Apr 242017
 
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Pablo Picasso Self portrait 1896

 


Euro and Shares Rally After Macron Wins First Round of French Election (Ind.)
Fight Over Obamacare Could Shut Down The Government (CNN)
Trump Push For Border Wall Threatens To Cause Government Shutdown (G.)
America is Regressing into a Developing Nation for Most People (Parramore)
London Mayor To Subsidise ‘Naked’ Homes Solution To Housing Crisis (G.)
China Stocks Head For Worst Day Of 2017 As Regulators Tighten Grip (R.)
Chinese Billionaires Amass In The Country’s Heartland (CNBC)
Jack Ma Sees Decades of Pain as Internet Upends Old Economy (BBG)
Fear City (Naomi Klein)
IMF Warns Greece That Additional Economic Overhauls Are Needed (WSJ)
Greek Banks Aspire To Begin Online Asset Auctions In June (K.)

 

 

Not sure there’s all that much to celebrate. Looks like a torn country.

Euro and Shares Rally After Macron Wins First Round of French Election (Ind.)

The euro briefly surged to a five-month high against a basket of currencies after centrist candidate Emmanuel Macron won the first round of a hotly contested French election vote, an outcome broadly considered the most market-friendly. Immediately after the vote on Sunday, the euro surged to $1.0940, its highest level against the dollar since November last year, before retreating to around $1.0869. It rose against the pound and the Swiss franc too and stocks across Europe and Asia climbed as investors pulled out of assets considered safest to hold during times of economic uncertainty or political turmoil, like gold, Japan’s yen and core government bonds. The FTSE 100 was up 1.5% in early trading while Paris’ CAC 40 added almost 4%. Germany’s DAX rose more than 2%.

Analysts and strategists were quick to point out that the outcome lessens the risk of an anti-establishment shock, like the UK’s vote last year to quit the European Union and Donald Trump’s US presidential election victory in November. “Macron will be reassuring to markets, with his pledge to lower corporate taxes and to lighten the administrative burden on firms. He basically represents continuity,” said Octavio Marenzi, CEO of Opimas, a capital markets management consultancy. “While the markets would have preferred Trump-style deregulation, no candidate, including Macron, would dare touch such an agenda in France,” he added.

Read more …

The media can’t make up their minds on what could cause a shutdown. Obamacare….

Fight Over Obamacare Could Shut Down The Government (CNN)

The fight over Obamacare’s future is now threatening to shut down the federal government. Congress must pass a spending bill by the end of this week or the federal government will run out of money. And Democrats, whose votes are needed to approve a budget, plan to use their leverage to force Republicans to stabilize Obamacare. They want the budget deal to fund a set of Obamacare subsidies that are crucial to keeping insurers in the program. Here’s how Obamacare figures into the government spending battle. Subsidies make health care affordable for those with low-incomes: The House GOP bill to repeal and replace Obamacare may be shelved for now, but Republicans still hold tremendous power over Obamacare’s future.

The most pressing issue is the funding of subsidy payments to insurers known as cost-sharing reductions, or CSRs. These make health care more affordable for lower-income Obamacare enrollees by reducing their deductibles and co-pays. Those with incomes under $29,700 for a single person are eligible. The payments can cut deductibles to as low as $227, on average, instead of nearly $3,500 for the standard silver Obamacare plan. These subsidies are important to insurers, too. A little over 7 million people, or 58%, signed up for policies with cost-sharing subsidies on the Obamacare exchanges for 2017. The payments are made directly to insurers and will cost the federal government an estimated $7 billion this year.

Republicans sued Obama to block the subsidies: The subsides have been at the center of a court battle since 2014, when House Republicans sued the Obama administration to try to stop them. GOP lawmakers have argued that Congress never appropriated funds for the payments. A district court judge agreed last year, ruling the subsidies were illegal. The Obama administration filed an appeal, and the subsidies continue to be paid while GOP lawmakers and Trump officials agree on a settlement.

Read more …

… or the border wall.

Trump Push For Border Wall Threatens To Cause Government Shutdown (G.)

Looming above Washington as Congress and the White House attempt to avert a funding shutdown in only five days’ time, Donald Trump’s central campaign promise to build a wall on the Mexican border threatens to bring the US government to a halt this week in a national display of dysfunction. On Sunday, even White House officials expressed uncertainty about whether the president would sign a funding bill that did not include money for a wall, which Trump has promised since the first day of his presidential campaign. “We don’t know yet,” said the White House budget director, Mick Mulvaney, on Fox News Sunday. “We are asking for our priorities.” The president himself waded into the negotiations on Sunday, holding out two sticks and no carrot. “ObamaCare is in serious trouble,” he tweeted. “The Dems need big money to keep it going – otherwise it dies far sooner than anyone would have thought.”

“The Democrats don’t want money from budget going to border wall despite the fact that it will stop drugs and very bad MS 13 gang members,” he continued, suggesting he would accuse Democrats of being soft on international crime. But Trump also retreated from a related pledge to the American people: that he would “make Mexico pay” for the wall, which is estimated to cost billions. “Eventually, but at a later date so we can get started early, Mexico will be paying, in some form, for the badly needed border wall,” the president tweeted, without offering a plan or timeline. Without a deal, funding for the government will run out at midnight on 28 April, Trump’s 100th day in office. The secretary of homeland security, John Kelly, told CNN’s State of the Union on Sunday he suspected the president would push for the wall. “He’ll do the right thing, for sure, but I suspect he’ll be insistent about the funding,” Kelly said.

Read more …

“..the low-wage sector has little influence over public policy. Check. The high-income sector will keep wages down in the other sector to provide cheap labor for its businesses. Check. Social control is used to keep the low-wage sector from challenging the policies favored by the high-income sector. Mass incarceration – check. The primary goal of the richest members of the high-income sector is to lower taxes. Check. Social and economic mobility is low. Check.”

America is Regressing into a Developing Nation for Most People (Parramore)

You’ve probably heard the news that the celebrated post-WW II beating heart of America known as the middle class has gone from “burdened,” to “squeezed” to “dying.” But you might have heard less about what exactly is emerging in its place. In a new book, The Vanishing Middle Class: Prejudice and Power in a Dual Economy, Peter Temin, Professor Emeritus of Economics at MIT, draws a portrait of the new reality in a way that is frighteningly, indelibly clear: America is not one country anymore. It is becoming two, each with vastly different resources, expectations, and fates. In one of these countries live members of what Temin calls the “FTE sector” (named for finance, technology, and electronics, the industries which largely support its growth).

These are the 20% of Americans who enjoy college educations, have good jobs, and sleep soundly knowing that they have not only enough money to meet life’s challenges, but also social networks to bolster their success. They grow up with parents who read books to them, tutors to help with homework, and plenty of stimulating things to do and places to go. They travel in planes and drive new cars. The citizens of this country see economic growth all around them and exciting possibilities for the future. They make plans, influence policies, and count themselves as lucky to be Americans. The FTE citizens rarely visit the country where the other 80% of Americans live: the low-wage sector. Here, the world of possibility is shrinking, often dramatically. People are burdened with debt and anxious about their insecure jobs if they have a job at all. Many of them are getting sicker and dying younger than they used to.

They get around by crumbling public transport and cars they have trouble paying for. Family life is uncertain here; people often don’t partner for the long-term even when they have children. If they go to college, they finance it by going heavily into debt. They are not thinking about the future; they are focused on surviving the present. The world in which they reside is very different from the one they were taught to believe in. While members of the first country act, these people are acted upon. The two sectors, notes Temin, have entirely distinct financial systems, residential situations, and educational opportunities. Quite different things happen when they get sick, or when they interact with the law. They move independently of each other. Only one path exists by which the citizens of the low-wage country can enter the affluent one, and that path is fraught with obstacles. Most have no way out.

The richest large economy in the world, says Temin, is coming to have an economic and political structure more like a developing nation. We have entered a phase of regression, and one of the easiest ways to see it is in our infrastructure: our roads and bridges look more like those in Thailand or Venezuela than the Netherlands or Japan. But it goes far deeper than that, which is why Temin uses a famous economic model created to understand developing nations to describe how far inequality has progressed in the United States. The model is the work of West Indian economist W. Arthur Lewis, the only person of African descent to win a Nobel Prize in economics. For the first time, this model is applied with systematic precision to the U.S.

The result is profoundly disturbing. In the Lewis model of a dual economy, much of the low-wage sector has little influence over public policy. Check. The high-income sector will keep wages down in the other sector to provide cheap labor for its businesses. Check. Social control is used to keep the low-wage sector from challenging the policies favored by the high-income sector. Mass incarceration – check. The primary goal of the richest members of the high-income sector is to lower taxes. Check. Social and economic mobility is low. Check.

Read more …

Yeah, sure, when things get too expensive you just lower the quality. Could it be an idea to tackle the cause of the problem instead of mere symptoms?

London Mayor To Subsidise ‘Naked’ Homes Solution To Housing Crisis (G.)

Who needs internal walls or a fitted kitchen anyway? As house prices soar ever further out of reach, London’s mayor, Sadiq Khan, is to subsidise a new generation of ultra-basic “naked” homes wthat will sell for up to 40% less than standard new builds. The apartments will have no partition walls, no flooring and wall finishes, only basic plumbing and absolutely no decoration. The only recognisable part of a kitchen will be a sink. The upside of this spartan approach is a price tag of between £150,000 and £340,000, in reach for buyers on average incomes in a city where the average home now costs £580,000.

The no-frills concept is to be be tested with 22 apartments on three sites in Enfield, north London, where the council will allow builders to take over derelict council estate garages and car parks. Khan has awarded a £500,000 grant to what he says will be the largest custom-build development in London. If successful, a further seven sites will be built. “The idea is to strip out all of the stuff that people don’t want in the first place,” said Simon Chouffot, one of the founders of the not-for-profit developer, Naked House. “People want to do some of the custom building. We can make it affordable by people doing some of the work themselves.” The developers are a group of thirtysomethings who found themselves priced out of buying homes in London’s fast-rising property market.

“We are all from generation rent and we have been growing up with this housing crisis,” said Chouffot, 37. “I put down roots in north-east London but it was impossible to buy there. My response has been to live on a boat on the Regent’s canal. The average income in our area is about £40,000 but the average income you need to buy a property is £170,000, so there is a huge affordability gap.” He said the Enfield homes would be about 15% cheaper to build than standard new homes because of their basic design.

Read more …

A power struggle developing? Xi must tackle the debt, or risk losing.

China Stocks Head For Worst Day Of 2017 As Regulators Tighten Grip (R.)

China stocks tumbled more than 1% on Monday and looked set for their biggest loss of the year amid signs that Beijing would tolerate more market volatility as regulators clamp down on shadow banking and speculative trading. Recent signs of stability in China’s economy “have provided a good external environment and a window of opportunity to reduce leverage in the financial system, strengthen supervision and ward off risks,” the official Xinhua News Agency reported on Sunday. “Over the past week, interbank rates trended higher, bond and capital markets suffered from sustained corrections and some institutions faced liquidity pressure. But these have little impact to the stability of the broader environment.”

The Shanghai Composite Index slumped 1.6% to 3,123.80 points by the lunch break, after posting its biggest weekly loss so far this year last week. The blue-chip CSI300 index fell 1.3% to 3,423.11. Barring a rebound, the indexes looked set for their biggest one-day percentage loss since mid-December. Daily declines of more than 1% in the indexes have been rare for notoriously volatile Chinese markets this year. “Even the better-than-expected Q1 data could not boost the market, as investors are concerned about regulatory risks,” wrote Larry Hu, analyst at Macquarie Capital Ltd, referring to stronger-than-expected 6.9% economic growth early in the year.

In the latest of a flurry of regulatory measures, China’s insurance regulator said on Sunday it will ramp up its supervision of insurance companies to make sure they comply with tighter risk controls and threatened to investigate executives who flout rules aimed at rooting out risk-taking. The banking regulator said late on Friday that growth in Chinese wealth management products (WMPs) and interbank liabilities eased in the first quarter, suggesting authorities are making some headway in containing financial risks built up by years of debt-fuelled stimulus.

