreds of traffickers, big and small, over the years, and who was involved in tracking Ali.

“Every Kenyan will tell you: what’s supposed to happen is that if you belong to a strong syndicate, you’re out.” It was the syndicate aspect that interested Gretchen Peters. A former foreign correspondent in Afghanistan and Pakistan, Peters had become fascinated by the links between drugs and terrorism that she saw in the Taliban’s heroin operation, and by the hidden connections between other forms of criminality. Ditching journalism, she decided to tackle wildlife crime. Peters set up the Satao Project – named after one of Kenya’s magisterial “tusker” bull elephants, killed by a poacher’s poisoned arrow in 2014 – to investigate criminal gangs in 2015 but quickly ran into the underlying problem: corruption. “If there’s a network that is moving illegal goods from one country to another, there are inevitably government officials involved, protecting them or looking the other way,” she says. “It is impossible for that not to be happening.”

Hired by the US department of state, Peters began by studying ivory supply chains in Tanzania and Kenya, but her investigations quickly enveloped Uganda too and spread into other forms of trafficking. There is in East Africa, she says, “a regional ecosystem moving ivory, drugs and guns … a matrix of different organisations that collaborate to move illegal goods along the Swahili coast.” The overlap between drugs and ivory smuggling came as no surprise to her. “I’m not aware of any syndicate trafficking ivory transnationally that is only moving ivory,” she says. No illicit commodity is as profitable as drugs, so: “When you get up to the traffickers they’re almost inevitably moving narcotics too.”

Read more …

Thermodynamics 101.

Want To Fight Climate Change? Don’t Invest In Tesla (MW)

Morgan Stanley identified 39 stocks that generate at least half their revenue “from the provision of solutions to climate change,” something it said was a central component of investing to make a difference, as opposed to just a making a buck. “In our view, impact investing needs to begin with companies whose products and services have a notable positive environmental or social impact,” wrote Jessica Alsford, an equity strategist at the investment bank. Not surprisingly, alternative-energy companies ranked the highest in terms of their positive impact, and the “top five climate-change impact stocks” were all manufacturers of solar and wind energy: Canadian Solar, China High Speed Transmission, GCL-Poly, Daqo New Energy and Jinko Solar. Not among the top companies? Electric-car makers, including Tesla. Elon Musk’s company has been an investor favorite for years, even eclipsing Ford and General Motors in market cap.

Tesla shares are up nearly 66% so far this year, but the good it may have been doing for portfolios may not translate to it doing good for the planet. Morgan Stanley said this was one of the “biggest surprises” of its study. The bank grouped the “climate-change impact stocks” into four sector categories: utilities, renewable manufacturers, green infrastructure companies and transportation stocks. It then analyzed them on a number of metrics, including “the CO2 [carbon dioxide] savings achieved from the products and services sold by the companies,” as well as secondary and tertiary factors centered around the environmental impact of the making of these products. This is where Tesla, along with China’s Guoxuan High-Tech, fall short.

“Whilst the electric vehicles and lithium batteries manufactured by these two companies do indeed help to reduce direct CO2 emissions from vehicles, electricity is needed to power them,” Morgan Stanley wrote. “And with their primary markets still largely weighted towards fossil-fuel power (72% in the U.S. and 75% in China) the CO2 emissions from this electricity generation are still material.” In other words, “the carbon emissions generated by the electricity required for electric vehicles are greater than those saved by cutting out direct vehicle emissions.” Morgan Stanley calculated that an investment of $1 million in Canadian Solar results in nearly 15,300 metric tons of carbon dioxide being saved every year. For Tesla, such an investment adds nearly one-third of a metric ton of CO2.

Read more …

Aug 092017
 
 August 9, 2017  Posted by at 7:56 am Finance Tagged with: , , , , , , , , , ,  2 Responses »
Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedInShare on TumblrFlattr the authorDigg thisShare on RedditPin on PinterestShare on StumbleUponEmail this to someone


Fred Stein Police car, New York 1942

 

The Only Thing Keeping Italy’s Debt Alive is the ECB (DQ)
Federal Bank Regulator Drops a Bombshell as Corporate Media Snoozes (Martens)
Officials Spend Big In The Run Up To China’s Communist Party Congress (BBG)
China Is Taking on the ‘Original Sin’ of Its Mountain of Debt (BBG)
Jeff Gundlach Predicts He Will Make 400% On Bet Against Stock Market (CNBC)
Our Broken Economy, in One Simple Chart (NYT)
The Economic Crash, Ten Years On (Pettifor)
Opioid Deaths In US Break New Record: 100 People A Day (RT)
New Hampshire Sues Purdue Pharma Over Opioid Marketing Practices (R.)
Americans Are Dying Younger, Saving Corporations Billions (BBG)
Unlearning The Myth Of American Innocence (G.)
EU Nations Start Process Of Returning Refugees, Migrants To Greece (AP)

 

 

As Trump sinks into opioids and nuke threats (talking to Kim in his own language, and no, Trump does not like the Korea thing), and Google sinks into its self-dug moral morass, let’s not forget this one thing: we would not have what poses as an economy if not for central banks buying anything not bolted down. And they cannot keep doing that. And what then?

“At current government debt net issuance rates and announced QE levels, the ECB will have been responsible for financing 100% of Italy’s deficits from 2014 to 2019”

The Only Thing Keeping Italy’s Debt Alive is the ECB (DQ)

New statistical data from the investment bank Jefferies LLC has revealed a startling new trend that could have major implications for Europe’s economic future: Italian banks have begun dumping unprecedented volumes of Italian sovereign debt. Holdings of government debt by Italian financial institutions slumped by a record €20 billion in June – almost 10% of the total – after €9.4 billion of sales in May. As the FT reports, the selling by Italian banks is the most emphatic example yet of a broader trend: banks sold €46 billion of government paper in June across Europe, taking the total reduction since the start of this year to €257 billion. The banks’ mass sell-off is probably being driven by two main factors: first, as an attempt to preempt a pending Basel III reform package that could eliminate the equity capital privilege for EU government bonds and second, to position themselves for an anticipated autumn announcement from the ECB that it will begin tightening monetary policy.

“Maybe we are seeing an indication of Italian banks catching up with what their counterparts in Spain have known for a long time – that sovereign debt is not the place to be in a world of rising interest rates, said Jefferies’ senior European economist, Marchel Alexandrovich. But then: who’s buying it? The answer, in the case of Italy, is the ECB and its Italian branch office, the Bank of Italy, where Italian bank deposits rose by €22 billion in June and €50 billion since the start of 2017. The ECB “overbought” Italian government debt in July with purchases of €9.6 billion — its highest monthly quota since quantitative easing began. As Italian banks offload their holdings, the ECB, with Italian native and former Bank of Italy governor Mario Draghi at the helm, is picking up the slack.

In doing so, the central bank surpassed its own capital key rules by which member state debt is bought in proportion to the size of each country’s economy. By contrast, the ECB’s German Bund purchases slipped below its capital key rules for the fourth month in a row, which further depressed the spread between Italian and German 10-year debt to 152 basis points, its lowest level of the year. This spread is artificial, derived from the ECB’s binge buying of European sovereign bonds, particularly those belonging to countries on the periphery. A report published in May by Astellon Capital revealed that since 2008, 88% of Italy’s government debt net issuance was acquired by the ECB and Italian Banks. At current government debt net issuance rates and announced QE levels, the ECB will have been responsible for financing 100% of Italy’s deficits from 2014 to 2019. That was before taking into account the current sell-down of Italian bonds by Italian banks.

Read more …

As central banks buy 100% of a country’s new debt, US banks pay out more than 100% of earnings, and “share buybacks represent 72% of the total payouts for the 10 largest bank holding companies”. What better way to characterize a non-functioning economy?

Federal Bank Regulator Drops a Bombshell as Corporate Media Snoozes (Martens)

Last Monday, Thomas Hoenig, the Vice Chairman of the Federal Deposit Insurance Corporation (FDIC), sent a stunning letter to the Chair and Ranking Member of the U.S. Senate Banking Committee. The letter contained information that should have become front page news at every business wire service and the leading business newspapers. But with the exception of Reuters, major corporate media like the Wall Street Journal, Bloomberg News, the Business section of the New York Times and Washington Post ignored the bombshell story, according to our search at Google News. What the fearless Hoenig told the Senate Banking Committee was effectively this: the biggest Wall Street banks have been lying to the American people that overly stringent capital rules by their regulators are constraining their ability to lend to consumers and businesses.

What’s really behind their inability to make more loans is the documented fact that the 10 largest banks in the country “will distribute, in aggregate, 99% of their net income on an annualized basis,” by paying out dividends to shareholders and buying back excessive amounts of their own stock. Hoenig writes that the banks are starving the U.S. economy through these practices and if “the 10 largest U.S. Bank Holding Companies were to retain a greater share of their earnings earmarked for dividends and share buybacks in 2017 they would be able to increase loans by more than $1 trillion, which is greater than 5% of annual U.S. GDP.” Backing up his assertions, Hoenig provided a chart showing payouts on a bank-by-bank basis. Highlighted in yellow on Hoenig’s chart is the fact that four of the big Wall Street banks are set to pay out more than 100% of earnings: Citigroup 127%; Bank of New York Mellon 108%; JPMorgan Chase 107% and Morgan Stanley 103%.

What’s motivating this payout binge at the banks? Hoenig doesn’t offer an opinion in his letter but he does state that share buybacks represent 72% of the total payouts for the 10 largest bank holding companies. What share buybacks do for top management at these banks is to make the share price of their bank’s stock look far better than it otherwise would while making themselves rich on their stock options. If just the share buybacks (forgetting about the dividend payouts) were retained by the banks instead of being paid out, the banks could “increase small business loans by three quarters of a trillion dollars or mortgage loans by almost one and a half trillion dollars.” Hoenig also urged in his letter that there be a “substantive public debate” on what the biggest banks are doing with their capital rather than allowing this “critical” issue to be “discussed in sound bites.” Most corporate media responded to this appeal by ignoring Hoenig’s letter altogether.

Read more …

They all want to show nice numbers at the Congress. Shadow banks lend them the money to do it. In exchange for power.

Officials Spend Big In The Run Up To China’s Communist Party Congress (BBG)

In the run up to China’s blockbuster Communist Party congress later this year, officials have spent big to ensure the economy is humming along nicely when the conclave begins. It’s after that that things get interesting. With the central government’s deficit limit capped at 3%, officials usually turn on the taps around November and December, once they know they’ll have raised enough to fund a late-year splurge. Not this time. A push to smooth out spending means the fiscal pump is unlikely to go into high gear at year end, which is when economists see growth moderating toward the government’s baseline of 6.5%. While policy makers have quasi-fiscal options up their sleeve – like accelerating infrastructure project approvals or ratcheting up lending via policy banks – efforts to curb profligate local governments and limit debt may restrain those channels too.

“It’s China’s political-business cycle: this year is very important for the political transition, so they front-loaded fiscal spending to ensure a stable economic backdrop,” Larry Hu, head of China economics at Macquarie in Hong Kong. “China’s economy has a fiscal system and a shadow fiscal system. If growth really slows to threaten the target, then we’re going to see spending.” The question is, how much. China ran a fiscal deficit of 918 billion yuan ($137 billion) in the first half, or more than 2% of economic output during the period, Bloomberg calculations show. That’s a record both by value and share. The spending fueled better-than-expected economic growth of 6.9% in the first six months, and infrastructure investment surging at over 20%.

China International Capital Corp. analysts led by Liu Liu say the budgeted deficit will be 1.46 trillion yuan in the second half, versus 2.46 trillion yuan in the same period last year. The world’s second-largest economy still depends on government spending at all levels, as construction of things like roads and railways can be a key buffer when private investors start pulling back or, as now, political sensitivities make robust growth especially important. But those priorities are now clashing with the need to clamp down on indebtedness at lower levels of government, and the desire to avoid a year-end spending glut. In the past, officials have been able to use off-balance sheet spending, such as policy bank loans and funds raised through local government financing vehicles, to keep their deep pockets open.

Read more …

It’s starting to feel increasingly like a big fat Ponzi.

China Is Taking on the ‘Original Sin’ of Its Mountain of Debt (BBG)

China’s much-vaunted campaign to tackle its leverage problem has captured headlines this year. But to understand why they’re taking on the challenge – and the threat it could pose to the world’s second-largest economy – you need to dig into the mountain. Characterized in state media as the “original sin” of China’s financial system, leverage has swelled over the past decade – partly because policy makers were trying to cushion a slowdown in growth from the old normal of 10% plus. What’s fueled the leverage has been a rapid expansion in household and corporate wealth looking for higher returns in a system where bank interest rates have been held down. The unprecedented stimulus unleashed since 2008 effectively brought to life the “monster” China’s leadership is now trying to tackle, says Andrew Collier at Orient Capital Research in Hong Kong and author of “Shadow Banking and the Rise of Capitalism in China.”

Implicit backing from the central government meant borrowers had free license to take on debt. “You basically have anybody selling anything they want as they think they can’t lose,” Collier said. Deleveraging – championed by President Xi Jinping and the Communist Party Politburo in April – hasn’t truly begun, as “they’re trying to forestall the pain as long as possible,” he said. The equivalent of trillions of dollars are now held in all manner of assets in China, from high-yielding wealth management products to so-called entrusted investments. Taking the heftiest piece of the leverage mountain first, wealth management products had a precipitous rise over the past several years.

