Jun 182018
 
 June 18, 2018  Posted by at 8:15 am Finance Tagged with: , , , , , , , , , , , ,  


Paul Klee Pflanze und Fenster Stillleben 1927

 

The US Should Break The German Lock On The European Economy (CNBC)
Merkel Gets Extra Time To Reach Deal With EU Over Asylum Row (G.)
Eurozone Braces For Row With Greece Over Bailout Exit Terms (G.)
The Bigger Cryptocurrencies Get, The Worse They Perform: BIS (R.)
May’s NHS ‘Brexit Dividend’ Claim Draws Scepticism And Doubt (G.)
FARC Peace Deal At Risk As Conservative Duque Wins Colombia Presidency (AFP)
Bolivia’s Morales Condemns US Intervention in Venezuela, Latin America (TSur)
Russia-Syria Warnings of Coming False-Flag Attack Have Ring of Truth (MPN)
Refugee Camps Reopening On Greek Mainland (K.)
Scientists Scramble To Stop Bananas Being Killed Off (G.)
Losing The Buzz (ODT)
Where Have All Our Insects Gone? (G.)
Bringing Julian Assange Home (John Pilger)

 

 

There’s a thought.

The US Should Break The German Lock On The European Economy (CNBC)

Germany may only account for 3.4% of the world economy, but it is more than a quarter of the European Union’s demand and output. The EU, in turn, is close to 20% of the world economy, and, based on last year’s numbers, it takes $283.5 billion of U.S. exports, or 18.3% of America’s total goods sold overseas. What the U.S. sells to the EU is more than 40% of all the goods America exports to China and Japan. That shows that the damage caused to the U.S. economy transcends, by far, Germany’s surplus of $64.2 billion on American trades in 2017. Imagine, for example, what would happen to the EU economy, to the rest of the world — and to U.S. export sales in general — if Germany were not living off its fellow Europeans with a massive €164.4 billion trade surplus.

That German surplus is stifling the economic growth in the rest of Europe, because it is a deficit for countries trading with Germany. You can think of those €164.4 billion as a large wealth transfer to Germany. Indeed, it is a structural foundation of Germany’s export-driven economy, where sales to the rest of the world account for nearly a half of German GDP (compared with 14% in the U.S. case). What Europe, the U.S. and the rest of the world need here is a radical change of German economic policies. Germany should be generating more growth from domestic demand to give an opportunity to its trade partners to sell more of their goods and services on German markets. That would boost intra-European growth and create opportunities for more American sales to Europe — its largest overseas customer.

There is nothing new here. It’s a very old story Germans don’t even want to talk about. And why should they? France is meekly taking it on the chin with annual deficits of 36 to 41 billion euros on its German trades, and the rest of Europe does not dare question what it wrongly sees as a virtuously strong German economy.

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There will be no such deal. Not a comprehensive one.

Merkel Gets Extra Time To Reach Deal With EU Over Asylum Row (G.)

Germany’s interior minister, Horst Seehofer, has signalled he is open to giving Angela Merkel more time to reach a deal with Germany’s EU partners over an asylum row that has threatened to bring down her government. As the German chancellor met leaders of her Christian Democratic Union (CDU) on Sunday in an attempt to divert the collapse of her fledgling administration, Seehofer emerged from emergency talks with his Christian Social Union (CSU) saying he had no intention of toppling Merkel. Seehofer wants police stationed at borders to turn back refugees and migrants arriving from other EU countries but signalled he would give Merkel two weeks’ grace to reach migration agreements with EU partners.

“No one in the CSU is interested in bringing the chancellor down, or dissolving the CDU/CSU parliamentary partnership or destroying the coalition,” Seehofer told the Bild am Sonntag newspaper, adding that he did not want the asylum row to endanger the coalition government, which is less than 100 days old. Seehofer said his party was keen to find a way to limit the number of asylum seekers arriving in Germany. “We finally want to have a solution for the return of refugees at our borders which is fit for the future,” he added. But he was quoted in the Welt am Sonntag as having voiced his scepticism about the future of the CDU/CSU alliance in a meeting of the CSU’s leadership. “I cannot work with this woman any more,” he was quoted as saying.

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A row with the IMF, you mean.

Eurozone Braces For Row With Greece Over Bailout Exit Terms (G.)

Eurozone finance ministers are braced for a row this week with the Greek government over the terms of a “golden goodbye” as the country prepares to exit its third bailout programme. Concerns that Greece will suffer a fourth financial collapse unless an agreement is signed with the EU to write off some of its debt mountain are likely to surface before a showdown in Brussels on Thursday. The IMF, which has lent Greece several billion euros and has taken part in a tripartite monitoring of reforms with the European commission and ECB, is expected to pull out of the arrangement unless Brussels reduces Greece’s debt burden. Without the IMF on board, Germany and other hardline countries such as Finland and Austria could demand stricter clauses in the reform programme due to be imposed on Greece as the price of its final bailout payoff.

“Everyone has an interest to alleviating the burden, for Greece and the rest of the creditors,” said Olivier Bailly, the chief adviser to the EU’s finance commissioner, Pierre Moscovici. “If we leave too much burden, this will slow down Greece’s recovery.” He played down the impact of the IMF pulling out of the first stage of surveillance that will last until at least 2022. “What is important is that the IMF give its view on debt measures. What the markets expect is that it says they are credible enough,” he said, admitting that the lack of involvement by the Washington-based lender of last resort puts pressure on Germany. Finance ministers from the 19-member currency bloc will meet on Thursday to agree a package of measures that will include a final loan payment of between €10bn and €12bn and a cash buffer of up to €20bn. The payments are due to be the last of the €86bn bailout agreed in 2015.

[..] Hans Vijlbrief, the top EU official advising eurogroup ministers, said: “It’s very important that Greece can stand on its own feet. If it’s not credible, we won’t come out. This is the first condition.” The Eurogroup is seeking to reduce Greek debt payments by extending loans until beyond 2040 and reducing the interest rate to near 1%, well below the rate Greece would need to pay international investors. The IMF, however, has insisted that reducing the overall debt mountain from the outset is the only way to stabilise Athens’ public finances. Vijlbrief said the EU charter prevented the Eurogroup from offering debt write-offs, but this assertion has never been tested and is still the basis for IMF involvement in the next stage of Greece’s recovery.

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The bank of banks feels threatened.

The Bigger Cryptocurrencies Get, The Worse They Perform: BIS (R.)

Cryptocurrencies are not scalable and are more likely to suffer a breakdown in trust and efficiency the greater the number of people using them, the Bank of International Settlements (BIS)said on Sunday in its latest warning about the rise of virtual currencies. For any form of money to work across large networks it requires trust in the stability of its value and in its ability to scale efficiently, the BIS, an umbrella group for the world’s central banks, said in its annual report. But trust can disappear instantly because of the fragility of the decentralized networks on which cryptocurrencies depend, the BIS said.

Those networks are also prone to congestion the bigger they become, according to the BIS, which noted the high transaction fees of the best-known digital currency, bitcoin, and the limited number of transactions per second they can handle. “Trust can evaporate at any time because of the fragility of the decentralised consensus through which transactions are recorded,” the Switzerland-based group said in its report. “Not only does this call into question the finality of individual payments, it also means that a cryptocurrency can simply stop functioning, resulting in a complete loss of value.”

The BIS’ head of research, Hyun Song Shin, said sovereign money had value because it had users, but many people holding cryptocurrencies did so often purely for speculative purposes. “Without users, it would simply be a worthless token. That’s true whether it’s a piece of paper with a face on it, or a digital token,” he said, comparing virtual coins to baseball cards or Tamagotchi. [..] Agustin Carstens, general manager of the BIS, has described bitcoin as “a combination of a bubble, a Ponzi scheme and an environmental disaster”.

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The claim is so out there it’s funny.

May’s NHS ‘Brexit Dividend’ Claim Draws Scepticism And Doubt (G.)

Theresa May’s promise of £400m extra in weekly NHS spending within five years has been overshadowed by scepticism among experts and her own backbenchers over her claim it can be financed through a windfall delivered by Brexit. Ahead of a major speech by the prime minister in which she will pledge a £20bn annual real-terms NHS funding increase by 2023-24, May was ridiculed for arguing that some of the money would come from a so-called Brexit dividend. “At the moment, as a member of the European Union, every year we spend significant amounts of money on our subscription, if you like, to the EU,” she said in an interview on BBC One’s Andrew Marr show.

“When we leave we won’t be doing that. It’s right that we use that money to spend on our priorities, and the NHS is our number-one priority.” The Institute for Fiscal Studies (IFS) said, however, that even the government had accepted the idea of an immediate post-Brexit boost to coffers would not happen. The decision to announce extra spending for the NHS and to frame it specifically as a benefit of leaving the EU has been widely seen as a sop by May to hardline Brexiters in her cabinet and on the Tory backbenches ahead of some potentially crucial votes this week on the EU withdrawal bill.

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Finally there’s peace, and now this. Colombia is set to become a NATO member.

FARC Peace Deal At Risk As Conservative Duque Wins Colombia Presidency (AFP)

Conservative Ivan Duque won Colombia’s presidential election Sunday after a campaign that turned into a referendum on a landmark 2016 peace deal with FARC rebels that he pledged to overhaul. Duque, 41, polled 54 percent to his leftist rival Gustavo Petro’s 42 percent with almost all the votes counted, electoral authority figures showed. Petro, a leftist former mayor and ex-guerrilla, supports the deal. Tensions over the deal became apparent in the immediate aftermath of Duque’s victory, after the president-elect lost no time in pledging “corrections” to the peace deal. “That peace we long for — that demands corrections — will have corrections, so that the victims are the center of the process, to guarantee truth, justice and reparation,” Duque told supporters in his victory speech at his campaign headquarters.

“The time has come to build real change,” Duque said, promising a future for Colombians “of lawfulness, freedom of enterprise and equity,” after decades of conflict. His vanquished opponent Petro promised to resist any fundamental changes to the deal. “Our role is not to be impotent and watch it being destroyed,” he said. FARC, which disarmed and transformed into a political party after the peace deal but did not contest the election, immediately called on Duque to show “good sense” in dealing with the agreement. “What the country demands is an integral peace, which will lead us to the hoped-for reconciliation,” the FARC said in a statement after Duque’s presidential win. The former rebels also called for an early meeting with Duque.

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A US supported coup soon?

Bolivia’s Morales Condemns US Intervention in Venezuela, Latin America (TSur)

Bolivian President Evo Morales said Saturday that Latin America “is no longer the United States’ backyard” while denouncing the United States’ attempt to convince its South American allies to help it orchestrate a military intervention or coup in Venezuela. In an interview with news agency EFE, Morales explained that several Latin American leaders have confided in him that U.S. Vice president Mike Pence is “trying to convince some United States-friendly countries” help them seize control of the South American country and replace the current government led by Nicolas Maduro. The real target, Morales explained, is not the Venezuelan president but “Venezuelan oil, and Venezuelans know that.”

Drawing parallels to 2011 military intervention in Libya, Morales said the U.S. isn’t interested in helping with alleged humanitarian crisis since, despite the current political and social turmoil in Libya, the U.S. will not intervene there since “the country’s oil is now owned by the U.S. and some European oil companies,” Morales asserted. “One military intervention (in the region) would only create another armed conflict,” he added pointing to Colombia’s membership in the North Atlantic Treaty Organization (NATO) as a general sign of an escalation of “military aggression to all Latin America and the Caribbean” region. Morales explained, however, that U.S. interventionism is not only militaristic.

“When there are no military coups, they seek judicial or congressional coups” as in the case of former Brazilian President Dilma Rousseff’s impeachment and the Luiz Inacio Lula da Silva’s imprisonment, which is barring him from running in the upcoming 2018 elections.

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They warned of the last one as well.

Russia-Syria Warnings of Coming False-Flag Attack Have Ring of Truth (MPN)

In recent days, speculation has swirled regarding whether another chemical-weapons attack will soon take place in Syria, as sources in both Syrian intelligence and the Russian military have warned that U.S.-backed forces in the U.S.-occupied region of Deir ez-Zor are planning to stage a chemical weapons attack to be blamed on the Syrian government. Concern that such an event could soon take place has only grown since the U.S. government announcement this past Thursday that the U.S. would provide $6.6 million over the next year to fund the White Helmets, the controversial “humanitarian” group that has been accused of staging “false flag” chemical weapons attacks in the past.

Notably, the White Helmets were largely responsible for staging the recent alleged chlorine gas attack in Eastern Ghouta, which led the United States, the United Kingdom and France to attack Syrian government targets. That same attack in Eastern Ghouta had been predicted weeks prior by the Russian military and Syrian government, who are warning once again that a similar event is likely to occur in coming weeks. An additional and largely overlooked indication that another staged attack could soon take place has been the recent movements of U.S. military assets to the Syrian coast, particularly the deployment of the Harry S. Truman Carrier Strike Group (HSTCSG). As MintPress previously reported, the deployment of the HSTCSG – which consists of some 6,500 sailors — was first announced in April prior to the U.S., France and U.K. bombing of Syria. However, the group did not arrive until after that bombing had taken place.

While the April bombing was called a “one-time shot” by U.S. Secretary of Defense James Mattis, the fact that the Truman strike group’s deployment to the region was not canceled after the bombings occurred led some to suggest that the U.S. may have been anticipating more strikes against Syria’s government in the coming months. Indeed, soon after the U.S.-led bombing of Syria, U.S. Ambassador to the UN, Nikki Haley, declared the U.S. was “locked and loaded” should the Syrian government again be accused of using chemical weapons. Now, amid claims from both the Syrian and Russian governments of another chemical weapons provocation, as well as the U.S.’ renewed funding of the White Helmets, the strike group’s deployment directly off the Syrian coast has only given greater credence to those previously voiced concerns.

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12,000 refugees so far this year.

Refugee Camps Reopening On Greek Mainland (K.)

While European Union countries shut their doors to migrants – Italy and Malta last week refused to allow a rescue ship carrying more than 600 migrants to dock at their ports – Greek authorities are reopening unused camps and facilities across the mainland to accommodate the swelling number of asylum seekers. Following a series of meetings last week, sources told Kathimerini, the Ministry for Migration Policy decided to reopen four camps, first set up at the peak of the refugee crisis in 2015, raising the total number of operational centers to 25. More specifically, tents have been set up again at the Malakasa camp, north of Athens, to house 300 people.

The Vagiochori camp near Thessaloniki, in northern Greece, is also expected to open in the coming days, providing accommodation for 400 individuals. The facility at Elefsina, west of the capital, has been hosting 250 refugees since late April, while another 350 migrants and refugees were transferred to the reception center at Oinofyta, north of Attica. A drop in the migrant population at the Skaramangas refugee center, meanwhile, was reversed after September last year, with the current number estimated at more than 2,000. An average 75 migrants land daily on Greece’s Aegean islands. A total of 12,065 people had entered the country until June 11 this year.

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“..the plant is heavily cloned so if you have a disease that can kill one tree, it can potentially wipe out the entire industry.”

Scientists Scramble To Stop Bananas Being Killed Off (G.)

A British company has joined the race to develop a banana variety resistant to diseases and climatic changes that threaten to disrupt the availability of the country’s favourite fruit – or even kill it off altogether. The UK alone consumes more than 5bn bananas a year, while the fruit is a staple food in many poor countries and accounts for an export industry worth $13bn (£9.8bn) a year. But the global supply chain is threatened by a virulent disease that has been attacking plantations in Australia, south-east Asia and parts of Africa and the Middle East. As experts warn the fungus known as “fusarium wilt”, or Panama disease, could spread to Latin America, from where the majority of bananas are exported, scientists are scrambling to create a more robust variety that could help sustain the crop.

A single type of banana, called the Cavendish, accounts for 99.9% of bananas traded globally. It replaced a tastier variety wiped out by disease in the 1950s. Now researchers at the Norwich-based startup Tropic Biosciences are using gene editing techniques to develop a more resilient version of the Cavendish after securing $10m from investors. The company’s CEO, Gilad Gershno, : “In the developed world we tend to take bananas for granted. A banana found in your local supermarket grown in Costa Rica and shipped to the UK probably costs less than an apple grown 20 miles away. “If you look at the broader consumption on top of exports, the banana industry is worth a massive $30bn a year. However,people have been getting increasingly worried because the plant is heavily cloned so if you have a disease that can kill one tree, it can potentially wipe out the entire industry.”

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“10,000,000,000,000,000,000. 10 quintillion. That equals more than 1500 million insects for every person.”

Losing The Buzz (ODT)

He starts at the beginning, with a black and white photocopy of a pie chart representing the animal kingdom and its various, speciated slices of pie. 80 percent of all known species of animals are insects, he says. You can tell an insect – if you can get it to hold still for long enough – by its six legs, exoskeleton divided into a head, thorax and abdomen and its two waggling antennae. By far the biggest orders of insects are the coleoptera (beetles) and the hymenoptera (wasps, bees and ants), followed by the lepidoptera (butterflies and moths), then diptera (flies and mosquitoes) and, finally, other insects, such as grasshoppers and silverfish. “The total number of individual insects alive worldwide today is …” He writes it out. 10,000,000,000,000,000,000. “… 10 quintillion. That equals more than 1500 million insects for every person.”

[..] The total biomass, that is the total weight of all organisms on earth, is estimated at 545.2 Gt C (gigatons of carbon), the researchers say. More than 80% of this, 452.5Gt C, is plants. Next comes bacteria (16%, 87.2Gt C) and fungi (2%, 10.9 Gt C). Animals make up just 0.4% of the total biomass. The globe’s 7.6 billion people account for just 0.01% of all living things. And yet our impact on the globe has been enormous – some would say catastrophic. According to the Proceedings article, humans are responsible for the possibly irreparable loss of large chunks of the animal and plant kingdoms; more than 80% of all wild animals and half of all plants.

Anthony Harris finds it deeply disturbing. “Farmed poultry now makes up 70% of all birds on the planet, with just 30% wild,” he says with a shocked tone. “The picture for mammals is worse. 60 percent of all mammals on earth are livestock, mostly cattle and pigs, 36% are humans and just 4% of all mammals are wild.’ [..] Without insects, we face total ecological collapse and global famine. It is being called the Sixth Mass Extinction. The Fifth Mass Extinction was the one that killed off the dinosaurs, 66 million years ago. Harvard entomologist Prof E.O. Wilson has estimated that, without insects and other land-based invertebrates, humanity would only last a few months. Land-based plants and animals would be next to go. The planet would fall quiet and still. The last time the earth was like that was 440 million years ago.

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Anyone seen any initiative to stop this?

Where Have All Our Insects Gone? (G.)

Certainly, the statistics are grim. Native ladybird populations are crashing; three quarters of butterfly species – such as the painted lady and the Glanville fritillary – have dropped significantly in numbers; while bees, of which there are more than 250 species in the UK, are also suffering major plunges in populations, with great yellow bumblebees, solitary potter flower bees and other species declining steeply in recent years. Other threatened insects include the New Forest cicada, the tansy beetle and the oil beetle. As for moths, some of the most beautiful visitors to our homes and gardens, the picture is particularly alarming. Apart from the tiger moth, which was once widespread in the UK, the V-moth (Marcaria wauaria) recorded a 99% fall in numbers between 1968 and 2007 and is now threatened with extinction, a fate that has already befallen the orange upperwing, the bordered gothic and the Brighton wainscot in recent years.

An insect Armageddon is under way, say many entomologists, the result of a multiple whammy of environmental impacts: pollution, habitat changes, overuse of pesticides, and global warming. And it is a decline that could have crucial consequences. Our creepy crawlies may have unsettling looks but they lie at the foot of a wildlife food chain that makes them vitally important to the makeup and nature of the countryside. They are “the little things that run the world” according to the distinguished Harvard biologist Edward O Wilson, who once observed: “If all humankind were to disappear, the world would regenerate back to the rich state of equilibrium that existed 10,000 years ago. If insects were to vanish, the environment would collapse into chaos.”

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Beginning and end of a speech by Pilger in Sydney. Tomorrow there are many rallies for Assange, especially in Australia. There is also a UN Human RIghts Commission meeting in Genava.

Bringing Julian Assange Home (John Pilger)

The persecution of Julian Assange must end. Or it will end in tragedy. The Australian government and prime minister Malcolm Turnbull have an historic opportunity to decide which it will be. They can remain silent, for which history will be unforgiving. Or they can act in the interests of justice and humanity and bring this remarkable Australian citizen home. Assange does not ask for special treatment. The government has clear diplomatic and moral obligations to protect Australian citizens abroad from gross injustice: in JulianE’s case, from a gross miscarriage of justice and the extreme danger that await him should he walk out of the Ecuadorean embassy in London unprotected. We know from the Chelsea Manning case what he can expect if a US extradition warrant is successful — a United Nations Special Rapporteur called it torture.

[..] Malcolm Turnbull is now the Prime Minister of Australia. Julian Assange’s father has written to Turnbull. It is a moving letter, in which he has appealed to the prime minister to bring his son home. He refers to the real possibility of a tragedy. I have watched Assange’s health deteriorate in his years of confinement without sunlight. He has had a relentless cough, but is not even allowed safe passage to and from a hospital for an X-ray . Malcolm Turnbull can remain silent. Or he can seize this opportunity and use his government’s diplomatic influence to defend the life of an Australian citizen, whose courageous public service is recognised by countless people across the world. He can bring Julian Assange home.

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Jun 172018
 
 June 17, 2018  Posted by at 9:05 am Finance Tagged with: , , , , , , , , , , , , , , ,  


George Grosz Apocalyptic landscape 1936

 

Is Merkel’s Reign Nearing A Frustrated End? (G.)
Merkel Wants to Hold Urgent Summit With EU States on Migration Issues (Sp.)
Italy Bars Two More Refugee Ships From Ports (G.)
Spain Rescues More Than 900 Boat Migrants, Finds Four Bodies (R.)
First Migrants From Aquarius Rescue Ship Arrive At Spanish Port (Sky)
Spain Says France To Take In Aquarius Ship Migrants (AFP)
Trump Keeps His Promises On Trade (AFP)
China Tariffs On US Soybeans Could Cost Iowa Farmers Up To $624 Million (DMR)
Mattis: Putin Is Trying To “Undermine America’s Moral Authority” (CJ)
Consumers Stubbornly Cling to Cash (DQ)
May To Unveil £20 Billion A Year Boost To NHS Spending (G.)
Greece, FYROM To Sign Name Change Accord Sunday (K.)

 

 

This morning Merkel’s coalition partner, Horst Seehofer, said ‘I can not work with this woman anymore’. Looks like game could be over.

Is Merkel’s Reign Nearing A Frustrated End? (G.)