Read more …

The billionaire bubble. A communist party rules this country. In name.

Chinese Billionaires Amass In The Country’s Heartland (CNBC)

ZHENGZHOU, China — Here in China’s heartland, in the capital of its Henan province, some of the country’s most powerful leaders are meeting. But these are not the political elite that have run the country for decades, this is a new crop of leaders — all from the private sector. This city, near corn and wheat fields, is hosting an annual meeting from the China Entrepreneur Club. That’s an invite-only group composed of 55 Chinese billionaires, at last count. In other words, they’re the richest — and among the most influential — people in a country that’s already minting millionaires monthly. Unlike many of the moneyed elite from other developing countries, who accrued wealth from a privatization land-grab, almost all of China’s entrepreneurs started from scratch. And these entrepreneurs aren’t just titans of industry, but also technology, energy, finance and retail.

In many ways, they are China’s new economy. How they’ve succeeded, mostly despite the Communist government, is a major and under-appreciated part of the story of China’s transformation over the past 35 years. In fact, even before the Chinese government officially acknowledged the benefits of private companies, hundreds of thousands of businesses had already begun. A handful of those have become international giants. Huawei is now one of the largest telecommunications equipment makers in the world, but it started by importing used gear from the telephone exchange in Hong Kong. The company now known as Lenovo, the world’s top PC-maker by market share, started by selling televisions imported into China. Geely, now one of China’s biggest carmakers, started by selling parts for refrigerators.

The people behind those names are China’s first generation of entrepreneurs. The second generation came about in the 1990s, and the country’s third crop of entrepreneurs includes people like Alibaba’s Jack Ma, and Tencent’s Pony Ma (no relation), who are now the focus of most of the Western world’s attention. And China is already churning out a new slew of tech titans in the making. By some measures, China’s private sector now accounts for two thirds of its economy. Entrepreneurs, not politicians, are now the ones driving the long-sought economic rebalancing away from a dependence on manufacturing and exports and more toward services and consumption.

But one of the major questions about China’s future is what the dynamic will be like between entrepreneurs and state-owned enterprises. So far, Beijing has largely treated private success benignly because the biggest stars, like Alibaba, are more valuable to the national cause without official direction or interference. Those companies are flying China’s flag, in an increasingly international capacity, more effectively than any state campaign or directive could ever hope to achieve. But the state and its companies still comprise a full third of China’s economy, and when state-owned enterprises begin to get crowded out, there will likely be tension.

Read more …

Ma has wild fantasies.

Jack Ma Sees Decades of Pain as Internet Upends Old Economy (BBG)

Alibaba Chairman Jack Ma said society should prepare for decades of pain as the internet disrupts the economy. The world must change education systems and establish how to work with robots to help soften the blow caused by automation and the internet economy, Ma said in a speech to an entrepreneurship conference in Zhengzhou, China. “In the next 30 years, the world will see much more pain than happiness,” Ma said of job disruptions caused by the internet. “Social conflicts in the next three decades will have an impact on all sorts of industries and walks of life.” It was an unusual speech for the Alibaba co-founder, who tends to embrace his role as visionary and extol the promise of the future. He explained at the event that he had tried to warn people in the early days of e-commerce it would disrupt traditional retailers and the like, but few listened.

This time, he wants to warn against the impact of new technologies so no one will be surprised. “Fifteen years ago I gave speeches 200 or 300 times reminding everyone the Internet will impact all industries, but people didn’t listen because I was a nobody,” he said. Ma made the comments as Alibaba, China’s largest e-commerce operator, spends billions of dollars to move into new businesses from film production and video streaming to finance and cloud computing. The Hangzhou-based company, considered a barometer of Chinese consumer sentiment, is looking to expand abroad since buying control of Lazada to establish a foothold in Southeast Asia, potentially setting up a clash with the likes of Amazon.com. Ma, 52, was also critical of the traditional banking industry, saying that lending must be available to more members of society. The lack of a robust credit system drives up the costs for everyone, he said.

[..] Ma was at times brutal in his criticism of companies that won’t adapt. At one point, he said cloud computing and artificial intelligence are essential for business – and if leaders don’t get that, they should find young people in their companies to explain it to them. Another time, he called for traditional industries to stop complaining about the internet’s effects on the economy. He said Alibaba critics ignore that Taobao, its main online marketplace, has created millions of jobs. [..] He also warned that longer lifespans and better artificial intelligence were likely to lead to both aging labor forces and fewer jobs. “Machines should only do what humans cannot,” he said. “Only in this way can we have the opportunities to keep machines as working partners with humans, rather than as replacements.”

Read more …

Klein interviews Kim Philipps-Fein, author of Fear City, which describes New York in the 1970s, and Trump’s role in it.

Fear City (Naomi Klein)

When i published “The Shock Doctrine” a decade ago, a few people told me that it was missing a key chapter in the evolution of the tactic I was reporting on. That tactic involved using periods of crisis to impose a radical pro-corporate agenda. They said that in the United States that story doesn’t start with Reagan in the 1980s, as I had told it, but rather in New York City in the mid-1970s. That’s when the city’s very near brush with all-out bankruptcy was used to dramatically remake the metropolis. Massive and brutal austerity, sweetheart deals for the rich, privatizations. In classic Shock Doctrine style, under cover of crisis, New York changed from being a place with some of the most generous public services in the country, engaged in some cutting-edge attempts at racial and economic integration, to the temple of nonstop commerce and gentrification that we all know and still love today.

New York’s debt crisis is an incredibly important and little understood chapter in the evolution of what Nobel Prize-winning economist Joseph Stiglitz calls market fundamentalism, a process the Trump administration is in the process of rapidly accelerating, which is why I was so happy to receive Kim Phillips-Fein’s remarkable new book, “Fear City.” In it, she meticulously documents how the remaking of New York City in the ’70s was a prelude to what would become a global ideological tidal wave, one that has left the world brutally divided between the 1% and the rest. She helps us to understand many of the forces that Trump exploited to win the White House, from economic insecurity to crumbling public infrastructure to fearmongering about black crime, all amid previously unimaginable private wealth.

Read more …

Thomsen continues to play an ugly part.

IMF Warns Greece That Additional Economic Overhauls Are Needed (WSJ)

The IMF had a sobering message for Greece this weekend: Even if the country secures debt relief from its European creditors—a question that is by no means assured with bailout talks still deadlocked—the nation still needs even more painful economic overhauls than currently planned. Seven years into an economic crisis and another near-term financial emergency looming, that is a message no Greek wants to hear and a key reason why the IMF is also urging Germany and Athens’ other European creditors to give the country hope in the form of real debt relief. The country’s “fiscal and structural reforms…pension reforms, tax reforms, are only a down payment,” said Poul Thomsen, IMF’s European department chief and Greece’s original bailout architect, on the sidelines of the fund’s semiannual meeting of finance ministers and central bankers.

To bring the country’s unemployment and income levels back to precrisis rates will take “deep structural reforms, many of which are not yet on the books,” he said. The jobless rate is currently at 22% and half of all the youth labor force are without work. “This is a long-term project,” he said. Mr. Thomsen, along with IMF Managing Director Christine Lagarde, met with Finance Minister Euclid Tsakalotos over the weekend ahead of a return of the fund to Athens next week. Although bailout talks continue, the fund hasn’t been involved in emergency financing for the country in three years, and future funding from the IMF is an open question. Fund officials worry the Greece’s existing efforts are stretching the nation’s political and social limits to their breaking point.

The country has already endured a series of political crises and government changeovers over the bailout years. Another could be coming, analysts say, as the government faces debt due in the coming months that it can’t cover without additional help from outside creditors. Earlier this year, the fund said the deadlock over new bailout terms, financing and debt relief risked pushing the country out of the eurozone. Analysts say Greece’s crisis could be the thread that unravels the currency union, especially amid Britain’s rejection of the European Union and rising anti-euro parties in key upcoming elections.

Read more …

The blessings of foreclosures. The entire country is for sale. It’s a colony.

Greek Banks Aspire To Begin Online Asset Auctions In June (K.)

The country’s four systemic banks have evolved into some of the biggest property owners in Greece, obtaining ownership of assets worth over €40 billion in the past few years. The majority are properties that came under the banks’ full ownership mainly from being the collateral used by borrowers – households and enterprises – who failed to repay their debts. There also are properties used to house bank branches that were shut down, assets belonging to banks’ subsidiaries of banks, etc. According to bank officials, the acquisition of these properties has met all the legal requirements and they do not include assets stemming from nonperforming loans created during the years of crisis, originating, instead, from previous years.

Banks are examining various ways to sell them off – including the use of an online platform for investors – so as to be rid of the heavy maintenance costs, to capitalize on the assets and to obtain liquidity that can then be channeled into the economy through loans. Certain lenders are at an advanced stage in the creation of such a platform, aiming to launch the first auctions some time in June. It is estimated that if banks manage to attract foreign investors this could revitalize the Greek property market, which has contracted dramatically in recent years due to the prolonged recession. From 250,000 transactions in 2007, the market dropped to just 20,000 in 2014. Banks have already engaged in certain transactions, selling some small or large properties (such as hotels) to foreign investors.

However, more extensive activity,requires other procedures, which would also be simple and transparent. Electronic auctions appear as the best way forward, as they are open, do not require the seller’s physical presence and have low costs, while also keeping out the “vultures” that take advantage of the lack of transparency in conventional auctions. The online platforms will include all the main details of each asset, while potential buyers will be allowed to visit the properties on offer and submit their offers online on certain dates. Bank officials tell Kathimerini that one such platform in the US has sold over 200,000 properties worth $34 million to investors from more than 100 countries in the last decade.

Read more …

Apr 232017
 
 April 23, 2017  Posted by at 2:31 pm Finance Tagged with: , , , , , , , , , ,  11 Responses »
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René Magritte Le Cri du Coeur 1960

 

Austerity is over, proclaimed the IMF this week. And no doubt attributed that to the ‘successful’ period of ‘five years of belt tightening’ a.k.a. ‘gradual fiscal consolidation’ it has, along with its econo-religious ilk, imposed on many of the world’s people. Only, it’s not true of course. Austerity is not over. You can ask many of those same people about that. It’s certainly not true in Greece.

IMF Says Austerity Is Over

Austerity is over as governments across the rich world increased spending last year and plan to keep their wallets open for the foreseeable future. After five years of belt tightening, the IMF says the era of spending cuts that followed the financial crisis is now at an end. “Advanced economies eased their fiscal stance by one-fifth of 1pc of GDP in 2016, breaking a five-year trend of gradual fiscal consolidation,” said the IMF in its fiscal monitor.

In Greece, the government did not increase spending in 2016. Nor is the country’s era of spending cuts at an end. So did the IMF ‘forget’ about Greece? Or does it not count it as part of the rich world? Greece is a member of the EU, and the EU is absolutely part of the rich world, so that can’t be it. Something Freudian, wishful thinking perhaps?

However this may be, it’s obvious the IMF are not done with Greece yet. And neither are the rest of the Troika. They are still demanding measures that are dead certain to plunge the Greeks much further into their abyss in the future. As my friend Steve Keen put it to me recently: “Dreadful. It will become Europe’s Somalia.”

An excellent example of this is the Greek primary budget surplus. The Troika has been demanding that it reach 3.5% of GDP for the next number of years (the number changes all the time, 3, 5, 10?). Which is the worst thing it could do, at least for the Greek people and the Greek economy. Not for those who seek to buy Greek assets on the cheap.

 

But sure enough, the Hellenic Statistical Authority (ELSTAT) jubilantly announced on Friday that the 2016 primary surplus was 4.19% (8 times more than the 0.5% expected). This is bad news for Greeks, though they don’t know it. It is also a condition for receiving the next phase of the current bailout. Here’s what that comes down to: in order to save itself from default/bankruptcy, the country is required to destroy its economy.