A way for borrowers who have trouble getting traditional bank loans to win funding, WMPs have grown in popularity as they typically offer savers much higher yields than banks offer on deposits. WMPs are also a hit because they give lenders a way to keep loans off of their balance sheets, and to skirt regulatory requirements when channeling funds to borrowers, according to Raymond Yeung at Australia & New Zealand Banking in Hong Kong. The regulatory crackdown this year — mostly in the form of more stringent guidelines on use of financial products — has seen the amount of WMPs outstanding taper off from a peak in April, while yields on them have surged as providers competed for funds. In July, the bank watchdog is said to have told some lenders to cut the rates they offered on the products.

Read more …

“It’s not really a bear call on the S&P 500. It’s more of a bull call on volatility..”

Jeff Gundlach Predicts He Will Make 400% On Bet Against Stock Market (CNBC)

DoubleLine CEO Jeffery Gundlach expects his bet for a decline in the S&P 500 will return 400%. “I’ll be disappointed if we don’t make 400% on the puts, and we don’t even need a big market decline for that to happen,” Gundlach said Tuesday on CNBC’s “Halftime Report.” He said that in his firm’s analysis, volatility is so low that it can make a big return by buying put options — bets for a decline — on the S&P 500 for December. “It’s not really a bear call on the S&P 500. It’s more of a bull call on volatility,” he said. In its slow grind higher, the S&P 500 has only closed more than 1% higher or lower on four trading days this year.

As a result of the muted market performance, the CBOE Volatility Index (.VIX), widely considered the best gauge of fear in the market, has persistently held near historical lows around 10 or below this year and hit an all-time low of 8.84 on July 26. The VIX was near 10.1 midday Tuesday as the S&P 500 edged up to a record high. “I think going long the VIX is really sort of free money at a 9.80 VIX level today,” Gundlach said. “I believe the market will drop 3% at a minimum sometime between now and December. And when it does I don’t think the VIX will be at 10.” Gundlach reiterated his expectations for a snap higher in the VIX once volatility picks up, since hedge funds have piled heavily into bets that volatility will remain low.

Read more …

OK, got it. Now what?

Our Broken Economy, in One Simple Chart (NYT)

Many Americans can’t remember anything other than an economy with skyrocketing inequality, in which living standards for most Americans are stagnating and the rich are pulling away. It feels inevitable. But it’s not. A well-known team of inequality researchers — Thomas Piketty, Emmanuel Saez and Gabriel Zucman — has been getting some attention recently for a chart it produced. It shows the change in income between 1980 and 2014 for every point on the distribution, and it neatly summarizes the recent soaring of inequality.= The line on the chart (which we have recreated as the red line above) resembles a classic hockey-stick graph. It’s mostly flat and close to zero, before spiking upward at the end. That spike shows that the very affluent, and only the very affluent, have received significant raises in recent decades.

This line captures the rise in inequality better than any other chart or simple summary that I’ve seen. So I went to the economists with a request: Could they produce versions of their chart for years before 1980, to capture the income trends following World War II. You are looking at the result here. The message is straightforward. Only a few decades ago, the middle class and the poor weren’t just receiving healthy raises. Their take-home pay was rising even more rapidly, in%age terms, than the pay of the rich. The post-inflation, after-tax raises that were typical for the middle class during the pre-1980 period — about 2% a year — translate into rapid gains in living standards. At that rate, a household’s income almost doubles every 34 years. (The economists used 34-year windows to stay consistent with their original chart, which covered 1980 through 2014.)

In recent decades, by contrast, only very affluent families — those in roughly the top 1/40th of the income distribution — have received such large raises. Yes, the upper-middle class has done better than the middle class or the poor, but the huge gaps are between the super-rich and everyone else. The basic problem is that most families used to receive something approaching their fair share of economic growth, and they don’t anymore.

Read more …

Nice try, Ann. But people have no political power left. Just look at the mess that all parties are in, in both the UK and US. So are you going to break the power of finance?

The Economic Crash, Ten Years On (Pettifor)

Challenging and dismantling gargantuan financial markets that operate beyond democratic regulatory oversight will not be easy, but it is long overdue. Some believe that the management of financial markets by governments will never be restored. I do not agree. Because of global imbalances, economic and financial tensions could lead to the onset of wars. These could dismantle global financial markets just as the two world wars did. There is a more peaceful way of restoring finance to the role of servant to, and not master of, economies and regions. For that to happen the public must realise that citizens can exercise economic power over global financial markets. The global ‘House of Finance’ is almost entirely dependent, and indeed largely parasitic, on the public sector. In other words, private finance is largely dependent for its capital gains on taxpayers like you and me.

Commercial banks do not need savings or tax revenues to lend. All they need is to provide finance to viable projects that will generate employment and income in the future – which will repay the loans. The most viable projects today are those needed to protect Britain from climate change. Any government with political spine would have insisted that the banks lend, at low affordable rates, to transformative projects in the real, productive economy where jobs are created, income generated, and society protected. And if shareholders and executives object to such conditions, then politicians should withdraw access to the Bank of England’s QE and low interest rates, and to government guarantees for deposits.

Quantitative easing – the creation of liquidity currently directed only at the financial sector – is only possible because central banks, if not directly publicly owned, are dependent for their legitimacy and money-creation powers, on taxpayers. The Federal Reserve is ultimately backed by US taxpayers. The Bank of England is a nationalised bank, whose authority is derived from Britain’s 31 million-plus taxpayers.

Read more …

” ..in 2015, the amount of opioids prescribed in the US was enough for every American to be medicated around the clock for three weeks.”

Opioid Deaths In US Break New Record: 100 People A Day (RT)

The first nine months of 2016 saw a sharp increase in opioid drug overdoses in the US compared to the prior year, according to new data by the National Center for Health Statistics (NCHS). The government is struggling to respond to the crisis. Deaths due to drug overdose peaked in the third quarter of last year – 19.7 cases for every 100,000 people, compared to 16.7 in the same period the year before, according to newly released numbers from the NCHS, which is part of the US Centers for Disease Control and Prevention (CDC). The Centers attributed 33,000 deaths in 2015 to opioid drugs, including legal prescription painkillers as well as illicit drugs like heroin and street fentanyl. “Opioid prescribing continues to fuel the epidemic. Today, nearly half of all US opioid overdose deaths involve a prescription opioid,” according to the CDC.

A new study published in the American Journal of Preventive Medicine says actual opioid mortality rate changes are on average 22% higher than federal statistics indicate, due to information missing from CDC records. “Opioid mortality rate changes were considerably understated in Pennsylvania, Indiana, New Jersey and Arizona,” said the study’s author, Dr. Christopher Ruhm, a health economist at the University of Virginia. Top US officials have consistently raised the alarm about the addiction crisis in the US, but a solution is yet to be found. [..] Last week, the Trump-appointed commission on combating the drug addiction crisis in America called on the president to declare “a national emergency.”

After the meeting with Trump on Tuesday, Price said the administration will act without such a declaration. “Here is the grim reality,” the commission wrote in their letter to Trump. “Americans consume more opioids than any other country in the world. In fact, in 2015, the amount of opioids prescribed in the US was enough for every American to be medicated around the clock for three weeks.”

Read more …

And this is how the opioid disaster started, and still rolls on. Easy fix (pun intended), but who’s going to do it?

New Hampshire Sues Purdue Pharma Over Opioid Marketing Practices (R.)

New Hampshire sued OxyContin maker Purdue Pharma LP on Tuesday, joining several state and local governments in accusing the drugmaker of engaging in deceptive marketing practices that have helped fuel a national opioid addiction epidemic. The lawsuit filed in Merrimack County Superior Court claimed that Purdue Pharma significantly downplayed the risk of addiction posed by OxyContin and engaged in marketing practices that “opened the floodgates” to opioid use and abuse. The lawsuit came after the state’s top court in June overturned a ruling that barred the enforcement of subpoenas against Purdue and four other drugmakers because of the use of a private law firm by the office of the attorney general.

The complaint said the Stamford, Connecticut-based company had spent hundreds of millions of dollars since the 1990s on misleading marketing that overstated the benefits of opioids for treating chronic, rather than short-term, pain. Purdue and three executives in 2007 pleaded guilty to federal charges related to the misbranding of OxyContin, and agreed to pay a total of $634.5 million to resolve a U.S. Justice Department probe. That year, the privately held company reached a $19.5 million settlement with 26 states and the District of Columbia. It agreed in 2015 to pay $24 million to resolve a lawsuit by Kentucky. The lawsuit by New Hampshire, which was not among those settled, said Purdue has continued to benefit from its earlier misconduct and has since 2011 expanded the market for opioids in the state.

Read more …

No wonder with the opioid cases.

Americans Are Dying Younger, Saving Corporations Billions (BBG)

Steady improvements in American life expectancy have stalled, and more Americans are dying at younger ages. But for companies straining under the burden of their pension obligations, the distressing trend could have a grim upside: If people don’t end up living as long as they were projected to just a few years ago, their employers ultimately won’t have to pay them as much in pension and other lifelong retirement benefits. In 2015, the American death rate—the age-adjusted share of Americans dying—rose slightly for the first time since 1999. And over the last two years, at least 12 large companies, from Verizon to General Motors, have said recent slips in mortality improvement have led them to reduce their estimates for how much they could owe retirees by upward of a combined $9.7 billion, according to a Bloomberg analysis of company filings.

“Revised assumptions indicating a shortened longevity,” for instance, led Lockheed Martin to adjust its estimated retirement obligations downward by a total of about $1.6 billion for 2015 and 2016, it said in its most recent annual report. Mortality trends are only a small piece of the calculation companies make when estimating what they’ll owe retirees, and indeed, other factors actually led Lockheed’s pension obligations to rise last year. Variables such as asset returns, salary levels, and health care costs can cause big swings in what companies expect to pay retirees. The fact that people are dying slightly younger won’t cure corporate America’s pension woes—but the fact that companies are taking it into account shows just how serious the shift in America’s mortality trends is.

It’s not just corporate pensions, either; the shift also affects Social Security, the government’s program for retirees. The most recent data available “show continued mortality reductions that are generally smaller than those projected,” according to a July report from the program’s chief actuary. Longevity gains fell short of what was projected in last year’s report, leading to a slight improvement in the program’s financial outlook. [..] Absent a war or an epidemic, it’s unusual and alarming for life expectancies in developed countries to stop improving, let alone to worsen. “Mortality is sort of the tip of the iceberg,” says Laudan Aron, a demographer and senior fellow at the Urban Institute. “It really is a reflection of a lot of underlying conditions of life.” The falling trajectory of American life expectancies, especially when compared to those in some other wealthy countries, should be “as urgent a national issue as any other that’s on our national agenda,” she says.

Read more …

Not sure where this article aims to go, but Americans entering another dimension is a nice starting point.

Unlearning The Myth Of American Innocence (G.)

I grew up in Wall, a town located by the Jersey Shore, two hours’ drive from New York. Much of it was a landscape of concrete and parking lots, plastic signs and Dunkin’ Donuts. There was no centre, no Main Street, as there was in most of the pleasant beach towns nearby, no tiny old movie theatre or architecture suggesting some sort of history or memory. Most of my friends’ parents were teachers, nurses, cops or electricians, except for the rare father who worked in “the City”, and a handful of Italian families who did less legal things. My parents were descendants of working-class Danish, Italian and Irish immigrants who had little memory of their European origins, and my extended family ran an inexpensive public golf course, where I worked as a hot-dog girl in the summers. The politics I heard about as a kid had to do with taxes and immigrants, and not much else. Bill Clinton was not popular in my house. (In 2016, most of Wall voted Trump.)

We were all patriotic, but I can’t even conceive of what else we could have been, because our entire experience was domestic, interior, American. We went to church on Sundays, until church time was usurped by soccer games. I don’t remember a strong sense of civic engagement. Instead I had the feeling that people could take things from you if you didn’t stay vigilant. Our goals remained local: homecoming queen, state champs, a scholarship to Trenton State, barbecues in the backyard. The lone Asian kid in our class studied hard and went to Berkeley; the Indian went to Yale. Black people never came to Wall. The world was white, Christian; the world was us. We did not study world maps, because international geography, as a subject, had been phased out of many state curriculums long before. There was no sense of the US being one country on a planet of many countries. Even the Soviet Union seemed something more like the Death Star – flying overhead, ready to laser us to smithereens – than a country with people in it.

I have TV memories of world events. Even in my mind, they appear on a screen: Oliver North testifying in the Iran-Contra hearings; the scarred, evil-seeming face of Panama’s dictator Manuel Noriega; the movie-like footage, all flashes of light, of the bombing of Baghdad during the first Gulf war. Mostly what I remember of that war in Iraq was singing God Bless the USA on the school bus – I was 13 – wearing little yellow ribbons and becoming teary-eyed as I remembered the video of the song I had seen on MTV. “And I’m proud to be an American; Where at least I know I’m free”. That “at least” is funny. We were free – at the very least we were that. Everyone else was a chump, because they didn’t even have that obvious thing. Whatever it meant, it was the thing that we had, and no one else did. It was our God-given gift, our superpower.

Read more …

Because Greece has the absolutely worst accomodations for them.

EU Nations Start Process Of Returning Refugees, Migrants To Greece (AP)

European Union countries have begun the process of sending migrants who arrived in Europe via Greece over the last five months back to have their asylum applications assessed there. EU rules oblige migrants to apply for asylum in the country they first enter. But the rules were suspended as hundreds of thousands of people, many of them Syrian refugees, entered Greece in 2015. The European Commission recommended in December that EU countries gradually resume transfers to Greece of unauthorized migrants arriving from March 15 onwards. “Some member states have made requests but transfers have not begun. Greece has to give assurances that they have adequate reception conditions,” European Commission spokeswoman Tove Ernst said Tuesday.