For nearly 14 years as Germany’s chancellor, Angela Merkel has defined and personified Europe’s middle ground: pragmatic, consensual, mercantilist, petit-bourgeois, above all stable. It is little wonder the leader of Mitteleuropa’s major economic power has dominated the political centre for so long. But what if Merkel falls? Can the centre hold? These are increasingly urgent questions as the once unassailable “Mutti” struggles to hold together a fractious coalition. The immediate issue, which is likely to come to a head on Monday, is a furious row over EU immigration policy. But other problems are piling up, with unpredictable consequences for Europe’s future cohesion.

Merkel’s political obituary has been written many times, but now the final draft is nearing completion. She is under fire from the hard-right, anti-immigrant Alternative für Deutschland (AfD), which stormed into the Bundestag last autumn. She has problems with the failing, unpopular Social Democrats on her left, on whom she depends for support. More seriously, though, Merkel is being challenged from within by her interior minister, Horst Seehofer, former chairman of Bavaria’s rightwing CSU, which is allied to Merkel’s Christian Democrats. In sum, Seehofer is demanding Germany no longer admit migrants who have first entered the EU via other member states – which is nearly all of them.

In Merkel’s view, such a bar would be illegal and would wreck her efforts – ongoing since the 2015 Syrian refugee crisis, when Germany accepted 1 million migrants – to create a balanced, EU-wide policy of voluntary migrant quotas. She says Seehofer should wait for this month’s EU summit to come up with a joint plan. The problem with that approach is twofold. Seehofer’s CSU, which faces a critical electoral clash with the AfD in October, complains that the EU has been trying and failing to agree this for years. Another objection, as her critics see it, is that most Germans, recalling her 2015 “open door” policy, do not trust Merkel on this issue. Polls indicate 65% back tighter border controls.

Last week’s row between France and Italy, sparked by Rome’s decision to refuse entry to a ship, the Aquarius, carrying 629 migrants rescued off Libya, showed how improbable is the prospect of agreement at the Brussels summit. Italy’s new populist leadership, in common with an emerging axis of nationalist-minded governments in Austria, Hungary and Poland, believes it has a mandate to halt the migrant flow. Meanwhile, so-called “frontline states” such as Greece, Spain and Italy accuse “destination states” such as Germany, France and the UK of failing to accept a fair share of migrants. Divisions have been exacerbated by the failure, so far, of a key Merkel-backed initiative, the multibillion-euro EU Emergency Trust Fund for Africa, to reduce migration by addressing “root causes” in places such as Nigeria, Eritrea and Somalia.

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And this is of course far too late. This summit should have been held 3 years ago. And it should be a UN summit, not some talks with Greece and Italy. Give Africa a voice. And Central America. Stop inviting xenophobia.

Merkel Wants to Hold Urgent Summit With EU States on Migration Issues (Sp.)

German Chancellor Angela Merkel wants to hold an urgent summit dedicated to the migration crisis and to discuss this issue with a group of the EU member states, local media reported. The Bild newspaper reported Saturday citing own sources in the leadership of several EU countries that Merkel would like to discuss migration-related issues with leadership of Austria, Greece, and Italy. According to the media outlet, a final decision about the date of the summit has not been made yet, however it could take place later in the month. Earlier, Italy’s Prime Minister Giuseppe Conte, called for reforms of EU asylum rules, proposing that the EU set up centers to process asylum claims in migrants’ countries of origin. France’s President Emanuel Macron also stressed the need to modify current migration rules and criticizing the European Union for not sharing the burden with Rome over the migrant crisis.

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This comes at a bad time given Merkel’s problems.

Italy Bars Two More Refugee Ships From Ports (G.)

Italy’s interior minister has sparked a new migration crisis in the Mediterranean by barring two rescue boats from bringing refugees to shore, a week after the Auarius was prevented from docking. “Two other ships with the flag of Netherlands, Lifeline and Seefuchs, have arrived off the coast of Libya, waiting for their load of human beings abandoned by the smugglers,” Matteo Salvini, the leader of the anti-immigrant party the League, wrote on his Facebook page. “These gentlemen know that Italy no longer wants to be complicit in the business of illegal immigration, and therefore will have to look for other ports [not Italian] where to go.”

Italy’s closure of its ports to the migrant rescue ship Aquarius, which was carrying 620 people, triggered warnings from aid agencies of a deadly summer at sea for people trying to cross the Mediterranean. Axel Steier, the co-founder of Mission Lifeline which operates the Lifeline ship, said his crew had rescued more than 100 migrants off Libya on Friday in an operation with a US warship, and transferred them to a Turkish merchant vessel. He said his ship was too small to make the journey from Libya to Italian ports and that he always transferred migrants to other ships, but insisted those craft should have the right to land in Italy.

“I am sure there is an obligation for Italy to take them because its closest safe harbour is Lampedusa. We hand over migrants to Europe because of the Geneva convention,” he said. Vessels chartered by an assortment of European NGOs have plied the waters off Libya for three years, rescuing migrants from leaking boats and transporting them to Sicily.

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Greece, Italy and now Spain.

Spain Rescues More Than 900 Boat Migrants, Finds Four Bodies (R.)

Spain’s coast guard rescued 933 migrants and found four dead bodies in the Mediterranean Friday and Saturday, as the country prepared for the arrival of a charity rescue ship that was denied a port by Italy and Malta. The number of people fleeing poverty and conflict by boat to Spain doubled last year and is likely to rise again in 2018, according to the EU border agency, potentially pushing migration up the national political agenda. Spanish Prime Minister Pedro Sanchez has already made migrant-friendly moves in his first two weeks in the job, offering to take in the rescue ship Aquarius with 629 people on board and pledging free healthcare to undocumented migrants. The coast guard said on Twitter it had rescued 507 people from 59 small dinghies in the Gibraltar strait, where it also found the four bodies.

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Kudos to Sanchez. But what comes next?

First Migrants From Aquarius Rescue Ship Arrive At Spanish Port (Sky)

The first boat of the Aquarius convoy carrying 630 people, who have become the focus of a pan-European disagreement over migration, has docked in Valencia. The Italian coast guard vessel Dattilo arrived in the Spanish port just before 7am local time on Sunday, and will be followed by the Aquarius and another Italian navy ship, the Orione. The migrants were rescued a week ago off the coast of Libya and have been at sea ever since after the Italian government refused to allow the vessel they were aboard to dock in Italy. Among those rescued are seven children aged under five, 32 children aged between five and 15 years, 61 young people aged from 15 to 17 and 80 women, seven of whom are pregnant.

They were rescued in several different operations last weekend after Italian coastguard vessels reported a group of small rubber dinghies off the coast of Libya. The Aquarius, a charity rescue vessel operated by French charities SOS Mediterranee and Medecins Sans Frontieres (MSF), picked up more than a hundred people in a complex night-time rescue before being asked by the Italian authorities to take on board hundreds more people they had recovered. However the Italian interior minister, Matteo Salvini, then refused to allow the Aquarius to dock at Italian ports, fulfilling an election pledge to stop the arrival of migrants from Africa. Malta also refused to allow them to dock there, arguing that the Italians had assumed responsibility for the rescue operations.

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More kudos for Sanchez. France is moving.

Spain Says France To Take In Aquarius Ship Migrants (AFP)

Madrid said Saturday it had accepted an offer from France to take in migrants from the Aquarius rescue ship, currently en route to Spain with more than 600 people on board. “The French government will work together with the Spanish government to handle the arrival of the migrants” scheduled for Sunday, Spain’s deputy prime minister Carmen Calvo said in a statement. “France will accept migrants who express the wish to go there” once they have been processed in Valencia, the statement said. The vessel is at the heart of a major migration row between European Union member states.

Chartered by a French aid group, the vessel rescued 629 migrants including many children and pregnant women off Libya’s cost last weekend. Italy’s new populist government and Malta refused to let it dock in their ports, accusing each other of failing to meet their humanitarian and EU commitments. Spain eventually stepped in and agreed to receive the refugees. France – who had angered Rome by branding it irresponsible over the vessel rejection – offered Thursday to welcome Aquarius migrants who “meet the criteria for asylum”.

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Still negotiating.

Trump Keeps His Promises On Trade (AFP)

By inflicting tariffs on the steel and aluminum of his allies, and then on tens of billions of dollars in goods from China, US President Donald Trump has quickly moved to fulfill the tough campaign pledges he made on trade. During his first year in office, Trump and his top economic aides made repeated threats and warned that preliminary investigations were launched into whether certain imports were being unjustly subsidized. But no concrete steps were taken. That all changed in March, when the “America First” president went on the offensive. “What happened for a period of time is the president was constrained by different members” of his administration, said Edward Alden, a specialist on US economic competitiveness at the Council on Foreign Relations.

“But the president has become increasingly confident in his own judgment on these issues… He is willing to do radical things he promised during his campaign and for many years before that.” In its latest move, the White House on Friday announced stiff 25 percent tariffs on Chinese imports, sparking immediate retaliation from Beijing. The move, which Trump justified as payback for the theft of American intellectual property and technology, reignited a trade spat between the world’s two largest economies, spooking markets and worrying business leaders.

It came on top of the tariffs on Chinese steel and aluminum that went into effect in late March – measures that prompted Beijing to slap punitive duties on 128 US goods, including pork, wine and certain pipes. Since June 1, steel and aluminum imports from the European Union, Canada and Mexico have been hit with tariffs of 25 percent and 10 percent, respectively. Trump has seemingly opted to go with his gut, sometimes over the protestations of his closest aides.

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Since there is no glut of soybeans globally, this looks improbable.

China Tariffs On US Soybeans Could Cost Iowa Farmers Up To $624 Million (DMR)

Perhaps Iowa farmers’ biggest fear is becoming a harsh reality: The escalating U.S.-China trade dispute erupted Friday, with each country vowing to levy 25 percent tariffs on $50 billion in goods. U.S. and Iowa agriculture is caught in the crossfire, with farmers selling $14 billion in soybeans to China last year, its top export market. Soybeans are among hundreds of U.S. products China has singled out for tariffs. The U.S. has an equally long list that includes taxing X-ray machines and other Chinese goods. Iowa farmers could lose up to $624 million, depending on how long the tariffs are in place and the speed producers can find new markets for their soybeans, said Chad Hart, an Iowa State University economist.

U.S. soybean prices have fallen about 12 percent since March, when the U.S.-China trade dispute began. “Any tariff or tax put in place will have a significant impact, not only to the U.S. soybean market but to Iowa’s, because we’re such a large producer,” Hart said Friday. Iowa is the nation’s second-largest soybean grower, producing 562 million bushels last year worth $5.2 billion. “It will slow down the market. Even with the tariffs in place, we will ship a lot of soybeans to China,” Hart said. “It just won’t be nearly the amount we did before. “It’s likely to still be our largest market even with these tariffs in place.”

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Word.

Mattis: Putin Is Trying To “Undermine America’s Moral Authority” (CJ)

At a graduation ceremony for the US Naval War College (barf), US Secretary of Defense James Mattis asserted that Russian President Vladimir Putin “aims to diminish the appeal of the western democratic model and attempts to undermine America’s moral authority,” and that “his actions are designed not to challenge our arms at this point but to undercut and compromise our belief in our ideals.” This would be the same James Mattis who’s been overseeing the war crimes committed by America’s armed forces during their illegal occupation of Syria.

This would be the same United States of America that was born of the genocide of indigenous tribes and the labor of African slaves, which slaughtered millions in Korea, Vietnam, Cambodia, Iraq, Libya and Syria for no legitimate reason, which is partnered with Ukrainian Nazis, jihadist factions in Syria and Iranian terror cultists, which supports 73 percent of the world’s dictators, which interferes constantly in the electoral processes of other countries as a matter of policy, which stages coups around the world, which has encircled the globe with military bases, whose FBI still targets black civil rights activists for persecution to this very day, which routinely enters into undeclared wars of aggression against noncompliant governments to advance plutocratic interests, which remains the only country ever to use nuclear weapons on human beings after doing so completely needlessly in Japan, and which is functionally a corporatist oligarchy with no meaningful “democratic model” in place at all.

A casual glance at facts and history makes it instantly clear that the United States has no “moral authority” of any kind whatsoever, and is arguably the hub of the most pernicious and dangerous force ever assembled in human history. But the establishment Russia narrative really is that cartoonishly ridiculous: you really do have to believe that the US government is 100 percent pure good and the Russian government is 100 percent pure evil to prevent the whole narrative from falling to pieces. If you accept the idea that the exchange is anything close to 50/50, with Russia giving back more or less what it’s getting and simply protecting its own interests from the interests of geopolitical rivals, it no longer makes any sense to view Putin as a leader who poses a unique threat to the world. If you accept the idea that the west is actually being far more aggressive and antagonistic toward Russia than Russia is being toward the west, it gets even more laughable.

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“Currency in Circulation vs. GDP is increasing on all continents..”

Consumers Stubbornly Cling to Cash (DQ)

The last month has been an unhappy time for daydreamers of a cashless nirvana. Following weeks of disruptive tech failures, payment outages, and escalating cyber fraud scams, much of it taking place in Britain, consumers have been reminded of one of the great benefits of physical cash: it is accepted just about everywhere and does not suddenly fail on you. The findings of a new study by UK-based online payments company Paysafe, partly owned by US private equity giant Blackstone, confirm that consumers on both sides of the Atlantic continue to cling to physical lucre. For its Lost in Transaction report, Paysafe surveyed over 5,000 consumers in the UK, Canada, the US, Germany, and Austria on their payment habits.

One of its main findings is that 87% of consumers used cash to make purchases in the last month, while 83% visited ATMs, and 41% are not interested in even hearing about cash alternatives. “Despite the apparent benefits of low-friction payment technologies, these findings suggest many consumers aren’t ready to lose visibility of the payment process,” says Paysafe Group Chief Marketing Officer Oscar Nieboer. “It’s clear that the benefits are not unilaterally agreed upon, with cultural and infrastructure trends at play, and it may be some time before adoption is widespread.” Although consumers continue to cling to cash, they appear to be carrying less of it: 49% overall in the survey and 55% of U.S. respondents said they carry less cash now than they did a year ago.

The average American consumer carries $42 today — that’s $8 less than in 2017. In the UK the average amount carried in 2017 was £33; that has now fallen to £21. But that does not mean that the amount of cash in circulation is dwindling. On the contrary, according to this year’s G4S cash report, the world average ratio of currency vs GDP continues to rise, reaching 9.6% in 2018. “Currency in Circulation vs. GDP is increasing on all continents, indicating a consistent, growing demand for cash across the world,” says the report. South America has by far the highest cash dependency relative to its GDP, with an average ratio of over 16%.

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First you kill it, then it needs to be revived. How much of the £20 billion goes to repairing the damage already done?

May To Unveil £20 Billion A Year Boost To NHS Spending (G.)

Taxpayers are to be asked to help fund a £20bn a year injection of extra cash into the National Health Service by 2023-24 that will pay for thousands more doctors and nurses, while cutting cancer deaths and improving mental health services, Theresa May will say today. The announcement, before the NHS’s 70th birthday next month, will represent the biggest funding boost since Gordon Brown imposed a one percentage point rise in National Insurance to pay for more NHS spending in his 2002 budget, in the face of Tory claims that Labour was slapping a “tax on ordinary families”.

Government sources said the increases, which would be paid for in part by a “Brexit dividend”, would amount to around £600m a week extra for the NHS in cash terms within six years. Health and social care secretary Jeremy Hunt said last night that the government wanted to “show the world what a cutting-edge 21st-century healthcare system can look like”. He added: “This long-term plan and historic funding boost is a fitting birthday present for our most loved institution. Like no other organisation could ever hope to be, the NHS is there for every family at the best and worst of times, from the wonder of birth to the devastation of death, living and breathing those very British values of decency, fairness and compassion.

He said the extra cash “recognises the superhuman efforts made by staff over the last few years to maintain services in the face of rapidly growing demand. But it also presents a big opportunity for the NHS to write an entirely new chapter in its history”. Details of how the public will be required to pay through tax rises, and the proportion of the funding increases they will pay for, will not be spelled out until the budget, because of ongoing arguments involving the chancellor Philip Hammond, Hunt, and No 10.

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70% of Greeks is against the deal, protests are everywhere. But he pushed it through. In Foreign Policy, someone suggested giving him a Nobal Peace Prize for it. But, but, democracy…

Greece, FYROM To Sign Name Change Accord Sunday (K.)

Greece and the Former Yugoslav Republic of Macedonia (FYROM) are set to sign a historic accord to modify the latter’s name after Greek Prime Minister Alexis Tsipras survived a no-confidence vote in Parliament Saturday. The accord is to be signed in the Prespes region, a lake district which borders Greece, FYROM and Albania, by the two countries’ foreign ministers Sunday. Tsipras and his FYROM counterpart Zoran Zaev will both attend the ceremony, along with UN mediator Matthew Nimetz and other European officials – including the European Union’s foreign policy chief Federica Mogherini and European Neighborhood Policy and Enlargement Negotiations Commissioner Johannes Hahn.

Following the ceremony, members of the two delegations will hold a working lunch in the town of Otesevo, in FYROM. Security at the event is expected to be ultra-tight. A protest against the deal will be held in the nearby village of Pisoderi. On Saturday, after more than two days of vehement debate in Parliament, Greece’s SYRIZA-led government survived a no-confidence vote brought against it by the main opposition New Democracy party, but with one less MP. The motion garnered 127 votes with 153 against. The junior coalition partner Independent Greeks (ANEL) backed the government despite its opposition to the name deal with FYROM that Tsipras announced last week, bar one MP, Dimitris Kammenos, who backed the motion. He was subsequently expelled from the party, reducing the government’s majority to 153.

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


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

 

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

 

 

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

This Fed Grows Relentlessly More Hawkish (WS)

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

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

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

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

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

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

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

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

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

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

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Don’t forget the BOJ and China.

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

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

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

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

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

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

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

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In a world of their own.

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

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

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

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

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

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

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

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

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

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Losing business support may prove fatal for May.

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

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

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

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

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“Not Trump” is not an identity.

The North Korea Summit Through the Looking Glass (Jacobin)

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

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

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

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

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

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

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

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What will the police do when quantum computing gets involved?

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

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

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

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

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

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

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

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

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

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84 scientists from 44 international organisations..

Antarctic Ice Melting Faster Than Ever (G.)

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

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

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

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Jun 072018
 
 June 7, 2018  Posted by at 2:24 am Finance Tagged with: , , , , , , , , , , ,  


Vincent van Gogh The good Samaritan (after Delacroix) 1890

 

UK House Prices Have Soared 100-Fold Since 1966 (CityAM)
No Need To Buy US Gas At Triple The Price, Will Buy From Russia – Austria (RT)
European Businesses Advised To Avoid Using British Parts Ahead Of Brexit (Sky)
Volatility May Hit Wall Street As Alphabet, Facebook Leave Tech Sector (R.)
China’s Debt Default Avalanche (ZH)
Turkey Escalates Row With Greece Over ‘Putschist’ Soldiers (G.)
Merkel Backs Macron’s European Defense Force Initiative (RT)
Airbnb Culls Japan Listings Ahead Of New Rental Law (AFP)
Whoever Controls The Narrative Controls The World (CJ)
How Humanity Could Become Impossible To Propagandize (CJ)
Study Warns Of Alarming Decline In Australian Fish (AFP)

 

 

Shifting priorities. Homes are no longer places to live.

UK House Prices Have Soared 100-Fold Since 1966 (CityAM)

UK house prices are 106 times higher than they were when England won the World Cup in 1966, according to research from online mortgage broker Trussle. Average house prices have gone up from £2,006 to £211,000, the company found, while wages have risen at around a third of the rate, moving from £798 to £26,500. But for the country’s footballers, the story is somewhat different. On average Premier League footballers earn 1,136 times more than top-flight stars like Bobby Moore and George Best did back in 1966. It’s estimated that the average wage of the current England squad is just below £80,000 per week – more than 3 times the annual UK average wage.

Ishaan Malhi, CEO and founder of Trussle, said: “A lot of has changed since England won the World Cup. We’ve put a man on the moon, invented the internet and we’ve seen technology transform almost every aspect of our lives. “We’ve also seen the UK housing market change dramatically. Prices have soared in the last 52 years, wages have struggled to keep pace and for young people, the chances of getting on the property ladder today will feel a lot slimmer than they did in 1966.” The research from Trussle comes as analysis from trade union GMB published yesterday showed that rents in London are far outpacing wage growth. Analysing data from the Valuation Office Agency, GMB found that between 2011 and 2017, rent prices for two-bedroom flats in London increased by 25.9%, whilst over the same period, monthly earnings increased by just 9.1%.

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European ties to Russia are old and deep.

No Need To Buy US Gas At Triple The Price, Will Buy From Russia – Austria (RT)

The US is force-feeding Europe its liquefied natural gas, which is three times more expensive that buying it from Russia, Austrian President Alexander Van der Bellen said after signing a gas-supply contract with Moscow until 2040. While US politicians are accusing Europe of being dependent on Russian gas, they forget that “American liquefied gas is two or three times more expensive than Russian gas. Under such circumstances, it makes little sense in purely economic terms to replace Russian gas with American LNG,” Van der Bellen said at a press conference after meeting Russian President Vladimir Putin in Vienna on Tuesday.

Putin noted that Austria is a major transportation hub for Russian gas being exported to Europe. “Austria has become one of the key, if not to say, one of the most important units of Russian gas transportation to Western Europe and plays an important role in ensuring the energy security of the entire European continent,” Putin said. He recalled that Russia has exported more than 200 billion cubic meters of natural gas to Austria in the past 50 years. After the meeting, Russia’s Gazprom and Austria’s OMV signed a gas supply contract until 2040.

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Trade deals can be bitches.

European Businesses Advised To Avoid Using British Parts Ahead Of Brexit (Sky)

European governments are advising businesses not to use British parts in goods for export ahead of Brexit, Sky News has established. In its advice rolled out to all Dutch businesses, the Dutch government has told its exporters that “if a large part of your product consists of parts from the UK” domestic exporters may lose free trade access under existing deals. The advice says: “Brexit will have consequences for exports outside the EU. “After Brexit, parts made in the UK no longer count towards this minimum production in the European Union.” This is a reference to what are known as “rules of origin” and “local content” under international trade rules. In order to qualify for EU free trade deals, a certain proportion, typically 55% of a product’s parts, needs to come from the EU.