And that’s not all: the surplus is a requirement to get a next bailout tranche, and debt relief, but as a reward for achieving that surplus, Greece can now expect to get less … debt relief. Because obviously they’re doing great, right?! They managed to squeeze another €7.3 billion out of their poor. So they should always be able to do that in every subsequent year.

The government in Athens sees the surplus as a ‘weapon’ that can be used in the never-ending bailout negotiations, but the Troika will simply move the goalposts again; that’s its MO.

A country in a shape as bad as Greece’s needs stimulus, not a budget surplus; a deficit would be much more helpful. You could perhaps demand that the country goes for a 0% deficit, though even that is far from ideal. But never a surplus. Every penny of the surplus should have been spent to make sure the economy doesn’t get even worse.

Greek news outlet Kathimerini gets it sort of right, though its headline should have read “Greek Primary Surplus Chokes Economy“.

Greek Primary Surplus Chokes Market

The state’s fiscal performance last year has exceeded even the most ambitious targets, as the primary budget surplus as defined by the Greek bailout program, came to 4.19% of GDP, government spokesman Dimitris Tzanakopoulos announced on Friday. It came to €7.369 billion against a target for €879 million, or just 0.5% of GDP. A little earlier, the president of the Hellenic Statistical Authority (ELSTAT), Thanos Thanopoulos, announced the primary surplus according to Eurostat rules, saying that it came to 3.9% of GDP or €6.937 billion.

The two calculations differ in methodology, but it is the surplus attained according to the bailout rules that matters for assessing the course of the program. This was also the first time since 1995 that Greece achieved a general government surplus – equal to 0.7% of GDP – which includes the cost of paying interest to the country’s creditors. There is a downside to the news, however, as the figures point to overtaxation imposed last year combined with excessive containment of expenditure.

The amount of €6-6.5 billion collected in excess of the budgeted surplus has put a chokehold on the economy, contributing to a great extent to the stagnation recorded on the GDP level in 2016. On the one hand, the impressive result could be a valuable weapon for the government in its negotiations with creditors to argue that it is on the right track to fiscal streamlining and can achieve or even exceed the agreed targets. On the other hand, however, the overperformance of the budget may weaken the argument in favor of lightening the country’s debt load.

Eurogroup head Dijsselbloem sees no shame in admitting this last point :

Dijsselbloem Sees ‘Tough’ Greek Debt Relief Talks With IMF

“That will be a tough discussion with the IMF,” said Dijsselbloem, who is also the Dutch Finance Minister in a caretaker cabinet, “There are some political constraints where we can go and where we can’t go.” The level of Greece’s primary budget surplus is key in determining the kind of debt relief it will need. The more such surplus it has, the less debt relief will be needed.

That’s just plain insane, malicious even. Greek PM Tsipras should never have accepted any such thing, neither the surplus demands nor the fact that they affect debt relief, since both assure a further demise of the economy.

Because: where does the surplus come from? Easy: from Troika-mandated pension cuts and rising tax levels. That means the Greek government is taking money OUT of the economy. And not a little bit, but a full 4% of GDP, over €7 billion. An economy from which so much has already vanished.

The €7.369 billion primary surplus, in a country of somewhere between 10 and 11 million people, means some €700 per capita has been taken out of the economy in 2016. Money that could have been used to spend inside that economy, saving jobs, and keeping people fed and sheltered. For a family of 3.5 people that means €200 per month less to spend on necessities (the only thing most Greeks can spend any money on).

I’ve listed some of the things a number of times before that have happened to Greece since the EU and IMF declared de facto financial war on the country. Here are a few (there are many more where these came from):

25-30% of working age Greeks are unemployed (and that’s just official numbers), well over 1 million people; over 50% of young people are unemployed. Only one in ten unemployed Greeks receive an unemployment benefit (€360 per month), and only for one year. 9 out of 10 get nothing.

Which means 52% of Greek households are forced to live off the pension of an elderly family member. 60% of Greek pensioners receive pensions below €700. 45% of pensioners live below the poverty line with pensions below €665. Pensions have been cut some 12 times already. More cuts are in the pipeline.

40% of -small- businesses have said they expect to close in 2017. Even if it’s just half that, imagine the number of additional jobs that will disappear.

 

But the Troika demands don’t stop there; they are manifold. On top of the pension cuts and the primary surplus requirement, there are the tax hikes. So the vast majority of Greeks have ever less money to spend, the government takes money out of the economy to achieve a surplus, and on top of that everything gets more expensive because of rising taxes. Did I ever mention businesses must pay their taxes up front for a full year?

The Troika is not “rebalancing Greece’s public finances in a growth-friendly manner”, as Dijsselbloem put it, it is strangling the economy. And then strangling it some more.

There may have been all sorts of things wrong in Greece, including financially. But that is true to some degree for every country. And there’s no doubt there was, and still is, a lot of corruption. But that would seem to mean the EU must help fight that corruption, not suffocate the poor.

 


Yes, that’s about a 30% decline in GDP since 2007

 

The ECB effectively closed down the Greek banking system in 2015, in a move that’s likely illegal. It asked for a legal opinion on the move but refuses to publish that opinion. As if Europeans have no right to know what the legal status is of what their central bank does.

The ECB also keeps on refusing to include Greece in its QE program. It buys bonds and securities from Germany, which doesn’t need the stimulus, and not those of Greece, which does have that need. Maybe someone should ask for a legal opinion on that too.

The surplus requirements will be the nail in the coffin that do Greece in. Our economies depend for their GDP numbers on consumer spending, to the tune of 60-70%. Since Greek ‘consumers’ can only spend on basic necessities, that number may be even higher there. And that is the number the country is required to cut even more. Where do you think GDP is headed in that scenario? And unemployment, and the economy at large?

The question must be: don’t the Troika people understand what they’re doing? It’s real basic economics. Or do they have an alternative agenda, one that is diametrically opposed to the “rebalancing Greece’s public finances in a growth-friendly manner” line? It has to be one of the two; those are all the flavors we have.

You can perhaps have an idea that a country can spend money on wrong, wasteful things. But that risk is close to zilch in Greece, where many if not most people already can’t afford the necessities. Necessities and waste are mutually exclusive. A lot more money is wasted in Dijsselbloem’s Holland than in Greece.

In a situation like the one Greece is in, deflation is a certainty, and it’s a deadly kind of deflation. What makes it worse is that this remains hidden because barely a soul knows what deflation is.

Greece’s deflation hides behind rising taxes. Which is why taxes should never be counted towards inflation; it would mean all a government has to do to raise inflation is to raise taxes; a truly dumb idea. Which is nevertheless used everywhere on a daily basis.

In reality, inflation/deflation is money/credit supply multiplied by the velocity of money. And in Greece both are falling rapidly. The primary surplus requirements make it that much worse. It really is the worst thing one could invent for the country.

For the Greek economy, for its businesses, for its people, to survive and at some point perhaps even claw back some of the 30% of GDP it lost since 2007, what is needed is a way to make sure money can flow. Not in wasteful ways, but in ways that allow for people to buy food and clothing and pay for rent and power.

If you want to do that, taking 4% of GDP out of an economy, and 3.5% annually for years to come, is the very worst thing. That can only make things worse. And if the Greek economy deteriorates further, how can the country ever repay the debts it supposedly has? Isn’t that a lesson learned from the 1919 Versailles treaty?

The economists at the IMF and the EU/ECB, and the politicians they serve, either don’t understand basic economics, or they have their eyes on some other prize.

 

Apr 222017
 
 April 22, 2017  Posted by at 8:38 am Finance Tagged with: , , , , , , , , ,  No Responses »
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Andrei Rublev Trinity 1411

 


White House Orders Agencies to Prepare for Potential Government Shutdown (BBG)
Beware: The Next Financial Crisis Is Coming (Planet Ponzi)
Robert Prechter Is Awaiting A Depression-Like Shock In The US (MW)
Fed’s Fisher Warns Trump About Plans To ‘Do A Number’ On Dodd-Frank (BI)
Former FinMin Says China Should Let Local Governments Default on Debt (BBG)
Everything Gets Worse – Pakistan vs. India (Bhandari)
Dijsselbloem Sees ‘Tough’ Greek Debt Relief Talks With IMF (BBG)
Schaeuble Says Greece to Blame for Delays in Bailout Program
Greece Blows EU-IMF Bailout Targets Away With Strong Budget Performance (R.)
Greek Primary Surplus Chokes Market (K.)
On Neocons and their Mental Defects (Taleb)
28 Refugees Found Dead In Drifting Dinghy Off Libyan Coast (Ind.)

 

 

It could happen.

White House Orders Agencies to Prepare for Potential Government Shutdown (BBG)

The White House ordered federal agencies Friday to began preparations for a potential partial government shutdown after signaling President Donald Trump would demand money for key priorities in legislation to continue funding the government beyond April 29. But the president and his aides expressed confidence that Congress would work out a spending agreement and that there won’t be any halt in government operations. Administration officials portrayed the order as normal contingency planning, stressing that the previous administration had followed the same practice as funding deadlines approached. “I think we’re in good shape” on avoiding a deadlock on maintaining funding, Trump told reporters in the Oval Office on Friday. White House press secretary Sean Spicer said the administration is “confident” because negotiations are ongoing and “no one wants a shutdown.”

The push to reach an agreement on spending is complicated by White House efforts to try again for a House vote on replacing Obamacare next week, crowding the congressional schedule with two politically thorny measures the same week. House approval of an Obamacare repeal would give the president a legislative victory to boast about before his 100th day in office April 29. But failure to reach an agreement on spending legislation would risk marring the anniversary with a government shutdown. House Republicans plan a conference call Saturday with Ryan and other leaders to discuss the health-care bill as well as spending legislation. Republican Congressional leaders have pushed back against scheduling an Obamacare vote during the week, indicating there isn’t a clear strategy yet for achieving passage.

Mick Mulvaney, Trump’s director of Office of Management and Budget, said Thursday Democrats will need to agree to pay for some Trump’s top priorities, including a wall at the U.S.-Mexico border, in legislation to fund the government for the remainder of the fiscal year, which ends Oct. 1. Democrats responded harshly to Mulvaney’s remarks Thursday. “Everything had been moving smoothly until the administration moved in with a heavy hand,” said Matt House, spokesman for Senate Minority Leader Chuck Schumer of New York.

Read more …

“Constantly printing more money will not end in prosperity, but in ruin.”

Beware: The Next Financial Crisis Is Coming (Planet Ponzi)

There is more debt, credit, and leverage today than there was preceding the banking crisis of 2008. No lessons were learned from that catastrophe as trillions of taxpayer dollars were provided in the form of bank bailouts from the US Federal Reserve. Despite their name, US Federal Reserve Banks are not part of the federal government and they are not banks. For the past 11 years, the Federal Reserve has been run by non-elected officials, Ben Bernanke and Janet Yellen (career academics), alongside a host of X Goldman and JP Morgan bankers. Since 2007, these non-elected bankers have provided banks “temporary, emergency liquidity measures.” Since when is eight years temporary?

Banks have continued to lend trillions and trillions of dollars to fund the construction of grotesquely overpriced residential and commercial properties around the world. The trillions of dollars given in bank bailouts are a perfect example of government “pay-to-play.” When giving out this money, most bankers are making at least three flawed assumptions:
1. Real estate prices will always go up. Clearly, this is the denial phase of “a bubble mentality.”
2. Rents will always keep rising. Rents peaked a few years ago. There is a massive oversupply of high-end residential and commercial properties on the market while real wages have declined. This is a sign that a crash is imminent.
3. The Federal Reserve will always bail them out. With zero transparency or an audit the Federal Reserve’s balance sheet has ballooned from 500 billion to nearly 5 trillion in a short period. The Federal Reserve doesn’t have the money to keep bailing companies out.

The Federal Reserve has become nothing more than a rogue hedge fund taking leveraged, wildly speculative, gargantuan and high-risk positions in bonds and mortgages. Next up, the Fed will angle to dump these toxic real estate assets in your pension fund. There are several steps that need to be taken to address this situation and save your pensions:
1. The President and Congress need to order an immediate audit of the Fed.
2. The Fed’s positions need to be unwound.
3. No more taxpayer funded bailouts – save your pension!