“Reception conditions in Greece have significantly improved since last year, which is why the Commission recommended a gradual resumption of transfers,” she said. The recommendation is not binding on EU countries. Greece’s asylum service says requests have been made to return more than 400 migrants. Seven requests have been accepted so far. In Athens, Greece’s migration minister said the returns would involve “tiny numbers.” “We will accept a few dozen people in coming months,” Yiannis Mouzalas told private Skai TV Tuesday. “This will be done provided we have the proper conditions to receive them.” Mouzalas said it was a “symbolic move” dictated by Greece’s EU obligations.

Read more …

Jun 282017
 
Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedInShare on TumblrFlattr the authorDigg thisShare on RedditPin on PinterestShare on StumbleUponEmail this to someone


James Dean in a photobooth 1949

 

All Companies Hit By Ransomware Attack Used Bootleg Or Unpatched Software (WS)
Yellen: Banks Very Much Stronger; No Financial Crisis In Our Lifetime (CNBC)
There Is No Excuse For Janet Yellen’s Complacency (Steve Keen)
Yellen: “I Don’t Believe We Will See Another Crisis In Our Lifetime” (ZH)
Trio of Fed Speakers Warn on Valuations With Eyes on Tightening (BBG)
Car Loans, Credit Card Debt Push UK Back Towards Another Credit Crisis (Tel.)
UK Banks Ordered To Hold More Capital As Consumer Debt Surges (G.)
ECB VP: Slack In European Economy Looks Worse Than We Thought (CNBC)
Chinese Satellite Data Hint At Ominous Manufacturing Slowdown (ZH)
UK Government Refuses To Pay For Fireproof Cladding (Ind.)
Democrats The Only Thing Standing In The Way Of Single-Payer In California (CP)
Democrats The Only Thing Standing In The Way Of Single-Payer In California (CP)
The Human Tragedy Of Drug Abuse And Car Crashes (BBG)
Search Results Show Why Europe Is Mad at Google (BBG)
‘Google, Facebook Are Super Monopolies On The Scale Of Standard Oil’ (CNBC)
Greeks Work 203 Days Out Of The Year To Pay Taxes (K.)
Greek Garbage Collectors Reject Compromise As Trash Piles Up (AP)
At Least 24 Migrants Die Off Libya in 48 Hours, More Than 8,000 Rescued (R.)

 

 

Wolf Richter explains what happened yesterday. They’re all either thieves or extremely stupid/negligent.

Merck, Rosneft, Ukraine government, Ukraine International Airport, Maersk, WPP (world’s largest advertising agency), Mondelez etc. They’ve all been found to either use bootleg software or not having patched their systems with a readily available Microsoft patch.

All Companies Hit By Ransomware Attack Used Bootleg Or Unpatched Software (WS)

The Petya ransomware attack infected over 2,000 computer systems across the world as of midday today, according to Kaspersky Lab, cited by Reuters. Russia and Ukraine were most affected. Other victims were in Britain, France, Germany, Italy, Poland, and the US. When China starts up its computers, it will suffer the consequences for not staying in bed. The malware includes code known as “Eternal Blue,” which was also used in the WannaCry attack in May. Experts believe the code was purloined from NSA. The ransomware encrypts hard drives of infected machines and then demands $300 in bitcoin in order for the user to regain access. Petya takes advantage of the same vulnerability in Windows as WannaCry. But Microsoft released a patch to fix this vulnerability on March 14.

Patched computers were not affected by WannaCry, and are not affected today. The Windows Malicious Software Removal Tool detects and removes the malware automatically during the updating process. But that update isn’t available for bootleg copies of Windows – hence China’s disproportionate problems with the attack in May. And computers that are running legitimate versions of Windows but hadn’t been updated for whatever reason are vulnerable. Amazingly, when WannaCry hit, plenty of companies were mauled because some dude hadn’t updated their machines. Corporate and government networks were hit. You’d think after the hue and cry in May, all legit corporate systems would be updated, and bootleg copies of Windows would be replaced either by a legit copy of Windows or another operating system. But no. Rinse and repeat.

[..] These are big sophisticated companies, many of them with global operations, and therefore with global IT networks, not mom-and-pop operations. And yet the Windows machines in their networks hadn’t been updated and had remained vulnerable, or were using bootleg copies of Windows that couldn’t be updated, even after all the hoopla in May about this vulnerability. Just sitting here and shaking my head.

Read more …

Grandma goes nuts.

Yellen: Banks Very Much Stronger; No Financial Crisis In Our Lifetime (CNBC)

Fed Chair Janet Yellen said Tuesday that banks are “very much stronger” and another financial crisis is unlikely anytime soon. Speaking during an exchange in London with British Academy President Lord Nicholas Stern, the central bank chief said the Fed has learned lessons from the financial crisis and has brought stability to the banking system. Banks last week passed the first round of the Fed’s stress tests to see how they would perform under adverse conditions like a 10% unemployment rate and turbulence in commercial real estate and corporate debt. “I think the public can see the capital positions of the major banks are very much stronger this year,” Yellen said. “All of the firms passed the quantitative parts of the stress tests.”

She also made a bold prediction: that another financial crisis the likes of the one that exploded in 2008 was not likely “in our lifetime.” The crisis, which erupted in September 2008 with the implosion of Lehman Brothers but had been stewing for years, would have been “worse than the Great Depression” without the Fed’s intervention, Yellen said. Yellen added that the Fed learned lessons from the financial crisis and is being more vigilant to find risks to the system. “I think the system is much safer and much sounder,” she said. “We are doing a lot more to try to look for financial stability risks that may not be immediately apparent but to look in corners of the financial system that are not subject to regulation, outside those areas in order to try to detect threats to financial stability that may be emerging.”

Read more …

Steve explains that Yellen knows Minsky, but prefers to ignore him.

There Is No Excuse For Janet Yellen’s Complacency (Steve Keen)

Janet Yellen has been reported by Reuters as saying in London yesterday that “she does not believe that there will be a run on the banking system at least as long as she lives”: “Would I say there will never, ever be another financial crisis? You know probably that would be going too far but I do think we’re much safer and I hope that it will not be in our lifetimes and I don’t believe it will be,” Yellen said at an event in London. The only word I can use to describe this belief is “delusional”. The only way in which her belief could be justified would be in financial crises were truly random events, caused by something outside the economy—or just by a very bad throw of the economic dice. This is indeed the perspective of mainstream “Neoclassical” economic theory, in which Yellen was trained, and because of which she was deemed eligible—and indeed eminently suitable—to Chair the Federal Reserve.

This is the theory that led the OECD to proclaim, two months before the crisis began in August 2007, that “the current economic situation is in many ways better than what we have experienced in years”, and that they expected that “sustained growth in OECD economies would be underpinned by strong job creation and falling unemployment.”. It is the theory that led her colleague David Stockton, then the Director of the Division of Research and Statistics at the Fed, to dismiss the possibility of a recession after the crisis had begun, in December 2007—the very month that the recession is now regarded as having commenced: “Overall, our forecast could admittedly be read as still painting a pretty benign picture: despite all the financial turmoil, the economy avoids recession and, even with steeply higher prices for food and energy and a lower exchange value of the dollar, we achieve some modest edging-off of inflation.” (FOMC, Dec 2007)

So what we are getting from her is not merely her own personal complacency, but the complacency of an approach to economics which has always been grounded in the beliefs that (a) capitalism is inherently stable, (b) that the financial sector can be ignored—yes that’s right, ignored—when doing macroeconomics, and (c) that the Great Depression was an anomaly that can also be ignored, because it can only have been caused either by an exogenous shock or bad government policy, both of which cannot be predicted in advance.

Read more …

It’s a really crazy thing to say. Does she expect to be fired soon?

Yellen: “I Don’t Believe We Will See Another Crisis In Our Lifetime” (ZH)

If there was any confusion why the Fed intends to keep hiking rates, even in the face of negative economic data and disappearing inflation, it was put to rest over the past 2 days when not one, not two , not three, but four Fed speakers, including the three most important ones, made it clear that the Fed’s only intention at this point is to burst the asset bubble. First there was SF Fed president John Williams who said that “there seems to be a priced-to-perfection attitude out there” and that the stock market rally “still seems to be running very much on fumes.” Speaking to Australian TV, Williams added that “we are seeing some reach for yield, and some, maybe, excess risk-taking in the financial system with very low rates. As we move interest rates back to more-normal, I think that that will, people will pull back on that,

Then it was Fed vice chairman Stan Fischer’s turn, who while somewhat more diplomatic, delivered the same message: “the increase in prices of risky assets in most asset markets over the past six months points to a notable uptick in risk appetites…. Measures of earnings strength, such as the return on assets, continue to approach pre-crisis levels at most banks, although with interest rates being so low, the return on assets might be expected to have declined relative to their pre-crisis levels–and that fact is also a cause for concern.” Fischer then also said that the corporate sector is “notably leveraged”, that it would be foolish to think that all risks have been eliminated, and called for “close monitoring” of rising risk appetites.

All this followed the statement by Bill Dudley, who many perceive as the Fed’s shadow chairman, who yesterday warned that rates will keep rising as long as financial conditions remain loose: “when financial conditions tighten sharply, this may mean that monetary policy may need to be tightened by less or even loosened. On the other hand, when financial conditions ease—as has been the case recently—this can provide additional impetus for the decision to continue to remove monetary policy accommodation.” And finally, it was Yellen herself, who speaking in London acknowledged that some asset prices had become “somewhat rich” although like Fischer, she hedged that prices are fine… if only assumes record low rates in perpetuity:

“Asset valuations are somewhat rich if you use some traditional metrics like price earnings ratios, but I wouldn’t try to comment on appropriate valuations, and those ratios ought to depend on long-term interest rates,” she said. It was not all doom and gloom. Responding to a question on financial system stability, Yellen said post-crisis regulations (and $2.5 trillion in excess reserves which just happen to be fungible and give the banks the impression that they are safe) had made financial institutions much “safer and sounder.” “Will I say there will never, ever be another financial crisis? No, probably that would be going too far. But I do think we’re much safer and I hope that it will not be in our lifetimes and I don’t believe it will.”

Read more …

There were smokescreeens a-plenty too.

Trio of Fed Speakers Warn on Valuations With Eyes on Tightening (BBG)

When a trio of Federal Reserve officials delivered remarks on Tuesday, the state of U.S. financial markets came in for a little bit of criticism. When all was said and done, U.S. equities sank the most in six weeks, yields on 10-year Treasuries rose and the dollar weakened to the lowest level versus the euro in 10 months. Fed Chair Janet Yellen said that asset valuations, by some measures “look high, but there’s no certainty about that.” Earlier, San Francisco Fed President John Williams said the stock market “seems to be running very much on fumes” and that he was “somewhat concerned about the complacency in the market.” Fed Vice-Chair Stanley Fischer suggested that there had been a “notable uptick” in risk appetite that propelled valuation ratios to very elevated levels.

The Fed officials’ comments came amid a torrent of events that buffeted financial markets Tuesday, from an IMF cut to its U.S. growth forecast, Google suffering the biggest ever EU antitrust fine, a fresh blow to the Republican agenda in Washington and a global cyberattack. Still, selling in U.S shares accelerated around 1:30 p.m. as Yellen delivered her assessment of the market since the central bank raised interest rates June 14. “Asset valuations are somewhat rich if you use some traditional metrics like price earnings ratios, but I wouldn’t try to comment on appropriate valuations, and those ratios ought to depend on long-term interest rates,” Yellen said during a speech in London.

Investors are on guard for signs of a change in its economic outlook that could delay rate increases or when it will begin shrinking its $4.5 trillion balance sheet. Yellen said the Fed’s plans for the balance sheet were “well understood” by financial markets. Officials have said they intend to begin allowing the portfolio to roll off this year. In the end, Yellen made it pretty apparent that that her plans for continued monetary policy tightening haven’t shifted. “We’ve made very clear that we think it will be appropriate to the attainment of our goals to raise interest rates very gradually,” Yellen said.

Read more …

All the credit was the only thing that kept the country going.

Car Loans, Credit Card Debt Push UK Back Towards Another Credit Crisis (Tel.)

Banks are “forgetting the lessons” of the financial crisis, increasing the risk of reckless lending which could land them — and the wider economy — in trouble later, Mark Carney has warned. Credit card lending is booming and the Bank of England fears that banks are becoming complacent, assuming the relatively good economic times will continue indefinitely. As a result lenders are cutting down the amount of capital they put aside to keep them safe if those loans turn bad — something that could leave them in financial trouble if there is a recession and customers cannot pay back their debts. “I think it is forgetting some of the lessons of the past, or not fully learning the lessons of the past,” said Mr Carney, the Bank of England’s Governor. He said that the economy overall is performing well and total lending is not getting out of hand, but consumer credit is growing by more than 10pc per year, with credit cards and car loans growing particularly fast.

“Most financial stability indicators are neither particularly elevated nor subdued. Nevertheless, there are pockets of risk that warrant extra vigilance,” he said at the publication of the latest Financial Stability Report. “Consumer credit has increased rapidly. Lending conditions in the mortgage market are becoming easier. And lenders may be placing undue weight on the recent performance of loans in benign conditions.” As well as holding more capital against credit card debt and consumer loans, banks have also been warned that next month the Financial Conduct Authority and the Prudential Regulation Authority will also publish new affordability rules to make sure customers are likely to be able to repay their debts.