The Dutch government says UK parts “no longer count towards EU origin” in its official “Brexit impact scan” advice to Dutch businesses. That warning has also been underpinned by the EU’s own technical notice on this issue. “As of withdrawal date, the UK becomes a third country. UK inputs are considered ‘non-originating’,” it says. A leading car industry executive told Sky News that not using UK parts for EU exports would be a “catastrophe” for the British industry. “The hard Brexiteers have built a bomb under the UK automotive industry and the EU have lit it,” said one chief executive. Sky News has also heard of major UK automotive suppliers now ceasing UK supply of major components to cars for export to countries currently covered by EU Free Trade Areas – countries such as South Korea, South Africa and Canada.

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A new day.

Volatility May Hit Wall Street As Alphabet, Facebook Leave Tech Sector (R.)

Volatility could well be in the cards for Wall Street again early this fall, but not for the same reason stocks got rattled in February. This time the culprit would be the largest-ever shakeup of the stock market’s broad business sectors, which will mean some of the hottest stocks, like Facebook and Google parent Alphabet, will shift from their traditional homes in the top-performing technology sector and into a deepened pool of telecommunications and media stocks. The sweeping reorganization of the Global Industry Classification Standard, or GICS, means that funds tracking the telecom, tech and consumer discretionary sectors will be forced to trade billions of dollars of stock to realign their holdings by a Sept. 28 effective date.

While the choppiness many investors expect to see is unlikely to hit stocks in quite the same way that wave of the global uncertainty did in early 2018, the fact that so much money must be shifted among index funds in a short time will cause a stir. In a bid to ensure a smooth transition, leading fund provider Vanguard Group has have already started adjusting its sector exchange-traded funds, or ETFs, while State Street Global Advisors is launching an entirely new fund. Other investors predict price swings and commotion on trading desks if last-minute sales of Alphabet and Facebook shares by heavyweight technology index funds dwarf demand from a handful of telecom funds buying those stocks.

“There’s probably going to be net selling,” said Andrew Bodner, president of Double Diamond Investment Group in Parsippany, New Jersey. “That will be a temporary scenario, and it could be a good buying opportunity for a lot of those stocks.” Maintained by S&P Dow Jones Indices and MSCI since 1999 and widely used by portfolio managers, the GICS classifies companies across 11 sectors. The newest, real estate, was split off from financials in 2016. The upcoming changes, which have yet to be finalized, are meant to reflect evolving industries. Facebook and Alphabet will move from information technology and sit alongside AT&T Inc and Verizon Communications in a broadened telecommunication services sector that will be renamed communications services.

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Who’s the boss in China? Xi or the shadows?

China’s Debt Default Avalanche (ZH)

[..] what if the first domino to fall in the coming corporate debt crisis is not in the US, but in China? After all, as part of China’s aggressive deleveraging campaign, there has already been a spike of corporate bankruptcies as banks shed more of their massive note holdings and de-risk their balance sheets. According to Logan Wright, Hong Kong-based director at research firm Rhodium, there have already been least 14 corporate bond defaults in China in 2018; a separate analysis by Economic Information Daily, as of May 25, there had already been no less than 20 corporate defaults, involving more than 17 billion yuan, a shockingly high number for a country which until recently had never seen a single corporate bankruptcy, and a number which is set to increase as Chinese banks pull pull back from lending to other firms that use the funds to buy bonds, exacerbating the pressure on the market.

“You have seen banks redeeming funds placed with non-bank financial institutions that have reduced the pool of funds available for corporate bond investment overall,” Wright told Bloomberg, adding that additional bond defaults are especially likely among those property developers and local-government financing vehicles which have relied on shadow banking sources of funds. As we discussed last year, as part of Beijing’s crackdown on China’s $10 trillion shadow banking sector, strains have spread from high-yield trust products to corporate bonds as the lack of shadow funding has choked off refinancing for weaker borrowers. Separately, Banks’ lending to other financial firms, a common route for funds and securities brokers to add leverage for corporate bond investments, declined for three straight months, or a total of 1.7 trillion yuan ($265 billion), since January according to Bloomberg calculations.

The deleveraging campaign is also depressing bond demand: “Unlike the U.S., where the majority of buyers of bonds are mutual funds, individuals and investment companies, in China, the key holders of bonds are bank on-and off-balance sheet positions,” said Jason Bedford at UBS, who noted that Chinese banks are buying far fewer bonds as a result. Putting the number in context, according to Bloomberg, China’s four largest banks held about 4.1 trillion yuan in bonds issued by companies and other financial institutions at the end of 2017, nearly 20% below 5.1 trillion yuan a year earlier; all Chinese banks held about 12 trillion yuan of corporate bonds on or off their balances sheets, some 70% of outstanding issuance, according to Citic.

It is therefore hardly surprising to see that Chinese corporate bonds, especially riskier issues, have been getting slammed in recent weeks. According to Chinabond data, as noted first by Bloomberg, the yield premium of three-year AA- rated bonds over similar-maturity AAA notes has blown out 72 bps since March to 225 basis points, the highest level since August 2016, an indication of the recent pressures on weaker firms. One can imagine what is going on with deep junk-rated corps.

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Under heavy police protection in Greece. Because the Turks may come and get them. Elections June 24.

Turkey Escalates Row With Greece Over ‘Putschist’ Soldiers (G.)

Turkey has sent fighter jets roaring into Greek airspace as tensions mount between the two neighbours following the release from pre-trial detention of eight Turkish army officers described as traitors by Ankara. Formations of F-16s flew at low altitude over Aegean isles for more than 20 minutes on Tuesday as Turkey furiously accused Greece of sheltering terrorists. Ankara vowed to trace the commandos who it claimed participated in the failed July 2016 coup against the president, Recep Tayyip Erdogan and his government. “It is our duty to find these ‘putschist’ soldiers wherever they are, pack them up and bring them to Turkey,” the country’s deputy prime minister, Bekir Bozdag, said late on Monday.

He personally criticised the Greek prime minster, Alexis Tsipras, for failing to hand the soldiers over to Turkey after they flew into Greek airspace. “From statements made in Greece by its prime minister right after the coup, we were of the positive opinion that they would be extradited to Turkey,” he said. “We thought that Mr Tsipras would keep his word. With time, though, we saw that the judicial authorities were mobilised and these ‘putschists’ were not extradited.” The fate of the eight has been in Greek hands ever since the army officers took local authorities aback, landing their helicopter outside the northern border town of Alexandroupolis a day after the abortive coup.

[..] On Monday Greek authorities moved the military personnel out of police custody; following expiry of the 18-month pre-trial period they are legally allowed to be detained while they apply for asylum. They have been placed in top-secret locations under heavy police protection. “Given Turkey’s mindset, the situation is very dangerous,” said a senior judicial source. “But this is an issue of justice and we feel strongly that we must stand up for it.”

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Competition for NATO?!

Merkel Backs Macron’s European Defense Force Initiative (RT)

Chancellor Angela Merkel has supported “in principle” the idea of a joint European Defense Force proposed by French President Emmanuel Macron. Germany’s opposition had been the main stumbling block for the much-discussed project. “I am in favor of President Macron’s proposal for an intervention initiative,” the German chancellor told Frankfurter Allgemeine newspaper on Sunday. “However, such an intervention force with a common military-strategic culture must fit into the structure of defense cooperation,” she said. Merkel said that the German military, the Bundeswehr, “must, in principle, be part of such an initiative,” but added that her statement “doesn’t mean that we are to be involved in every mission.”

During his key speech at Sorbonne University last September, Macron proposed a European military “intervention force” that would protect the continent by taking action in hotspots around the globe. It’s a crucial element of the French leader’s defense reform, which is aimed at integrating European defense capacities. But the talks on implementing the European Defense Force have so far been complicated due to Berlin’s cautions approach to the initiative. “European defense cooperation is very important. Of the 180 weapon systems that currently co-exist in Europe, we must move to a situation like the United States, which has only about 30 weapons systems,” Merkel said.

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Still a pretty weak law.

Airbnb Culls Japan Listings Ahead Of New Rental Law (AFP)

Rental platform Airbnb has suspended a large majority of its listings in Japan ahead of a new law that goes into effect next week regulating short-term rentals in the country. The law, which will comes into force on June 15, requires owners to obtain a government registration number and meet various regulations that some have decried as overly strict. “This weekend we reached out to those hosts who have not yet obtained their notification number to let them know that they will need this to accept any new bookings,” Airbnb spokesman for Asia-Pacific Jake Wilczynski told AFP. “We have informed those hosts that we are in the process of turning off future listing capabilities.”

He declined to confirm the exact number of listings affected, but local media reports and sources put the figure at about 80 percent of the rentals available on the site across Japan. Wilczynski said many Airbnb hosts had already obtained their registration, and others were “going through or finalising” the process. “We are on course to register tens of thousands of new listings in Japan in the months ahead,” he added. [..] The law limits stays to 180 days a year, and allows local governments to impose additional restrictions, with the tourist magnet of Kyoto only permitting rentals in residential areas between mid-January and mid-March, the low season for tourists.

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Two excellent pieces from Caitlin Johnstone.

Whoever Controls The Narrative Controls The World (CJ)

MSNBC host Joy Reid still has a job. Despite blatantly lying about time-traveling hackers bearing responsibility for bigoted posts a decade ago in her then-barely-known blog, despite her reportedly sparking an FBI investigation on false pretenses, despite her colleagues at MSNBC being completely fed up with how the network is handling the controversy surrounding her, her career just keeps trundling forward like a bullet-riddled zombie. To be clear, I do not particularly care that Joy Reid has done any of these things. I write about war, nuclear escalations and the sociopathy of US government agencies which kill millions of people; I don’t care that Joy Reid is or was a homophobe, and I don’t care that she lied to cover it up.

The war agendas that MSNBC itself promotes on a daily basis are infinitely worse than either of these things, and if that isn’t obvious to you it’s because military propaganda has caused you to compartmentalize yourself out of an intellectually honest understanding of what war is. What is interesting to me, however, is the fact that Reid’s bosses are protecting her career so adamantly. Both by refusing to fire her, and by steering the conversation into being about her controversial blog posts rather than the fact that she told a spectacular lie in an attempt to cover them up, Reid is being propped up despite this story constantly re-emerging and making new headlines with new embarrassing details, and despite her lack of any discernible talent or redeeming personal characteristics. This tells us something important about what is going on in the world.

It is not difficult to find someone to read from a teleprompter for large amounts of money. What absolutely is difficult is finding someone who is willing to deceive and manipulate to advance the agendas of the privileged few day after day. Who else would be willing to spend all day on Twitter smearing everyone to the left of Hillary Clinton while still claiming to stand on the political left? Who else would advance the point-blank lieabout “17 intelligence agencies” having declared Russia guilty in US election meddling months after that claim had been famously and virally debunked? Who else would publicly claim that Edward Snowden’s NSA leaks did not benefit anyone besides Russia? Who else could oligarchs like Comcast CEO Brian L Roberts, whose company controls MSNBC, count on to consistently advance his agendas?

While it’s easy to find someone you can count on to advance one particular lie at one particular time, it is difficult to find someone you can be absolutely certain will lie for you day after day, year after year, through election cycles and administration changes and new war agendas and changing political climates. A lot of the people who used to advance perspectives which ran against the grain of the political orthodoxy at MSNBC like Phil Donahue, Ed Schultz and Dylan Ratigan have vanished from the airwaves never to return, while reporters who consistently keep their heads down and toe the line for the Democratic establishment like Chris Hayes, Rachel Maddow and Joy Reid are richly rewarded and encouraged to remain.

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It’s just that I’m asking myself if maybe the notion that ‘we can change and be better people’ is itself a narrative?!

How Humanity Could Become Impossible To Propagandize (CJ)

Narrative rules our world today, from our most basic concepts about ourselves to the behavior of nations and governments. Right now your direct experience of life is little more than the air going in and out of your respiratory system, your gaze moving from left to right over this text, and perhaps the sensation of your bum in a chair or sofa; without any narrative overlay, those experiences are all you are in this moment. Add in mental narrative and all of a sudden you’re a particular individual with a particular name and a particular story, who has perhaps some concerns about the future and regrets about the past, with all sorts of desires and goals and fears and aversions. As far as your actual present experience is concerned, all that stuff is pure mental noise. Pure narrative.

The same is true of things like power, money, and government. There is nothing grafted onto the electrons of the universe which says that the world needs to be mostly ruled by a few billionaires and their lackeys. Only the made-up rules about how power, money and government operate cause that to be the case, and those rules are only as true as we all collectively agree to pretend they are. They are all mental constructs that people made up, and we can therefore change them whenever we want to. Which is why so much plutocratic effort goes into making sure that we don’t.

Narrative dominates our society from top to bottom, which means that all someone has to do to control society is control its narratives. If people are sick, hungry, or poor, you don’t have to give them medicine, food or money to pacify them; you can just give them a narrative instead. If you can get them subscribed to the notion that attempts to rectify these problems with economic justice ought to be rejected and avoided by all hardworking Americans, you can have them defending the plutocracy and advocating their own poverty without giving them a thing. In a society where power is relative and money equals power, the rich are necessarily incentivized to keep everyone else poor in order to retain power, so using narrative control to pacify the masses is a common and useful tactic.

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Wherever you look, life itself appears to be exiting the planet. Rapidly.

Study Warns Of Alarming Decline In Australian Fish (AFP)

Conservation experts warned Wednesday of alarming falls in Australian fish populations and called for more marine reserves and better management to halt the decline. A 10-year study, looking at nearly 200 species at 544 sites, found the main cause was overfishing, with climate change also contributing, although the organisation that manages the nation’s fisheries disputed the findings. The research, in the decade to 2015 by the University of Tasmania and Sydney’s University of Technology, indicated that the numbers of large fish species – over 20 centimetres (eight inches) – had decreased by about 30 percent.

Claimed to be the first independent assessment of the size and abundance of coastal fish species off the Australian continent, it used frequent underwater surveys by divers along blocks of reef. Researchers compared areas where fishing was allowed with marine parks where it was limited or not permitted at all. “We found consistent population declines amongst many popular commercial and recreational fishes, including in marine parks that allowed limited fishing, while numbers increased within no-fishing reserves,” said lead author Graham Edgar. The study, published in the journal Aquatic Conservation, warned that the present situation globally — with more than 98 percent of seas open to some form of fishing — needed “immediate multinational attention”.

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Jun 022018
 


Edward S. Curtis Crow Scout in Winter 1908

 

The US Economy Suddenly Looks Like It’s Unstoppable (CNBC)
Record 95.9 Million Americans Are No Longer In The Labor Force (ZH)
The Pause That Refreshes (Roberts)
EU Joins Global Battle Against Trump Tariff Onslaught (AFP)
Eurozone Not Facing New Debt Crisis – Juncker (R.)
Three Critical Lessons From Europe’s Recent Mini-Meltdown (Black)
EU Lawmakers From Italy’s Coalition Parties Seek Funds To Quit Euro (R.)
Canada Auditor General To Public Service: Stop Ignoring My Reports (CBC)
Greece’s Busiest Port Reveals the Perils of Privatization (Nation)
EU Scraps Plans To Tackle Antibiotics Abuse (G.)

 

 

And I have a bridge in Brooklyn.

The US Economy Suddenly Looks Like It’s Unstoppable (CNBC)

In the face of persistent fears that the world could be facing a trade war and a synchronized slowdown, the U.S. economy enters June with a good deal of momentum. Friday’s data provided convincing evidence that domestic growth remains intact even if other developed economies are slowing. A better-than-expected nonfarm payrolls report coupled with a convincing uptick in manufacturing and construction activity showed that the second half approaches with a tail wind blowing. “The fundamentals all look very solid right now,” said Gus Faucher, chief economist at PNC. “You’ve got job growth and wage gains that are supporting consumer spending, and tax cuts as well. There’s a little bit of a drag from higher energy prices, but the positives far outweigh that. Business incentives are in good shape.”

The day started off with the payrolls report showing a gain of 223,000 in May, well above market expectations of 188,000, and the unemployment rate hitting an 18-year low of 3.8%. Then, the ISM manufacturing index registered a 58.7 reading — representing the%age of businesses that report expanding conditions — that also topped Wall Street estimates. Finally, the construction spending report showed a monthly gain of 1.8%, a full point higher than expectations. Put together, the data helped fuel expectations that first-quarter growth of 2.2% will be the low-water point of 2018. “May’s rebound in jobs together with yesterday’s report of solid income growth and the rise in consumer confidence points to the economy functioning very well,” the National Retail Federation’s chief economist, Jack Kleinhenz, said in a statement.

“Solid fundamentals in the job market are encouraging for retail spending, as employment gains generate additional income for consumers and consequently increase spending.” The most recent slate of widely followed barometers could see economists ratchet up growth expectations. Already, the Atlanta Fed’s GDPNow tracker sees the second quarter rising by 4.8%. While the measure also was strongly optimistic on the first quarter as well, at one point estimating 5.4% growth, other gauges are positive as well. CNBC’s Rapid Update, for instance, puts the April-to-June period at 3.6%.

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The unemployment rate is meaningless. Is that why it keeps being reported?

Record 95.9 Million Americans Are No Longer In The Labor Force (ZH)

In what was otherwise a solid jobs report – one which Donald Trump may or may not have leaked in advance – in which the establishment survey reported that a higher than expected 223K jobs were added at a time when numbers below 200K are expected for an economy that is allegedly without slack, the biggest surprise was not in the Establishment survey, but the household, where the unemployment rate tumbled once more, sliding to a new 18 year low of 3.8%, even as the participation rate declined once again, as a result of a stagnant labor force, which was virtually unchanged (161.527MM in April to 161.539MM in May, even as the total civilian non-inst population rose by 182K to 257.454LMM).

What was perhaps more interesting, however, is that for all the talk that the slack in the labor force is set to decline, precisely the opposite is taking place, because in May, the number of people not in the labor force increased by another 170K, rising to 95.915 million, a new all time high. Adding to this the 6.1 million currently unemployed Americans, there are 102 million Americans who are either unemployed or out of the labor force (and it is also worth noting that of those employed 26.9 million are part-time workers). In other words, contrary to prevailing economist groupthink, there is a lot of slack in the economy, and if as the latest Beige Book revealed, employers are now hiring drug addicts and felons to make up for the shortage of qualified candidates, a long time will pass before wages see significant gains.

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Deutsche is dangerous.

The Pause That Refreshes (Roberts)

As long as interest rates remain low and negative in some cases, debt can continue to be accumulated even with weaker rates of economic growth. More importantly, as long as rates remain low, the banking system can continue to play the “hide-the-debt game” through derivatives, swaps and a variety of other means. But rates are rising, and sharply, on the shorter-end of the curve. Historically, sharply rising rates have been a catalyst for a debt related crisis. As long as everything remains within the expected ranges, the complicated “math” behind trillions of dollars worth of financial instruments function properly. It is when those boundaries are broken that things “go wrong” and quickly so.

People have forgotten that in 2008 a major U.S. financial firm crashed as its derivative based exposure “blew up.” No, I am not talking about Lehman Brothers, the poster-child of the financial crisis, I am talking about Bear Stearns. In just 365-days, Bear Stearns stock went from $159 to $2, with about half of the loss occurring within a few weeks. Bear Stearns was the warning shot for the financial markets in early 2008 that no one heeded. Within a couple of months, the markets dismissed Bear Stearns as a “non-event” and rallied to a higher level than prior to the event, and almost back to highs for the year. Remember, there was “nothing to worry about” at the time, even though the Fed was increasing interest rates, as the “Goldilocks economy” could handle tighter monetary policy.

Sure, housing had been slowing down, mortgage delinquencies were rising, along with credit card defaults, but there wasn’t much concern. Today, we are seeing similar signs.Interest rates are rising, along with delinquencies, defaults, and a slowing housing market. But no one is concerned as the “Goldilocks economy” can clearly offset these mild risks. And no one is paying attention to, what I believe to be, one of the biggest risks to the global financial markets – Deutsche Bank.

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Globalization in reverse.

EU Joins Global Battle Against Trump Tariff Onslaught (AFP)

The EU on Friday launched its first counteroffensive against Washington’s punishing steel and aluminum tariffs while the US began meetings in Canada with outraged finance ministers from its top trading partners. Meanwhile in Washington, US President Donald Trump floated the possibility of scrapping the 24-year-old North American Free Trade Agreement in favor of separate bilateral deals with Canada and Mexico. And in another leg of Trump’s multi-front trade offensive, Commerce Secretary Wilbur Ross arrived in Beijing to continue fraught talks with Chinese officials. Trump has vowed to press ahead with tariffs on as much as $50 billion in imports from China.

Brussels and Ottawa on Friday filed legal challenges at the World Trade Organization against Washington’s decision. The EU, Canada and Mexico also threatened stiff retaliatory tariffs as they pushed back against Trump’s moves. Canadian Prime Minister Justin Trudeau said Friday he was dumbfounded by Washington’s national security basis for the tariffs, given that US and Canadian troops had fought together in World War II, Afghanistan and elsewhere. “This is insulting to them,” he told NBC News. British Prime Minister Theresa May said she was “deeply disappointed” and reiterated a call for Britain and the EU to be “permanently exempted” from the “unjustified” metals tariffs.

At the Group of Seven ministerial meeting in Canada, US Treasury Secretary Steven Mnuchin faced stern reactions from his counterparts, who accused Trump of jeopardizing the world economy with steps that would prove job killers for all concerned. “The French, British and Germans held firm,” French Finance Minister Bruno Le Maire told reporters. “Everyone expressed their complete incomprehension of the American decisions and everyone said it was up to the Americans to take the next step since they were the ones who imposed the tariffs.”

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This is like the owner of a sports team publicly declaring the coach has their full support. Bad sign.

Eurozone Not Facing New Debt Crisis – Juncker (R.)

There is no threat of a new sovereign debt crisis in the euro zone despite an anti-establishment coalition government taking power in Italy, European Commission President Jean-Claude Juncker said in remarks published on Saturday. Asked by the RND network of German newspapers if the single currency bloc faced a new crisis, Juncker said: “No. The reactions of the financial markets are irrational. People should not draw political conclusions from every fluctuation in the stock market. Investors have been wrong on so many occasions before.” A governing coalition comprising two parties hostile to the euro was installed in Italy on Friday, calming markets spooked by the possibility of a new election that might have become a referendum on quitting the single currency. “I am certain the Italians have a keen sense of what is good for their country,” Juncker said. “They will sort it out.”

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It will just take one little spark.

Three Critical Lessons From Europe’s Recent Mini-Meltdown (Black)

1) On the day that the finance minster was rejected, financial markets worldwide tanked. Italy’s stock market plunged 5%, which is considered a major drop. But curiously, the stock market in the US fell as well, with the Dow Jones Industrial Average shedding 400 points. Even markets in China and Japan had significant drops as a result of the Italy turmoil. Now, it’s easy to see why Italy’s markets fell. And even the rest of Europe. But the entire world? Granted, a lot of people made a really big deal out of this event, concluding that it signals the end of the euro.. or Europe itself… or some other such drama. Sure, maybe. But it’s almost impossible to foretell a trend as significant as ‘the end of the euro’ based on a single event.