Capitalism without bankruptcy is like Catholicism without hell. Constantly printing more money will not end in prosperity, but in ruin. The coming collapse will be much worse than in 2008-2009 because the debt is so much larger and the Federal Reserve has run out of bullets. Since the 1980s, we have seen real average wages decline, college tuition skyrocket nearly 2,000%, and housing prices hitting all-time new highs while high-paying jobs have disappeared. Rents have risen so much that many small businesses are no longer economically viable. The situation doesn’t look any better for graduates. Graduates entering the jobs market have nearly $250,000 in student debt. A graduate may get a job in Manhattan for $40,000 a year ($3,333 a month before tax) but rent on a studio apartment costs $3,000 a month. The numbers just don’t add up anymore.

Read more …

Social mood: “declining stock and property prices, contracting debt, angry and somber music, more intense horror movies..”

Robert Prechter Is Awaiting A Depression-Like Shock In The US (MW)

Avi Gilburt: You’ve said that, once the stock market tops, you expect a major bear market and economic contraction to take hold. What is your general timing for this to occur?

Robert Prechter: The true top for stocks in terms of real money (gold) occurred way back in 1999. Overall prosperity has waned subtly since then. Primary wave five in nominal terms started in March 2009, and wave B up in the Dow/gold ratio started in 2011. Their tops should be nearly coincident.

Gilburt: What do you foresee will set off this event?

Prechter: Triggers are a popular notion, borrowed from the physical sciences. But I don’t think there are any such things in financial markets. Waves of social mood create trends in the stock market, and economic and political events lag behind them. Because people do not perceive their moods, tops and bottoms in markets sneak right past them. At the top, people will love the market, and events and conditions will provide them with ample bases for rationalizing being heavily invested.

Gilburt: You’ve said we will be mired in a “depression-type” event. How long could that last?

Prechter: I don’t know. All I can say for sure is that the degree of the corrective wave will be larger than that which created the malaise of the 1930s and 1940s.

Gilburt: How are conditions going to change from what we have now?

Prechter: The increasingly positive trend in social mood over the past eight years has been manifesting in rising stock and property prices, expanding credit, buoyant pop music, lots of animated fairy tales and adventure movies, suppression of scandals, an improving economy and — despite much opinion — fairly moderate politics. This trend isn’t quite over yet. In the next wave of negative mood, we should see the opposite: declining stock and property prices, contracting debt, angry and somber music, more intense horror movies, eruption of scandals, a contracting economy and political upheaval. That’s been the pattern of history.

It’s all relative, though, and it’s never a permanent condition. Just as people give up on the future, its brightness will return. The financial contraction during the negative mood trend of 2006-2011 was the second worst in 150 years. Yet, thanks to the return of positive mood, many people have already forgotten about it. Investors again embrace stocks, ETFs, real estate, mortgage debt, auto-loan debt and all kinds of risky investments that they swore off just a few years ago.

Read more …

Because the Fed is doing such a great job of keeping banks in check.

Fed’s Fisher Warns Trump About Plans To ‘Do A Number’ On Dodd-Frank (BI)

Stanley Fischer, the vice chairman of the Federal Reserve, on Friday delivered an unusually sharp warning to President Donald Trump and his plan to “do a number” on post-crisis reforms aimed at reining in Wall Street. Fed officials usually go out of their way to not appear political, which makes the comments all the more startling. Fischer, a former Citigroup banker and respected policymaker who led the Bank of Israel for many years, appears truly concerned. “We seem to have forgotten that we had a financial crisis, which was caused by behavior in the banking and other parts of the financial system, and it did enormous damage to this economy,” Fischer told CNBC’s Sara Eisen in the lobby of the IMF, responding to a question about the potential rolling back of Dodd-Frank rules.

This happened just as the president was signing an executive order aimed at what he said was “reviewing” Dodd-Frank. “Millions of people lost their jobs. Millions of people lost their houses,” Fischer said. “This was not a small-time, regular recession. This was huge, and it affected the rest of the world, and it affected, to some extent, our standing in the world as well. We should not forget that. “The strength of the financial system is absolutely essential to the ability of the economy to continue to grow at a reasonable rate, and taking actions which remove the changes that were made to strengthen the structure of the financial system is very dangerous.”

Asked specifically about Trump’s vow to “do a number” on Dodd-Frank, Fischer shot back: “I’m not sure precisely what the president said and what a ‘number’ is, but there are aspects of Dodd-Frank, which if they were taken away would have very serious potential consequences for the economy — not immediately but when times get tough.” What provisions is he most worried about? The ability of the Fed and other regulators to wind down large banks, many of which are still seen as too big to fail. “I think it is very important that big banks be subject to the discipline of the possibility of going bankrupt. It is also very important that that discipline extends to not making those changes, the bankruptcy of a big bank, a huge shock and the source of crisis or damage to the overall economy,” Fischer said. “So we need the resolution mechanisms that have been put in place which will allow the authorities and the markets to wind up a big bank.”

Read more …

Beware the cascade.

Former FinMin Says China Should Let Local Governments Default on Debt (BBG)

Former Finance Minister Lou Jiwei said China should allow smaller local governments to default on debt because it would signal that central government bailouts aren’t assured. Such defaults would educate investors that their investments will be allowed to go bad, Lou said Friday at a public finance forum in Beijing. “They need to shoulder responsibility,” said Lou, who’s now chairman of the country’s social security fund. “Nobody will save them.” Lou’s comments reiterate those by Premier Li Keqiang and other central government officials such as current Finance Minister Xiao Jie that local government debt shouldn’t be bailed out, or benefit from assumptions it will be.

With economic growth accelerating for a second-straight quarter to 6.9% through March, policy makers have more room to cut leverage and rein in risks. A credit surge since 2014 that underpinned growth has also fueled a further buildup in borrowing. Total debt rose to 258% of economic output last year from 161% in 2008, Bloomberg Intelligence estimates show. Lou said government debt remains broadly safe, but borrowing levels are poised to keep climbing given increased investment in substandard public-private partnership projects.

Read more …

Great long read on India and its region.

Everything Gets Worse – Pakistan vs. India (Bhandari)

When Narendra Modi announced on 8th November 2016 that he was demonetizing 86% of the monetary value of all currency in circulation, he gave three major reasons for doing so: to end corruption, to end terrorism and to eliminate counterfeit currency. Ironically, all three are now in far worse condition than they were previously, and even worse than the predictions I made. Many ATMs in India still dispense no cash. The economy is in shatters. This had to happen, as any new cash is rapidly moving under the carpets of the financial powerful that hoard currency. Small businesses are traumatized by the lack of access to cash – many are closing for good. People continue to avoid making non-essential purchases. Even food demand has failed to recover. Poor people very likely are still forced to go to bed half-hungry.

No-one knows whether there are famines in parts of India, as none of the mainstream media are covering the issue. Not unlike North Koreans or the Chinese during the times of Mao, Indians today, particularly members of the so-called educated class, simply cannot see what Modi or their nationalistic paradigm does not want them to see. Indian banks and other financial institutions are extremely unethical. Since privatization was implemented in the 1990s, they have charged fees and commissions for accounts that were never agreed upon. Indians never fight, so this continues. After the demonetization exercise, these mysterious charges have started to appear more often. Then they deduct certain services and financial taxes, and most people don’t make the effort to try to understand them. Indians are getting very tired of the banks – not for moral, but simply for financial reasons.

Bank websites are extremely unwieldy. They require a sequence of passwords and OTPs (one time pad codes), which have an automatic expiry date. Getting the whole sequence right to make an online payment without having these websites freeze during the procedure leaves one with a sense of accomplishment. Most people prefer to walk down to their banks to get bank officials to perform such online transactions. India is simply not ready for the digital age. This experiment in going cashless will end in a disaster. Similar to every tyrant, Modi likes to think that tax collection should be at the heart of society. He imagines a society in which subjects dance around the state. The problem is, one can perfect the tax system or minimize corruption, but with a per capita GDP of $1,718, India simply does not have the required productivity.

Read more …

Anything you do can and will be used against you: The more such surplus it has, the less debt relief will be needed.

Dijsselbloem Sees ‘Tough’ Greek Debt Relief Talks With IMF (BBG)

Discussions between Greece’s European creditors and the IMF on additional debt relief for the Mediterranean euro region member will be difficult because of political hurdles within the 19-nation bloc, though a solution is on the horizon, Eurogroup Chairman Jeroen Dijsselbloem said. “Greece: We’re very close, it’s really the last stretch,” he said in a Bloomberg Television interview on Friday in Washington with Francine Lacqua and Tom Keene. “We have a full agreement on the major reforms. How they are to be designed, when they are to be implemented, the size of them.”

IMF Managing Director Christine Lagarde said Friday she had “constructive discussions” with Greek Finance Minister Euclid Tsakalotos in preparation for the return of bailout auditors to Athens after euro-area finance ministers reached a tentative agreement on the measures Greece needs to implement to qualify for the next tranche of emergency loans. Dijsselbloem met Tsakalotos earlier on Friday in Washington. “That will be a tough discussion with the IMF,” said Dijsselbloem, who is also the Dutch Finance Minister in a caretaker cabinet, “There are some political constraints where we can go and where we can’t go.” The level of Greece’s primary budget surplus is key in determining the kind of debt relief it will need. The more such surplus it has, the less debt relief will be needed.

The Hellenic Statistical Authority on Friday unveiled data on last year’s primary surplus, which Eurostat is expected to validate on Monday. The surplus was 3.9% according to the European Union’s statistics office methodology, or 4.2% according to what has been agreed in the bailout program. The bailout target was for a primary surplus of 0.5% of GDP. In spite of its better-than-expected primary surplus last year, the IMF is not convinced Greece will be able to maintain that level of performance for 2018 and beyond. The fund estimates that at least half of the primarily surplus for 2016 came from one-off measures rather than structural changes that will continue delivering results in the years to come, according to a person familiar with its analysis. That has prompted the fund to demand more austerity measures.

Read more …

Groundhog man.

Schaeuble Says Greece to Blame for Delays in Bailout Program

German Finance Minister Wolfgang Schaeuble said the Greek government bore responsibility for current delays in the country’s bailout program. Greece is to blame that its creditors didn’t return to Athens during the Greek Easter break to finish negotiations on steps the nation must take to qualify for the next tranche of emergency loans, Schaeuble told reporters Friday on the sidelines of the IMF spring meetings. IMF European Department head Poul Thomsen said at a media briefing there’s been enough progress recently to send back a mission to Greece. Greece and its international creditors struck a tentative agreement at a meeting of euro-area finance ministers in Malta earlier this month, breaking the latest deadlock over the country’s rescue and paving the way for about €7 billion in aid for Athens.

Although the decision represents progress, the euro area won’t unlock the payout until their audit in Athens is concluded. “It would have been possible to continue the mission in Athens immediately in the week after Malta,” said Schaeuble. “This was not possible during the Greek Easter break.” In a statement on Friday, IMF Managing Director Christine Lagarde said she had a “constructive dialogue” with Greek Finance Minister Euclid Tsakalotos “in preparation for the return of the mission to discuss the two legs of the Greece program: policies and debt relief.” The IMF isn’t holding back progress, said Schaeuble. “The IMF isn’t delaying this process at all,” he said.

Read more …

The worst thing Greece could do.

Greece Blows EU-IMF Bailout Targets Away With Strong Budget Performance (R.)

Greece far exceeded its international lenders’ budget demands last year, official data showed on Friday, posting its first overall budget surplus in 21 years even when debt repayments are included. The primary surplus – the leftover before debt repayments that is the focus of IMF-EU creditors – was more than eight times what they had targeted. Data released by Greek statistics service ELSTAT – to be confirmed on Monday by the EU – showed the primary budget surplus at 3.9% of GDP last year versus a downwardly revised 2.3% deficit in 2015. This was calculated under European System of Accounts guidelines, which differ from the methodology used by Greece’s in bailout deliberations.