The situation is deemed relatively urgent — one part of an annual assessment of the losses which banks could make in a hypothetical recession has been brought forwards this year. Instead of publishing the results in November, the consumer credit part of the so-called stress tests will be revealed in September. That decision reflects the short-term nature of consumer loans. Short-term loans can also pose a threat to financial stability because households take them less seriously than mortgages. Consumer debts only amount to one-seventh of the total of mortgage debt, but they account for 10-times the amount of bad loans which banks write off.

That also has implications for the wider economy — a household in financial trouble will cut spending deeply to make sure it can still pay the mortgage, but is less worried about credit cards. Mortgage lending standards are also under the spotlight. The Financial Policy Committee told banks in 2014 that they should assess whether borrowers could still afford their mortgages if the Bank of England’s base rate went up by three%age points. Most banks calculated this by adding 3%age points to their standard variable rates, but some lenders said that in this scenario they might not pass the full cost onto customers. Officials reject this interpretation and have ordered banks to add the full 3 points to their rates when judging the affordability.

Read more …

First you lower rates, then you take measures against the fully predictable consequences.

UK Banks Ordered To Hold More Capital As Consumer Debt Surges (G.)

The Bank of England is to force banks to strengthen their financial position in the face of a rapid growth in borrowing on credit cards, car finance and personal loans. The intervention by Threadneedle Street means banks will need to set aside as much as £11.4bn of extra capital in the next 18 months and is intended to protect the financial system from the 10% rise in consumer lending over the year. The Bank is also bringing forward the part of the annual stress tests on banks that scrutinises their exposure to consumer credit by two months to September. The Bank’s Prudential Regulation Authority and the City regulator, the Financial Conduct Authority, will also publish next month how they expect lenders to treat borrowers in the consumer credit market.

The Bank’s half-yearly assessment of risk to financial markets also set out measures to rein in the riskiest mortgage lending, highlighted the risks associated with the UK’s exit from the EU and said commercial property prices were “at the top end of sustainable valuations”. While the Bank found risks to financial stability were neither “particularly elevated nor subdued” it warned that there “pockets of risk that warrant vigilance”. “Consumer credit has increased rapidly. Lending conditions in the mortgage market are becoming easier. And lenders may be placing undue weight on the recent performance of loans in benign conditions,” said Mark Carney, governor of the Bank of England.

Carney said the decision to call on banks to hold more capital – which is largely a rejig of their current resources rather than raising new funds – was taken after domestic risks returned to “standard” levels. A year ago, after the Brexit vote, the Bank had relaxed regulatory requirements on banks – using new tools it was given after the financial crisis – and is now reversing that decision.

Read more …

“..if we adopt, as in the U.S., a broader concept of unemployment (which in the U.S. they call U6) then unemployment in the euro area is at 18% whereas it is at 9% in the case of the U.S..”

ECB VP: Slack In European Economy Looks Worse Than We Thought (CNBC)

The difference between current and potential levels of output in the euro area economy could be greater than the ECB originally thought, its vice president, Vitor Constancio, warned on Tuesday. “What we see, what we observe is that domestic factors of inflation starting with wage and cost developments and then also price decisions are not responding the way we would expect in view of our more common estimates of this slack. So we have to ask ourselves – are these measures of the slack of the economy correct?,” explained Constancio, speaking to CNBC from the ECB Forum on central banking in Sintra. The board had therefore begun to ask themselves whether other variables should instead be considered to establish a more accurate view of the current economic situation.

“The unemployment rate now is 9.3% according to the normal international standard of measuring employment …. But if we adopt, as in the U.S., a broader concept of unemployment (which in the U.S. they call U6) then unemployment in the euro area is at 18% whereas it is at 9% in the case of the U.S. which would imply that the slack is then bigger than we could judge some time ago,” he noted. “That being the case it justifies fully what the president (Mario Draghi) said at the end of his speech (on Tuesday) that we need persistence. If we want to bring inflation to our target of below but close to 2% then we have to persist in the type of monetary policy that we been adopting,” he added.

Read more …

Earlier, we saw Yellen vs Minsky. Here’s China’s Minsky moment.

Chinese Satellite Data Hint At Ominous Manufacturing Slowdown (ZH)

A reading published by San Francisco-based SpaceKnow Inc. which uses commercial satellite imagery to monitor activity across thousands of industrial sites signaled deterioration in the country’s manufacturing sector for the first time since August. The gauge, known as the China Satellite Manufacturing Index, fell to 49.6, below the 50 break-even level. The index incorporates satellite data from thousands of industrial sites across China. Satellite imagery has often proved eerily presceint in the recent past: In the US, satellite data analyzing activity in retailers’ parking lots pointed to significant activity weakness at core US retail locations, even as sentiment indicators were suggesting an uptick in sales following the election. Meanwhile, small- and medium-sized enterprises showed the lowest level of confidence in 16 months, and conditions in the steel business remained lackluster, according to Bloomberg.

Some other indicators have been slightly more sanguine: sales-manager sentiment stayed positive, and outlook of financial experts recovered. Still, data suggest that output in China’s economy slowed during the second quarter after a strong start to the year, with investment slowing, some credit becoming tighter and signs that curbs on the country’s property market are starting to have an impact. Should growth continue to slow, China’s leaders would find themselves in an awkward position, with the country’s twice-a-decade leadership transition expected to occur this fall when the 19th Party Congress convenes to appoint its new senior leadership. It’s widely believed that China’s President Xi Jinping will begin serving his second five-year term.

[..] [That] could be the spark that ignites China’s “Minsky moment” – the financial cataclysm that Kyle Bass and other perma-china-bears have been waiting for when China’s overleveraged market crumbles to dust – might finally be in the offing. Indeed, though China’s markets have been relatively calm recently, the PBOC’s attempts to tighten liquidity have sparked some instability in recent months. Back in March, the central bank had to engage in mini bailouts when a jump in interbank rates caused some small regional lenders to default on their interbank loans after money market rates shot higher. Meanwhile, China’s weakening credit impulse should give any China bulls pause.

Read more …

Completely nuts. Feels like they’re looking to get tossed out.

UK Government Refuses To Pay For Fireproof Cladding (Ind.)

Councils face bills running to hundreds of millions of pounds to make tower blocks safe after the Government said it would not guarantee extra money to pay for vital work to prevent a repeat of the Grenfell disaster. Ninety-five high-rise buildings in 32 local authority areas have failed safety tests, the Department for Communities and Local Government (DCLG) said yesterday, with hundreds more blocks still to be tested. The findings prompted Theresa May to announce a “major national investigation” into the use of cladding on high-rise blocks, with every sample so far tested in the wake of the Grenfell found to be unsafe. But despite emergency fire safety checks being carried out nationwide under central government direction, councils will not be reimbursed for refurbishment work carried out.

A DCLG spokesperson said there was “no guarantee” of central government funding and that it would be “up to local authorities and housing associations to pay” for the work needed to ensure residents’ safety. The spokesperson said financial support would be considered on a “case by case” basis for those that could not afford to carry out the necessary work, but did not clarify what the criteria for that consideration would be. The announcement was met with severe criticism from some of the councils affected, with local authorities already having their budgets severely squeezed after years of austerity measures. Julie Dore, leader of Sheffield City Council, which is among the authorities to have discovered unsafe cladding, said “starved” councils would be forced to make cuts to other areas, including schooling, if central government did not help with costs.

“Local authorities have been starved of money over the past seven years. Our spending power has decreased,” she said. “There is no way we can afford to reclad our tower blocks. If we have to find that money, it will come from other projects, from investing in the fabric of our schools, capital investment in our infrastructure, the money has to come out of that. And it can’t really be done. “I say absolutely, categorically that the Government should pay. If they can find £1bn to send to Northern Ireland, that gets more spending per capita than anywhere else, to buy 10 votes, then these people, living in high-rise towers, deserve better.”

Read more …

There is no serious press left in the US to get to the bottom of this.

Democrats The Only Thing Standing In The Way Of Single-Payer In California (CP)

Nothing better illustrates the political bankruptcy of the Democratic Party—for all progressive intents and purposes—than California State Assembly Speaker Anthony Rendon’s announcement on Friday afternoon that he was going to put a “hold” on the single-payer health care bill (SB 562) for the state, effectively killing its passage for at least the year. The Democratic Party finds itself in a bind in California. They hold the governorship and a supermajority in both houses of the legislature, so they can pass any bill they want. SB 562 had passed the Senate 23-14. There was enormous enthusiasm among California progressive activists, who [..] were working tirelessly, and hopeful of success. After all, Bernie’s people were taking over the California party from the bottom since the election.

I recall a night of drinking last year with an old friend who has been spearheading that effort, as he rebuffed my skepticism, and insisted that this time there would be a really progressive takeover of the California party, and single-payer would prove it. After all, once enough progressive pressure was been put on the legislators, the bill would be going to super-progressive Democratic Governor, Jerry Brown, who had made advocacy of single-payer a centerpiece of his run for President in 1992, saying: “We treat health care not as a commodity to be played with for profit but rather the right of every American citizen when they’re born.” Bernie foretold. Unfortunately, today that Governor is, according to Paul Song, co-chair of the CHC, “doing everything he can to make sure this never gets on his desk.”

And it won’t. Unfortunately, all the Democrats like Rendon, who “claims to be a personal supporter of single-payer,” will make sure that their most progressive governor is not put in the embarrassing position of having to reject what he’s been ostensibly arguing for for twenty-five years, of demonstrating so blatantly what a fraud his, and his party’s, progressive pretensions are. Thus unfolds the typical Democratic strategy: Make all kinds of progressive noises and cast all kinds of progressive votes, while carefully managing the process so that the legislation the putatively progressives putatively support never gets enacted. Usually, they blame Republican obstructionism, and there certainly is enough of that, and where there is, it provides a convenient way for Democrat legislator to “support” legislation they know will be blocked and wouldn’t really enact themselves if they could.

Read more …

Phones are as addictive as opioids.

The Human Tragedy Of Drug Abuse And Car Crashes (BBG)

More than 130,000 Americans are killed annually by preventable causes, and the number has been climbing at a faster rate recently because of opioid abuse and car crashes involving drivers distracted by mobile devices. The death count jumped more than 7% in 2015 to about 146,600, according to a report by the National Safety Council Tuesday. The council said lawmakers often overlook simple solutions that could avoid deaths on the roads or in people’s homes, while public attention is focused on events that are relatively rare in the U.S., like terrorist attacks or plane crashes. Vehicle mishaps and poisonings, driven by opioid abuse, killed more than 80,000 people combined in 2015. Preventable accidents cost society about $850 billion a year, according to the group.

“Culturally, we’re numb to these things,” NSC President Deborah Hersman said in a phone interview. “Why are these deaths any less tragic or important? We should be talking about these things every day because they affect our families.” The toll from opioids is worsening, partly because so many patients become dependent on painkillers, often turning to street drugs like heroin. Almost one in four people on Medicaid, the U.S. health program for the poor, received powerful and addictive opioid pain medicines in 2015, Express Scripts Holding Co. said this month. The council said lawmakers should tighten oversight of the distribution of prescription medications and improve access to drugs that can reverse overdoses and treat addiction.

[..] “We need to make distracted driving socially unacceptable,” Tom Goeltz, whose daughter Megan was killed in a car crash last year, said at a news conference held by the NSC Tuesday. “This tragedy could have easily been prevented.” Goeltz, a Minnesotan who works to help industrial companies avoid accidents, said his daughter was pregnant when her car was struck by a distracted driver. “As a safety consultant with over 30 years of experience, I was powerless to save my daughter,” he said. “We all know people that have been killed on our roads. We all know somebody. How is this acceptable to us? We need to do more. You don’t want to be a part of this club.”

Read more …

“..Google has 90 days to come up with its own solution [..]. If it doesn’t do that, the EU will fine it up to 5% of the entire company’s daily global revenue.”

Search Results Show Why Europe Is Mad at Google (BBG)

Europe hit Alphabet’ Google with a $2.7 billion fine on Tuesday, saying it broke antitrust laws by favoring one of its search services over rival websites. The case centers around Google Shopping ads, which place color pictures, prices and links to products that consumers have typed into its search engine. The EU’s Competition Chief Margrethe Vestager said Google’s search algorithms should treat its own Shopping service the same way as other price-comparison sites. What exactly does this look like in practice? Here’s a walk-through of what the EU is so upset about. This is for desktop computer searches. On phones, there’s less digital real estate, leaving even less space for competitors. Before we start, it’s important to note that Google argues customers aren’t that interested in clicking through to other price comparison sites and want to go directly to retailers’ sites from Google. It denies any wrongdoing and is considering an appeal.

Google Shopping Today: The screenshot below shows results for a search in Germany for “gas grill.” Five Google Shopping ads take up the most valuable part of the page at the top. No other comparison shopping websites show up in the first couple of links. Scrolling down, you see the first result for a competing price comparison service – Idealo – come in at number six. There’s another at number 11, Moebel24. But that link is listed as an ad, meaning Moebel24 had to pay for that placement, even though it’s near the bottom of the page. The EU says this is bad because consumers click far more often on results appearing higher up in Google’s search results. Even on a desktop computer, the top ten results on page 1 generally get about 95% of all clicks on generic search results (with the top result receiving about 35% of all clicks), the European Commission said on Tuesday.

2014 Proposal: The EU’s Google investigation has been going for years. Vestager’s predecessor tentatively struck a deal with Google in 2014 for a hybrid model that set aside space in those top Shopping search boxes for other price comparison websites. But the agreement fell apart when competitors realized they had to pay for that placement. [..] What could Google do to satisfy Europe’s demands this time? Vestager said Google has 90 days to come up with its own solution, as long as it gives equal treatment to competing price comparison sites. If it doesn’t do that, the EU will fine it up to 5% of the entire company’s daily global revenue. [..] Google would have to sacrifice space currently occupied by its own Shopping ads to make the latter idea work, cutting into a highly profitably and growing revenue stream.