At face value, the rejection of a cabinet minister in Italy should have almost -zero- relevance on economies as large and diversified as the US, China, and Japan. To me, this is another sign that we’re near the peak of the bubble… and possibly already past it. Markets are so stretched, and investors are on such pins and needles, that even a minor, insignificant event induces panic. And it makes me wonder: if financial markets are so tightly wound that something so irrelevant can cause such an enormous impact, how big will the plunge be when something serious happens?

2) It wasn’t just stocks either. Bond markets were also keenly impacted. Bear in mind that stocks are volatile by nature; prices move much more wildly than other asset classes. But bonds, on the other hand, are supposed to be safe, stable, boring assets. Especially government bonds in highly developed nations. In Italy the carnage was obviously the worst. Investors dumped the 2-year Italian government bond, and yields (which move opposite to prices) surged from 0.9% to 2.4% in a matter of hours. Simply put, that’s not supposed to happen. And it hadn’t happened in at least three decades. Again, though, even in the United States, yields on the US 10-year note dropped 16 basis points overnight, from 2.93% to 2.77% (which means US bond prices increased).

That’s considered MAJOR volatility for US government bonds. To put it in context, the only day over the past few YEARS that saw 10-year yields move more than that was the day after Donald Trump won the US Presidential Election in 2016. So it was a pretty big deal. Again, this leads me to wonder: if safe, stable assets like government bonds can react so violently from such an insignificant event, how volatile will riskier assets be when there’s an actual crisis? Just imagine what’s going to happen to all the garbage assets out there (like unprofitable, heavily indebted businesses) when a real downturn kicks in.

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No, they supported setting up a fund for countries in trouble.

EU Lawmakers From Italy’s Coalition Parties Seek Funds To Quit Euro (R.)

European Union lawmakers from the two parties forming Italy’s new government coalition backed this week a rejected proposal to set up EU funds to help countries quit the euro, a sign of the Italian leadership’s ambivalent position on the common currency. Their vote came as the anti-establishment 5-Star Movement and far-right League were finalising a deal to form an executive in Rome, under pledges that leaving the euro was not in their government programme. The government was sworn in on Friday. An earlier attempt to form a government foundered after the parties proposed as economy minister an economist who had devised a plan for Italy’s departure from the euro zone, prompting his rejection by the head of state.

Despite the declared intentions to stay in the euro, all six EU lawmakers from the League and all but one of the 14 5-Star Members of the European Parliament voted on Wednesday for a document that called for the establishment of programmes of financial support “for member states that plan to negotiate their exit from the euro.” The document voted on by their EU lawmakers called for compensation for “the social and economic damages caused by the euro zone membership.” The document was an amendment to a European Parliament resolution on the EU budget for the 2021-2027 period. The proposal, advanced by three leftist MEPs, was backed by 90 lawmakers but was rejected by a majority of the 750 MEPs.

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Sure this is very recognizable across the globe.

Canada Auditor General To Public Service: Stop Ignoring My Reports (CBC)

Canada’s auditor general says he’s getting tired of filing annual reports recommending reforms to the way the government does business — only to see those recommendations disappear down the memory hole afterward. Michael Ferguson released his spring audits on Tuesday. They included scathing criticisms of the government’s performance on the Phoenix pay system, Indigenous services and military justice. Many of these problems have been highlighted in Ferguson’s reports in the past. And that, he told CBC News, is the problem. “We always get the department agreeing to our recommendation but then somehow we come back five years later, 10 years later and we find the same problems,” he told host Chris Hall on CBC Radio’s The House on Wednesday.

“It almost is like the departments are trying to make our recommendations and our reports go away by saying they agree with our recommendations.” His work has made one thing clear, he said: the federal government has a culture problem that makes meaningful change difficult. “They need to do things to make the results better.” Part of the problem stems from political pressure on the public service, said Ferguson. Politicians tend to think from election to election, he said, which can undermine public servants’ efforts to bring in a longer-term plan. “It seems like the political side of things ends up having more weight in the conversation.” In Parliament, he said — and particularly with respect to Indigenous Services — progress tends to be measured on the basis of how much money the government spends on a particular policy file, and not on measurable outcomes.

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“.. it is clear there were strong interests to see Greece’s public wealth turned over into other peoples’ hands..”

Greece’s Busiest Port Reveals the Perils of Privatization (Nation)

In 2015, as a condition of the $100 billion European Union bailout that followed the 2008 financial crisis, the Greek government agreed to privatize a number of state-held assets including the Piraeus Port Authority, which manages the port’s container and passenger terminals. The Greek state sold a majority stake for $330 million to COSCO. For the Chinese company, the purchase had a clear financial logic. About 80 percent of China’s imports and exports to and from Europe are transported by sea, and by avoiding the need to sail to busy Northern European ports like Rotterdam or Hamburg, COSCO could offload containers in Piraeus, reducing the time it takes cargo to get to Europe by nearly a week. Plus, by owning the port authority, COSCO could help determine how much its own ships would have to pay itself in port fees.

As part of the deal, COSCO pledged to participate in financing $410 million worth of investment in the port, including a repair of port equipment and the dredging of Piraeus’s central port. Supporters of privatization argue these improvements signal a coming maritime renaissance at Piraeus—already the busiest port in the eastern Mediterranean. Nektarios Demenopolous, the deputy manager for investor relations at Piraeus Port Authority, told me, “There are 300 million euros [$350 million] of investment to come in the next five years, followed by another 50 million. Privatization has made the port much more dynamic and will reboot activities at the port like ship repair that have been in recession. It will be remembered as a success story.”

But a “success story” for whom? The dockworkers of Piraeus say they and their families have seen little of the alleged gains brought by COSCO. As Piraeus Port Authority boasts of widening profit margins and increasing maritime traffic, wages for dockworkers haven’t budged since they were slashed from 1500 euros ($1,750) per month to 600 euros after the financial crisis. Beyond that, COSCO now hires few dockworkers as full-time employees, and tends to enlist unskilled laborers for complex container unloading. COSCO also primarily remunerates people on an ad hoc basis as subcontractors, leaving dockworkers and their families entirely dependent on the ebb and flow of traffic into Piraeus. It also means their traditional retirement benefits have disappeared.

The long list of Greek public assets in the privatization pipeline includes Athens International Airport, the oil refiner Hellenic Petroleum, and the electric-grid operator. To date, some roughly $5 billion in Greek state assets, including the Port of Piraeus and Greece’s regional airport network, have been sold, and it is expected that the Greek government will sell nearly $55 billion worth of state assets within the next decade. There is no conclusive evidence that privatized state assets are more efficiently managed than their state-owned predecessors, but privatization is undoubtedly an effective means for a cash-strapped government to raise funds when its creditors are getting impatient. “Piraeus was always a profitable port. However, it is clear there were strong interests to see Greece’s public wealth turned over into other peoples’ hands,” said Giorgos Gogos, head of the Piraeus dockworkers’ union.

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How corrupt is Juncker?

EU Scraps Plans To Tackle Antibiotics Abuse (G.)

The EU has scrapped plans for a clampdown on pharmaceutical pollution that contributes to the spread of deadly superbugs. Plans to monitor farm and pharmaceutical companies, to add environmental standards to EU medical product rules and to oblige environmental risk assessments for drugs used by humans have all been discarded, leaked documents seen by the Guardian reveal. An estimated 700,000 people die every year from antimicrobial resistance, partly due to drug-resistant bacteria created by the overuse, misuse and dumping of antibiotics. The UK’s chief medical officer, Dame Sally Davies, has warned that failing to act could lead to a post-antibiotic apocalypse, spelling “the end of modern medicine” as routine infections defy effective treatment.

Some studies predict that antimicrobial resistance could cost $100tn (£75tn) between now and 2050, with the annual death toll reaching 10 million over that period. An EU strategy for pharmaceuticals in the environment was supposed to propose ways to avert the threat, but leaked material shows that a raft of ideas contained in an early draft have since been diluted or deleted. Proposals that have fallen by the wayside include an EU push to have environmental criteria for antibiotic use included in international agreements as “good manufacturing practice requirements”. This would have allowed EU inspectors to visit factories in Asia or Africa, sanctioning them were evidence of pharmaceutical pollution found.

[..] The pharmaceutical industry spent nearly €40m on lobbying EU institutions in 2015, according to voluntary declarations, and enjoys infamously easy access to officials. Public records show that the European Federation of Pharmaceutical Industries and Associations had more than 50 meetings with the Juncker commission in its first four and a half months of office. In the same period, GlaxoSmithKline had 15 meetings with the commission, Novartis had eight engagements, Sanofi and Johnson & Johnson had six sessions apiece, while Pfizer and Eli Lilly both met with EU officials five times each.

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May 312018
 
 May 31, 2018  Posted by at 9:07 am Finance Tagged with: , , , , , , , , , , , ,  


Vincent van Gogh The sower 1888

 

Liquidity Crisis Coming: Here, There, Everywhere (Mish)
The Trump Effect Is Keeping Bull Market Alive – Robert Shiller (CNBC)
Global Growth Too Dependent On Cheap Borrowing – OECD (G.)
The Euro Has To Be Abandoned If Europe Is To Be Saved (Syll)
Italy Crisis: Workers Are Paying For Decisions Made Nearly 30 Years Ago (Clark)
Italy Crisis Dents Greek Hopes Of Returning To Bond Markets (G.)
Eurozone, IMF Seek Last-Minute Deal On Greek Debt Relief At G7 This Week (R.)
Fed Proposes Changes To Rule Limiting Risky Trading On Wall Street (AP)
US To Hit EU With Steel And Aluminum Tariffs (G.)
Abe Slams US Vehicle Tariff Hikes As ‘Unacceptable’ (JT)
George Osborne’s London Evening Standard Sells Its Editorial Independence (OD)
Bayer Wins US Nod For Monsanto Deal To Create Agrochemical Giant (R.)
The British Countryside Is Being Killed By Herbicides And Insecticides (G.)

 

 

Nuts all around.

Liquidity Crisis Coming: Here, There, Everywhere (Mish)

The problem is global. Central bank actions explain most of what you need to know. Italian bonds provide a good example. Despite the recent, massive selloff in Italian bonds, 10-year Italian bonds still trade at roughly the same yield as US 10-year bonds. Is there no default risk? No eurozone exit risk? Of course there is. But those bonds trade where they do because the ECB is engaged in QE to a far greater extent than the the Fed ever did. How nuts is that? 88% of the S&P is with Vanguard, BlackRock, and State Street. How nuts is that? Close to $7 trillion in bonds trade with a negative yield. The figure was close to $10 trillion at one point. How nuts is that?

According to LCD, covenant-lite loan now account for a record 75% of the roughly $970 billion in outstanding U.S leveraged loans. Covenant-lite agreements vary, but they allow things like paying interest with more debt rather than cash or skipping repayments entirely for periods of time. How nuts is that? This is totally nuts, across the board. Puplava calls it “mindless”. I suspect he would be the first to admit that he seriously understated the concern. My “totally nuts” position is also too mild, but I also struggle for the precise words. A global liquidity crisis looms. It is entirely central-bank sponsored. Just don’t expect me, Puplava, or anyone else to tell you precisely when the crisis will hit. But it will. And when it does, don’t fool yourself into believing that you can necessarily escape in time.

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How to keep everything overpriced.

The Trump Effect Is Keeping Bull Market Alive – Robert Shiller (CNBC)

Nobel Prize-winning economist Robert Shiller hasn’t been the most optimistic voice on Wall Street, but he isn’t writing off the bull market. His chief reason: President Donald Trump’s pro-business influence. “There is a sort of optimism about the markets under Trump, and that’s continuing. I don’t see a reason for it about to change,” the Yale professor said Tuesday on CNBC’s “Trading Nation.” “There’s something about how the world is reacting to the president. Something about his self-confidence which is gradually lifting our spirits.” Shiller believes the momentum is so powerful, it’s essentially propping up a bull market that is getting long in the tooth.

“We’ve seen an overpriced stock market. We’ve seen concerns about that for years now,” he said. Shiller acknowledged it’s definitely possible the U.S. stock market could generate gains this year, but he warned the Trump effect “is not a very reliable thing.” So, he said the best strategy is to diversify abroad in this environment. “If you have been overexposed to the United States in your portfolio, this is a time to reconsider that,” Shiller said. “Not to pull out, but to balance things … Europe is cheaper than the U.S..”

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These clowns really believe this: “self-sustaining growth”.

Global Growth Too Dependent On Cheap Borrowing – OECD (G.)

Unemployment will drop to its lowest level since 1980 across the world’s richest nations, but global growth remains dependent on cheap borrowing and government spending, the Organisation for Economic Cooperation & Development (OECD) has warned in its latest global economy health check. The rise of tit-for-tat protectionist trade barriers, the return of volatile financial markets, and soaring oil prices also spell trouble for the global economy as it heads towards the 10-year anniversary of the 2008 banking collapse, the OECD said.

“The economic expansion is set to continue for the coming two years, and the short-term growth outlook is more favourable than it has been for many years,” said Angel Gurría, secretary general of the OECD, the Paris based thinktank for the world’s 35 richest nations, including the US, Britain, Brazil, Mexico and Russia. “However, the current recovery is still being supported by very accommodative monetary policy, and increasingly by fiscal easing. This suggests that strong, self-sustaining growth has not yet been attained.” Central banks in Britain, the eurozone, Japan and the US have kept interest rates low and pumped funds into their economies via quantitative easing to maintain investment and promote growth. Governments have eased back on austerity measures, allowing more state funds for infrastructure projects and welfare payments, especially pensions.

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In the end, people want to keep sovereignty. Which has largely been sold off by their leaders.

The Euro Has To Be Abandoned If Europe Is To Be Saved (Syll)

The euro has taken away the possibility for national governments to manage their economies in a meaningful way – and in Italy, just as in Greece a couple of years ago, the people have had to pay the true costs of its concomitant misguided austerity policies. The unfolding of the repeated economic crises in euroland during the last decade has shown beyond any doubts that the euro is not only an economic project but just as much a political one. What the neoliberal revolution during the 1980s and 1990s didn’t manage to accomplish, the euro shall now force on us.

But do the peoples of Europe really want to deprive themselves of economic autonomy, enforce lower wages and slash social welfare at the slightest sign of economic distress? Is increasing income inequality and a federal Uberstate really the stuff that our dreams are made of? I doubt it. History ought to act as a deterrent. During the 1930s our economies didn’t come out of the depression until the folly of that time, the gold standard, was thrown on the dustbin of history. The euro will hopefully soon join it.

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Countries will be forced to leave.

Italy Crisis: Workers Are Paying For Decisions Made Nearly 30 Years Ago (Clark)

You could say that Italy’s current problems – indeed all of Europe’s economic woes – go back to the early 1990s, when wrong-headed decisions were made by the European elite and enshrined in the Maastricht Treaty – which workers have been paying for ever since. Cuts in public spending have increased unemployment, which in turn has increased the deficit, which has led to more cuts, and so on and so on. Italy‘s National Debt is now 132% of its GDP. Although growth rates are now positive, its average annual rate of growth from 1999-2016 was zero. With 31.7% youth unemployment, La Dolce Vita and Ryan Paris’s catchy song, is a long distance memory.

The tragedy is that it was all so predictable. One man who warned what Europe was letting itself in for in the rush to squeeze as many countries as possible into the Eurozone, was the late Labour politician Peter Shore, the UK’s secretary of state for economic affairs from 1967-69 and trade minister from 1974-6. In the early-to-mid 1990s I was teaching economics in Switzerland and was in correspondence with Shore. He very kindly sent me copies of parliamentary debates where he had railed against the Maastricht Treaty and its imposition of a financial strait-jacket on EEC/EU members – regardless of the state of their economies.

Shore told the House of Commons on March 24, 1993: “The most astonishing omission from the treaty is the fact that it never faces the issue of the counter-recession policy, about which it contains not a word. One lesson that we should have learned from the disasters of the inter-war years was that tendency to go too high in a boom, and too low in recession and slump. “Why is that aspect not written into the protocol? Why does it not say that we must recognise those counter-cyclical problems, and will certainly do so if unemployment grows by X per cent? Instead of having merely 3% and 60% for borrowing and debt, why not have 3, 4 or 5% of the level of unemployment or the fall in GDP?”

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“Events in Italy are changing everything.”

Italy Crisis Dents Greek Hopes Of Returning To Bond Markets (G.)

Greece is watching the unfolding crisis in Italy with growing nervousness. Events in Rome are eliciting a sense of deja vu in Athens, the capital long on the frontline of the eurozone crisis. And nerves are being rattled. “We want a stable, democratic and pro-European Italy,” the country’s foreign minister, Nikos Kotzias, told reporters. “We are worried that if there is instability and it has an impact on the financial situation, this could create problems for us.” The turmoil in Italy could not come at a worse time for Greece. After almost a decade of exclusion from international markets, the debt-stricken nation had set its sights on returning to much-needed normality this summer.

Hopes had been high that when it emerged from its third multi-billion EU-funded bailout programme, Athens would regain market access. But on Wednesday government officials, bankers and analysts were decidedly downbeat. All agreed that with political uncertainty raging across the Ionian Sea, and global investors jittery, the prospect of Greece tapping markets any time soon was beginning to resemble a pipe dream. With soaring bond yields – interest rates on government borrowing – it was out of the question the country could afford the interest rates that would allow it to assume the mantle of post-bailout normality.

“What is happening in Italy worries us immensely,” a senior Bank of Greece official said. “The bond markets have gone mad in southern Europe. With such yields it is totally prohibitive that Greece could return to them when the programme ends.” [..] Italy’s financial turmoil has put hopes of “a clean exit,” on the back burner. “The government’s narrative of clean breaks, and going it alone, is over for now,” a well-placed official conceded. “Events in Italy are changing everything.”

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With Italy on the horizon? It amkes little difference, nobody wants to reduce the principal of the debt. And that is what is needed.

Eurozone, IMF Seek Last-Minute Deal On Greek Debt Relief At G7 This Week (R.)

Euro zone policy-makers will seek last-minute backing this week from the IMF for their debt-relief offer to Greece, to ensure it is credible with markets and draws investors back to Greece after it exits its bailout. The talks are to take place on the sidelines of a meeting of in Canada of finance ministers and central bankers from the world’s top seven economies, the G7, in June, officials involved in the negotiations said. The bailout ends on Aug. 20. “This thing has to be done now,” one senior official involved in the talks said. If no deal is agreed by next Monday, the official said, the IMF would most likely not take part in the bailout at all.

After three successive bailouts since Athens lost market access in 2010, euro zone governments are now Greece’s main creditors, with total loans of €230 billion so far. The IMF took part in the first two bailouts, but has refused to join in the third, which began in 2015. It says the euro zone must agree on how to make Greek debt, now at 179% of GDP, sustainable. Euro zone finance ministers have argued they can only give such details towards the end of the three-year bailout. So the IMF has remained only an observer over the past three years. [..] The IMF and the euro zone agree there should be no “haircut” – a reduction in the principal of the debt – but only an extension of maturities and grace periods.

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I smell bailouts.

Fed Proposes Changes To Rule Limiting Risky Trading On Wall Street (AP)

The Federal Reserve is proposing to ease a rule aimed at defusing the kind of risk-taking on Wall Street that helped trigger the 2008 financial meltdown. The Fed under new leadership on Wednesday unveiled proposed changes to the Volcker Rule, which bars banks’ risky trading bets for their own profit with depositors’ money. The high-risk activity is known as proprietary trading. The proposed changes would match the strictest applications of the rule to banks that do the most trading – 18 banks with at least $10bn in trading assets and liabilities. They account for 95% of all US bank trading and include some foreign banks with US operations, Fed officials said.

Less stringent requirements would apply to banks that do less trading. The idea is to make it easier for banks to comply with the Volcker Rule without sacrificing the banks’ safety and soundness, the officials said. “The proposal will address some of the uncertainty and complexity that now make it difficult for firms to know how best to comply, and for supervisors to know that they are in compliance,” Fed chair Jerome Powell said at a meeting of the Fed governors. “Our goal is to replace overly complex and inefficient requirements with a more streamlined set of requirements.”

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The EU is not about to give in.

US To Hit EU With Steel And Aluminum Tariffs (G.)

The Trump administration is reportedly planning to impose import tariffs on European steel and aluminum after finding no satisfaction in its effort to win trading concessions on the issue. An announcement dropping the EU from an exemption to global tariffs of 25% on imported steel, and 10% on aluminum, could come on Thursday, according to the Wall Street Journal. The move is likely to bring retaliatory action from European Union trade regulators who have warned they will target American products as motorcycles, jeans and bourbon if additional US tariffs are imposed.

Signs of increasing friction between the US and Europe over trade came early Wednesday when Wilbur Ross, the US commerce secretary, drew a sharp line with the EU over Chinese trade negotiations, telling counterparts at a trade development panel in Paris that Europe is using tariffs as an “excuse” to refuse trade negotiations. “China are paying their tariffs,” Ross told the panel. “China hasn’t used that as an excuse not to negotiate … It’s only the EU that is insisting we can’t negotiate if there are tariffs,” he added. Ross’s comments were made in response to EU criticism of import tariffs the Trump administration imposed on dozens of trade partners in March. On Tuesday, the White House added $50bn in new tariffs despite telling China the trade dispute was “on hold” while negotiations continued.

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Make Detroit great again.

Abe Slams US Vehicle Tariff Hikes As ‘Unacceptable’ (JT)

Prime Minister Shinzo Abe on Wednesday condemned U.S. President Donald Trump’s reported move to impose tariffs of up to 25% on imported vehicles as unwarranted and offensive. “If the U.S. slaps Japan, its ally, with tariffs like this, that would be incomprehensible and unacceptable,” Abe told the head of the Democratic Party for the People, Yuichiro Tamaki, during a debate between party leaders in the Diet. The Trump administration recently launched a Section 232 national security probe into whether vehicle and parts imports are harming the U.S.’s domestic auto industry — a step that could provide Trump with the legal basis to institute tariffs.

The move followed yet another surprise announcement by the Trump administration in March that Japan, unlike Washington’s other key allies and partners, wouldn’t be excluded from steel and aluminium tariffs. Tamaki said the hike, if realized, would “deal a severe blow to Japan’s economy.” “Did you get an advance notice on this measure?” Tamaki asked Abe. “You yourself often claim that Japan and the U.S. are 100% together. If there had been no heads-up from the U.S. side on this matter, I’d have to suspect that we may not be seen as their ally.” Abe dodged Tamaki’s question, but stressed he had explained to Trump in their past conversations that Japanese automobile makers are “vastly contributing” to the U.S. economy by creating jobs.