Under EU-IMF standards, the surplus was even larger. Government spokesman Dimitris Tzanakopoulos said the primary budget surplus under bailout terms reached 4.19% of GDP last year versus the 0.5% of GDP target. “It is more than eight times above target,” Tzanakopoulos said in a statement. “Therefore, the targets set under the bailout program for 2017 and 2018 will certainly be attained.” Debt-strapped Greece and its creditors have been at odds for months over the country’s fiscal performance, delaying the conclusion of a key bailout review which could unlock needed bailout funds. The IMF, which has reservations on whether Greece can meet high primary surplus targets, has yet to decide if it will fund Greece’s current bailout, which expires in 2018.

Read more …

The surplus kills the economy even more.

Greek Primary Surplus Chokes Market (K.)

The state’s fiscal performance last year has exceeded even the most ambitious targets, as the primary budget surplus as defined by the Greek bailout program, came to 4.19% of GDP, government spokesman Dimitris Tzanakopoulos announced on Friday. It came to €7.369 billion against a target for €879 million, or just 0.5% of GDP. A little earlier, the president of the Hellenic Statistical Authority (ELSTAT), Thanos Thanopoulos, announced the primary surplus according to Eurostat rules, saying that it came to 3.9% of GDP or €6.937 billion. The two calculations differ in methodology, but it is the surplus attained according to the bailout rules that matters for assessing the course of the program. This was also the first time since 1995 that Greece achieved a general government surplus – equal to 0.7% of GDP – which includes the cost of paying interest to the country’s creditors.

There is a downside to the news, however, as the figures point to overtaxation imposed last year combined with excessive containment of expenditure. The amount of €6-6.5 billion collected in excess of the budgeted surplus has put a chokehold on the economy, contributing to a great extent to the stagnation recorded on the GDP level in 2016. On the one hand, the impressive result could be a valuable weapon for the government in its negotiations with creditors to argue that it is on the right track to fiscal streamlining and can achieve or even exceed the agreed targets. On the other hand, however, the overperformance of the budget may weaken the argument in favor lightening the country’s debt load. It is no coincidence that German Finance Minister Wolfgang Schaeuble noted in Washington that over the last couple of years, Greek government deficit forecasts are more realistic than those of the IMF.

Read more …

Skin in the game.

On Neocons and their Mental Defects (Taleb)

So we tried that thing called regime change in Iraq, and failed miserably. We tried it in Libya, and now there are now active slave markets in the place. But we satisfied the objective of “removing a dictator”. By the exact same reasoning, a doctor would inject a patient with “moderate” cancer cells “to improve his cholesterol numbers”, and claim victory after the patient is dead, particularly if the post-mortem shows remarkable cholesterol readings. But we know that doctors don’t do that, or, don’t do it in such a crude format, and that there is a clear reason for it. Doctors usually have some skin in the game. And don’t give up on logic, intellect and education, because a tight but higher order logical reasoning would show that the logic of advocating regime changes implies also advocating slavery.

So these interventionistas not only lack practical sense, and never learn from history, but they even make mistakes at the pure reasoning level, which they drown in some form of semi-abstract discourse. The first flaw is that they are incapable in thinking in second steps and unaware of the need for it –and about every peasant in Mongolia, every waiter in Madrid, and every car service operator in San Francisco knows that real life happens to have second, third, fourth, nth steps. The second flaw is that they are also incapable of distinguishing between multidimensional problems and their single dimensional representations –like multidimensional health and its stripped, cholesterol-reading reduced representation. They can’t get the idea that, empirically, complex systems do not have obvious one dimensional cause and effects mechanisms, and that under opacity, you do not mess with such a system.

An extension of this defect: they compare the actions of the “dictator” to the prime minister of Norway or Sweden, not to those of the local alternative. And when a blow up happens, they invoke uncertainty, something called a Black Swan, not realizing that one should not mess with a system if the results are fraught with uncertainty, or, more generally, avoid engaging in an action if you have no idea of the outcomes. Imagine people with similar mental handicaps, who don’t understand asymmetry, piloting planes. Incompetent pilots, those who cannot learn from experience, or don’t mind taking risks they don’t understand, may kill many, but they will themselves end up at the bottom of, say, the Atlantic, and cease to represent a threat to others and mankind.

So we end up populating what we call the intelligentsia with people who are delusional, literally mentally deranged, simply because they never have to pay for the consequences of their actions, repeating modernist slogans stripped of all depth. In general, when you hear someone invoking abstract modernistic notions, you can assume that they got some education (but not enough, or in the wrong discipline) and too little accountability. Now some innocent people, Yazidis, Christian minorities, Syrians, Iraqis, and Libyans had to pay a price for the mistakes of these interventionistas currently sitting in their comfortable air-conditioned offices. This, we will see, violates the very notion of justice from its pre-biblical, Babylonian inception. As well as the ethical structure of humanity.

Read more …

Just a week ago we commemorated a man on a cross whose image we remember but whose teachings we’ve forgotten.

28 Refugees Found Dead In Drifting Dinghy Off Libyan Coast (Ind.)

Almost 30 migrants have been found dead in a boat drifting off the coast of Libya as the number of refugees dying in attempts to reach Europe reach record highs. Fishermen found the bodies of 28 people, including four children, in waters near the smuggling hub of Sabratha after more than 8,300 asylum seekers were rescued over the Easter weekend. “Their boat stopped in the middle of the water because the engine was broken,” said Ahmaida Khalifa Amsalam, the interior ministry’s security commander. He said the victims appeared to have died of thirst and hunger after their vessel was left drifting in the Mediterranean.

They were buried in a cemetery dedicated to migrants whose bodies are regularly washed up on the coast of Libya, which remains embroiled in a bloody civil war six years after the UK helped overthrow Muammar Gaddafi. Smugglers have increasingly resorted to packing migrants into flimsy dinghies that are unable to survive the crossing to Europe, with some being intercepted and forced back by the Libyan coastguard, others being rescued by EU officials and aid agencies, and many sinking. Tuesday’s tragic discovery was the latest incident of refugees being found dead inside boats, with a worrying trend emerging suggesting engines are being removed or sabotaged at sea.

Read more …

Apr 192017
 
 April 19, 2017  Posted by at 9:06 am Finance Tagged with: , , , , , , , , ,  2 Responses »
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Jan van Eyck Saint Barbara 1437

 


The Great Western Economic Depression (Nielson)
How Western Civilisation Could Collapse (BBC)
Why the Federal Reserve Is Bad for America (DDMB)
Trump’s New Problem: Americans Aren’t Shopping (CNN)
British PM Wants Election Now, Before Cost of Brexit Becomes Clear (ICept)
UK Tory MPs Still Under Investigation For Election Fraud (Can.)
China’s $8.5 Trillion Shadow Bank Industry Is Back in Full Swing (BBG)
So China’s Authorities Crack Down on Housing Speculation? (WS)
Subsidiarity – A European Union Smokescreen To Justify Failure (Bilbo)
Greece’s Migration Policy Ministry to Spread Migrants in Small Towns (GR)
How the Greek Crisis is Profitable for the International Monetary Fund (GR)
Key South Africa Leopard Population Crashing (AFP)

 

 

“Consider 0% and near-zero interest rates to be the economic equivalent of a defibrillator: the most-extreme, last-resort attempt to “stimulate” the human body when it is near death. Our economies have had this economic defibrillator attached to them for more than eight years – without the slightest glimmer of life.”

The Great Western Economic Depression (Nielson)

Western economies are “recovering”. How do we know this? We are told this, over and over and over again by our governments. Then this assertion is repeated thousands of times more by the dutiful parrots of the Corporate media. The problem is that in the real world there is not a shred of evidence to support this assertion. In the U.S.; ridiculous official lies were created claiming the creation of 15 million new jobs. In reality, there are three millionless Americans with jobs today than at the official end of the “recession”. These imaginary jobs are invented by assorted statistical frauds, with the primary deceit being so-called “seasonal adjustments”. To be legitimate, all seasonal adjustments must to net to zero at the end of each year. Instead, in the U.S.A., the biggest job creator in the nation every year is the calendar.

Beyond the grandiose but absurd claims of new jobs in the U.S., there have been few signs of economic health across the Corrupt West. Despite this, these traitorous regimes continue the pretense that their horrific mismanagement of our economies is making things better rather than worse. There are numerous subtle means of demonstrating that Western economies have never been in more calamitous ill health than they are today. Fortunately, there are also two very large and important indicators which provide absolute proof that all of the economies of the Corrupt West are in a Greater Depression: interest rates and energy demand. Regular readers have often seen the observation in these commentaries that interest rates across the West have never been this low for this long in the entire history of these nations – not even close. Why not? Two reasons:

1) Interest rates this low have always been perceived (by our governments and all legitimate economic commentators) as being so reckless that any short-term benefit from such rates would have been more than offset by long-term harm.

2) The reason why our governments have always deemed interest rates this low to be reckless is that in remotely healthy economies such rates would cause these economies to “over-heat” so rapidly and extremely that they would reach unsustainable levels of production and demand.

Are our economies over-heating? No. Nothing could be further from the truth. We see nothing but over-capacity all around us: one hundred million permanently unemployed people across the West, relentless business closures, declining real wages, and near-empty shopping malls (in “consumer economies”). Interest rates this low are supposed to cause such rapid business expansion that the economy suffers from a labour shortage. Why are there a hundred million people unemployed across the West instead of labour shortages? Regular readers have seen this question answered in the past in the form of a metaphor.

Consider 0% and near-zero interest rates to be the economic equivalent of a defibrillator: the most-extreme, last-resort attempt to “stimulate” the human body when it is near death. Our economies have had this economic defibrillator attached to them for more than eight years – without the slightest glimmer of life. What would happen to a human body if it was defibrillated continuously for more than eight years? Charred meat. This is what Western economies have become: charred meat.

Read more …

Bit bland, because BBC. But useful to note that inequality collapses civilizations.

How Western Civilisation Could Collapse (BBC)

While it’s impossible to predict the future with certainty, mathematics, science and history can provide hints about the prospects of Western societies for long-term continuation. Safa Motesharrei, a systems scientist at the University of Maryland, uses computer models to gain a deeper understanding of the mechanisms that can lead to local or global sustainability or collapse. According to findings that Motesharrei and his colleagues published in 2014, there are two factors that matter: ecological strain and economic stratification. The ecological category is the more widely understood and recognised path to potential doom, especially in terms of depletion of natural resources such as groundwater, soil, fisheries and forests – all of which could be worsened by climate change.

That economic stratification may lead to collapse on its own, on the other hand, came as more of a surprise to Motesharrei and his colleagues. Under this scenario, elites push society toward instability and eventual collapse by hoarding huge quantities of wealth and resources, and leaving little or none for commoners who vastly outnumber them yet support them with labour. Eventually, the working population crashes because the portion of wealth allocated to them is not enough, followed by collapse of the elites due to the absence of labour. The inequalities we see today both within and between countries already point to such disparities.

For example, the top 10% of global income earners are responsible for almost as much total greenhouse gas emissions as the bottom 90% combined. Similarly, about half the world’s population lives on less than $3 per day. For both scenarios, the models define a carrying capacity – a total population level that a given environment’s resources can sustain over the long term. If the carrying capacity is overshot by too much, collapse becomes inevitable. That fate is avoidable, however. “If we make rational choices to reduce factors such as inequality, explosive population growth, the rate at which we deplete natural resources and the rate of pollution – all perfectly doable things – then we can avoid collapse and stabilise onto a sustainable trajectory,” Motesharrei said. “But we cannot wait forever to make those decisions.”

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Seeing the world through beer goggles.

Why the Federal Reserve Is Bad for America (DDMB)

Commercial real estate and bonds are more overvalued than at any time in history and stocks are trading at their priciest level save one period, the late 1990s before the dotcom implosion. The beer goggles, it would seem, have blinded investors to the bubble wrap that’s enveloped their portfolios. There are a few brave souls at the Fed who have raised a red flag. On March 22nd, Boston Fed President Eric Rosengren warned, “…we must acknowledge that the commercial real estate sector has the potential to amplify whatever problems may emerge when we at some point face an economic downturn.”