Read more …

US anti-trust laws are strong enough to counter this. But you need politicians to apply them.

‘Google, Facebook Are Super Monopolies On The Scale Of Standard Oil’ (CNBC)

Google shareholders won’t be phased by the EU’s $2.7 billion fine against the company for competition abuses related to its shopping business, Elevation Partners co-founder Roger McNamee told CNBC on Tuesday. “As a shareholder of Google you’re looking at this and saying: ‘We won again,'” McNamee said. The venture capitalist spoke hours after EU regulators fined Google a record €2.4 billion ($2.7 billion), ruling that the search-engine giant violated antitrust rules for its online shopping practices. Google said it will consider appealing the decision to the highest court in Europe. “Google, Facebook, Amazon are increasingly just super-monopolies, especially Google and Facebook. The share of the markets they operate in is literally on the same scale that Standard Oil had … more than 100 years ago – with the big differences that their reach is now global, not just within a single country,” he said on “Squawk Alley.”

The fine is not large enough to change Google’s behavior, he added. “The only thing that will change it is regulations that actually say you can or can’t do something.” McNamee said Google’s business model isn’t structured in a way that allows for competition. “The way that Google’s product works makes its anti-competitive behavior much more obvious — but do not underestimate how powerful Facebook’s monopoly has been to boosting Instagram and WhatsApp,” he said. The competition issue with the big tech companies extends beyond the EU into the U.S., he said. “They do stifle innovation. They stifle entrepreneurship. … You can see this even in Silicon Valley it’s very hard for any of the unicorn generation of companies to actually reach successful critical mass because, you know, one of their competitors gets acquired by Google and Facebook and then the category is over,” said McNamee. “I think it’s a big policy question the world is going to have to deal with over the next few years,” he said.

Read more …

The problem is not even the duration, France and Belgium are worse. The problem is what Greeks are left with after taxes are paid, which is much less than the others.

Greeks Work 203 Days Out Of The Year To Pay Taxes (K.)

Greeks will work an average of 203 days this year to pay taxes to the state and social insurance contributions, according to research conducted by the Dragoumis Center for Liberal Studies (KEFIM) to raise awareness about tax freedom day – the first day of the year in which a country has theoretically earned enough income to pay its taxes. In the case of Greece, this day will be on July 23, which means that Greeks will have worked 15 days more than last year, when tax freedom day arrived on July 7. The only two European Union countries in which tax freedom day will arrive after that in Greece are France and Belgium. Cyprus celebrated its tax freedom day on March 29, while Malta and Ireland did the same on April 18 and 30 respectively. Bulgaria was next on May 18 before Finland on June 22.

KEFIM, which conducted research into the topic for a third straight year, said citizens are working an increasing number of days each year to meet their tax obligations and, compared to 2006, Greeks now work two months more to this end. Referring to the results of the research, financial analyst and member of KEFIM’s scientific council Miranda Xafa said the “government managed to achieve a primary surplus by tax hikes and not through spending cuts.” Xafa also said that for every 100 euros a self-employed professional makes, 82 go toward tax and and other contributions. New Democracy vice president Adonis Georgiadis said that Greece had “lost another month because of overtaxation.” “Our aim when we become the government is to reverse the trend,” he said.

Read more …

Today is day 12 of the garbage strike. Weekend weather forecast up to 44ºC (111ºF). Some judge needs to declare a public health emergency, if Tsipras is too scared to do it.

Greek Garbage Collectors Reject Compromise As Trash Piles Up (AP)

Greece’s municipal garbage collectors on Tuesday rejected a government compromise offer and decided to continue an 11-day protest that has left mounds of festering refuse piled up across Athens amid high temperatures during the key summer tourism season. Municipal workers union head Nikos Trikas said the protest will go on as planned until Thursday at least, after an inconclusive meeting with Prime Minister Alexis Tsipras. The union is pressing the left-led government to honor a pledge to provide permanent jobs for long-term contract workers, and rejected Tsipras’ proposals as a “slight” but unsatisfactory improvement on past offers. Greek authorities have warned that the uncollected trash poses a public health risk ahead of a heat wave forecast for later this week.

Tourism Minister Elena Kountoura urged the union to reconsider, arguing that the protest “endangers public health, and is bad for tourism as well as the country’s international image.” The Athens Trade Association has also called on the two sides to reach a compromise, warning that piles of garbage would discourage tourists from traveling to the Greek capital. Tourism is a vital source of revenue for Greeces battered economy. Although not technically on strike most of the time, municipal workers have been blockading garages where municipal trash collection trucks operate from, as well as landfill sites across the country. Trikas said that unions will review their position Thursday, when they have called a 24-hour strike. He also pledged to increase emergency crews that the union has on duty to ensure that the garbage mounds do not mushroom out of all control.

Read more …

Where are Merkel and Macron? Why are their voters not demanding they tackle the issue?

At Least 24 Migrants Die Off Libya in 48 Hours, More Than 8,000 Rescued (R.)

Red Crescent volunteers recovered the bodies of 24 migrants on Tuesday that were washed up in an eastern suburb of the Libyan capital, Tripoli, as large-scale rescues were made in the Mediterranean. Residents in Tajoura district said the bodies had begun washing up at the end of last week. Several had been partially devoured by stray dogs, according to a local coast guard official. The toll was expected to increase as the flimsy boats used to carry migrants as far as international waters normally carry more than 100 people. Three migrants died in the Mediterranean on Monday night, a German aid group said, during Italian-led rescue operations in which thousands more were pulled to safety.

About 5,000 migrants were picked up off the Libyan coast by emergency services, Italy’s navy, aid groups and private boats on Monday, and rescues were continuing on Tuesday, according to an Italian coastguard spokesman. “Despite all efforts, three people died from a sinking rubber boat” and rescue boats in the area are struggling to cope, German humanitarian group Jugend Rettet said on Facebook. Jugend Rettet (Rescuing Youth) is one of about nine aid groups patrolling seas into which people traffickers have sent more than half a million refugees and migrants on highly dangerous voyages towards Europe over the past four years. “We reached the capacity limit of our ship, while our crew is seeing more boats on the horizon. Currently, all vessels are overloaded,” Jugend Rettet added.

About 72,000 migrants arrived in Italy on the perilous route from Libya between Jan. 1 and June 21, roughly 20% more than in 2016, and more than 2,000 died on the way, according to the International Organization for Migration.

Read more …

Feb 042017
 
 February 4, 2017  Posted by at 2:43 pm Finance Tagged with: , , , , , , , ,  2 Responses »
Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedInShare on TumblrFlattr the authorDigg thisShare on RedditPin on PinterestShare on StumbleUponEmail this to someone


Esther Bubley Boy who rides to school daily on Greyhound bus, Washington Court House, Ohio 1943

 

It’s been a while since the Automatic Earth featured an article from Energy Matters, the site run by our longtime friend Euan Mearns, Honorary Research Fellow at The University of Aberdeen, and his co-conspirator Roger Andrews, a British engineer/geophysicist, semi-retired in Mexico. But I read a piece by Roger yesterday that I like, because it allows me to rant against all the false claims emanating from countries and companies about the share of renewable power in their total energy consumption.

Roger focuses on the railway system in the Netherlands, run by NS, which recently claimed that it operates on 100% wind power. This is of course, if you know anything about electricity generation and the grid, a preposterous claim, and that the company has the guts to make such a claim can only serve to prove how little the general public knows about the topic. Or they wouldn’t dare. Green is still so sexy in certain circles, and actual knowledge so poor, that companies like the NS feel no scruples about stretching their ‘greenness’ into absurd theater territory.

Google does something similar. And you might be inclined to think that the topic is so important for both the companies and the people they seek to please with their claims that grossly exaggerating the numbers would be out of the question, but not so. Instead, “Google announced that it will purchase enough renewable energy to match 100% of its operations in 2017”. And that is not the same as running on renewables, which is what is being suggested (in carefully cherry-picked terms). I like this assessment by electronicdesign.com:

Is Google’s Renewable Energy Plan What It Seems?

“Essentially, Google is contracting for green energy from places that can never reach its data centers. If it were as simple as Google claims, it would be easy to build a renewable power sector. New York City could execute a massive number of contracts with wind farms in upstate New York because they are on the same grid.“ [..]

Google is promising to buy—on an annual basis—the same amount of megawatt-hours (MWh) of renewable energy as the amount of megawatt-hours of electricity that it consumes for its worldwide operations. This approach will benefit the renewable energy market even though it is still generating the same amount of greenhouse gas emissions with or without its 100% renewable energy purchasing plan.

Google ‘buys renewable energy’ in various places around the world, but its servers don’t run on it. It’s exactly like companies buying carbon permits from poorer nations; an excuse to keep polluting. As both the permits and the renewables are traded in markets where prices are low and/or heavily subsidized. As for the scale involved, “In 2015, Google consumed 5.7 terawatt-hours (TWh) of electricity, which is nearly as much electricity as the city of San Francisco.” And don’t forget it keeps consuming ever more as the company grows. That’s a lot of fossil fuels. The medieval ‘principle’ of absolution inevitably comes to mind.

As for the Netherlands’ railways, Roger concludes below, after explaining why, that “the Netherlands’ electrified railways continue to be powered dominantly by fossil fuel electricity. The “Harried Dutch commuters” who are “travelling on one of the most environmentally friendly rail networks in the whole of Europe, if not the world” are being sold a bill of goods.”

 

I would like to add that because of continuing issues related to intermittency and baseload, which are nowhere near being solved, the very grid itself that is used to deliver the ‘renewable’ electricity couldn’t exist without fossil fuels. Or, in other words, if there were only ‘green’ sources of electricity, there would be no grid. How much can be moved towards ‘green’ sources is still somewhat debatable, but just like solar panels and wind turbines cannot build themselves but need fossil fuels to be produced, there is a limit far far below the 100% both Google and the Dutch railways are (deceitfully?) toying around with. Here’s Roger:

 

 

a target=”new” href=”http://euanmearns.com/do-the-netherlands-trains-really-run-on-100-wind-power/”>Do The Netherlands’ Trains Really Run On 100% Wind Power?

This question generated a number of comments in the last Blowout so I thought I would take a quick look at it. I find that the electrified portion of the Dutch railway network (Nederlandse Spoorwegen, or NS) runs on grid electricity that comes dominantly from fossil fuel generation (natural gas and coal). NS claims 100% wind power because it has a contract with various wind farms to produce enough energy to power its rail system, but this is just an accounting transaction. Only a small fraction of the power delivered to its trains actually comes from wind.

First some details on the Netherlands’ electricity sector. As shown in the table below installed capacity is dominantly fossil fuel, with natural gas making up 61% of total installed capacity and coal 15%. Wind contributes 4,117MW, representing 13% of the capacity mix. (Data from ENTSO-E ):

No details on the current generation mix are readily available, but as shown in Figure 1 gas and coal supplied around 80% of the Netherlands’ electricity between 2000 and 2013 and it’s likely that this percentage still applies.

Figure 1: The Netherlands’ generation mix 2000-2013. Data from Frontier Economics

How much of the Netherlands’ electricity is supplied by wind? According to Cleantechnica
wind power in the Netherlands generates 7.4 billion kWh (7.4TWh) of electricity annually, and according to BP the Netherlands’ total electricity generation in 2015 was 109.6TWh. However, wind power consumption in the Netherlands in 2015 was 12.5TWh, indicating that about 5TWh of wind power was imported during the year. So while wind contributes about 7% to the Netherlands’ electricity generation it contributes about 11% to the country’s electricity consumption. Either figure comfortably exceeds the amount of electricity NS uses to power its electric trains, which is variously quoted as either 1.2 or 1.4TWh/year.

The Netherlands imports wind power basically because it’s falling behind its EU renewable energy targets. But how does NS know the power it imports is wind? Because Eneco, which contracts to supply NS with wind power, gets a “Guarantee of Origin” from the exporter under which the exporter confirms that the power came from wind and assigns the rights to it to NS. As Cleantechnica puts it: “the GoO system allows for the transfer of the rights to call electricity green from those who actually generate renewable energy to those who don’t but want to classify their power as such. The actual amount of green energy produced is unaffected.”

There is, however, a problem. For NS to use only wind power from wind farms to power its rail system the wind farms must be connected directly to NS’s railways. (Figure 2: Note the dotted lines showing non-electrified track. According to LJ Electrical only 2,231km of NS’s total 3,223km of track is electrified):

Figure 2: The Netherlands’ railway network.

And of course no such connections exist. The two Dutch wind farms that have contracted to sell power to NS (Noordoostpolder and Luchterduinen) are both connected directly to the Dutch grid, along with all the other power plants in the country, and NS draws its power from the grid:

Figure 3: The Netherlands’ electricity grid. Grid connections for the Luchterduinen and Nordpoostpolder wind farms (locations approximate) are shown in black.

When wind power is fed into a grid it becomes inextricably mixed with all the vibrating electrons from other generation sources to the point where there is no way of knowing where any power taken from the grid came from. Grid power in fact reflects the overall generation mix, which in the case of the Netherlands is dominantly gas and coal with only a small contribution from wind. How much wind? Over the course of this year the average will be around 11%, equal to wind power’s share of the Netherlands’ annual grid electricity consumption.