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Why am I not surprised?

George Osborne’s London Evening Standard Sells Its Editorial Independence (OD)

London’s Evening Standard newspaper, edited by the former chancellor George Osborne, has agreed a £3 million deal with six leading commercial companies, including Google and Uber, promising them “money-can’t-buy” positive news and “favourable” comment coverage, openDemocracy can reveal. The project, called London 2020, is being directed by Osborne. It effectively sweeps away the conventional ethical divide between news and advertising inside the Standard – and is set to include “favourable” news coverage of the firms involved, with readers unable to differentiate between “news” that is paid-for and other commercially-branded content.

Leading companies, most operating global businesses, were given detailed sales presentations by Evening Standard executives at the newspaper’s west London offices in an effort to sign them up to the lucrative deal. Among those that have paid half a million pounds each to be involved are international taxi-app firm Uber, which is facing an imminent court appeal against the decision to cancel its licence to operate in London. The Evening Standard has previously come under fire for not declaring Osborne’s £650,000-a-year part time job with the fund managers BlackRock, who hold a £500m stake in Uber.

The global tech giant, Google, still recovering from reputational damage over its low UK tax bills and criticism over its close relationship to the Cameron-Osborne government, has also signed up. Some companies, including Starbucks, walked away from the Evening Standard’s pitch, rejecting the offer of paying to boost their reputations through tailored news and comment. London 2020 is scheduled to start on June 5. Unbranded news stories, expected to be written by staff reporters – but paid for by the new commercial “partners” as part of the 2020 deal – have already been planned for inclusion in the paper’s news pages within a week of the project’s launch.

The London Evening Standard has a circulation of close to 900,000 and distributes more copies within a two-mile radius of Westminster than the Times does across the UK nationally. Many London commuters, who pick up their free copy of the Standard at underground and rail stations, will be unaware that they will be reading paid-for news coverage that is part of a wider commercial deal. An increasing number of British newspapers often carry “native advertising”, essentially paid-for commercials designed to look like independent editorial articles.

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It is a sad day.

Bayer Wins US Nod For Monsanto Deal To Create Agrochemical Giant (R.)

Bayer won U.S. approval for its planned takeover of Monsanto after agreeing to sell about $9 billion in assets, clearing a major hurdle for the $62.5 billion deal that will create by far the largest seeds and pesticides maker. Makan Delrahim, who heads the U.S. Justice Department’s (DoJ) Antitrust Division, said the asset sales agreed to by Bayer were the “largest ever divestiture ever required by the United States.” A Bayer spokesman said the planned sale of businesses with 2.2 billion euros ($2.54 billion) in sales to BASF already agreed to address antitrust concerns, mainly in Europe, were not materially different from the DoJ’s demands. “Receipt of the DOJ’s approval brings us close to our goal of creating a leading company in agriculture,” Bayer CEO Werner Baumann said in a statement.

Bayer’s move to combine its crop chemicals business, the world’s second-largest after Syngenta, with Monsanto’s industry-leading seeds business, is the latest in a series of major agrochemicals tie-ups. U.S. chemicals giants Dow Chemical and DuPont merged in September 2017 and are now in the process of splitting into three units. In other consolidation in the sector, China’s state-owned ChemChina purchased Syngenta and two huge Canadian fertilizer producers merged to form a new company, now called Nutrien. Bayer committed to selling its entire cotton, canola, soybean and vegetable seeds businesses and digital farming business, as well its Liberty herbicide, which competes with Monsanto’s Roundup.

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As the industry that produces them gets bigger.

The British Countryside Is Being Killed By Herbicides And Insecticides (G.)

In June 2011 I took a long drive up the A1, the Great North Road. At Scotch Corner I turned for Barnard Castle. The villages were well kept, the countryside was green, the fields dotted with sheep. Everything was normal. Or so I thought. Beyond Barnard Castle I took a narrow lane into part of Upper Teesdale and suddenly colours exploded along the roadside. I stopped the car and jumped out. There was a bed of orchids, hundreds of them, and behind that, billowing banks of violet, scarlet, white, yellow and cornflower blue. I had seen alpine meadows, but this took my breath away. Further into the dale I found a footpath that led me down beside a shady brook. There were more orchids of a different species and a grass snake hunting frogs in a pool.

Out in the open again, there was the haunting cry of curlews overhead, then redshanks, plovers and snipe. I spent two days up there, talking to environmentalists and farmers involved in the upland hay meadow project for the North Pennines area of outstanding natural beauty (AONB). The landowners were being paid to restrict the use of fertiliser, not employ herbicides, and stop grazing after mid-May. Together with some seeding programmes and careful monitoring, the meadows had become magnificent. When I drove back home, I came down to a countryside where the only flowers were dandelions, watched over by crows. The monotonous green of the rye grass was unbroken. Compared to what I had just experienced, it felt like a desert. I felt cheated. My entire adult life had been spent admiring a shoddy and simplified reproduction, a poor impersonation of a much-loved friend.

[..] Seven years on, the statistics for the British countryside are heartbreaking. Over a quarter of all British birds are under threat, eight species are almost extinct. Three-quarters of all flying insects have disappeared since 1945, including a staggering 60 different moths. Orchid ranges have shrunk by half; two species are gone. The State of Nature 2016 report described Britain as being “among the most nature-depleted countries in the world”. [..] 40% of all species are in moderate or steep decline. Over a quarter of the hedgehog population has disappeared in a decade. Toads are down 68% in 30 years, water voles are no longer found in 94% of the places where they once lived. Likewise mountain hares are in steep decline, as are rabbits. Even that great survivor, the fox, has lost over 40% of its population.

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May 302018
 
 May 30, 2018  Posted by at 9:07 am Finance Tagged with: , , , , , , , , , , , ,  


Wassily Kandinsky Moscow II 1916

 

Italy: No Easy Fixes For The European Central Bank (G.)
Investors Ask If ECB Has Will And Means To Save Euro From Italian Turmoil (R.)
Blanchard: Europe Should Be OK – But ‘I’m Very Worried About Italy’ (CNBC)
NIRP’s Revenge: Italian Bonds Plunge, Worst Day in Decades (WS)
Italy Could Be The Next Greece – Only Much Worse (CNBC)
“Everything Has Gone Wrong”: Soros Warns “Major” Financial Crisis Is Coming (ZH)
Soros-Backed Campaign To Push For New Brexit Vote Within A Year (G.)
Pace Of Greek Credit Contraction Increases In April (K.)
EU Plans To Boost Spending In South, Cut Funds For Eastern Europe (RT)
It’s Hard To Be An Empire (Jim Kunstler)
China Slams Surprise US Trade Announcement, Says Ready To Fight (R.)
High Number Of Workers With No Pay Raise Says Inflation Worries Overblown (MW)
industrial-Scale Beef Farming Comes To The UK (G.)
Meat And Fish Multinationals ‘Jeopardising Paris Climate Goals’ (G.)

 

 

“Under the Target2 system, which is the way eurozone central banks keep account of liabilities to each other, Italy already owes £442bn.”

Italy: No Easy Fixes For The European Central Bank (G.)

The last eurozone crisis was solved – or deferred – when the president of the European Central Bank, Mario Draghi, declared in July 2012 that the institution was ready to do “whatever it takes” to save the euro. Bond markets calmed down, weak banks got access to funding again and an economic recovery of sorts materialised. In terms of central bank rescue acts, it was a textbook operation. Unfortunately, there are no easy ECB fixes for the new Italian crisis. The ECB’s first problem is its own powers. Even if it were minded to try to reverse the dramatic sell-off in Italian bonds, the rules say it is only supposed to respond to emergency calls from countries that have agreed to budget conditions.

With new elections now likely in Italy in the autumn, it’s hard to see how a deal could be done. Even if a technical fudge could be found, the second problem is that the eurozone’s big powers might prefer the ECB to do nothing. Günther Oettinger, the EU’s budget commissioner, seems to believe a bout of market turmoil “might become a signal to [Italian] voters after all to not vote for populists on the right and left”. In practice, the experience might provoke a bigger vote for anti-euro parties, but the strategy seems set.

The third problem for the ECB will come if capital drains from Italian banks. In that case the ECB could in theory claim a clear need to intervene to prevent damage to eurozone banks outside Italy. But, again, there could be pressure to stay on the sidelines. Under the Target2 system, which is the way eurozone central banks keep account of liabilities to each other, Italy already owes £442bn. Any ECB-backed support for its banks would see that figure rise further, provoking fears over repayment. Note that Target2 imbalances are already a hot topic in Germany, where the Bundesbank is the single biggest creditor.

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I’m sure it has the will. Draghi’s Plunge Protection Team is working hard today, euro’s up 0.5%. The problem is that everyone knows whatever the ECB does is only a temp stopgap.

Investors Ask If ECB Has Will And Means To Save Euro From Italian Turmoil (R.)

Investors are again speculating what the ECB could do to solve the problem of a surge in Italy’s debt yields that is causing stress for Italian banks and reviving questions about a euro break up. The stakes will be huge if a repeat election in the euro zone’s third-largest economy become a de facto referendum on Italy’s membership of the euro and its role in the European Union. Italy’s economy is at least 10 times bigger than that of Greece, which needed 250 billion euros ($289 billion) of euro zone and IMF money to bail it out. If Italy needed a similar level of support, the numbers involved would be eyewatering.

Total IMF firepower would only add up to around 500 billion euros and even with the 400 billion euros that the European Stability Mechanism could conceivably get together, it still wouldn’t completely cover Italy. Perhaps it’s no wonder then that Italy’s bond markets saw their worst sell-off in 26 years on Tuesday and investors are starting to look inquisitively at the ECB. “If this continues for another couple of sessions, I think you will have to see some official (European) response,” said Saxo Bank’s head of foreign exchange strategy John Hardy. “It becomes a ‘whatever it takes’ kind of moment,” he added, recalling the promise made in 2012 by ECB President Mario Draghi to keep the euro intact.

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Inflexibility killed the cat.

Blanchard: Europe Should Be OK – But ‘I’m Very Worried About Italy’ (CNBC)

Political chaos in the euro zone’s third-biggest economy won’t be going away anytime soon, according to IMF former chief economist Olivier Blanchard, who on Tuesday issued an ominous assessment of the country. Panic roiled markets Tuesday as a political fight in Italy prompted one of its worst market sell-offs in years. Underlying investor fear was the prospect of Italy leaving the euro and others following suit, which Blanchard, now an economics professor at the Massachusetts Institute of Technology, described as more of a psychological fear than a realistic threat.

The potential concern, rather, involves Italy’s creditors, who would have to “move carefully,” the economist told CNBC’s Joumanna Bercetche in Paris. The rest of Europe may avoid a domino effect, but Italy looks to remain mired in a quagmire. “I suspect in this case the EU will do whatever is needed to prevent contagion, so I’m not terribly worried about contagion,” Blanchard said. “I’m very worried about Italy. Not worried about the rest of Europe. It will be tough, but the rest of Europe, the rest of (the) euro will be OK.” [..] “The writing was on the wall,” Blanchard said. “When you have capital mobility, and you give signals that you might not stay in the euro … then you expect investors to move, and I think that’s what we are seeing.”

Markets were already nervous about M5S and Lega’s economic plans for Italy. Though the parties did not in fact pledge to leave the euro, they signaled a disregard for the EU’s fiscal rules, such as those limiting states’ deficit levels. [..] Asked if there may be positives to the standoff in the form of EU concessions for Italy in order to prevent a pull-out, Blanchard responded, “No. I am not optimistic.” Unsurprisingly, he described himself as very bearish on the country. The best-case scenario, the economist said, would be for the winners of the next elections to provide a program that satisfies the voter base — victory is predicted for the populist parties again — but remains fiscally responsible.

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Wolf Richter is dead on: “..Italian bonds – no matter what maturity – should never ever have traded with a negative yield..”

NIRP’s Revenge: Italian Bonds Plunge, Worst Day in Decades (WS)

On Tuesday, Italian bonds had their worst day in Eurozone existence, even worse than any day during the worst periods of the 2011 debt crisis. And this comes after they’d already gotten crushed on Monday, and after they’d gotten crushed last week. And this happened even as the ECB is carrying on its QE program, including the purchase of Italian government bonds; and even as it pursues its negative-interest-rate policy (NIRP). As bond prices plunge, yields spike by definition, and the spike in the two-year yield was spectacular, going from 0.3% on Monday morning to 2.73% on Tuesday end of day:

But note that until May 26, the two-year yield was still negative as part of the ECB’s interest rate repression. On that fateful day, the two-year yield finally crossed the red line into positive territory. To this day, it remains inexplicable why the ECB decided that Italian yields with maturities of two years or less should be negative – that investors, or rather pension beneficiaries, etc., who own these misbegotten bonds, would need to pay the Italian government, one of the most indebted in the world, for the privilege of lending it money. But that scheme came totally unhinged just now. The 10-year Italian government bond yield preformed a similar if not quite as spectacular a feat. Over Monday and Tuesday, it went from 2.37% to 3.18%:

But here’s the thing: Italian bonds – no matter what maturity – should never ever have traded with a negative yield. Their yields should always have been higher than US yields, given that the Italian government is in even worse financial shape than the US government. Italy’s debt-to-GDP ratio is 131%, and more importantly, it doesn’t even control its own currency and cannot on its own slough off a debt crisis by converting it into a classic currency crisis, which is how Argentina is dealing with its government spending. The central bank of Argentina recently jacked up its 30-day policy rate to 40% to keep the peso from collapsing further. That’s the neighborhood where Italy would be if it had its own currency. But the ECB’s QE shenanigans and NIRP drove even Italian yields below zero, and so now here is NIRP’s revenge.

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Oettinger takes the prize for the biggest fool so far.

Italy Could Be The Next Greece – Only Much Worse (CNBC)

Nearly a decade after a protracted Greek debt crisis spooked global markets, a fresh round of political turmoil in Italy has revived fears about the fate of the European financial system and its common currency. This time, the numbers are a lot bigger. “Italy’s economy is 10 times larger than that of Greece, whose debt crisis shook the euro area’s foundations,” wrote Desmond Lachman, a resident fellow at the American Enterprise Institute, in a recent blog post. “The single currency is unlikely to survive in its present form if Italy were forced to exit that monetary arrangement.”

Italy’s economy has been struggling since the Great Recession years with a debt load that rivals the heavy Greek borrowing that forced massive cuts in public services there and drove Greece into a deep recession. That Italian debt crisis has become central to the ongoing political instability, as multiple governments have failed to resolve it. [..] Even if the populist parties stop short of a clear call for exiting the euro, their strength has widened the political gap with EU officials in Brussels. In an echo of the Greek debt crisis, the latest turmoil has reopened a political rift between Germany and the “peripheral” economies of Greece, Italy and Spain. That political divide will further complicate ongoing efforts to resolve Italy’s crushing debt burden.

On Tuesday, EU officials promised to respect Italian voters’ right to choose their own government, after Germany’s European commissioner said Italians should not vote for the populists. “My worry, my expectation, is that the coming weeks will show that the markets, government bonds, Italy’s economy, could be so badly hit that these could send a signal to voters not to elect populists from the left or right,” Guenther Oettinger, a German commissioner who oversees the EU budget committee, said in a German television interview.

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“..a relationship that was neither voluntary nor equal – the very opposite of the credo on which the EU was based.”

“Everything Has Gone Wrong”: Soros Warns “Major” Financial Crisis Is Coming (ZH)

Until recently, it could have been argued that austerity is working: the European economy is slowly improving, and Europe must simply persevere. But, looking ahead, Europe now faces the collapse of the Iran nuclear deal and the destruction of the transatlantic alliance, which is bound to have a negative effect on its economy and cause other dislocations. The strength of the dollar is already precipitating a flight from emerging-market currencies. We may be heading for another major financial crisis. The economic stimulus of a Marshall Plan for Africa and other parts of the developing world should kick in just at the right time. That is what has led me to put forward an out-of-the-box proposal for financing it.

“The EU is in an existential crisis. Everything that could go wrong has gone wrong,” he said. To escape the crisis, “it needs to reinvent itself.” “The United States, for its part, has exacerbated the EU’s problems. By unilaterally withdrawing from the 2015 Iran nuclear deal, President Donald Trump has effectively destroyed the transatlantic alliance. This has put additional pressure on an already beleaguered Europe. It is no longer a figure of speech to say that Europe is in existential danger; it is the harsh reality.” “We may be heading for another major financial crisis,” Soros said explicitly.

“I personally regarded the EU as the embodiment of the idea of the open society. It was a voluntary association of equal states that banded together and sacrificed part of their sovereignty for the common good. The idea of Europe as an open society continues to inspire me. But since the financial crisis of 2008, the EU seems to have lost its way. It adopted a program of fiscal retrenchment, which led to the euro crisis and transformed the eurozone into a relationship between creditors and debtors. The creditors set the conditions that the debtors had to meet, yet could not meet. This created a relationship that was neither voluntary nor equal – the very opposite of the credo on which the EU was based.”

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Interference in a country’s politics. Hmm.

Soros-Backed Campaign To Push For New Brexit Vote Within A Year (G.)

A campaign to secure a second Brexit referendum within a year and save the UK from “immense damage” is to be launched in days, the philanthropist and financier George Soros has announced. The billionaire founder of the Open Society Foundation said the prospect of the UK’s prolonged divorce from Brussels could help persuade the British public by a “convincing margin” that EU membership was in their interests. In a speech on Tuesday ahead of the launch of the Best for Britain campaign – said to have already attracted millions of pounds in donations – Soros suggested to an audience in Paris that changing the minds of Britons would be in keeping with “revolutionary times”.

Best for Britain had already helped to convince parliamentarians to extract from Theresa May a meaningful vote on the final withdrawal deal, he said, and it was time to engage with voters, and Brussels, to pave the way for the UK to stay in the bloc. It is expected to publish its campaign manifesto on 8 June. Soros, 87, said: “Brexit is an immensely damaging process, harmful to both sides … Divorce will be a long process, probably taking more than five years. Five years is an eternity in politics, especially in revolutionary times like the present. “Ultimately, it’s up to the British people to decide what they want to do. It would be better however if they came to a decision sooner rather than later. That’s the goal of an initiative called the Best for Britain, which I support.

“Best for Britain fought for, and helped to win, a meaningful parliamentary vote which includes the option of not leaving at all. This would be good for Britain but would also render Europe a great service by rescinding Brexit and not creating a hard-to-fill hole in the European budget. “But the British public must express its support by a convincing margin in order to be taken seriously by Europe. That’s what Best for Britain is aiming for by engaging the electorate. It will publish its manifesto in the next few days.”

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Recovery.

Pace Of Greek Credit Contraction Increases In April (K.)

The funding deficit is growing in the Greek economy, as there was a sharper credit contraction in April, data from the Bank of Greece showed on Tuesday. The pace of financing Greek households and enterprises stood at -1.9% last month, from -1% in March and -0.9% in February. The flow of credit turned negative by 1.2 billion euros in April from the positive amount of 217 million euros in March. The negative flow means that loans repaid outweighed those issued, after factoring in loan write-offs and sales of nonperforming loans by banks.

In practice the fresh credit issued is offset by the burden of the increased write-offs and payments mostly by enterprises. Data analysis showed that the funding flow to the economy’s basic domains last month was negative by 2.4% for industry and by 1.7% for construction. At the same time the financing rate for tourism was marginally positive at 1%, while in commerce the rate was zero, against a positive 1% in March. The sector with the lowest funding rate in comparison with last year was electricity and water, which declined 12.6%.

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Who blinked first?

EU Plans To Boost Spending In South, Cut Funds For Eastern Europe (RT)

The European Commission proposed on Tuesday increased spending of EU money on Italy and other southern member states hit by the economic and migrant crises, while reducing funds for regions in the former communist eastern countries, Reuters reports. The proposal on the 2021-2027 budget comes as Italy is facing the prospect of snap elections after the summer. The commission proposed a new methodology to distribute funds that takes into account unemployment levels and the reception of migrants, and not just economic output as previously done. This will result in a reduction of regional funds for eastern countries because they have grown faster in recent years. The budget would increase to €1.1 trillion ($1.2 trillion) from €1 trillion in the current seven-year period. A third of spending would be allocated to help reduce the gap between rich and poor regions of the bloc.

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Jim on Memorial Day.

It’s Hard To Be An Empire (Jim Kunstler)

I suppose that military prowess is all we’ve got left in the national pride bag in these times of foundering empire. Few are fooled these days by the “land of opportunity” trope when so many young people are lucky to get a part-time gig on the WalMart loading dock along with three nights a week of slinging Seaside Shrimp Trios for the local Red Lobster. Of course, there are a few choice perches in venture capital out in Silicon Valley, or concocting collateralized loan obligations in the aeries of Wall Street — but nobody is playing Aaron Copeland’s Fanfare for the Common Man to celebrate these endeavors.

There’s a macabre equivalency between our various overseas war operations and the school shootings that are now a routine feature of American daily life. The purposes are equally obscure and the damage is just as impressive — many lives ruined for no good reason. But consider more lives are lost every year in highway crashes than in the Mexican War of the 1840s and more Americans are dying each year lately of opioid overdoses than the entire death toll of the Vietnam War. America’s soul is at war with its vaunted way-of-life.

It’s hard to be an empire, for sure, but it’s even harder, apparently, to be a truly virtuous society. First, I suppose, you have to be not insane. It’s hard to think of one facet of American life that’s not insane now. Our politics are insane. Our ideologies are insane. The universities are insane. Medicine is insane. Show biz is insane. Sexual relations are insane. The arts are insane. The news media is utterly insane. And what passes for business enterprise in the USA these days is something beyond insane, like unto the swarms of serpents and bats issuing from some mouth of hell in the medieval triptychs. How do you memorialize all that?

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“..the trade renege could leave Washington dancing with itself..”

China Slams Surprise US Trade Announcement, Says Ready To Fight (R.)

China on Wednesday lashed out at Washington’s unexpected statement that it will press ahead with tariffs and restrictions on investments by Chinese companies, saying Beijing was ready to fight back if Washington was looking to ignite a trade war. The United States said on Tuesday that it still held the threat of imposing tariffs on $50 billion of imports from China and would use it unless Beijing addressed the issue of theft of American intellectual property. The declaration came after the two sides had agreed earlier this month to look at steps to narrow China’s $375 billion trade surplus with America, and days ahead of a visit to Beijing by U.S. Commerce Secretary Wilbur Ross for further negotiations.