Wiser words, especially given so few who recall that it was not the decline in oil prices that made the late 1980s such a painful period for the economy, but rather the crash in commercial real estate the energy crunch catalyzed. Underlying the multiple overheating markets is a persistent underappreciation of financial instability among Fed policymakers. The institution, overladen as it is with PhD economists, has yet to revisit the models that drive its setting of interest rate policy. Had the Fed’s inflation metrics taken into account runaway stock prices in the late 1990s and skyrocketing home prices in the early 2000s, it’s likely they would have intervened to tighten financial conditions much sooner than they did. Revisiting the wisdom of former Fed chair McChesney Martin is useful:

The danger with these econometricians is they don’t know their own limitations, and they have a far greater sense of confidence in their analyses than I have found to be warranted. Such people are not dangerous to me because I understand their limitations.

They are, however, dangerous to people like you and the politicians because you don’t know their limitations, and you are impressed and confused by the elaborate models and mathematics. The flaws in these analyses are almost always embedded in the assumptions on which they are based. And that is where broader wisdom is required, a wisdom that these mathematicians generally do not have.

You always want these technical experts on tap in positions like this, but never on top. The hope is that President Donald Trump heeds McChesney Martin’s 1970s-era wisdom, that he respects the wishes of those who originally envisioned the Fed as an appreciably more intellectually diverse entity. After all, the original 1913 Federal Reserve Act requires the president to appoint leaders across a diversity of industries.

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How is it possible that these people completely miss out on the reason why? Which is: they have no money to spend. They’re not stingy, or skeptical, they’re simply poor.

Trump’s New Problem: Americans Aren’t Shopping (CNN)

President Trump keeps pushing “Buy American.” He’s planning to tout it again at a stop in Wisconsin on Tuesday. But the alarming reality is Americans aren’t spending much money on anything right now, regardless of where it’s made. Retail sales declined in February and March from the prior month, according the Commerce Department. Shoppers haven’t been this stingy since early 2015, and it’s likely to hurt the economy. The U.S. is on track for very sluggish 0.5% growth in the first three months this year, according to the latest estimates from Macroeconomic Advisers and the Atlanta Federal Reserve. That falls massively short of the 4% growth that Trump has promised. Trump loves to plug how Americans’ confidence in the economy has skyrocketed since he won the election. He’s right.

Consumers, businesses (big and small) and investors are all feeling a lot more optimistic, according to various surveys. But all that enthusiasm isn’t translating into more shopping, which drives the U.S. economy. About 70% of the American economy comes from people buying stuff. Kate Warne, a long-time investment strategist at Edward Jones, calls this the era of “skeptical optimism.” “People are more optimistic, but they’re skeptically optimistic,” Warne told CNNMoney. “I don’t think they are confident yet that things will change as much as they would like them too.” [..] Another twist is that Republicans are a lot more optimistic than Democrats. [..] Overall, the University of Michigan index of consumer confidence has jumped from 87 in October to 98 today. But that headline figure masks a wild division.

Democrats believe “a deep recession” is coming under Trump (their confidence index is a mere 55), while Republicans expected a “new era of robust economic growth” (their index level is a sky-high 122). Independents are in between, as you might expect. If half the country thinks recession is near, that might explain why retail sales are slowing, or even showing some signs of decline.

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Good observation. But a good chance for May’s opponents.

British PM Wants Election Now, Before Cost of Brexit Becomes Clear (ICept)

Prime Minister Theresa May, who was actually against Brexit before she was for it, made another dramatic U-turn on Tuesday, declaring that Britain needs to elect a new Parliament in June, three years ahead of schedule, despite her clear promise not to call an election when she campaigned to succeed David Cameron last year. Her decision to subject Britons to a third national election campaign in just over two years — after the 2015 general election and the referendum on exiting the European Union ten months ago — was met with something less than enthusiasm by many voters. In her address to the nation, May claimed that a fresh election was necessary to keep opposition parties from obstructing her Conservative government during negotiations over Britain’s withdrawal from the European Union.

That argument rang hollow, however, given that the opposition Labour Party had just voted for the government’s bill to begin the process of leaving the E.U. and is not campaigning to overturn the results of last year’s referendum. To most political observers, it was clear that May’s decision was driven by something else: a desire to capitalize on the unprecedented weakness of the Labour Party, which is divided over Brexit, and its own leader, Jeremy Corbyn, and has trailed the Conservatives by up to 21 points in recent polls. As the writer Robert Harris and the broadcaster James O’Brien suggested, it might also be in May’s own self-interest, and that of her party, to ask the nation for a five-year term now, before the costs of Brexit become apparent. Although even many die-hard Labour supporters seemed resigned to defeat, some on the left welcomed the chance to vote against what they see as the potentially disastrous policy of a complete break with Europe.

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What is this, Brazil?

20 UK Tory MPs Still Under Investigation For Election Fraud (Can.)

Theresa May has announced a snap election on 8 June 2017. But as the country prepares for another election campaign, it’s important to remember that MPs in her party are being investigated for election fraud for the 2015 general election. And given the mainstream media’s reluctance to report the issue, we need to ensure it is kept firmly on the agenda. 12 police forces have submitted files to the Crown Prosecution Service (CPS) over allegations that up to 20 MPs and/or their agents broke election spending limits in the 2015 election. The CPS is deciding whether charges should be brought. And a decision is expected soon – and is likely to come during the election campaign. The allegations centre around the ‘battle bus’ campaign, and associated expenses such as hotel rooms.

Many argue that the campaign promoted prospective local MPs in key seats. Under election law, any expenditure which promotes a local candidate should be covered locally. But the ‘battle bus’ and associated costs were declared nationally. Each constituency has a fixed amount of money it can spend locally. And including the ‘battle bus’ expenditure would have meant many candidates overspent. Additionally, the Election Commission has fined the Conservatives £70,000 for multiple breaches in connection to election spending during the 2015 campaign. But it isn’t just the ‘battle bus’ campaigns where the Conservatives have been accused of fraud. As The Canary previously reported, there are questions over how the party used social media and, particularly, Facebook, to target voters.

A report by the London School of Economics has also warned [pdf] that Facebook targeting opens the door to electoral fraud: “The ability to target specific people within a particular geographic area gives parties the opportunity to focus their attention on marginal voters within marginal constituencies. This means, in practice, that parties can direct significant effort – and therefore spending – at a small number of crucial seats. Yet, though the social media spending may be targeted directly at those constituencies, and at particular voters within those constituencies, the spending can currently be defined as national, for which limits are set far higher than for constituency spending.”

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“..the property and construction industries, which contribute about 25 to 30% of China’s economic output..”

China’s $8.5 Trillion Shadow Bank Industry Is Back in Full Swing (BBG)

China’s shadow banking is back in full swing, an unintended side effect of the government’s campaign against financial leverage, which has curbed traditional lending and squeezed bond financing. Data from the central bank Friday showed that off-balance sheet lending surged 754 billion yuan ($109 billion) in March, taking the first quarter’s total increase to a record 2.05 trillion yuan. Efforts by the People’s Bank of China to curb fresh lending may have prompted borrowers, especially real estate developers, to resort to alternative forms of financing, said Xu Gao at Everbright Securities. Since late last year, the PBOC and regulators have taken steps to rein in risks to China’s financial system, including raising short-term interest rates, clamping down on leverage in the bond market, and curbing funding for property speculation.

The measures have sent debt-reliant borrowers scurrying to shadow financing, an industry Moody’s Investors Service estimates is worth about $8.5 trillion, and another area where regulators are trying to reduce risk. “You must tread a fine line,” said Everbright’s Xu. “Choking the bond market to death doesn’t mean the financing needs will be curbed as well. Instead, it will drive funding to areas that are more unreachable for the regulators. At the end of the day, risks may be declining in the bond market, but in the overall financial system, they would be rising.” The PBOC in January ordered the nation’s lenders to strictly control new loans in the first quarter of the year, putting a particular emphasis on mortgage lending to contain runaway home prices.

The move saw banks extending 4.22 trillion yuan of new loans in the first quarter, 8.5% less than the same period in 2016. It was the first year-on-year decline since 2011. The government is trying to contain the possibility of a shock emanating from the property and construction industries, which contribute about 25 to 30% of China’s economic output, Moody’s estimates. The increasing role of shadow banks as providers of finance is among characteristics that have raised the financial system’s vulnerability to a property-related shock, Moody’s said in a March report. In a move to curb shadow banking, financial regulators are working together to draft sweeping new rules for asset-management products, people familiar with the matter said in February.

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Cracking down on what is 25-30% of your economy?!

So China’s Authorities Crack Down on Housing Speculation? (WS)

Dozens of cities have imposed ever tougher buying restrictions, more stringent down-payment requirements especially for second homes, stricter resale limits, etc. etc., and they’ve redoubled their efforts since mid-March when it became apparent that the prior redoubled efforts had not produced results, as people figured out how to get around them. But China depends heavily on property development and property speculation for its economic growth, and no one really wants to bring it down: The National Bureau of Statistics (NBS) reported on Monday that first-quarter growth in property investment – residential, commercial, and office spaces combined – soared 9.1%. This red-hot property sector, and the 40 other sectors that are directly affected by it, drove China’s official GDP growth in Q1 to 6.9%.

As always, analysts keep saying that it would take a few more months for the restrictions to take effect and start cooling the market. That line was once again repeated on Monday, officially: “Because the latest round of cooling measures came out after March 17, their impact on the entire economy including home prices may show in April or later,” Mao Shengyong, a spokesman for the NBS said at a briefing, according to Reuters. Houses are for habitation, not for speculative investment, he said. That would be a novel concept in these crazy times. But who really wants to cool the market, when state-owned developers and state-owned banks are firing it up? Yet, everyone sees the risks. Reuters: “Most analysts agree an overheating property market poses the single biggest risk to China’s economic growth, with increasingly tough government measures to cool soaring prices raising the risk of a nasty crash.”

But the cooling off is not happening yet. New construction measured in floor space soared 11.6% in the first quarter, year-over-year, the NBS reported, and sales jumped 19.5%, though that growth rate was down a notch from the year 2016, when sales at soared 22.5%, the highest in seven years, as the boom in first-tier cities was spilling into second- and third-tier cities. With state-owned developers, funded by state-owned banks, firing up much of the show, and with speculators, who assume the government has their back, running wild in a gushing celebration of ever-soaring prices and huge automatic profits, there’s little chance that this scheme that has already transcended irrational exuberance will simply “cool” to a level of “stability,” and plateau somewhere soon, as it is hoped. Phenomenal bubbles like this don’t go quietly.

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“The Oxford Dictionary defines subsidiarity as “(in politics) the principle that a central authority should have a subsidiary function, performing only those tasks which cannot be performed at a more local level”

Subsidiarity – A European Union Smokescreen To Justify Failure (Bilbo)

One of the various smokescreens that were erected by the European Commission and the bevy of economists that it either paid or were ideologically aligned to justify the design of the monetary union around the time of the Maastricht process was the concept of subsidiarity. In 1993, the Centre for Economic Policy Research (a European-based research confederation) published its Annual Report – Making Sense of Subsidiarity: How Much Centralization for Europe? – which attempted to justify (ex post) the decisions imported from the 1989 Delors Report into the Maastricht Treaty that eschewed the creation of a federal fiscal capacity.

It was one of many reports at the time by pro-Maastricht economists that influenced the political process and pushed the European nations on their inevitable journey to the edge of the ‘plank’ – teetering on the edge of destruction and being saved only because the European Central Bank has violated the spirit of the restrictions that a misapplication of the subsidiarity principle had created. It is interesting to reflect on these earlier reports. We find that the important issues they ignored remain the central issues today and predicate against the monetary union ever being a success. One of the authors of the 1993 Report, Jean-Pierre Danthine has recently reflected on the work some 25 years after its publication.