And only half of the wind power NS has contracted for comes from the Netherlands. The other half comes from “newly built wind farms in …. Belgium and Finland”. Wind power now supplies about 10% of Belgium’s electricity, so power imported from the Belgian grid will be about 10% wind. Wind power from Finland can be discounted. Only about 2% of Finland’s generation mix is wind, and by the time it passes through the Finnish, Swedish and German grids on its way to the Netherlands it will effectively have disappeared. Imports from the German grid, however, will contain about 14% wind power, although not wind power that NS has contracted for. Putting these numbers together indicates that only 10-15% of the electricity consumed annually by NS’s electric trains will come from wind, with the rest a mixture that includes mostly Dutch gas and coal plus a small amount of Belgian and German coal, nuclear and lignite – and maybe even a little German solar.

The supply of wind power to the Dutch grid will also not be constant. I have no wind records for the Netherlands but P.F. Bach supplies data for Belgium, which should be a close analogy, and Figure 4 shows Belgian wind generation for September 2014:

Figure 4: Belgian wind generation, September 2014

With an installed capacity of around 1850MW in this month the overall wind capacity factor was 11% and there were a number of occasions on which wind generation fell effectively to zero for hours on end. During these periods wind generation in the neighboring Netherlands would also have fallen to low levels. Were these conditions to repeat themselves now, and if NS’s trains were powered exclusively by wind, they would almost certainly come to a halt. (Although Eneco, NS’s wind power procurer, claims that its “wind farm portfolio guarantees sufficient capacity to cover such eventualities” . Apparently Eneco can make the wind blow to order.)

So how does NS justify the claim that all Dutch trains run on 100% wind power? Well, it actually claims that only the electrified portion runs on 100% wind. Only the Guardian has seen fit to publish a correction:

An earlier version said all Dutch trains were now 100% powered by wind-generated electricity, according to the national railway company NS. The company said all electric trains were now powered by wind energy. (my emphasis)

And how does NS justify this lesser claim? According to Railway Technology because it has a:

“green energy contract – thought to be among the largest yet signed in Europe – between power supplier Eneco and VIVENS, an energy procurement joint venture comprising Netherlands Railways (NS), Veolia, Arriva, Connexxion and rail freight firms”, and because

“NS and Eneco have carefully selected a list of wind farms that fulfil their criteria of being traceable, sustainable – or renewable – and additional, or new”, and because

“This partnership ensures that new investments can be made in even newer wind farms, which will increase the share of renewable energy. In this way, the Dutch railways aim to reduce the greatest negative environmental impact caused by CO2 in such a way that its demand actually contributes to the sustainable power generation in the Netherlands and Europe.”

The first two are “feel good” justifications that have no practical impact. The third – that by purchasing wind power that would otherwise have gone elsewhere NS is leaving the door open for more wind projects and more CO2 reductions – is the only one that offers any tangible benefits. But there is no guarantee that the unfilled demand will be met by renewables, and in any event the 1.2-1.4TWh/year consumed by NS represents barely more than 1% of the Netherlands’ annual electricity consumption and a totally negligible fraction of European consumption. This is hardly enough to make a big deal about.

And meanwhile the Netherlands’ electrified railways continue to be powered dominantly by fossil fuel electricity. The “Harried Dutch commuters” who are “travelling on one of the most environmentally friendly rail networks in the whole of Europe, if not the world” are being sold a bill of goods.

 

 

Dec 272014
 
 December 27, 2014  Posted by at 12:42 pm Finance Tagged with: , , , , , , ,  2 Responses »
Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedInShare on TumblrFlattr the authorDigg thisShare on RedditPin on PinterestShare on StumbleUponEmail this to someone


John Vachon Billie Holiday at the Newport Jazz Festival Jul 1954

Natural Gas Drops Below $3 for First Time Since 2012 (Bloomberg)
Oil Caps Fifth Weekly Loss on Global Supply Glut Concern (Bloomberg)
Saudi Arabia Maintains Spending Plans in 2015 Despite Oil Slide (WSJ)
Saudis To Hit ‘Panic Button’ At $40 Oil: Energy CEO (CNBC)
Drilling Cutbacks Mean Service Companies Forced to Scrap Rigs (Oilprice.com)
Gartman: Get Ready For Oil Bankruptcies (CNBC)
China November Industrial Profits Suffer Sharpest Fall In 27 Months (Reuters)
China’s Shadow-Banking Boom Is Over (WSJ)
Game Over Japan: Real Wages Crash, Savings Rate Turns Negative (Zero Hedge)
Brazilian Oil Company Petrobras Sued By US City In Corruption Scandal (BBC)
Nicaragua Canal A Potential Threat To The US And Western Powers (RT)
The Cradle of Democracy Rocks the Autocrats (StealthFlation)
A Capitalist Christmas (Mises Inst.)
60 Prominent Germans Appeal Against Another War In Europe (Zero Hedge)
Gorbachev: Putin Saved Russia From Disintegration (RT)
Putin: It Is Time to Play Your Ace in the Hole (Daily Bell)
Google Further Crapifies Search, Exploiting Both Users and Advertisers (NC)
Apple Spent $56 Billion On Buybacks In 2014 (MarketWatch)
Strange Predictions For The Future From 1930 (BBC)

“We don’t see anything scary in the forecast ..”

Natural Gas Drops Below $3 for First Time Since 2012 (Bloomberg)

Natural gas slumped below $3 per million British thermal units in New York for the first time since 2012 on speculation that record production will overwhelm demand for the heating fuel. Futures settled at the lowest in 27 months and have plunged 26% in December, heading for the biggest one-month drop since July 2008, as mild weather and record production erased a surplus to year-ago levels for the first time in two years. Temperatures will be mostly above average in the eastern half of the U.S. through Dec. 30, according to Commodity Weather Group LLC. “We don’t see anything scary in the forecast,” said Stephen Schork, president of Schork Group Inc., a consulting group in Villanova, Pennsylvania.

“You had this psyche where people were worried about a polar vortex; we had a cold October and a cold early November, and boom, if you were long you are wrong.” Natural gas for January delivery fell 2.3 cents, or 0.8%, to settle at $3.007 per million Btu on the New York Mercantile Exchange. Futures touched $2.973, the lowest intraday price since Sept. 26, 2012. Volume was 54% below the 100-day average for the time of day at 2:32 p.m. Gas dropped 13% this week, a fifth straight weekly decline. Prices broke below several technical support levels, including $3.046 and then $3, and may be headed toward $2.80 or lower, said Schork. “I am playing this market short,” he said. “Anyone who is selling now is trying to trigger a panic selloff.”

Read more …

Why insist on talking about “OPEC’s refusal to cut production”, and not America’s?

Oil Caps Fifth Weekly Loss on Global Supply Glut Concern (Bloomberg)

Oil fell, capping a fifth weekly loss on concern that OPEC’s refusal to cut production will worsen a global supply glut. Brent and West Texas Intermediate extended their annual declines of more than 40%, the biggest since 2008, as the Organization of Petroleum Exporting Countries resisted supply cuts to defend market share while the highest U.S. production in three decades exacerbated a global glut. Trading volume headed for the lowest this year. “The market is still reeling from oversupply,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “It’s really hard to muster a substantial rally until we figure out how we are going to use all this oil.”

Brent for February settlement slipped 79 cents, or 1.3%, to $59.45 a barrel on the London-based ICE Futures Europe exchange, down 3.1% this week. The volume of all futures was 84% below the 100-day average as of 3:10 p.m., with much of Europe on holiday after Christmas. West Texas Intermediate crude for February delivery fell $1.11, or 2%, to $54.73 on the New York Mercantile Exchange with volume 68% below average. Prices were down 3.2% this week. Trading reached 174,562 contracts at 2:49 p.m. The previous lowest volume this year was 244,240 on Aug. 25. Brent traded at a premium of $4.72 to WTI on the ICE.

Read more …

They have zero choice.

Saudi Arabia Maintains Spending Plans in 2015 Despite Oil Slide (WSJ)

The Saudi government unveiled a 2015 budget on Thursday that signaled a continuation of a high level of spending despite pressures from a steep fall in oil prices in recent months. The kingdom, the world’s top oil exporter, depends on oil revenue to fund social spending, helping head off the kind of unrest that has roiled Middle Eastern countries since 2011. A prolonged oil-price slump could threaten such policies here and in other Gulf monarchies. Saudi King Abdullah struck a note of caution in the budget announcement, instructing officials to consider the developments that led to oil’s decline by “rationalizing the expenditure.” Riyadh has chosen not to cut output in an effort to push up prices, despite its dependence on oil exports.

The Saudi oil minister, Ali al-Naimi—secretary-general of OPEC – on Sunday blamed a lack of coordination among non-OPEC producers, along with speculators and misleading information, for the fall in the oil price. In an indication of the government’s confidence that it can weather the market volatility, Mr. al-Naimi described the slump as “a temporary situation.” The kingdom didn’t say on what price of oil it based its 2015 budget. The International Monetary Fund and others estimate a Saudi Arabia’s fiscal break-even price for oil at well above $90 a barrel—it has been trading recently under $60 – underlining the country’s vulnerability to changes in the energy market.

“It is worrying when the expanding government expenditure begins to erode the financial surpluses built over the last few years,” Saudi economist Fadhil Albuainain said. Saudi Arabia said on Thursday that it projects total expenditure in 2015 to reach 860 billion Saudi riyals ($229.3 billion), an increase of nearly 1% from the last budget, a record. It will likely use cash from its reserves to spend ondevelopment projects in sectors such as health care and education. The kingdom expects to run a wider deficit of 145 billion riyals to continue with its spending plans, as projected revenue falls by nearly a third to 715 billion riyals, according to a finance ministry statement.

Read more …

Really?

Saudis To Hit ‘Panic Button’ At $40 Oil: Energy CEO (CNBC)

Saudi Arabia has insisted that OPEC will keep oil production at 30 million barrels per day no matter the cost of crude, but even the world’s biggest oil exporter has a limit, the CEO of Breitling Energy told CNBC on Friday. “I think the panic button is at $40,” Chris Faulkner said in a “Squawk Box” interview. “They can say whatever they want, but at the end of the day, they can’t just bleed out money forever.” With the Saudis’ deficit for 2015 projected to reach $50 billion—the official figure is $39 billion—the country’s leaders will face challenges in maintaining its subsidies, he said. Young people will not stand for planned wage cuts, either, he added.

That said, Faulkner expects oil prices to rebound to the low $70s by the end of 2015, after initially sliding further into the low $50s and possibly recovering in the second quarter. With oil prices at current levels, Venezuela will likely default on its debt payments due in March and October, Faulkner said. Brent crude for February delivery traded below $61 in morning trade on Friday. Faulkner sees natural gas remaining below $5 until 2020, as the supply and demand fundamentals are unlikely to change significantly. Natural gas dipped below $3 on Friday for the first time since Sept. 24, 2012.

Read more …

A bit of hurt for Halliburton is always welcome.

Drilling Cutbacks Mean Service Companies Forced to Scrap Rigs (Oilprice.com)

Offshore oil contractors such as Halliburton or Transocean have seen their share prices tank worse than exploration companies because their revenue comes from being paid to drill, not necessarily from oil production after wells are completed. That means that when drilling slumps, their profits take an immediate hit. Even worse, exploration companies may see rising profits from existing production as oil prices rebound, but drilling service companies don’t benefit if their drilling contracts had been put on hold or cancelled. The problem is compounded by the fact that a slew of new offshore oil rigs are set to come into operation – an estimated 200 over the next six years. As Bloomberg reports, these new rigs will mean there could be a surplus of about 140 rigs, meaning offshore oil contractors will have to scrap that many to bring new ones online.

If oil prices stay where they are now – in the neighborhood of $60 per barrel – a deep contraction in shipping rig supply will be inevitable. In 2015, spending on offshore exploration may be slashed by 15%, which will mean taking a deep knife to companies providing rigs and contracting. Transocean has already announced that it is idling seven deepwater rigs, along with several other drillships. However the shakeout may take some time because offshore contractors can resort to using older rigs in order to bring down the rates they are charging, essential to maintaining market share. In order to entice exploration companies to keep up the drilling frenzy, older ships can keep costs lower. But that may not be a tenable prospect since offshore contractors will feel compelled to put the new and more state-of-the-art rigs into operation. That will force companies with older fleets to start discarding the most dated drilling rigs.

Transocean already took a $2.6 billion impairment charge in the third quarter of this year, due to a “decline in the market valuation of the company’s contract drilling services business.” By scrapping more ships, it expects to write down at least $240 million in the fourth quarter. More may be in the offing – Transocean released an update on the status of its fleet in mid-December, confirming its plans to scrap 11 ships. The statement also added that “additional rigs may be identified as candidates for scrapping.” Perhaps it is Seadrill, another offshore drilling services company, that has taking the worst of the oil price downturn. The company decided to cancel its dividend in November amid falling oil prices, a move that sent its share price tumbling downwards. Seadrill has seen its shares lose almost 75% of their value since July.

Read more …

Lots of ’em if the price doesn’t start rising soon.

Gartman: Get Ready For Oil Bankruptcies (CNBC)

Shale oil firms in the U.S. will suffer in the next two years due to the dramatic fall in the price of the commodity, according to Dennis Gartman, the founder and editor of the Gartman Letter, who expects a further fall in prices in the near term. The commodities investor has turned slightly more bearish on oil since last week, telling CNBC Tuesday that “crude oil prices haven’t seen their lows yet.” “I’m afraid we’re going to see demonstrably lower prices still,” he said. “Demand is weak and that price is going to continue to go down more.” The U.S. has seen a revolution in gas and oil production in the U.S. with new technology unlocking new shale resources.