William Zarit, chairman of the American Chamber of Commerce in China, said Washington’s threat of tariffs appeared to have been “somewhat effective” thus far. “I don’t think it is only a tactic, personally,” he told reporters on Wednesday, adding that the group does not view tariffs as the best way to address the trade frictions. “The thinking became that if the U.S. doesn’t have any leverage and there is no pressure on our Chinese friends, then we will not have serious negotiations.” [..] The Global Times said the United States was suffering from a “delusion” and warned that the “trade renege could leave Washington dancing with itself”.

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What you get with bogus claims of full employment.

High Number Of Workers With No Pay Raise Says Inflation Worries Overblown (MW)

An unusually high percentage of American workers still aren’t getting pay raises nine years after the end of the Great Recession — and that suggests the threat of inflation is still quite low. Some senior Federal Reserve officials, including Kansas City Fed President Esther George, want to raise U.S. interest rates more rapidly to head off the potential for higher wages to stoke inflation. The specter of higher rates has pushed up interest rates and acted as a drag on stocks. Yet a new report by researchers at the regional central bank George leads to suggest there’s little cause for alarm.

The Kansas City Fed researchers found that an abnormally high share of employees still in the same jobs haven’t received a pay raise in the last 12 months despite a 3.9% unemployment rate that is the lowest in almost two decades. Economists refer to the phenomenon as “wage rigidity.” [..] The rate of future wage growth in the U.S. also tends to rise more slowly than usual when a high number of people aren’t getting any raises at all, the research suggests. In the most recent 12-month period ended in April, hourly U.S. wages increased at a 2.6% rate. Normally when the unemployment rate is as low as it is now, wages tend to rise 3.5% to 4.5% year.

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What they claimed would never happen.

industrial-Scale Beef Farming Comes To The UK (G.)

Thousands of British cattle reared for supermarket beef are being fattened in industrial-scale units where livestock have little or no access to pasture. Research by the Guardian and the Bureau of Investigative Journalism has established that the UK is now home to a number of industrial-scale fattening units with herds of up to 3,000 cattle at a time being held in grassless pens for extended periods rather than being grazed or barn-reared. Intensive beef farms, known as Concentrated Animal Feeding Operations (CAFOs) are commonplace in the US. But the practice of intensive beef farming in the UK has not previously been widely acknowledged – and the findings have sparked the latest clash over the future of British farming.

The beef industry says that the scale of operations involved enables farmers to rear cattle efficiently and profitably, and ensure high welfare standards. But critics say there are welfare and environmental concerns around this style of farming, and believe that the farms are evidence of a wider intensification of the UK’s livestock sector which is not being sufficiently debated, and which may have an impact on small farmers. In contrast to large intensive pig and poultry farms, industrial beef units do not require a government permit, and there are no official records held by DEFRA on how many intensive beef units are in operation. But the Guardian and the Bureau has identified nearly a dozen operating across England. [..] The largest farms fatten up to 6,000 cattle a year.

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Stop the madness!

Meat And Fish Multinationals ‘Jeopardising Paris Climate Goals’ (G.)

Meat and fish companies may be “putting the implementation of the Paris agreement in jeopardy” by failing to properly report their climate emissions, according to a groundbreaking index launched today. Three out of four (72%) of the world’s biggest meat and fish companies provided little or no evidence to show that they were measuring or reporting their emissions, despite the fact that, as the report points out, livestock production represents 14.5% of all greenhouse gas emissions. “It is clear that the meat and dairy industries have remained out of public scrutiny in terms of their significant climate impact.

For this to change, these companies must be held accountable for the emissions and they must have credible, independently verifiable emissions reductions strategy,” said Shefali Sharma, director of the Institute for Agriculture and Trade Policy European office. The new Coller FAIRR Protein Producers Index has examined the environmental and social commitments of 60 of the world’s largest meat and fish producers and found that more than half are failing to properly document their impact, despite their central role in our lives and societies.

Many of the names in the index will be unfamiliar, but their consolidated revenues of $300bn cover around one-fifth of the global livestock and aquaculture market – roughly one in every five burgers, steaks or fish. The companies looked at by the index include giants like the Australian Agricultural Company, which has the biggest cattle herd in the world; the Chinese WH Group, the largest global pork company; or the US’s Sandersons, which processes more than 10 million chickens a week.

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May 162018
 


Alfred Wertheimer Elvis 1956

 

What If Wall Street Is Waiting For The Wrong Disaster? (BI)
US Mortgage Rates Surge To Highest Level In 7 Years (CNBC)
Economic Numbers Are Less Than Meet the Eye (Rickards)
Argentina Went From Selling 100-Year Bonds To An IMF Rescue In 9 Months (Q.)
Turkey’s Economy Enters A ‘Slow Burning Crisis’ (CNBC)
Investors In Turkey Stunned By Erdogan’s Fight With Markets (R.)
Ecuador Spent Millions On Spy Operation For Julian Assange (G.)
New York City Poised To Join Airbnb Crackdown (Pol.)
US State Lawsuits Against Purdue Pharma Over Opioid Epidemic Mount (R.)
Debt Relief Woes Threaten Greece’s Bailout Exit (K.)
Greece Changes Asylum Rules To Fight Camp Overcrowding (AP)
UK Government Wants To Put A Price On Nature – But That Will Destroy It (G.)
Chimpanzees Have Much Cleaner Beds Than Humans Do (Ind.)

 

 

Deflation.

What If Wall Street Is Waiting For The Wrong Disaster? (BI)

What if the entire world of money is preparing for the wrong disaster — which would be a disaster in and of itself? Since the financial crisis, Wall Street, central-bank heads, economists, and policymakers have been waiting for the return of inflation. At the beginning of this year, they thought they had found it. It came, so they thought, in the form of a weak dollar, wage growth, economic stability in China, and steadily rising interest rates. So here in the US, the Fed started talking about the importance of preparing to fight runaway inflation. In fact, it’s obsessed with the idea. According to Deutsche Bank analyst Torsten Slok, the Fed is talking more about inflation now (in its minutes and in its reports) than it did in 2006 when the economy was actually overheating, right before the crash.

This, even though personal-consumption expenditures haven’t grown by the Federal Reserve’s 2% target since the financial crisis. There’s a lot of noise, from data revisions and Trump tweets, trade-war threats and hopes of growth from tax policy, a wobbling stock market, and rising interest rates. But when it comes down to it, the things that everyone is saying will be sources of inflation may not be sources at all. Meanwhile, the weak dollar, wage growth, and a stable China elixir that got markets high in January have since faded. That should be a warning. If we play our cards wrong and pay attention to all the wrong signs, we may still be in a world tilting dangerously closer to our old enemy, deflation.

[..] As Slok said, aging can’t fully explain why wage growth has been suppressed, but he has other ideas too. “One important reason why the expansion since 2009 has been so weak is that wealth gains have been unevenly distributed (see chart below). A decline in the homeownership rate and the number of households holding stocks has dampened consumer spending growth for the bottom 90% of households,” he wrote in a note to clients back in March.

The deflationary impacts of economic inequality and an aging population are not going away with the flick of a wrist or the push of a button. They are long-term challenges that require imaginative, difficult policy solutions. It’s hard to see that coming from the Trump administration or an increasingly polarized, uncooperative world. So we need to ask ourselves: Are we waiting for the wrong disaster?

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That’s the end?!

US Mortgage Rates Surge To Highest Level In 7 Years (CNBC)

A sharp sell-off in the bond market is sending mortgage rates to the highest level in seven years. The average contract rate on the 30-year fixed will likely end the day as high as 4.875% for the highest creditworthy borrowers and 5% for the average borrower, according to Mortgage News Daily. Mortgage rates, which loosely follow the yield on the 10-year Treasury, started the year right around 4% but began rising almost immediately. They then leveled off in March and early April, only to begin rising yet again. Tuesday’s move follows positive economic data in retail sales, suggesting that newly imposed tariffs would not hit sales as hard as expected.

Rates have been widely expected to rise, as the Federal Reserve increases its lending rate and pulls back its investments in mortgage-backed bonds. But mortgage rates have reacted only in fits and starts. “The bottom line is that the writing on the wall has been telling rates to go higher since at least last September,” said Matthew Graham, chief operating officer of Mortgage News Daily. “Rates keep looking back to see if the writing has changed, and although there have been opportunities for hope (trade wars, stock selling-sprees, spotty data at times), it hasn’t. Today is just the latest reiteration of that writing.”

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10% unemployment.

Economic Numbers Are Less Than Meet the Eye (Rickards)

Let’s start with the employment report. The U.S. Department of Labor, Bureau of Labor Statistics report dated May 4, 2018, showed the official U.S. unemployment rate for April 2018 at 3.9%, with a separate unemployment rate for adult men of 4.1% and adult women of 3.7%. The 3.9% unemployment rate is based on a total workforce of 160 million people, of whom 153 million are employed and 6.3 million are unemployed. The 3.9% figure is the lowest unemployment rate since 2001, and before that, the early 1970s. The average rate of unemployment in the U.S. from 1948 to 2018 is 5.78%. By these superficial measures, unemployment is indeed low and the economy is arguably at full employment.

Still, these statistics don’t tell the whole story. Of the 153 million with jobs, 5 million are working part time involuntarily; they would prefer full-time jobs but can’t find them or have had their hours cut by current employers. Another 1.4 million workers wanted jobs and had searched for a job in the prior year but are not included in the labor force because they had not searched in the prior four weeks. If their numbers were counted as unemployed, the unemployment rate would be 5%. Yet the real unemployment rate is far worse than that. The unemployment rate is calculated using a narrow definition of the workforce. But there are millions of able-bodied men and women between the ages of 25–54 capable of work who are not included in the workforce.

These are not retirees or teenagers but adults in their prime working years. They are, in effect, “missing workers.” The number of these missing workers not included in the official unemployment rolls is measured by the Labor Force Participation Rate, LFPR. The LFPR measures the total number of workers divided by the total number of potential workers regardless of whether those potential workers are seeking work or not. The LFPR plunged from 67.3% in January 2000 to 62.8% in April 2018, a drop of 4.4percentage points. If those potential workers reflected in the difference between the 2018 and 2000 LFPRs were added back to the unemployment calculation, the unemployment rate would be close to 10%.

[..] Another serious problem is illustrated in Chart 1 below. This shows the U.S. budget deficit as apercentage of GDP (the white line measured on the right scale) compared with the official unemployment rate (the blue line measured on the left scale). From the late 1980s through 2009, these two time series exhibited a fairly strong correlation. As unemployment went up, the deficit went up also because of increased costs for food stamps, unemployment benefits, stimulus spending and other so-called “automatic stabilizers” designed to bring the economy out of recession. That makes sense. But as the chart reveals, the correlation has broken down since 2009 and the two time series are diverging rapidly. Unemployment is going down, but budget deficits are still going up.

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Too late to get a new government?

Argentina Went From Selling 100-Year Bonds To An IMF Rescue In 9 Months (Q.)

In financial markets, memories can be short. Last year, Argentina sold 100-year bonds, joining a select club of countries with the confidence to borrow for such an extended period. Yes, the same Argentina that has defaulted on its debt eight times in the past 200 years, including the largest sovereign default in history in 2001. Not long before investors decided it was a good idea to lend to the South American nation for 100 years, it was largely shut out of international capital markets. In June 2017, Argentina sold $2.75 billion of US dollar-denominated 100-year bonds at an effective yield of 8%. The history of defaults seemed to be forgotten—nearly $10 billion in bids were placed for the bonds.

The sale came at a time when investors were hungry for high-yielding debt, but it also showed confidence in president Mauricio Macri and his program of pro-market reforms. Less than a year later, Macri has asked the IMF for a $30 billion loan to help it combat a currency crisis and limit further damage to the Argentinian economy from a dangerous outbreak of market turmoil. What went wrong?

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Not sure it’ll be all that slow. Turekey has borrowed in dollars up the wazoo.

Turkey’s Economy Enters A ‘Slow Burning Crisis’ (CNBC)

Turkey’s economy is overheating and if the government doesn’t act then the country is in trouble, according to several analysts. “The government has no intention of tackling imbalances or overheating,” Marcus Chevenix, global political research analyst at TS Lombard, said in a research note this week. “It is this unwillingness to act that leads us to believe that we can now say that Turkey is entering a slow burning crisis.” The Turkish lira is at a record low against the dollar, and is ranked among the worst-performing currencies this year. After comments this week by Turkish President Recep Erdogan promising to lower interest rates after the country’s June election, the currency tanked to its lowest point yet against the greenback, hitting 4.4527 on Tuesday mid-afternoon.

The dollar has appreciated by around 18% against the lira so far this year. The reason? Erdogan has been sitting on interest rates, opting for a monetary policy that prioritizes growth over controlling its double-digit inflation. Turkey’s growth rate reached an impressive 7.4% for 2017 and leads the G-20, but at the expense of inflation, which has shot up to 10.9%. Market sentiment has driven much of the lira’s sell-off, as investors worry about government intervention in monetary policy and central bank independence. Investors have been hoping for a rate rise by the bank, but that now appears unlikely.

Erdogan plays an unusually heavy-handed role in deciding his country’s monetary policy, and many observers say he keeps the Central Bank of the Republic of Turkey’s (TCMB) hands tied. The bank finally raised its rates for the first time in several sessions in late April, moving its late liquidity window rate (which it uses to set policy) up by 75 basis points to 13.5%. The lira temporarily jumped on the news. But Erdogan aims to bring the rate back down, saying it must be done to ease pressure on Turkish households and drive the growth needed to create jobs for Turkey’s youth. “I’m seriously concerned about the Turkish lira,” Piotr Matys at Rabobank told CNBC via email. “Is Turkey the domino the market expects to fall next? It’s got all those problems — high current account deficit, government borrowing in other currencies.”

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He went to the City for this?!

Investors In Turkey Stunned By Erdogan’s Fight With Markets (R.)

“Shock and disbelief” – that’s how global money managers reacted to an attempt by Turkish President Tayyip Erdogan to re-assure foreign investors about his economic management as the lira went into tailspin. Fund managers who met Erdogan and his delegation in London on Monday, part of a three-day visit to Britain, were baffled about how he plans to tame rising inflation and a currency in freefall – while simultaneously seeking lower interest rates. Some said that while Erdogan has crushed his domestic enemies, he would find taking on international financial markets with policies that defy economic orthodoxy much tougher.

A resurgent dollar, rising oil prices and a jump in borrowing costs have caused havoc across emerging markets in recent weeks. However, Turkey has been among the worst affected due to its a gaping current account deficit and growing puzzlement over who exactly holds the reins of monetary policy. Erdogan’s comments that he planned to take greater control of the economy after snap presidential and parliamentary elections next month deepened investors’ worries about the central bank’s ability to fight inflation, helping to send the lira to a record low on Tuesday.

Rampant inflation dogged Turkey for decades before 2000 and has been back in double digits since the start of 2017. But Erdogan has styled himself as an enemy of high interest rates, defying orthodox monetary policy that prescribes tighter credit to keep a lid on prices. Speaking on condition of anonymity due to the political sensitivity of the meetings, investors told Reuters they were flabbergasted by his stance and willingness to go into battle with world markets at such a fragile time.

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A suggestive and tendentious piece by the Guardian, which seems to prepare us for a justification of Ecuador throwing Julian out. Other articles in today’s paper have titles like “How Julian Assange became an unwelcome guest in Ecuador’s embassy” and “Why does Ecuador want Assange out of its London embassy?”

Ecuador Spent Millions On Spy Operation For Julian Assange (G.)

Ecuador bankrolled a multimillion-dollar spy operation to protect and support Julian Assange in its central London embassy, employing an international security company and undercover agents to monitor his visitors, embassy staff and even the British police, according to documents seen by the Guardian. Over more than five years, Ecuador put at least $5m (£3.7m) into a secret intelligence budget that protected the WikiLeaks founder while he had visits from Nigel Farage, members of European nationalist groups and individuals linked to the Kremlin. Other guests included hackers, activists, lawyers and journalists.

[..] Documents show the intelligence programme, called “Operation Guest”, which later became known as “Operation Hotel” – coupled with parallel covert actions – ran up an average cost of at least $66,000 a month for security, intelligence gathering and counter-intelligence to “protect” one of the world’s most high-profile fugitives. An investigation by the Guardian and Focus Ecuador reveals the operation had the approval of the then Ecuadorian president, Rafael Correa, and the then foreign minister, Ricardo Patiño, according to sources. [..] Worried that British authorities could use force to enter the embassy and seize Assange, Ecuadorian officials came up with plans to help him escape.

They included smuggling Assange out in a diplomatic vehicle or appointing him as Ecuador’s United Nations representative so he could have diplomatic immunity in order to attend UN meetings, according to documents seen by the Guardian dated August 2012. In addition to giving Assange asylum, Correa’s government was apparently prepared to spend money on improving his image. A lawyer was asked to devise a “media strategy” to mark the “second anniversary of his diplomatic asylum”, in a leaked 2014 email exchange seen by the Guardian.

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Force them to open the books.

New York City Poised To Join Airbnb Crackdown (Pol.)

New York’s City Council is plotting a crackdown on Airbnb, the largest home-sharing platform in the world, as the hotel industry and its unionized workers push lawmakers in some of the nation’s biggest cities to blunt the $30 billion company’s growth. New York City’s push resembles a legislative effort underway in Los Angeles, and comes months after San Francisco passed a measure mandating that hosts of short-term rental platforms register their homes with the city, leading to a decline in listings. The coastal cities are among Airbnb’s largest markets in the United States.

The Council is crafting a bill that would require online home-sharing companies to provide the Mayor’s Office of Special Enforcement with the addresses of their listings — a potential blow to Airbnb if its users are revealed to be turning rent-regulated apartments into business enterprises in a city starved for more housing. The move is coming two years after New York’s state Legislature first took aim at Airbnb with a bill that banned the advertising of illegal short-term rentals — but ultimately did little to hurt the company. The New York push comes amid a well-funded advertising and lobbying campaign by the hotel industry, which has run ads supporting a recent report from City Comptroller Scott Stringer that was critical of Airbnb, and is accusing the company of reducing the amount of affordable housing in cities.

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What’s taking so long?

US State Lawsuits Against Purdue Pharma Over Opioid Epidemic Mount (R.)

Litigation against OxyContin maker Purdue Pharma is intensifying as six more U.S. states on Tuesday announced lawsuits, accusing the company of fueling a national opioid epidemic by deceptively marketing its prescription painkillers to generate billions of dollars in sales. U.S. state attorneys general of Nevada, Texas, Florida, North Carolina, North Dakota and Tennessee also said Purdue Pharma violated state consumer protection laws by falsely denying or downplaying the addiction risk while overstating the benefits of opioids. “It’s time the defendants pay for the pain and the destruction they’ve caused,” Florida State Attorney General Pam Bondi told a press conference.

Florida also sued drugmakers Endo Pharmaceuticals, Allergan, units of Johnson & Johnson and Teva Pharmaceutical Industries, and Mallinckrodt, as well as drug distributors AmerisourceBergen, Cardinal Health and McKesson. [..] Lawsuits have already been filed by 16 other U.S. states and Puerto Rico against Purdue. The privately-held company in February said it stopped promoting opioids to physicians after widespread criticism of the ways drugmakers market highly addictive painkillers. Bondi said state attorneys general from New York, California and Massachusetts were preparing similar lawsuits.

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And on and on and on…

Debt Relief Woes Threaten Greece’s Bailout Exit (K.)

The tug of war between the IMF and Berlin over the Greek debt issue is threatening Greece’s successful bailout program exit in August. Germany insists on granting Greece gradual debt relief under the condition that it will be approved every year by the Bundestag. For its part, the IMF disagrees with Berlin’s insistence on reviewing the measures every year and is threatening to leave the Greek program. If the IMF were to leave the program because it thinks that debt relief measures are inadequate to secure the sustainability of Greece’s debt, the country’s access to international market funding will be cast in doubt. This means that, inevitably, the government will have to resort to precautionary credit to shield itself from complications.

The chasm between Berlin and the IMF was clear during Monday’s session of the so-called Washington Group – representatives of Greece’s creditors as well as the governments of Germany, France, Spain and Italy, the biggest eurozone economies. Poul Thomsen, the head of the IMF’s European Department, who attended Monday’s meeting, countered that Berlin’s conditions were not acceptable. Thomsen said Tuesday that the Fund wants to activate the program for Greece but warned that time is running out and asked for final decisions on the matter by the next Eurogroup on May 24.

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Speed up deportations and appeals, restrict freedom of movement. Lovely

Greece Changes Asylum Rules To Fight Camp Overcrowding (AP)

Greece’s parliament approved legislation Tuesday that is designed to speed up the asylum process for migrants, ease the overcrowding at Greek island refugee camps and to deport more people back to Turkey. Under the new law, staff will be added at the office that handles asylum requests, the appeals process for rejected applications will be shortened and travel restrictions can be imposed on asylum-seekers who are moved from the Greek islands to the mainland. Currently, restrictions on asylum-seekers are mostly limited to five islands near the coast of Turkey, where strained refugee camps are trying to cope with up to three times more residents than planned.

More than 16,000 people are stuck there. A group of 13 Greek human rights organizations, however, has accused the government of ignoring refugee rights. The number of newly arriving migrants and refugees has risen sharply this year at the islands and Greece’s land border with Turkey, prompting the change in policy. Police cleared out two abandoned factory buildings used by migrants in the city of Patras in western Greece early Tuesday. More than 600 people will be moved from there to refugee camps on the mainland, police said.

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Have we lost the ability to frame everything in anything else than monetary terms?

UK Government Wants To Put A Price On Nature – But That Will Destroy It (G.)

Never mind that the new environmental watchdog will have no teeth. Never mind that the government plans to remove protection from local wildlife sites. Never mind that its 25-year environment plan is all talk and no action. We don’t need rules any more. We have a pouch of magic powder we can sprinkle on any problem to make it disappear. This powder is the monetary valuation of the natural world. Through the market, we can avoid conflict and hard choices, laws and policies, by replacing political decisions with economic calculations. Almost all official documents on environmental issues are now peppered with references to “natural capital” and to the Natural Capital Committee, the Laputian body the government has created to price the living world and develop a set of “national natural capital accounts”.

The government admits that “at present we cannot robustly value everything we wish to in economic terms; wildlife being a particular challenge”. Hopefully, such gaps can soon be filled, so we’ll know exactly how much a primrose is worth. The government argues that without a price, the living world is accorded no value, so irrational decisions are made. By costing nature, you ensure that it commands the investment and protection that other forms of capital attract. This thinking is based on a series of extraordinary misconceptions. Even the name reveals a confusion: natural capital is a contradiction in terms. Capital is properly understood as the human-made segment of wealth that is deployed in production to create further financial returns.