In his Op Ed (April 12, 2017) – Subsidiarity: The forgotten concept at the core of Europe’s existential crisis – he argues that “the disenchantment with Europe can arguably be traced to the failed application of the subsidiarity principle that was enshrined in the Maastricht Treaty.” He recognises that: “Europe’s deep-seated institutional design problem is tied to the inevitable trade-off between efficiency-enhancing centralisation and democracy-enhancing sovereignty.” Let’s go back to the Delors Report 1989, which I argue in my book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale – misapplied the concept of subsidiarity. It is clear from the historical record that the Delors Committee mainly relied on the concept of subsidiarity to justify the absence of a European-level fiscal function in the plan it outlined for monetary union.

The term, subsidiarity, a long-standing concept in political theory (as far back to Aristotle), entered the European dialogue in 1989 as part of a new ‘Eurolanguage’ as the political leaders were intent on pushing through the economic and monetary union. The Oxford Dictionary defines subsidiarity as “(in politics) the principle that a central authority should have a subsidiary function, performing only those tasks which cannot be performed at a more local level”. The concept was popularised by the Roman Catholic Church in the 1931 encyclical, Quadragesimo Anno, which pronounced that: “It is a fundamental principle of social philosophy, fixed and unchangeable, that one should not withdraw from individuals and commit to the community what they can accomplish by their own enterprise and/or industry.”

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An ‘everybody gets rich’ scheme.

Greece’s Migration Policy Ministry to Spread Migrants in Small Towns (GR)

The Migration Policy Ministry is developing a plan to spread about 20,000 migrants in small towns and rural communities across Greece, offering economic incentives to locals. According to a Proto Thema report, the project has been implemented in the town of Livadia with relative success. Now the ministry is looking for similar communities (with populations of 10,000-15,000) that have economic problems. According to the plan, such communities can accommodate 500-1,500 migrants in rented homes, while migrants can buy food and services using coupons provided by the State and the UNHCR. As authorities expect that some communities will be hostile to Muslim migrants, the ministry aims at counter-balancing religious differences and possible frictions by offering strong financial incentives to boost the ailing local economies.

The project will be extended in towns of Epirus, Western Macedonia and North-Western Greece that have high unemployment rates, provided that they are not located close to international borders. The Migration Policy Ministry also plans to offer high wages to people who wish to work in the migrant hospitality infrastructure. According to the Proto Thema report, a project coordinator working in Livadia right now earns an annual salary of 24,933 euros and a housing program director earns 22,666, wages that are double of that of an average public sector employee. Similar wages are offered to people who wish to work with migrants. The report says that such wages and overall economic incentives aim at mitigating any reactions by locals. Characteristically, the report says, apartments of 60-90 square meters in Livadia are rented for around 400 euros, again, a price above an average rental.

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“Interest rates of 3.6% for a super senior risk free lender were almost three times as high as the more junior ESM loans..”

How the Greek Crisis is Profitable for the International Monetary Fund (GR)

The relationship between Greece and the International Monetary Fund has been, from the start, very contentious to say the least. There is no question that Greece needs to build the trust and confidence of taxpayers and the global capital markets. But, the IMF advice more often than not seems to be more political or ideological than practical. However, the IMF should not be used as a scapegoat for successive Greek governments disappointing performance in building trust and confidence. The EC, especially Germany, enlisted the IMF to act as a foil for any failed policies, arguably smart political insurance. As the political foil, the IMF was provided with a cash cow to milk: Greece. And, milk Greece it has.

Greece has paid almost €4 billion in fees and interest to the IMF since the start of the programme. Interest rates of 3.6% for a super senior risk free lender were almost three times as high as the more junior ESM loans. Greece payments are so important to the IMF that they were 118% of IMF’s operating profit. Since 2010, IMF personnel expense have increased 48% compared to a decline of 8% in the prior seven years. And, not to go unnoticed, the IMF newly refurbished headquarters is 31% over budget at $562 million. With 97% of IMF’s cost now essentially fixed, losing Greece, Portugal, and Ireland, would cause massive financial trauma at the IMF and may well render it insolvent. So, the obvious question is: does the IMF have an incentive to keep Greece in crisis to protect its own financial survival and continue to milk the Greek cow?

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How many will just glance over a story like this? In only a few years, species are pushed over a cliff.

Key South Africa Leopard Population Crashing (AFP)

The leopard population in a region of South Africa once thick with the big cats is crashing, and could be wiped out within a few years, scientists warned on Wednesday. Illegal killing of leopards in the Soutpansberg Mountains has reduced their numbers by two-thirds in the last decade, the researchers reported in the Royal Society Open Science journal. “If things don’t change, we predict leopards will essentially disappear from the area by about 2020,” lead author Samual Williams, a conservation biologist at Durham University in England, told AFP. “This is especially alarming given that, in 2008, this area had one of the highest leopard densities in Africa.” The number of leopards in the wild worldwide is not known, but is diminishing elsewhere as well. The “best estimate” for all of South Africa, said Williams, is about 4,500.

What is certain, however, is that the regions these predators roam has shrunk drastically over the last two centuries. The historic range of Panthera pardus, which includes more than half-a-dozen sub-species, covered large swathes of Africa and Asia, and extended well into the Arabian Peninsula. Leopards once roamed the forests of Sri Lanka and Java unchallenged. Today, they occupy barely a quarter of this territory, with some sub-species teetering on the brink of extinction, trapped in 1 or 2% of their original habitat. Leopards were classified last year as “vulnerable” to extinction on the International Union for the Conservation of Nature’s Red List of endangered species, which tracks the survival status of animals and plants.

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Apr 182017
 
 April 18, 2017  Posted by at 9:26 am Finance Tagged with: , , , , , , , , , ,  2 Responses »
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Albrecht Dürer Study of the left hand of an apostle (for the Heller Altar) c.1508

 


Trump’s Next Big Policy Reversal Could Be On The TPP (CNBC)
Strong Dollar Could Cause Bond Market Crash – Martin Armstrong (USAW)
Stocks, Bonds Diverge Over Trump Tax Reform, Stimulus Odds (CNBC)
We’re Borrowing Our Way to Economic Disaster – Stockman (DR)
BMO Bundles Uninsured Mortgages in a Canadian Bond First
UK Will Never Build Enough Homes To Keep Prices Down (Tel.)
Greek Insurance Company Can Become a Weapon for China in Europe (GR)
Greek Debt Must Be Sustainable For IMF To Join Bailout – Lagarde (R.)
Taxation is Theft (Napolitano)
Is America’s Alliance with Turkey Doomed? (SCF)
Erdogan Says He Doesn’t Care What Europe Thinks About Turkey’s Vote (BBG)
Opening Of UN Files On Holocaust Will ‘Rewrite Chapters Of History’ (G.)
Critically Endangered Species Poached In World’s Protected Natural Sites (AFP)
At Least 8,500 Migrants Rescued From Mediterranean In Three Days (CNN)

 

 

And why not? He flip-flopped 5 times in one day last week, and his popularity rose.

Trump’s Next Big Policy Reversal Could Be On The TPP (CNBC)

From NATO to health care, President Donald Trump has evidenced he is comfortable making major policy flip-flops. His most recent reversal came last week, when a U.S. Treasury report declined to name China as a currency manipulator despite Trump’s repeated promises to formally accuse Beijing — a signature pledge during his campaign trail. So, what could Trump backtrack on next? One analyst said he hopes it will be the Trans-Pacific Partnership, the world’s largest trade deal that Trump withdrew from in January on the claim that it would hurt U.S. manufacturing. “Whoever thought that Trump would let China, a rival, off the hook on currency? If he can do that with a country that’s clearly not a friend, maybe he could reconsider reversing himself on TPP for a friend like Japan,” Sean King, senior vice president of Park Strategies, told CNBC on Tuesday.

Japan was set to be a major beneficiary of TPP, particularly the country’s auto sector that would have obtained cheaper access to U.S. markets. Tokyo, which has long lamented the trade pact would be “meaningless” without the U.S., has decided to forge ahead with the other remaining 10 participating nations to revive the deal but many are doubtful of whether the TPP will be a game-changer in Washington’s absence. Trump still has time to change his mind on TPP, King warned, noting that the treaty text remains valid until February 2018. “Trump said [TPP] was a disaster, but I’m sure the other members would be willing to make concessions to get the U.S. back in, just like South Korea was willing to make concessions to Obama for his endorsement of the U.S.-Korea [free trade agreement],” King said. “He’s certainly made greater reversals and claimed victory. Why not do this for our friends who want to stand with us against countries like China and North Korea? I’m all for it.”

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“There is no place to go but the dollar at this point.” “..you don’t collapse the core economy. It’s always the peripheral coming in.”

Strong Dollar Could Cause Bond Market Crash – Martin Armstrong (USAW)

Renowned financial expert Martin Armstrong says the biggest risk out there is the effect a strong U.S. dollar has on the global bond market. Armstrong explains, “There’s these people who keep saying the dollar is going to crash. If the dollar crashes, the world is happier and basically celebrating. You have half the U.S. debt equivalent in emerging market debt issued in dollars. If the dollar goes up, they are in trouble. Then you are going to see sovereign defaults .. The U.S. is not going to default, but as you start defaults elsewhere outside the country, it makes people begin to get concerned about sovereign debt. Sovereign debt is the worst of all. It’s not secured. If the U.S. government defaulted on its debt, what would happen? You cannot go down to the National Gallery and start lifting Picassos.”

So, a bond market crash is a distinct possibility? Armstrong says, “Yes. All these things are contagions .. The real risk is coming from Europe and Asia. That is the real risk .. There is no place to go but the dollar at this point.” If and when a global collapse comes, it will come from China or Europe. Armstrong says, “Yes, because you don’t collapse the core economy. It’s always the peripheral coming in. It was the same thing in the Great Depression. It wasn’t the fact that the U.S. defaulted. The problem was the first bank that went down was in Austria, and it happened to be owned in part by the Rothschilds. When people hear a bank owned by the Rothschilds went down, people started to sell off all other banks. Then all the countries defaulted.”

Armstrong says there is going to be a major “monetary reform” in the not so distant future, and the U.S. will end up with a dollar for domestic use and a dollar used for international trade, sort of like a “domestic dollar” and an “international trade dollar.” Armstrong says, “Yes. All it is doing is replacing the dollar as the reserve currency. That would satisfy China and Russia, and it would simply be maintained by an international board. I strongly advise against the IMF. It’s way, way too corrupt.” So, is gold a good asset to have with a coming currency reset? Armstrong says, “Yes, at that point, you are talking about a hedge against government. When you go through these monetary crises, effectively, all tangible assets rise in price, not just gold and silver. . . .

Tangible assets have a value to everybody globally. The downside is on real estate. I would never put 100% of my money in real estate because it is not moveable.” Fast-forward to now, and Armstrong predicts, “The economy is not going to come back. We are not going to see economic growth.” Where is all this taking the world? Armstrong, who is an expert on economic and political cycles, says, “You have to understand what makes war even take place? It does not unfold when everybody is fat and happy. Simple as that. You turn the economy down, and that’s when you get war. It’s the way politics works.”

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Are bonds the lesser bubble then?

Stocks, Bonds Diverge Over Trump Tax Reform, Stimulus Odds (CNBC)

Optimism that the Trump administration will be able to drive through a hefty pro-growth plan or tax package this year is fading by the day. Treasury Secretary Steve Mnuchin on Monday became the latest official to dial back expectations for a time table that included a tax plan by August. In an interview with the Financial Times, Mnuchin said getting tax reform by August was an “aggressive timeline” and would probably be delayed because of health care. In the bond market, there was little surprise. Bond yields, which move inversely to prices, have been falling for weeks as traders have become more skeptical that Washington will adopt any pro-growth policy this year. Stocks, meanwhile, have traded side ways recently, and the S&P 500 is still up 10% since election day, boosted by hope of fiscal stimulus and tax cuts.