This oil and gas boom has spurred economic activity and giving industry a competitive edge with less expensive fuel prices. However, the recent drop in prices – with Brent crude and WTI crude both down around 47% since mid-June – is set to impact the blossoming sector over the next two years, Gartman fears. “There will clearly be bankruptcies,” Gartman said, name checking oil production sites like the Permian Basin and the Marcellus Shale. U.S. oil production is a private-sector venture and differs wildly from the state-run companies in the Gulf states and South America.

These countries are able to extract oil from the ground at a cheaper cost than U.S. shale firms and there has been speculation that the two different industries could be playing a “game of chicken” over the price of oil before cutting back to ease the oversupply. A brief rally for oil on Monday was cut short with Saudi Arabian Oil Minister Ali al-Naimi stating that Organization of the Petroleum Exporting Countries would not cut production at any price, according to Reuters. Oil majors in Europe also received a stark warning this week with credit ratings agency Standard & Poor’s (S&P) placing BP, Total and Shell all on a negative watch. The change now means that the three firms are more likely to have their debt rating downgraded in the next three months.

Read more …

The “major unexpected headwinds” keep on coming.

China November Industrial Profits Suffer Sharpest Fall In 27 Months (Reuters)

Chinese industrial profits dropped 4.2% in November to 676.12 billion yuan ($108.85 billion), official data showed on Saturday, the biggest annual decline since August 2012 as the economy hit major unexpected headwinds in the second half. Despite last month’s drop, profits for January-November were 5.3% higher than in the first 11 months of 2013, according to the National Bureau of Statistics (NBS) data. The NBS attributed November’s profit drop to declining sales and a long-running slide in producer pricing power. “Increasing price falls shrank the space for profit,” the agency said. It said the impact of prices for coal, oil and basic materials falling to their lowest levels in years “was extremely clear”. As the NBS analysis suggested, the net slide in industrial profits was driven primarily by weakness in coal mining, and oil and gas industries, where November profits tumbled from a year earlier by 44.4% and 13.2% respectively.

Oil, coking coal and nuclear fuel processing industries saw their profits slide by 34.2%, according to the data. On the upside, Chinese technology industries saw profits grow sharply last month. Telecommunications firms saw a 20.7% increase, electronics and machinery grew 15.1% and automobile manufacturers enjoyed a 16.7% gain. “This suggests that on the one hand, in the context of weak investment demand, stable consumption demand provided a certain degree of support; on the other hand, promoting industry restructuring is having a positive effect on efficiency,” the NBS analysis said. However, the unbalanced nature of the performance highlights a quandary regulators face. They want to restructure the Chinese economy away from credit- and energy-intensive heavy industries toward lightweight technology products and services, yet they must also avoid causing a crisis in the financial system.

Read more …

Dangerous political games.

China’s Shadow-Banking Boom Is Over (WSJ)

Following years of explosive growth, China’s shadow-banking industry is experiencing a sharp slowdown after Beijing tightened its grip on the sector, which has been a key source of funding for the economy but also has added to rising debt levels and other risks in the financial system. The industry, a mélange of informal lenders such as trust companies and leasing firms, takes in money from investors and lends it to often risky projects for which traditional bank lending is unavailable. Investors have flocked to the so-called wealth-management and trust products sold by shadow lenders in recent years because they typically promise returns ranging from 4% to more than 10%, much higher than a bank account. But the sector has been hit especially hard in the second half of this year. Investors have shifted their cash into the rallying stock market.

The slowdown may become even more pronounced next year, with authorities set to increase efforts to rein in financial risks as the economy slows. “The government has realized that shadow banking has fallen off its radar screen and it carries enormous risks. The days of laissez-faire are over,” said Shen Meng, executive director of Chanson Capital, a boutique investment bank. A decline in interest rates in China and diminishing returns on property and infrastructure projects may also reduce the promised investment gains on the products issued by shadow banks. The outstanding value of shadow-banking products stood at 21.87 trillion yuan ($3.52 trillion) at the end of November, up 14.2% from the level a year earlier, according to estimates by Nomura Securities based on central-bank data. That growth is significantly slower than the 35.5% rise it registered for the whole of last year and the 33.1% gain in 2012.

The growth rate was as high as 75% in 2010, when Beijing encouraged shadow lenders to complement overstretched traditional banks and help extend a lending binge to keep the economy humming following the global financial crisis. The slowdown in the industry this year has primarily been caused by a series of tighter regulations that made it less profitable for shadow lenders to issue new products, or forced them to enhance risk controls. Shadow-lending products are usually sold through traditional banks. In July, China’s banking regulator asked banks to separate their wealth-management-product business from their retail-lending business, a move that incurred extra costs. Banks also were ordered to set up independent departments to oversee wealth-management products, and to better explain in sales documents that these products aren’t deposits and carry risks.

The result was immediate: New issuance of shadow-banking products fell by 309.6 billion yuan in July from a month earlier. That followed a month-on-month increase of 526.2 billion yuan in June and a rise of 993.2 billion yuan in January, according to estimates by Nomura Securities. There was a mild rebound in August, but issuance shrank in September and October before seeing a modest rise of 28.4 billion yuan in November. The slowdown since July coincided with a surge in China’s long-depressed stock market. Compared with the 43% gain of the Shanghai market this year, the yields on trust and wealth-management products, which have declined, no longer look as attractive.

Read more …

How much longer for Abe?

Game Over Japan: Real Wages Crash, Savings Rate Turns Negative (Zero Hedge)

When about a month ago it was revealed that Japan’s shadow economic advisor is none other than Paul Krugman, we said it was only a matter of time before the Japanese economy implodes. Terminally. We didn’t have long to wait and last night the barrage of Japanese economic data pretty much assured Japan’s transition into failed Keynesian state status. In fact, after last night’s abysmal Japanese eco data, we doubt even the most lobotomized Keynesian voodoo priests have anything favorable left to say about Abenomics: not only did core inflation miss expectations and is now clearly in slowdown mode despite Japan openly monetizing all gross Treasury issuance.

Not only did industrial production decline 0.6% missing expectations of an increase and record its first decline in 3 months with durable goods shipments crashing, not only did consumer spending plunge for the 8th straight month dropping 2.5% in November (with real spending on housing in 20% freefall), but – the punchline – both nominal and real wages imploded, when total cash wages and overtime pay declined for the first time in 9 months and 20 months, respectively. And the reason why any poll that shows a recently “re-elected” Abe has even a 1% approval rating has clearly been Diebolded beyond recognition, is that real wages cratered 4.3% compared to a year ago. This was the largest decline since the 4.8% recorded in December 1998. In other words, Abenomics has now resulted in the worst economy, if only for consumers, in the 21st century.

Read more …

The Petrobras scandal is yet to reach its climax. Brazil as a whole will be severely shaken.

Brazilian Oil Company Petrobras Sued By US City In Corruption Scandal (BBC)

The US city of Providence, Rhode Island is suing the Brazilian state-run oil company Petrobras over investor losses due to a corruption scandal. Unlike other class actions, some of the company’s senior executives have also been named as defendants. Providence alleges that Petrobras made false statements to investors that inflated the company’s value. Its lawyers say that when the corruption scandal broke, the city’s investments plummeted. So far, 39 people in Brazil have been indicted on charges that include corruption, money laundering and racketeering. They have been accused of forming a cartel to drive up the prices of major Petrobras infrastructure projects and of channelling money into a kickback scheme at Petrobras to pay politicians. The executives could face sentences of more than 20 years in jail.

The case has shaken the government of President Dilma Rousseff, who served as chair of the Petrobras board for seven years until 2010. She has denied any knowledge of the scheme. According to the Brazilian Federal Police the group under investigation moved more than $3.9bn (£2.5bn) in what police describe as “atypical” financial transactions. Brazilian courts have blocked around $270m in assets belonging to various suspects. Federal agents revealed contracts worth $22bn are regarded as suspicious. Former Petrobras director Paulo Roberto Costa, who worked at the company from 2004 to 2012, has told investigators that politicians received a 3% commission on contracts signed during this period.

Read more …

Crazy plan.

Nicaragua Canal A Potential Threat To The US And Western Powers (RT)

The Nicaragua Canal can become an alternative route through Central America for China and Russia, as well as an alternative route for potential military use right in America’s backyard, international consultant and author Adrian Salbuchi told RT. Nicaragua has begun the most ambitious construction project in Latin America – a waterway connecting the Atlantic and the Pacific oceans that is supposed to become an alternative to the Panama Canal. It is 278 km long, will cost around $50 billion and provide jobs for 50,000 people. The construction is being run by a Hong Kong company and should be completed by 2020. The project is supposed to boost Nicaragua’s GDP. Meanwhile, ecologists fear the giant ship canal will endanger Lake Nicaragua – Central America’s largest lake and Nicaragua’s largest main water source – which the waterway will run through. Locals are concerned their homes and farm lands are under threat. According to some estimates, around 30,000 people may be displaced by the waterway. RT discussed the project and protests it sparked in Nicaragua with international consultant and author Adrian Salbuchi.

RT: The residents are promised compensation. Why are they protesting? Were they misinformed about the project?
Adrian Salbuchi: It’s understandable because we are talking about a mega project that will displace many people; some estimates say as many as 30,000 farmers will be displaced. There will be an ecological impact, no doubt about it. However, I think we have to be very careful to distinguish between what is this spontaneous reaction of many of these farmers which is probably genuine, and what may also be some engineering of social convulsion from foreign powers, not only the US that had been doing that in the so-called Arab Spring and that had been doing that throughout Latin America for many decades. So I wouldn’t be surprised if some of the exaggeration or some of the future problems do come from some American agitators or Western agitators. Don’t forget this is the country which is governed by President Daniel Ortega of the Sandinista Liberation Front, who are enemies of the US for many decades.

RT: Just to push you a bit on this, do you think there may be a foreign state involved?
AS: Absolutely. And we should even take it together with what just happened with Cuba because if America is trying to bring Cuba into the fold, it might try to play a similar card with Nicaragua to try to range them away as in the case of Cuba from Russia, in the case of Nicaragua from China. We have to see not just the trade implications that are huge, and the economic implications that are also huge, as well as social and ecological, but much more so the geopolitical implications. This is a Chinese private company, but we all know that very likely behind the Chinese investment there are geopolitical factors being handled and being driven by the Chinese government quite rightly, who have an increasing interest throughout Latin America.

Read more …

People vs power.

The Cradle of Democracy Should Defy the Autocrats & Kleptocrats (Landevoisin)

On the old continent, this December 29th, a succinct political showdown is scheduled to take place which may well become a defining moment for our entirely unsettled new millenium. What is at stake is none other than the prosperity of the common man pitted against the privilege of concentrated power. Lamentably, this deliberate dogmatic divide has relentlessly defined human civilization for the ages. What is at hand isn’t so much about lofty ideals. It’s not about Socialism. It’s not about Capitalism. It’s not about Communism. It’s not about being a progressive, or a conservative or a liberal. It’s not about left vs right. Forget all those dumbed down dichotomies. It’s much more fundamental than all of that. Quite simply, it’s about People vs. Power, that’s it, nothing more. Those that have and wield institutional power, and those that do not. It’s as elementary and base as that I’m afraid.

Take a good look around, I defy you to point to a single socioeconomic construct in our supposedly enlightened and advanced society of today which is not essentially determined by that crude polarizing characterization. Whether it be our bought and paid for Political Class, our rapacious Banking Sector, our entitled Multinational Corporations, our entrenched Governmental Agencies, our marauding Military Industrial Complex, our fleecing Healthcare Providers, our muzzled Free Press, our hijacked Justice System, or our grossly overpaid CEOs, Athletes, and Entertainers, they all have one thing in common, and I assure you that it’s not the common good that they share. What they seek above all else is to expand the existing institutional dominion and their own privileges within it.

Sad to say, but at the end of the day, perhaps dog eat dog is what we humans are really best at, and the only state of being we’re actually capable of. Maybe all those exalted ideals of enlightened forms of governance are just a load of crap to make us feel better about ourselves. Judging by the overt self seeking avarice that dictates the pace of just about everything these days, it sure seems that way.

Read more …

“Menacing figures arrive at your door uninvited, demand your property, and threaten to perform an unspecified “trick” if you don’t fork over.”

A Capitalist Christmas (Mises Inst.)

Halloween has a socialist tenor. Menacing figures arrive at your door uninvited, demand your property, and threaten to perform an unspecified “trick” if you don’t fork over. That’s the way the government works in a nutshell. Thanksgiving has been reinterpreted as the white man, after burning, raping, and pillaging the noble Indian, trying to make amends with a cheap turkey dinner. New Year’s can be ruined as the beginning of a new tax year, and the knowledge that the next five or six months will be spent working for the government. That’s why I love Christmas. To this day it remains a celebration of liberty and private life, as well as a much-needed break from the incessant politicization of modern life. It’s the most pro-capitalist of all holidays because its temporal joys are based on private property, voluntary exchange, and mutual benefit.

In Christmas shopping, we find persistent reminders of charity programs that work and little sign of those (welfare bureaucracies) that don’t. The Salvation Army, Goodwill dispensers in parking lots, and boxes filled with canned goods and toys are all elements of true charity. This giving is based on volition rather than coercion, which is the key to its success. People complain about “commercialism,” but all the buying and selling is directed toward meeting the needs of others. Even if the recipient doesn’t give gifts in return, the giver still receives satisfaction. Absent entirely is the zero or negative-sum political process that tilts property in favor of one group or another. Santa, unlike Halloween figures, comes to your home to bring gifts and goodwill, and never takes anything except milk and cookies.