Concepts such as natural capital, human capital or social capital can be used as metaphors or analogies, though even these are misleading. But the 25-year plan defines natural capital as “the air, water, soil and ecosystems that support all forms of life”. In other words, nature is capital. In reality, natural wealth and human-made capital are neither comparable nor interchangeable. If the soil is washed off the land, we cannot grow crops on a bed of derivatives. A similar fallacy applies to price. Unless something is redeemable for money, a pound or dollar sign placed in front of it is senseless: price represents an expectation of payment, in accordance with market rates. In pricing a river, a landscape or an ecosystem, either you are lining it up for sale, in which case the exercise is sinister, or you are not, in which case it is meaningless.

Still more deluded is the expectation that we can defend the living world through the mindset that’s destroying it. The notions that nature exists to serve us; that its value consists of the instrumental benefits we can extract; that this value can be measured in cash terms; and that what can’t be measured does not matter, have proved lethal to the rest of life on Earth. The way we name things and think about them – in other words the mental frames we use – helps determine the way we treat them.

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Make a fresh bed every day.

Chimpanzees Have Much Cleaner Beds Than Humans Do (Ind.)

Chimpanzees have much cleaner beds – with fewer bodily bacteria – than humans do, scientists have found. A study comparing swabs taken from chimp nests with those from human beds found that people’s sheets and mattresses harboured far more bacteria from their bodies than the animals’ beds did from theirs. The researchers say their findings suggest that our attempts to create clean environments for ourselves may actually make our surroundings “less ideal”. More than a third – 35 per cent – of the bacteria in human beds comes from our own saliva, skin and faecal particles. By contrast, chimps – humans’ closest evolutionary relatives – appear to sleep with few such bacteria.

“We found almost none of those microbes in the chimpanzee nests, which was a little surprising,” said Megan Thoemmes, lead author of the paper. The researchers collected samples from 41 chimpanzee beds – or nests – in Tanzania and tested them for microbial biodiversity. At 15 primates’ nests, researchers also used vacuums to find out whether there were arthropods, such as insects, spiders, mites and ticks. “We also expected to see a significant number of arthropod parasites, but we didn’t,” said Ms Thoemmes. In addition, the team were shocked to find very few fleas, lice and bed bugs – ectoparasites – in the chimp nests.

“There were only four ectoparasites found, across all the nests we looked at. And that’s four individual specimens, not four different species,” said Ms Thoemmes, a PhD student at North Carolina State University. She believes chimps’ beds are cleaner because they make them freshly in treetops each day.

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May 142018
 
 May 14, 2018  Posted by at 8:56 am Finance Tagged with: , , , , , , , , , , , ,  


Alfred Wertheimer Elvis 1956

 

S&P 500 Should Be 1,000+ Points Lower Than Today – David Rosenberg (MW)
Why I Think the Stock Market Cannot Crash in 2018 (WS)
Italy’s Nascent Government Has Tough Economic Circles To Square (R.)
US Threatens European Companies With Sanctions After Iran Deal Pullout (G.)
May Faces Deadlock Over Brexit Customs Rules As Both Options Rubbished (Ind.)
Shoppers Desert UK High Streets (G.)
UK Metropolitan Police’s Facial Recognition Technology 98% Inaccurate (Ind.)
UK To Host Summit On Why Six Other Countries Should Join The EU (Ind.)
Xi Might Join Trump And Kim In Singapore (MS)
Prosecutors Seek Complete Media Ban On Cardinal George Pell Trial (NM)
Greek Pensions Under €1,000 Will Also Be Cut In 2019 (K.)
Greece Considers Boosting Capacity Of Refugee Centers

 

 

“..there are some serious people out there saying some very serious things about the longevity of the cycle..”

S&P 500 Should Be 1,000+ Points Lower Than Today – David Rosenberg (MW)

A reversion to the mean in U.S. stock prices could mean the market will fall by at least 20%, according to David Rosenberg of Gluskin Sheff and Associates, who gave his prediction at the Strategic Investment Conference 2018 in San Diego. Rosenberg, the chief economist and strategist at Toronto-based Gluskin Sheff, said this is one of the strangest securities-market rallies of all time. That’s because all asset classes have gone up, even ones that are inversely correlated. He thinks a breaking point is a year away, and so investors should start taking precautions now.

The beginning of this year started off great for investors. The S&P 500 Index hit record highs at around 2,750 points, and stocks had their best January since 1987. As if that was not enough, Rosenberg pointed out, many Wall Street strategists raised their target to 3,000. The media extrapolating record returns only added to the rise in investors’ unreasonable expectations. However, increasingly more hedge fund managers and billionaire investors who timed the previous crashes are backing out.

One of them is Sam Zell, a billionaire real estate investor, whom Rosenberg says is a “hero” of his. Zell predicted the 2008 financial crisis, eight months early. But, essentially, he was right. Today, his view is that valuations are at record highs. Then we have Howard Marks, a billionaire American investor who is the co-founder and co-chairman of Oaktree Capital Management. He seconds Zell’s view that valuations are unreasonably high and says the easy money has been made. “And I don’t always try to seek out corroborating evidence. But there are some serious people out there saying some very serious things about the longevity of the cycle,” said Rosenberg.

According to Rosenberg’s calculations, the S&P 500 should be at least 1,000 points lower than it is today based on economic growth. In spite of this, equity valuations sit at record highs. Another historically accurate indicator that predicts the end of bull cycles is household net worth’s share of personal disposable income. As you can see in the chart below, the last two peaks in this ratio almost perfectly coincided with the dot-com crash and the 2008 financial crisis.

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There is no market.

Why I Think the Stock Market Cannot Crash in 2018 (WS)

The 85% of S&P 500 companies that have reported earnings so far disclosed they’d bought back $158 billion of their own shares in Q1, according to the Wall Street Journal. The quarterly record of $164 billion was set in Q1 2016. If the current rate applies to all S&P 500 companies, they repurchased over $180 billion of their own shares in Q1, thus setting a new record. At this trend, including a couple of slower quarters, S&P 500 companies are likely to buy back between $650 billion and $700 billion of their owns shares in 2018. This would handily beat the prior annual record of $572 billion in 2007.

Here are the top buyback spenders in Q1: Apple: $22.8 billion, Amgen: $10.7 billion, Bank of America: $4.9 billion, JPMorgan Chase: $4.7 billion, Oracle: $4 billion, Microsoft: $3.8 billion, Phillips 66: $3.5 billion, Wells Fargo: $3.34 billion, Boeing: $3 billion, Citigroup: $2.9 billion. Buybacks pump up share prices in several ways. One is the pandemic hype and media razzmatazz around the announcements which cause investors and algos to pile into those shares and create buying pressure. Since May 1, when Apple announced mega-buybacks of $100 billion in the future, its shares have surged 11%. The magic words.

Other companies with big share buyback programs have also fared well: Microsoft shares are up 14% year-to-date. And if buybacks don’t push up shares, at least they keep them from falling: Amgen shares are flat year-to-date. Shares of the 20 biggest buyback spenders in Q1 are up over 5% on average year-to-date, according to the Wall Street Journal, though the S&P 500 has edged up only 2%.

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Basic income AND a parallel currency. How can this fit inside the eurozone?

Italy’s Nascent Government Has Tough Economic Circles To Square (R.)

The Italian coalition taking shape 10 weeks after March’s inconclusive election has made economic promises that seem incompatible with Europe’s fiscal rules and will be hard, if not impossible, to keep. These include slashing taxes for companies and individuals, boosting welfare provision, cancelling a scheduled increase in sales tax and dismantling a 2011 pension reform which sharply raised the retirement age.The marriage being sealed between the anti-establishment 5-Star Movement and the far-right League was seen as an unlikely and worrying prospect by most analysts before the March 4 election ended in a hung parliament.

The pre-election adversaries have spent the last few days trying to fuse their very different programs into a “contract” of mutually acceptable policy commitments. What they have in common is that they are extremely expensive. On the face of it their plans, which they say may also include a form of parallel currency, could push the budget deficit far above targets agreed with the EU, setting up a clash with the European Commission and Italy’s partners. “We will need to renegotiate EU agreements to stop Italy suffocating,” League leader Matteo Salvini said on Saturday after a day of talks with his 5-Star counterpart Luigi Di Maio.

5-Star’s flagship policy of a universal income for the poor has been costed at around 17 billion euros ($20 billion) per year. The League’s hallmark scheme, a flat tax rate of 15 percent for companies and individuals, is estimated to reduce tax revenues by 80 billion euros per year. Scrapping the unpopular pension reform would cost 15 billion euros, another 12.5 billion is needed to head off the planned hike in sales tax, and the parties are also considering printing a new, special-purpose currency to pay off state debts to firms. “If implemented, it would be the biggest shake-up of the Italian economic system in modern times,” said Wolfgang Munchau, head of the London-based Eurointelligence think-tank.

[..] olfango Piccoli, co-president of Teneo Intelligence, said taking on Brussels would be popular with Italian voters, and the new government had little to fear from a European Commission which “is very weak and on its way out”. The Commission, with just a year of its term remaining, “can’t really do much other than put Italy’s finances under greater scrutiny, and markets don’t care about that”, he said.

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Bolton.

US Threatens European Companies With Sanctions After Iran Deal Pullout (G.)

Donald Trump is prepared to impose sanctions on European companies that do business in Iran following his withdrawal of the US from the international nuclear deal, his administration reiterated on Sunday. Trump’s most senior foreign policy aides signalled that the US would continue pressuring allies to follow Washington in backing out of the pact, which gave Tehran relief from sanctions in exchange for halting its nuclear programme. John Bolton, Trump’s national security adviser, predicted that “the Europeans will see that it’s in their interests to come along with us” rather than continue with the 2015 deal, under which major European corporations have signed billions of dollars of contracts in Iran.

Asked on CNN’s State of the Union whether that meant the Trump administration would impose sanctions against those firms, Bolton said: “It’s possible. It depends on the conduct of other governments.” US sanctions on Iran reimposed following Trump’s withdrawal not only block American firms from doing business in the country, but also bar foreign firms that do business there from accessing the entire US banking and financial system. Mike Pompeo, Trump’s secretary of state, said on Sunday wealth created in Iran under the terms of the nuclear deal “drove Iranian malign activity” in the region. He declined to rule out sanctions against European firms. “The sanctions regime that is in place now is very clear on what the requirements are,” Pompeo said on Fox News Sunday.

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Britain better get rid of her.

May Faces Deadlock Over Brexit Customs Rules As Both Options Rubbished (Ind.)

Theresa May faces deadlock over the key controversy of customs rules after Brexit, after senior politicians rubbished both of the options being studied by her warring cabinet. Michael Gove – picked by the prime minister to examine her preferred “customs partnership” model – warned there were “significant question marks over the deliverability of it”. Meanwhile, the Irish deputy prime minister insisted Dublin would block a Brexit withdrawal agreement if she pursued an alternative technology-based solution, saying: “It won’t work.” The warnings left Ms May with few apparent options to resolve the impasse, with a deadline set by the EU just six weeks away.

Two working groups of key ministers have been set up to study both the customs partnership – under which the UK would collect tariffs on behalf the EU – and the tech-based “max-fac” proposal. Mr Gove, the environment secretary, speaking on the BBC’s The Andrew Marr Show, declined to back Boris Johnson’s description of the partnership model as “crazy”. But he said: “Boris pointed out that because it’s novel, because no model like this exists, there have to be significant question marks over the deliverability of it on time.” Crucially, Mr Gove also suggested the proposal would break Ms May’s key promise – stated again today – to ‘take back control” of borders and laws.

“What the customs partnership requires the British government to do is in effect to act as the tax collector and very possibly the effective deliverer of regulation for the European Union,” he claimed. A proposal to seek EU agreement to keep the UK in the single market and customs union past the end of 2020, while a solution is found, was also stamped on by Mr Gove. “I don’t believe in an extension,” he said – arguing it was “critical to meet that deadline” of ending the post-Brexit transition period after 21 months.

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Slowly, people are starting to get very afraid of Brexit.

Shoppers Desert UK High Streets (G.)

Shoppers are deserting the high street in greater numbers than during the depths of the recession in 2009, creating a brutal climate that is putting thousands more retail jobs at risk. The coming days will be crucial to the future of a handful of household names, including Mothercare and Carpetright, which are trying to persuade investors to make vital cash injections so they can jettison unwanted stores. There is also the spectre of job losses at Poundworld, the struggling discount chain, which is being cut adrift by its American owners. Dwindling shopper numbers tally with weak spending figures for April, which show Britons slashed spending on gadgets, furniture and even nights out.

Consumer spending dropped 2% last month, according to Visa’s consumer spending index, which has recorded declines in 11 of the past 12 months. “With inflation beginning to fall and wages growing faster than expected in recent months, it would have been easy to assume we might be over the worst of the consumer squeeze,” Mark Antipof, the chief commercial officer at Visa, said. “Yet there has been no corresponding improvement in spending. It is clear that consumers remain in belt-tightening mode.” High street visits declined 3.3% in April, according to the BRC-Springboard monthly tracker, which also highlighted nearly one in 10 town centre shops are lying empty.

The drop in footfall came on the back of a disastrous performance in March, when shopper numbers declined by 6%. Taken together there has been an unprecedented 4.8% drop over the two months – a bigger decline than was recorded in the same months of 2009 when the UK was mired in recession. “Not since the depths of recession in 2009 has footfall over March and April declined to such a degree, and even then the drop was less severe at -3.8%,” said the Springboard analyst Diane Wehrle. “Much could be made of the adverse impact on April’s footfall of Easter shifting to March but even looking at March and April together still demonstrates that footfall has plummeted.”

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Priceless.

UK Metropolitan Police’s Facial Recognition Technology 98% Inaccurate (Ind.)

Facial recognition software used by the UK’s biggest police force has returned false positives in more than 98 per cent of alerts generated, The Independent can reveal, with the country’s biometrics regulator calling it “not yet fit for use”. The Metropolitan Police’s system has produced 104 alerts of which only two were later confirmed to be positive matches, a freedom of information request showed. In its response the force said it did not consider the inaccurate matches “false positives” because alerts were checked a second time after they occurred. Facial recognition technology scans people in a video feed and compares their images to pictures stored in a reference library or watch list. It has been used at large events like the Notting Hill Carnival and a Six Nations Rugby match.

The system used by another force, South Wales Police, has returned more than 2,400 false positives in 15 deployments since June 2017. The vast majority of those came during that month’s Uefa Champion’s League final in Cardiff, and overall only 234 alerts – fewer than 10 per cent – were correct matches. Both forces are trialling the software. The UK’s biometrics commissioner, Professor Paul Wiles, told The Independent that legislation to govern the technology was “urgently needed”. He said: “I have told both police forces that I consider such trials are only acceptable to fill gaps in knowledge and if the results of the trials are published and externally peer-reviewed. We ought to wait for the final report, but I am not surprised to hear that accuracy rates so far have been low as clearly the technology is not yet fit for use.

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Irony is dead.

UK To Host Summit On Why Six Other Countries Should Join The EU (Ind.)

The British government will host a summit encouraging six European countries to join the EU for the sake of their “security, stability and prosperity”, months before it is due to sign its own Brexit withdrawal deal with Brussels. London will in July play host to Western Balkans governments including Serbia and Albania, as well as existing EU member states, to discuss reforms to pave the way to future EU enlargement. The summit is part of the so-called Berlin Process – a series of meetings aimed at supporting the region towards joining the bloc and described by the European parliament’s research arm as “bringing a new perspective and impetus to the enlargement process”.

Critics said the UK government must have “a sense of humour” for hosting a conference on EU enlargement and extolling the benefits of accession as Britain itself headed towards the exit door. The leaders of EU candidate countries Albania, Montenegro, Macedonia, and Serbia will attend, as well as those of Bosnia and Herzegovina, and Kosovo – two states who have both expressed an interest in joining the bloc but have not yet been accepted as candidates. They will be joined by representatives of the governments of EU countries with an interest in the region such as Austria, Croatia, France, Germany, Italy, Poland, Slovenia and Bulgaria.

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Makes sense.

Xi Might Join Trump And Kim In Singapore (MS)

The prospect of China’s president Xi Jinping coming to Singapore on June 12, 2018 to meet with United States President Donald Trump and North Korea leader Kim Jong-un has been raised. This is according to mainstream media reports in Singapore on May 11, which re-reported a Japanese newspaper, Mainichi Shimbun, that cited American diplomatic sources. In the Friday report, Mainichi Shimbun quoted a senior international negotiator with the National Security Council saying that “there is a possibility” the leader of a third country may take part. It is understood that this leader is Xi. The suggestion that the three leaders will descend upon Singapore at the same time is not without merit.

On Tuesday, May 8, Trump spoke to Xi about Kim’s recent visit to China. The Chinese president and North Korean leader met Monday and Tuesday, May 7 and 8, in China again in a second meeting. This meeting followed Kim’s first visit to Beijing in March. However, as of Friday morning, there were no news reports on North Korean media outlets of the date and venue of Kim’s meeting with Trump, Japanese broadcaster NHK reported. Previously, Kim and South Korean president Moon Jae-in issued a joint declaration to say that both sides aim to realise complete denuclearisation for a nuclear-free Korean Peninsula, at the historic inter-Korea summit on April 27. They also agreed to pursue three-way talks involving the two Koreas and the US, or four-way talks involving the two Koreas, the US and China.

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People no longer have a right to know?

Prosecutors Seek Complete Media Ban On Cardinal George Pell Trial (NM)


On Friday, the Victorian Department of Public Prosecutions lodged an application with the Country Court of Victoria for a ‘super injunction’ against media coverage of the trial of Cardinal George Pell, who is accused of a number of historical sexual offences. Cardinal Pell – the Vatican’s treasurer and the third highest ranked Catholic in the world – was committed to stand trial a fortnight ago. The orders being sought by the DPP, which will be decided on Wednesday morning in the County Court in Melbourne before Chief Judge Peter Kidd, are:

(1) Publication is prohibited of any report of the whole or any part of these proceedings and any information derived from this proceeding and any court documents associated with this proceeding. (2) The prohibition on publication applies within all States and Territories of Australia and on any website or other electronic or broadcast format accessible within Australia. (3) For the purpose of this order, ‘publication’ has the meaning attributed to it by s3 of the Open Courts Act, that is to say, it means the dissemination or provision of access to the public by any means including, publication in a book, newspaper, magazine or other written publication, or broadcast by radio or television; or public exhibition; or broadcast or electronic communication. (4) The order will expire upon a jury verdict in respect of the charges on the final indictment, or by further order of the court.

Ordinarily, an injunction against media reporting of a trial prevents outlets from reporting the details of the trial. But they can report the existence of the injunction and explain to readers why they’re not reporting the matter. The order that the DPP is seeking in the Pell matter is so broad that it will operate as a super injunction. The suppression order would be ‘any part of’ the proceedings, meaning the trial could not be reported, nor could media report the fact they’re not allowed to report. If Wednesday’s application for a super injunction is successful, this story will have to be removed from publication. [..] Cardinal Pell, aged 76, is the most senior Catholic charged with sexual offences anywhere in the world. Cardinal Pell has strongly denied the allegations levelled against him.

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We’re on a road to nowhere..

Greek Pensions Under €1,000 Will Also Be Cut In 2019 (K.)

The planned pension cuts for people who have already retired and which will be implemented as of January 2019 will also affect pensions under 1,000 euros, Deputy Minister for Social Security Tasos Petropoulos admitted on Sunday. “In October we will see the exact cuts in pensions […] and will improve them,” he told broadcaster Skai. “We have seven months ahead.” Petropoulos said the 18 percent cut in pensions includes benefits, and estimated that about 25-30 percent of pensioners will be affected by the new reductions. He also pledged to pay all pending main pensions by August, “except in some particular cases.”

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Now Turkish citizens fleeing Erdogan are added.

Greece Considers Boosting Capacity Of Refugee Centers

The Migration Policy Ministry is reportedly considering increasing the capacity of existing refugee and migrant centers on the mainland as a first step in managing a recent spike in arrivals from neighboring Turkey, in a plan ministry sources say the European Union agrees with. “Practically, this means tents will be set up between the containers, exacerbating the already difficult situation for the residents,” a nongovernmental organization official said. Increasing capacity also means that the current logistics involved in running the camps will have to be adjusted. For example, if daily food costs are €3.50 per person per day (according to the specifications cited in official announcements), an additional 16,478 additional refugees will mean an extra €57,673 per day.

According to official data, 6,632 refugees crossed into Greece in April alone and 16,478 people in the first five months of the year, of whom 9,375 arrived on the islands and 7,103 from the Evros border in northeastern Greece. The government is also hoping to reduce arrivals and overcrowding on the islands by investing in diplomacy with Turkey and speeding up the asylum process through a bill which is being discussed in Parliament. At the same time, the reactions of residents on the islands that have borne the brunt of migration, even if they do not reflect the views of the entire population, show their patience is wearing thin. Authorities have also recorded increased arrivals of Turkish nationals from Evros. About 30 Turks have been arriving on a daily basis since Turkish President Recep Tayyip Erdogan called elections for next month, versus zero arrivals previously.

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May 092018
 


Edgar Degas Two laundresses 1876

 

Fed Chair Powell To Emerging Markets: You Are On Your Own (ZH)
Argentina Seeks IMF Aid ‘To Avoid Crisis’ (BBC)
Europe On Collision Course With US Over Iran Deal (AFP)
Mnuchin: Revoking Boeing, Airbus Licenses To Sell Jets To Iran (R.)
Pompeo, In North Korea, To Return With Detained Americans (R.)
Central Banks Rigged The Cost Of Money And The State Of The Markets (Prins)
US Student Debt Just Hit $1.5 Trillion (MW)
The State of the American Debt Slaves, Q1 2018 (WS)
UK PM May Suffers Upper House Defeat Over Plans To Leave EU Single Market (R.)
UK Retailers Suffer Sharpest Sales Drop For 22 Years In April (G.)
Sharp Drop In UK Retail Job Vacancies As High Street Crisis Deepens (Ind.)
Cynthia Nixon: Marijuana Industry Could Be ‘A Form Of Reparations’ (Hill)
Record Drop In Greek Savings Last Year (K.)
Debt Repayment Feasible if Greece ‘Implements Reforms’ – Regling (AMNA)
British Diplomats: Saving The Rainforest Could Hurt Fighter Jet Sales (UE)

 

 

As the dollar keeps rising.

Fed Chair Powell To Emerging Markets: You Are On Your Own (ZH)

Over the weekend, when commenting on the ongoing rout in emerging markets, Bloomberg published an article titled “Rattled Emerging Markets Say: It’s Over to You, Central Bankers.” Well, overnight the most important central banker of all, Fed Chair Jay Powell responded to these pleas to “do something”, and it wasn’t what EMs – or those used to being bailed out by the Fed – wanted to hear. As Powell explained, speaking at a conference sponsored by the IMF and Swiss National Bank in Zurich, the Fed’s gradual push towards higher interest rates shouldn’t be blamed for any roiling of emerging market economies – which are well placed to navigate the tightening of U.S. monetary policy. In other words, with the Fed’s monetary policy painfully transparent, Powell’s message to EM’s was simple: “you’re on your own.”

Arguing that the Fed’s decision-making isn’t the major determinant of flows of capital into developing economies (which, of course, it is especially as the Fed gradually reverses the biggest monetary experiment in history) Powell said the influence of the Fed on global financial conditions should not be overstated, despite Bernanke taking the blame five years ago for the so-called taper tantrum. “There is good reason to think that the normalization of monetary policy in advanced economies should continue to prove manageable for EMEs,” Powell said, adding that “markets should not be surprised by our actions if the economy evolves in line with expectations.”

[..] Meanwhile, as the Fed refuses to change course, other policy makers have been forced to step in to counter the sharp, sudden capital outflows, with Argentina’s central bank abruptly raising rates three times, to 40% to halt a sell-off in the peso. Russia has also put the brakes on further monetary easing. Turkey, which is a unique basket case in that Erdogan is expressly prohibiting the central bank from doing the one thing it should to ease the ongoing panic, i.e., raise rates, is seeking to bring down its current account deficit. Overnight, we learned that Indonesia was burning reserves to prop up its currency.

Meanwhile, also overnight, JPM CEO Jamie Dimon said it’s possible U.S. growth and inflation prove fast enough to prompt the Fed to raise interest rates more than many anticipate, and it would be wise to prepare for benchmark yields to climb to 4%. Such a scenario would be a disaster for EMs: “A sustained move higher would pressure local currencies and lure away foreign investors. The IMF warned last month that risks to global financial stability have increased over the past six months.” “Central banks may have to respond with interest rate hikes if the sell-off intensifies,” said Chua Hak Bin, a senior economist at Maybank Kim Eng Research in Singapore. Those most vulnerable include Ukraine, China, Argentina, South Africa and Turkey according to the Institute for International Finance.

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IMF demand: austerity. Back to the hoovervilles.

Argentina Seeks IMF Aid ‘To Avoid Crisis’ (BBC)

Argentina is to start talks about a financing deal with the International Monetary Fund (IMF) on Wednesday amid reports it is seeking $30bn (£22bn). Finance minister Nicolas Dujovne is due to fly to the IMF’s Washington offices. After recent turmoil that saw interest rates hit 40%, President Mauricio Macri said IMF aid would “strengthen growth” and help avoid crises of the past. The talks come 17 years after Argentina defaulted on its debts and 12 years since it severed ties with IMF. Mr Macri said in an address to the nation on Tuesday: “Just a few minutes ago I spoke with (IMF) director Christine Lagarde, and she confirmed we would start working on an agreement.”

“This will allow us to strengthen our program of growth and development, giving us greater support to face this new global scenario and avoid crises like the ones we have had in our history,” he said. Local media and Bloomberg reported that Argentina was seeking $30bn, although the government declined to comment. The peso has lost a quarter of its value in the past year amid President Macri’s pro-market reforms. Last week the central bank raised interest rates from 33.25% to 40%. Many people still blame IMF austerity requirements for policies that led to a financial and economic meltdown in 2001 to 2002 that left millions of middle class Argentines in poverty. Argentina eventually defaulted on its debts. And although its last IMF loan was paid down in 2006, the country severed ties with the Washington-based body.

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“US sanctions will target critical sectors of Iran’s economy. German companies doing business in Iran should wind down operations immediately,” tweeted the US ambassador in Berlin, Richard Grenell.

Europe On Collision Course With US Over Iran Deal (AFP)

Donald Trump’s decision to pull out of the landmark 2015 deal curbing Iran’s nuclear programme is a bitter pill to swallow for European leaders and risks a creating a major transatlantic rift. French President Emmanuel Macron, who has spent the past year cultivating the closest ties with Trump among EU leaders, made saving the Iran deal one of his priorities during his state visit to Washington last month. German Chancellor Angela Merkel had also travelled to the US in late April and she worked closely with Macron and British Prime Minister Theresa May right up to the last minute.

In a joint statement issued shortly after Trump walked away from 2015 accord, they said they noted the decision with “regret and concern” but they said they would continue to uphold their commitments. “Our governments remain committed to ensuring the agreement is upheld, and will work with all the remaining parties to the deal to ensure this remains the case,” they said. They noted that this included the “economic benefits to the Iranian people that are linked to the agreement,” which means European firms would in theory continue to invest and operate there. This would appear to set the three countries, all signatories along with Russia, China and the EU, on a direct collision course with Washington.

European leaders have clashed with the White House already on issues ranging from climate change to trade and Trump’s decision to move the US embassy in Israel to Jerusalem. Trump’s hawkish National Security Advisor John Bolton said that European firms would have a “wind down” period to cancel any investments made in Iran under the terms of the accord. “US sanctions will target critical sectors of Iran’s economy. German companies doing business in Iran should wind down operations immediately,” tweeted the US ambassador in Berlin, Richard Grenell. Under the 2015 deal, Iran was meant to benefit from increased trade and contracts with foreign firms in exchange for accepting curbs on its nuclear activity and stringent monitoring.

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Airbus? But it’s European. Oh: “All the deals are dependent on U.S. licenses because of the heavy use of American parts in commercial planes.”

Mnuchin: Revoking Boeing, Airbus Licenses To Sell Jets To Iran (R.)

Licenses for Boeing Co and Airbus to sell passenger jets to Iran will be revoked, U.S. Treasury Secretary Steven Mnuchin said on Tuesday after President Donald Trump pulled the United States out of the 2015 Iran nuclear agreement. Trump said he would reimpose U.S. economic sanctions on Iran, which were lifted under the agreement he had harshly criticized. The pact, worked out by the United States, five other world powers and Iran, lifted sanctions in exchange for Tehran limiting its nuclear program. It was designed to prevent Iran from obtaining a nuclear bomb. IranAir had ordered 200 passenger aircraft – 100 from Airbus SE, 80 from Boeing and 20 from Franco-Italian turboprop maker ATR.

All the deals are dependent on U.S. licenses because of the heavy use of American parts in commercial planes. Boeing agreed in December 2016 to sell 80 aircraft, worth $17 billion at list prices, to IranAir under an agreement between Tehran and major world powers to reopen trade in exchange for curbs on Iran’s nuclear activities. The U.S. Treasury Department, which controls licensing of exports, said the United States would no longer allow the export of commercial passenger aircraft, parts and services to Iran after a 90-day period. “The Boeing and (Airbus) licenses will be revoked,” Mnuchin told reporters at the Treasury. “Under the original deal, there were waivers for commercial aircraft, parts and services and the existing licenses will be revoked.”

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Are they going to say they were well treated?

Pompeo, In North Korea, To Return With Detained Americans (R.)

U.S. Secretary of State Mike Pompeo is expected to return from North Korea with three American detainees, as well as details of an upcoming summit between leader Kim Jong Un and U.S. President Donald Trump, a South Korean official said on Wednesday. Pompeo arrived in Pyongyang on Wednesday from Japan and headed to the Koryo Hotel in the North Korean capital for meetings, a U.S. media pool report said. Trump earlier broke the news of Pompeo’s second visit to North Korea in less than six weeks and said the two countries had agreed on a date and location for the summit, although he stopped short of providing details. An official at South Korea’s presidential Blue House said Pompeo was expected to finalize the date of the summit and secure the release of the three American detainees.

While Trump said it would be a “great thing” if the American detainees were freed, Pompeo told reporters en route to Pyongyang he had not received such a commitment but hoped North Korea would “do the right thing”. “We’ll talk about it again today,” he said. “I think it’d be a great gesture if they would choose to do so.” The pending U.S.-North Korea summit has sparked a flurry of diplomacy, with Japan, South Korea and China holding a high-level meeting on Wednesday. Chinese Premier Li Keqiang said concerned parties should seize the opportunity to promote denuclearization of the Korean peninsula, the official Xinhua news agency reported.

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More Nomi.

Central Banks Rigged The Cost Of Money And The State Of The Markets (Prins)

Nomi Prins: The word “collusion” has come to be associated with Russia, Trump and the US election. My book is about something entirely different, much more global: the collusion (or coordination) that the US central bank (the Federal Reserve) forged with other major countries to fabricate an abundance of money in the wake of the 2008 financial crisis to support the US financial system at first, and banks and select companies and markets worldwide, as well, since. The Fed conjured up this money to provide liquidity for Wall Street banks. The policy was then exported to the major central banks who acted as a lender and supplier of last resort to the world.

Some of the most notable central banks include the European Central Bank (ECB), the Bank of Japan and the Bank of England. Collusion is about these powerful institutions’ relationships with each other. The book dives into how central banks rigged the cost of money and the state of the markets, and ultimately created more inequality and instability as a result. They did all of this in order to subsidize private banks at the expense of people everywhere. The book reveals the people in charge of these strategies, their elite gatherings and public and private communications. It uncovers how their policies rerouted economies, geopolitics, trade wars and elections.

How do central banks relate to the world’s markets? Central banks have several functions from an official standpoint. The first is to regulate the smooth and orderly operation of private banks or public banks within a particular country or region (the ECB is responsible for many countries in Europe). The other function they are tasked with is setting interest rates (the cost of borrowing money) so that there’s adequate economic balance between full employment and a select inflation rate. The idea is that if the cost of money is cheap enough, private banks will lend to the general population and businesses. The ultimate goal is that the money can be used to expand enterprise, hire people and develop a strong economic posture.

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What cannot be repaid will not be.

US Student Debt Just Hit $1.5 Trillion (MW)

America’s student loan problem just surpassed a depressing milestone. Outstanding student debt reached $1.521 trillion in the first quarter of 2018, according to the Federal Reserve, hitting $1.5 trillion for the first time. Though the marker is somewhat arbitrary, it offers a reminder of how quickly student debt has grown—jumping from about $600 billion 10 years ago to more than $1.5 trillion today—and that the factors fueling the increase aren’t likely to disappear any time soon. “People pay attention to milestones,” said Mark Kantrowitz, a financial aid expert. When student debt surpassed $1 trillion in 2012, “it definitely caused a shift in coverage of student loans in the news media,” he said.

In theory, that helps raise awareness of the issue for student advocates, lawmakers and, in particular, borrowers when considering what college to attend. But Kantrowitz added, “What’s more important is the impact on individual borrowers.” And they are feeling it. College graduates leave school with about $37,000 in debt on average, according to Kantrowitz’s data, a sum that can be bearable for many, given that the average starting salary for a new college graduate last year hovered around $50,000. But a large share—as many as one in six college graduates, Kantrowitz estimates—will leave school with debt that exceeds their income. That will make it challenging for those borrowers to pay off their loans on a standard 10-year repayment plan, he said.

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Now let’s throw in some rate hikes, see what happens.

The State of the American Debt Slaves, Q1 2018 (WS)

Total consumer credit rose 5.1% in the first quarter, compared to a year earlier, or by $184 billion, to $3.824 trillion (not seasonally adjusted), according to the Federal Reserve. This includes credit-card debt, auto loans, and student loans, but not mortgage-related debt. That 5.1% year-over-year increase isn’t setting any records – in 2011, year-over-year increases ran over 11%. But it does show that Americans are dealing with the economy and their joys and woes the American way: by piling on debt faster than the overall economy is growing. The chart below shows the progression of consumer debt since 2006. In line with seasonal patterns for first quarters, consumer credit (not seasonally adjusted) edged down from Q4, as the spending binge of the holiday shopping season turned into hangover, an annual American ritual:

Note how the dip after the Financial Crisis – when consumers deleveraged mostly by defaulting on those debts – didn’t last long. Over the 10 years since Q1 2008, consumer debt has now surged 47%. Over the same period, the consumer price index has increased 16.9%: Auto loans and leases for new and used vehicles rose by 3.8% from a year ago, or by $41 billion, to $1.118 trillion. It was one of the smaller increases since the Great Recession: The peak year-over-year jumps occurred at the peak of the new vehicle sales boom in the US in Q3 2015 ($87 billion or 9%). However, the still standing records were set in Q1 and Q2 2001 near the end of the recession, with each quarter adding around $93 billion, or 16%, year-over-year.

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It really makes no difference; the EU will say no anyway to all plans acceptable to the UK.

UK PM May Suffers Upper House Defeat Over Plans To Leave EU Single Market (R.)

Britain’s upper house of parliament on Tuesday inflicted another embarrassing defeat on Prime Minister Theresa May’s government on Tuesday, challenging her plan to leave the European Union’s single market after Brexit. May, who has struggled to unite the government behind her vision of Brexit, has said Britain will also leave the European Union’s single market and customs union after it quits the bloc next March. That stance has widened divisions not only within her own Conservative Party but also across both houses of parliament, which like Britons at large, remain deeply split over the best way to leave the EU after more than four decades of membership.

By a vote of 245 to 218, the unelected upper chamber, the House of Lords, supported an amendment to her Brexit blueprint, the EU withdrawal bill, requiring ministers to negotiate continued membership of the European Economic Area, meaning that it would remain in the single market. “The time has come over Brexit, really, for economic reality and common sense to prevail over political dogma and wishful thinking,” said Peter Mandelson, a member of the House of Lords from the main opposition Labour Party, who backed the amendment.

His comments drew criticism from pro-Brexit peers, including Conservative member Michael Forsyth who described the amendment as part of an attempt by “a number of people in this house who wish to reverse the decision of the British people”. Those proposing the amendment deny the charge. This is the 13th time in recent weeks that the government has been defeated in the House of Lords on the draft legislation that will formally terminate Britain’s EU membership.

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Must have been the weather.

UK Retailers Suffer Sharpest Sales Drop For 22 Years In April (G.)

Britain’s retailers suffered the sharpest drop in business in more than two decades last month as bad weather, the squeeze on household budgets and the timing of Easter led to a hefty cut in consumer spending. In the latest evidence of the slowdown in the economy since the turn of the year, the latest health check from the British Retail Consortium (BRC) and KPMG found that sales were down by 3.1% in April, the biggest decline since the survey was launched in 1995. Spending on non-food items has been particularly hard hit over the last three months, and retailers are braced for tough trading conditions to continue for the rest of the year even though wages have now started to rise more quickly than prices.

Retailers have been hit hard by a combination of problems on top of the squeeze on spending, including higher labour costs as a result of increases in the minimum wage, the shift to online shopping and rapidly changing spending patterns. Toys R Us and the electricals retailer Maplin collapsed in February and a number of retailers, including House of Fraser, New Look, Carpetright and Poundworld, are all pursuing agreements with their landlords to cut their rents and close stores. The industry had been expecting that year-on-year comparisons would look poor for April, but the BRC’s chief executive, Helen Dickinson, said the problem ran deeper.

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Pickers and packers.

Sharp Drop In UK Retail Job Vacancies As High Street Crisis Deepens (Ind.)

Wages rose in April amid strong demand for candidates, but the number of retail vacancies dropped sharply as the crisis on the high street worsened, a recruitment industry survey has found. Growth of overall job vacancies picked up to a three-month high in April, the Recruitment and Employment Confederation said. Demand for permanent staff increased in the “vast majority” of job categories during the month, with the notable exception of retail, the REC said. The study of 400 recruitment consultancies found that engineering and IT saw the steepest increases in vacancies. REC director of policy Tom Hadley said the high-profile struggles of many retailers indicated it was a good time for staff to consider how they could transfer their skills into other roles, such as in the technology sector or as pickers and packers in distribution centres. “Helping people make career transitions will become increasingly important in this fast-changing business and employment landscape,” he said.

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Smart.

“..In New York in 2017, 86% of fifth-degree marijuana arrests were of people of color, while only 9% of those arrested were white..”

Cynthia Nixon: Marijuana Industry Could Be ‘A Form Of Reparations’ (Hill)

New York gubernatorial candidate and actress Cynthia Nixon on Saturday expanded on her calls for marijuana legalization, saying that the industry could provide a form of “reparations” for communities of color. Nixon, who expressed her support for legalizing marijuana earlier this year, told Forbes that she views marijuana as a racial justice issue. “We’re incarcerating people of color in such staggering numbers,” she said. She expressed support for what is known as an “equity” program, which would prioritize giving marijuana business licenses to people who have received marijuana convictions in the past. “Now that cannabis is exploding as an industry, we have to make sure that those communities that have been harmed and devastated by marijuana arrests get the first shot at this industry,” she told Forbes.

“We [must] prioritize them in terms of licenses. It’s a form of reparations.” In New York in 2017, 86% of fifth-degree marijuana arrests were of people of color, while only 9% of those arrested were white, despite data showing that black and white people are about equally likely to use marijuana. “Arresting people — particularly people of color — for cannabis is the crown jewel in the racist war on drugs and we must pluck it down,” she said. “We must expunge people’s records; we must get people out of prison.” “The use of marijuana has been effectively legal for white people for a really long time,” she told Forbes. “It’s time that we legalize it for everybody else.”

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Everything keeps going down. It’s guaranteed.

Record Drop In Greek Savings Last Year (K.)

Household savings shrank by 32.5 billion euros in total in the period from 2011 to 2017, as families increasingly resorted to dipping into their deposits after finding that disposable incomes are no longer enough to cover their outgoings. Last year the drop in savings reached an historic high of 8.3 billion euros in current prices, according to an analysis by Eurobank. In addition, households have resorted to liquidating assets such as properties, deposits, shares and bonds, among other investments. Notably consumption shrank by almost a quarter from 2008 to 2017, falling from 163.3 billion euros to 123.3 billion last year, which was the sixth in a row with negative savings for Greek households; this means that disposable income was less than consumption.

Eurobank data showed that the wealth of the country’s households has been in constant decline since 2011, falling at an average rate of 6.6 billion euros per year, which is transformed from various forms of savings into consumption. The report by Eurobank’s analysis department highlighted that the economic recession, the stagnation in investments and the major fiscal adjustment Greece experienced from 2009 to 2017 have compressed households’ saving capacity, both in terms of incomes and their obligations to the state through taxes and social security contributions.

The figures reveal that Greek households’ net annual savings amounted to 11.4 billion euros in 2009, or 7% of their gross disposable income, while last year the balance was negative by 8.3 billion, or 6.7% of households’ gross disposable income. Shrinking private consumption has had a direct impact on investments: In 2009 investments had amounted to 18.3% of GDP and were 31.8% funded by domestic consumption and the rest from borrowing. In 2017 the investment rate slipped to 11.6% of GDP, with domestic consumption accounting for 91.1%.

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Delusional or lying to our faces?

Debt Repayment Feasible if Greece ‘Implements Reforms’ – Regling (AMNA)

“If the government in Athens implements all the remaining reforms decisively, Greece can successfully emerge from the ESM program in August 2018,” Klaus Regling, president of the European Stability Mechanism, has said. The ESM chief spoke at en event held in Aachen, Germany on the occasion of the awarding of the 60th International Charlemagne Prize to French President Emmanuel Macron. Regling expressed confidence that Greece could repay its loans, provided the maturity times are sufficiently extended and the obligations do not exceed 15-20% of the country’s economic performance. The ESM chief said that if the latest report on Greece’s bailout program is positive, there will be a final disbursement from the ESM, and then decisions will be made on possible further debt relief.

He argued that there was absolutely no alternative to the establishment of the rescue mechanism, without which, as he said, Greece, Portugal and Ireland would have probably come out of Economic and Monetary Union under “chaotic conditions,” while at the same time other countries such as Germany, would have problems. Regling also stressed that ESM interest rates are clearly below the level that countries would have to pay in the markets, and that is why they save a lot of money. In the case of Greece, “we estimate that ESM loans lead to savings of almost €10 billion [$11.8 billion] each year for the Greek budget”, he said and stressed that this is happening costing nothing to the European taxpayer.

“These savings are an expression of the solidarity shown by the member states of the euro zone,” he said, and referred to “great efforts” that Greece is making to fulfill the strict reform conditions. “Overall, Greece now has impressive adaptation efforts behind it. The budget deficit at the start of the 2009 crisis was above 15% of GDP. For two years, the country has been generating a budget surplus. Such a success is only possible with profound reforms,” Regling noted and said that if Greece implements all reforms, eurozone finance ministers would give Greece further debt relief, namely longer repayment times.

Finally, explaining the reasons why Greece remains in a program while the other countries have completed their own, referred to the country as a “special case” for three reasons: “Firstly, the Greek economy has had problems that are deeper rooted than for other countries in a program. Secondly, the country suffered from a much weaker public administration than the other eurozone member states. “And thirdly, the Greek government in the first half of 2015 went in the wrong direction with then finance minister (Yanis Varoufakis): major reforms were revoked and an effort was made to stop the agreed reform program. “As a result, the Greek economy had fallen into a recession. Grexit suddenly became a realistic scenario. The Bank of Greece estimates that this wrong move cost Greece €86 billion.”

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How we think.

British Diplomats: Saving The Rainforest Could Hurt Fighter Jet Sales (UE)

British government officials warned a proposed EU ban on palm oil in biofuels could harm UK defence sales to Malaysia, specifically Typhoon fighter jets, according to government emails obtained by Unearthed. The correspondence reveals that the British high commission in Kuala Lumpur even expected Malaysian Prime Minister Najib Razak to lobby Theresa May personally on the issue at last month’s Commonwealth Heads of Government meeting. In the event, Razak did not attend the meeting in London, a Number 10 spokeswoman told Unearthed. Correspondence between the Ministry of Defence, the Department for Environment, Food and Rural Affairs and the British high commission reveals British officials were concerned that EU moves to ban palm oil in biofuels could result in Malaysian trade reprisals against the UK.

MEPs voted in January to phase out the use of palm oil in biofuels, citing environmental concerns. The move sparked a furious response from the governments of Indonesia and Malaysia, which produce most of the world’s palm oil. The debate over palm oil is playing a significant role in the run-up to Malaysia’s general election, which will be held tomorrow. On the morning of 5 February, an official at the British high commission in Malaysia sent an email warning that the EU decision was “a big issue for Malaysia and, if not handled correctly, has the potential to impact on bilateral trade, particularly defence sales (Typhoon)”.

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