You wouldn’t think of hiding your silver from him. Unlike government bureaucrats, Santa and his workers are entirely trustworthy, and even work overtime by creating goods that are desired by millions of people. If the Labor Department or OSHA ever get around to investigating the North Pole, they’ll probably find all sorts of labor violations: safety and health (too cold), unemployment insurance (does he pay it?), minimum wage (is there exploitation here?), overtime (Heaven knows they work long hours), civil rights (any non-elves employed?), and disability (is Santa accommodating these tiny men?). But the point is that everyone is there voluntarily, and no doubt considers it an honor and privilege.

Read more …

What I said yesterday, in different words: “We appeal to the media, to more scrupulously adhere to their obligation to provide unbiased reporting.”

60 Prominent Germans Appeal Against Another War In Europe (Zero Hedge)

Two weeks ago, as the S&P was preparing to surge on the latest round of all time high market-goosing algo trickery by the FOMC, 60 prominent German personalities from the realms of politics, economics, culture and the media were less concerned with blinking red and green stock quotes and were focused on something far more serious to the future of the world: the threat of war with Russia. In a letter published by Germany’s Die Zeit, numerous famous and respected Germans including a former president and former prime minister write “Wieder Krieg in Europa? Nicht in unserem Namen!”, or, roughly translated, “War in Europe Again? Not in Our Names!”

The open letter to the German government, parliament, and media, excerpted here, was signed by more than 60 prominent German personalities and published in the weekly Die Zeit on Dec. 5. The initiators were Horst Teltschik (CDU), advisor to then-Chancellor Helmut Kohl at the time German of reunification; Walther Stützle (SPD), former Secretary of State for the Ministry of Defense; and Antje Vollmer (Greens), former Bundestag Vice President. Teltschik said, in motivating the appeal, “We are giving a political signal that the justified criticism of Russia’s Ukraine policy should not wipe out all the progress that we have made in the past 25 years in relations with Russia.” Below is an excerpted translation (source) of the original letter:

“Nobody wants war. But North America, the European Union, and Russia are inevitably driving towards war if they do not finally halt the disastrous spiral of threats and counter-threats. All Europeans, including Russia, are jointly responsible for peace and security. Only those who do not lose sight of this goal can avoid fatal actions. The Ukraine conflict shows that the quest for power and domination has not been overcome. In 1990, at the end of the Cold War, we all hoped that it would be. But the success of the détente policy and the peaceful revolutions allowed people to become lethargic and careless. In both East and West. The Americans, Europeans, and Russians all lost, as their guiding principle, the idea of permanently banishing war from their relationship.

Otherwise it is impossible to explain either the West’s eastward expansion without simultaneously deepening cooperation with Moscow—a policy which Russia sees as a threat—or Putin’s annexation of Crimea in violation of international law. At this moment of great danger for the continent, Germany has a special responsibility for the maintenance of peace. Without the will for reconciliation of the people of Russia, without the foresight of Mikhail Gorbachov, without the support of our Western allies, and without the prudent action by the then-Federal government, the division of Europe would not have been overcome. To allow German unification to evolve peacefully was a great gesture, shaped by the wisdom of the victorious powers. It was a decision of historic proportions. [..]

We call upon the members of the German Bundestag, delegated by the people as their political representatives, to deal appropriately with the seriousness of the situation. . . . Whoever is constructing a bogeyman, putting the blame on only one side, is exacerbating tensions, when the signals should be for de-escalation. We appeal to the media, to more scrupulously adhere to their obligation to provide unbiased reporting.than they have hitherto done. Editorialists and leading commentators are demonizing entire nations, without fully taking their histories into account. Any journalist experienced in foreign affairs would understand the Russians’ fear, since members of NATO in 2008 invited Georgia and Ukraine to join the Alliance. It is not about Putin. Heads of state come and go. What is at stake is Europe.

Read more …

And so he did. But not everybody likes that.

Gorbachev: Putin Saved Russia From Disintegration (RT)

Russian President Vladimir Putin saved the country from falling apart, former Soviet leader Mikhail Gorbachev said during the presentation of his new book ‘After the Kremlin.’ Gorbachev also commented on the situation in Ukraine and NATO expansion. “I think all of us – Russian citizens – must remember that [Putin] saved Russia from the beginning of a collapse. A lot of the regions did not recognize our constitution. There were over a hundred local constitutional variations from that of the Russian constitution,” RIA Novosti quoted Gorbachev as saying on Friday. He added that saving Russia during that crucial period was a “historical deed.” Gorbachev remarked that he knew the Russian president before Putin took office, describing him as having good judgment and discipline.

Commenting on the situation in Ukraine, the ex-Soviet president said the armed stand-off must be immediately stopped and both sides need to come to the negotiating table. “All of us are concerned by what is happening in Ukraine – politicians and the public. And the fact that our government is supporting the people who are in trouble there, no matter how hard things are at home, it is what always distinguished us,” Gorbachev said, stressing that the conflict cannot be solved through violence. Gorbachev also noted that influential American and European politicians need to speak out against the worsening of international ties, adding that many of his old colleagues are seeing the first signs of a new Cold War and understand how crucial it is to calm things down.

He said he has received comments which include concerns on how not to miss the escalating situation, and stopping it before it “acquires an explosive nature.” In terms of Russia’s worries over NATO’s expansion, Gorbachev agrees that the US is playing a key role in the process. “[NATO] began to establish bases around the world…I think the president is mostly right when drawing the attention to the special responsibility the US has,” Gorbachev said. Meanwhile, when speaking about the domestic situation in the country, the former president of the USSR expressed confidence that Russia will get out of the crisis, adding that the only questions are “when and at what price.” “Now we need to be very careful in politics – what policy is implemented, by who, and who stands to benefit?”

Read more …

Not smart enough for my tastes.

Putin: It Is Time to Play Your Ace in the Hole (Daily Bell)

The entire world is watching Putin play poker with the Western politicians lead by Obama and followed by Washington quislings in London, Brussels and Berlin. America’s goal since the end of the Cold War has been to weaken by financial, economic and, if necessary, military means any real competition to its global financial and resource domination through the petrodollar and dollar world reserve currency status. The current trade and economic sanctions against Russia and Iran follow this time-tested action that is never successful on its own, as we know from the 50-plus-year blockade of Cuba. But this strategy can lead to opposition nations retaliating by military means, often their only alternative to end blockades etc., which are an act of war and allow the US and other democracies to bring their ultimate superior military power to bare against the offending sovereign state.

This worked for Lincoln against the Confederate States of America, by Woodrow Wilson against the Central Powers before World War One, against the Japanese Empire before World War Two, Iraq, Libya – the list is endless. Recently the US has created the oil price collapse, working closely with its client state Saudi Arabia, in order to weaken the economic power of both Iran and Russia, the two main nations opposing US hegemony, foreign policy and petrodollar policy. Yes, this will play havoc with the US shale oil industry as well as London’s North Sea oil industry but oil profits pale in comparison to the importance of maintaining Western power over Russia and China. I hope Putin realizes the US is not playing games here, as this is a financial and strategic game to the death for Washington and it’s Western allies that have foolishly followed the Goldman Sachs/central banking cartel’s deadly sovereign debt recipe and for growth and prosperity.

The time is up; the debts can never be repaid and sooner or later must be repudiated one way or the other. China is waiting in the wings as the new world economic power and while it is too big to challenge, US strategy is to take out its top two allies, Iran and Russia, to buy time for Wall Street and Washington. The strategy might be a competitive economic course of action but the risk of military consequences and even a third world war loom on the horizon and no country has ever defeated Russia in a land attack. This is risky brinkmanship just to protect our banking and Wall Street elites and their profits at the expense of the American people, I might add, but the US has done this before.

Read more …

Nice takedown.

Google Further Crapifies Search, Exploiting Both Users and Advertisers (NC)

Google is a case study of why we need antitrust enforcement. With Google at 97% market share in search, Yahoo and Bing don’t have enough of a foothold for it to be worth the gamble of trying to beat Google at search, even with Google having degraded its service so badly that there are now obvious ways that a challenger could best them. I had assumed that the ongoing crapification of Google was for a commercial purpose, namely to optimize the browser for shopping and the hell with everything else. But as we will discuss in more detail below, my experience in poking around to see about buying a new laptop demonstrates that Google has gotten worse at that too. Lambert, who I enlisted to confirm my experience, was appalled and said, “What have they been doing with all that money?”

But as we’ll see, there is an evil purpose here, just not the evil purpose we’d first assumed. It isn’t as if the degradation of Google is a new phenomenon. I used Google heavily while researching ECONNED, which was written on an insanely tight time schedule. It worked really well then. But even a mere year later, by late 2010, the search algo had been restructured in some mysterious way to make the results much less targeted, and it’s been downhill since then. The most recent appalling change came in the last few months: eliminating the ability to do date range searches. But all of this ruination was so Google could make more money by optimizing for shopping right? Apparently not. I’ve idly and actively looked for stuff on the Internet over the years.

A reliable way to do that was to type in a rough or better yet precise description of the product/product name plus the word “price”. That would usually get you a nice list of vendors selling what you wanted so you could comparison shop, and often you’d get links to sites like Nextag which would provide a list of vendors with all-in prices as well as vendro ratings. Over the last two months, I’ve been looking for an easy-to-install monochrome laser printer (I have NO time to deal with anything more demanding than plug and play, and sadly, dealing with printers on a Mac is not plug and play). I didn’t get any good answers from all my searching and would up buying a used version of my current out-of-production printer. In retrospect, it appears some of my search hassles may have been due to Google, not to having atypical requirements.

Read more …

Biggest company on the planet because they buy their own stock?

Apple Spent $56 Billion On Buybacks In 2014 (MarketWatch)

If Apple’s year had a theme, it was the year the company finally started to chip away at that colossal hoard of cash. After a little nudging by activist investor Carl Icahn, Apple boosted its share-buyback program in April to $90 billion and increased the pace of capital returns. New data from FactSet show that Apple has been the biggest buyback spender of 2014 among the S&P 500, pouring more than $56 billion into the program on a trailing 12-month basis as of the end of the third quarter. That’s nearly three times the outlay of runner-up IBM, which spent $19.2 billion. Apple bought back $17 billion in shares last quarter, a 240% year-over-year increase that marks the second-highest dollar amount spent on buybacks during a quarter by any individual company in the S&P 500 since 2005, when FactSet began tracking the data. It’s second only to Apple’s own record of $18.6 billion set in the first quarter as part of the same buyback program.

Morningstar analyst Brian Colello said that while it’s not all surprising the world’s most valuable company would top a list such as this given its enormous cash cushion, he said the buybacks have undoubtedly been a “big contributor” to the stock’s strong performance in 2014. Adjusted for a 7-for-1 stock split earlier this year, shares of Apple have climbed more than 43% over the last 12 months. Since hitting a 52-week low back on Jan. 30, they have been on the march higher — flirting with all-time highs since September. “It showed that management was confident in its upcoming product launches and helped to put a floor into the company’s valuation during times of skepticism,” said Colello. Apple is the world’s most valuable company, with a $641.7 billion market cap, almost double the market valuations of the next companies on that list, Microsoft and Exxon Mobil, both valued around $377 billion.

Read more …

Curious.

Strange Predictions For The Future From 1930 (BBC)

Shortly before he died in 1930, former cabinet minister and leading lawyer FE Smith, a friend of Winston Churchill and one of the more outspoken British politicians of his age, wrote a book predicting how the world would look in 100 years’ time. They covered science, lifestyles, politics and war. So what did he say?

Health/lifespan Smith, a former Lord Chancellor who became the Earl of Birkenhead a few years before his death, was writing in a period when tuberculosis was a major killer in the UK and around the world. He was optimistic enough to suggest the eradication of this and other epidemic diseases was “fairly certain” by 2030, as was “the discovery of cures for such scourges as cancer”. Death from old age could also be delayed, Smith thought. Scientists would create injections containing an unspecified substance bringing “rejuvenations”, which would be used to prolong the average lifespan to as much as 150 years. Smith acknowledged this would present “grave problems” from an “immense increase in population”. He also foresaw extreme inter-generational inequality, wondering “how will youths of 20 be able to compete in the professions or business against vigorous men still in their prime at 120, with a century of experience on which to draw”?

Work and leisure
Mechanisation would mean a “gradual contraction” of hours worked, Smith believed. By 2030 it was likely the “average week of the factory hand will consist of 16 or perhaps 24 hours”, which no worker could possibly “grudge”. But, with factories largely automated, work would provide little scope for self-fulfilment, becoming “supremely easy and supremely dull”, consisting largely of supervising machines. It didn’t occur to Smith, in an age before widespread use of computers, that the machines might become self-monitoring. The cut in hours hasn’t happened yet. According to figures from the OECD group of industrialised nations, the lowest average weekly hours worked in a main job in 2013 were 30, in the Netherlands. The highest figure was 47.9, in Turkey. In the UK it was 36.5, with the US among the countries for which information was not provided.

Smith believed that, despite the shortening of hours, everyone would earn enough by 2030 to afford to play football, cricket or tennis in their spare time. But one of the big winners in this more leisure-rich world would be fox-hunting, one of his own hobbies. “As wealth increases, we shall all be able to ride to hounds,” he said. Men would free up even more time with changes to sartorial rules. By 2030 they would be expected to own only two outfits, one for leisure and the other for more formal occasions. John Logie-Baird had demonstrated television in the late 1920s and Smith was excited by the idea. He said that by 2030 full “stereoscopic television in full natural colours” would be available in people’s homes, with proper loudspeaker-quality sound. This meant exiled US citizens would be able to watch any baseball match and, in cricket, “the MCC selection committee, in conclave at Lord’s, will be able to follow the fortunes of an English eleven through the days (or weeks) of an Australian Test match”.

Read more …