Mnuchin’s remarks did not surprise markets, and, in fact, stocks rallied hard based on his comments that Treasury is looking at ways to raise funds to pay for the tax plan without the controversial border-adjustment tax. “That’s exactly why the [stock] market rallied. People hate the border-adjustment tax,” said Peter Boockvar at Lindsey Group. The tax is part of the Congressional tax reform plan and would slap a 20% tax on all imports but not tax exports. Opponents claim it could cause inflation and penalize consumers, while proponents say it would encourage more manufacturing in the U.S. and level the playing field for U.S. companies. The market was not surprised by the push back in the timeline for tax reform, since President Trump last week said health care would come ahead of taxes. Ever since Congress failed to vote on health care in March, the market has become increasingly doubtful a tax plan would get done any time soon.

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“Donald Trump is a tourist in the Imperial City of Washington D.C. He’s flipping, flopping and making it up as he goes.”

We’re Borrowing Our Way to Economic Disaster – Stockman (DR)

David Stockman joined the Fox Business and the show Mornings with Maria to discuss the tax reform highlights for the current White House and GOP platform and what he views as a real threat of economic disaster in the U.S. During the discussion Stockman highlights what to expect from a border adjustment tax possibility, the creation of jobs and the impact on Wall Street in the age of Donald Trump. Stockman takes to point the cause of tax reform in the current White House. He begins the segment noting, “I think the border adjustment tax will come out of the retailers margin – and it should. We do need revenue. We need to have a consumption tax, or a value added tax or a border adjustment tax – so that we may reduce taxation on wages and income. We desperately need more jobs in this country.

If you keep taxing the payroll at 15.5%, which we’re doing today, you’re not going to encourage the creation of jobs. You’re going to take what jobs there are and impact the take-home pay of those jobs.” David Stockman was then asked about his read on Donald Trump’s border tax proposals and the possibility of what the President described as a ‘reciprocal tax.’ “He has no idea what he’s talking about. He’s making it up as he goes along. Donald Trump is a tourist in the Imperial City of Washington D.C. He’s flipping, flopping and making it up as he goes.” “The border adjustment tax, or a value added tax is the way to get at the problem he’s talking about. Every other country in the world has a value added tax. You take it off the exports and put it on the imports. There is a proper way to do it and he ought to allow the republicans on the hill who understand that to move forward.

The idea that we can have a multi-trillion dollar tax cut and not pay for it with new revenue or spending cuts is dangerous. We are at $20 trillion in debt and it is headed to $30 trillion.” When asked about the pragmatic nature of a border adjustment tax, Stockman pressed “I think it’s basic math. If you want to cut the corporate tax rate to 20%, which I think would be wonderful, you’ve got to raise $2 trillion over the next ten years to pay for it. Where are you going to get the money? Are you going to close loopholes? I doubt that. The lobby effort will kill that. You need a new revenue source. If you don’t do that you’re stuck with the current tax system. You’re stuck with massive deficits that are going to kill this country. We are basically borrowing our way to economic disaster.”

[..] We are so “deep in the soup” debt wise and have such a massive, and building deficit that you have to have revenue neutral tax cuts. The border adjustment tax is dead. Without that you are not going to reduce the corporate tax rate down to 20% or 15%, etc.” “The Trump reflation fantasy is over. It is all downhill from here. The market it heading down 20 to 30% down, the 1600 on the S&P. We’re going to have negative shock after negative shock. It is about time they sober up. On April 28th the U.S government is going to shut down. That will be spring training on the continuing resolution until we get to MOAD in the summer.”

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Never been tried before.

BMO Bundles Uninsured Mortgages in a Canadian Bond First

Bank of Montreal is bundling uninsured residential mortgages into bonds in what could be the start of a new financing market for Canadian banks as the government scales back its support for home loans. The Toronto-based lender is planning to sell debt backed by nearly C$2 billion ($1.5 billion) of prime uninsured mortgages. That’s a new development in a country where big banks have historically packaged government-insured mortgages into bonds. If the Bank of Montreal deal is successful, other Canadian banks may follow its lead, providing banks with more financing to keep making mortgages, said Marc Goldfried, CIO at Canoe Financial. The net result may be that housing prices in Canada keep rising. “Right now the banks don’t have any other way to fund it, so there’s probably some form of internal limit on this kind of mortgage financing they’ll do,” Goldfried said by phone from Toronto.

But the Bank of Montreal deal may find headwinds, said Paul Gardner, partner and portfolio manager at Avenue Investment. Canada last year tightened access to the federal insurance to help tamp down rapid home price growth in areas like Toronto and Vancouver. The federal government or Ontario could craft more legislation to cool the housing market, Gardner said. The province’s finance minister is considering a foreign-buyers tax like the one that helped cool home prices in Vancouver. Canadian finance minister Bill Morneau, Ontario finance minister Charles Sousa, and Mayor John Tory are meeting in Toronto Tuesday to discuss the housing market in the Greater Toronto Area. “Residential mortgages, my God, it’s the last thing you want to invest in right now,” Gardner said by phone from Toronto. “When the capital markets are flush with cash, it makes sense that they would try at least to issue this stuff.”

[..] The bank will offer to renew the mortgage loans at the end of their term if the borrower is not in default, and if the borrowers satisfies the bank’s underwriting criteria at the time, which mitigates some of the risk of borrowers not being able to refinance. Canadian mortgage loans generally have a five-year term, and borrowers pay down their principal at a 25-to-30-year pace meaning they usually have to refinance a significant portion of their loan every five years.

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Oh boy. If these are the kind of people you rely on for advice, you’re in trouble.

UK Will Never Build Enough Homes To Keep Prices Down (Tel.)

Britain will never build enough houses to make property affordable for young people, according to research. A study presented to the Royal Economic Society’s annual conference said those hoping to get on the ladder may have to rely on windows of opportunity created by periodic slumps in the market. However, the overall trend will remain for residential property price rises to outpace salary growth, according to economists at the University of Reading. “The increases in housing supply required to improve affordability have to be very large and long-lasting; the step change would need to be much larger than has ever been experienced before on a permanent basis,” said Geoffrey Meen, Alexander Mihailov and Yehui Wang. The government has discussed moves to increase the supply of homes but the changes are on far too small a scale to act as a brake on price rises.

House prices in the UK stood at an average of £217,500 according to the Office for National Statistics. That is 7.7-times the average full-time salary in the UK of £28,200. By contrast in 2005 the average home cost £150,500, approximately 6.5-times the then-average full time salary of £22,888. Former Bank of England policymaker Kate Barker believes the country needs an additional 60,000 homes per year on top of those already being built. But the new paper argues there is little chance of this happening. “Although higher levels of house building are certainly desirable, the paper shows that there is a limit to what can be achieved by this route,” the report found. “The required increase in supply to stabilise the price to income ratio … is not feasible – permanent increases in construction would be required that have never been achieved in history.”

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The risks of garage-selling an entire country.

Greek Insurance Company Can Become a Weapon for China in Europe (GR)

It is no secret that the Chinese see Greece as a country that could help them get their foot (and saying) in the European Union. In GreekReporter’s recent documentary Athens Chinatown, it is the Cosco managing director in Greece who says the mediterranean country offers a strategic location and it was this factor that attracted Cosco to take over the Greek port of Piraeus. Furthermore, the editor of China-Greece times also states that the Chinese “see Greece as the gate to Europe.” The past few years, silently, China has looked into many Greek investments. After acquiring the Greek Port of Piraeus, now three Chinese companies are bidding for Greece’s biggest private insurer, Ethniki Asfalistiki. However what looks like a simple bidding, could possibly be of great importance to the future of Greece.

Established in 1891, Ethini Asfalistiki has invaluable contribution to the Greek economy for over a century. It is the largest insurance company in the country with total premiums of over €440 million and 18% market share, while it is in cooperation with the banking network for the sale of bank assurance products, provides access to a broad distribution network of about 500 offices. The estimated earnings for 2016 are €52 million. Ethniki Asfalistiki is also a sister company of Greece’s Ethniki Bank (National Bank), one of Greece’s four systemic banks. Whoever gets this bid will most likely acquire the bank as well. At the same time, another Chinese group has shown interest for Piraeus Bank. If they manage to close that deal then two out of Greece’s four main banks will be controlled by the Chinese. Eventually they will be able to have an important saying in the country’s economy, and maybe that’s what they are aiming for.

While the Chinese have done serious investments in Greece, this one, in combination with everything else they control can become a decisive factor on how much of a saying does Greece want the Chinese to have on the country’s future. Letting Ethniki Asfalistiki in the hands of China is probably allowing too much of their foothold in the Greek economy, which would mean a great political influence as well. China of course would like to be able to control and play with Greece’s economy in order to advance their interests. But it is dangerous for Greece when the country’s future becomes another argument on a geostrategic dialogue between the big powers. A forced Grexit threat, for example, could definitely be on the table and be directed to the EU or the U.S.A.

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That record is definitely broken beyond repair.

Greek Debt Must Be Sustainable For IMF To Join Bailout – Lagarde (R.)

The IMF will not take part in a bailout program for Greece if it deems the country’s debt is unsustainable, the international lender’s chief Christine Lagarde said in an interview published on Tuesday. Greece needs to implement reforms agreed by euro zone finance ministers earlier this month to secure a new loan under its €86 billion bailout programme, the third since 2010. The loan is needed to pay debt due in July, but talks continue and the IMF has not yet decided whether to join the bailout. The fund’s participation is seen as a condition for Germany to unblock new funds to Greece. “If Greek debts are not sustainable based on IMF rules and reasonable parameters, we will not take part in the program,” Lagarde told German newspaper Die Welt when asked if the IMF would take part in the plan if Greek debt is not restructured.

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Minor problem: so many people are dependent on Social Security. Highly relevant going forward.

Taxation is Theft (Napolitano)

With a tax code that exceeds 72,000 pages in length and consumes more than six billion person hours per year to determine taxpayers’ taxable income, with an IRS that has become a feared law unto itself, and with a government that continues to extract more wealth from every taxpaying American every year, is it any wonder that April 15th is a day of dread in America? Social Security taxes and income taxes have dogged us all since their institution during the last century, and few politicians have been willing to address these ploys for what they are: theft. During the 2012 election, then-Texas Gov. Rick Perry caused a firestorm among big-government types during the Republican presidential primaries last year when he called Social Security a Ponzi scheme. He was right. It’s been a scam from its inception, and it’s still a scam today.

When Social Security was established in 1935, it was intended to provide minimal financial assistance to those too old to work. It was also intended to cause voters to become dependent on Franklin Delano Roosevelt’s Democrats. FDR copied the idea from a system established in Italy by Mussolini. The plan was to have certain workers and their employers make small contributions to a fund that would be held in trust for the workers by the government. At the time, the average life expectancy of Americans was 61 years of age, but Social Security didn’t kick in until age 65. Thus, the system was geared to take money from the average American worker that he would never see returned.

Over time, life expectancy grew and surpassed 65, the so-called trust fund was raided and spent, and the system was paying out more money than it was taking in – just like a Ponzi scheme. FDR called Social Security an insurance policy. In reality, it has become forced savings. However, the custodian of the funds – Congress – has stolen the savings and spent it. And the value of the savings has been diminished by inflation. Today, the best one can hope to receive from Social Security is dollars with the buying power of 75 cents for every dollar contributed. That makes Social Security worse than a Ponzi scheme. You can get out of a Ponzi investment. You can’t get out of Social Security. Who would stay with a bank that returned only 75% of one’s savings?

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Essential reading on how the region came to be what it is.

Is America’s Alliance with Turkey Doomed? (SCF)

Shortly before his death in 1869, the pro-Western former Ottoman grand vizier and foreign minister Keçecizâde Mehmed Fuad Pasha commented, “It appeared preferable that . . . we should relinquish several of our provinces rather than see England abandon us.” In response to this commitment, the British made the territorial integrity of the Ottoman Empire against Russian aggression a key pillar of their foreign policy. Yet, in spite of the significance that Istanbul and London attached to their alliance in the 1850s, both sides were determined to eradicate each other by 1914. As Prime Minister Herbert Asquith put it, Britain was “determined to ring the death-knell of Ottoman dominion, not only in Europe, but in Asia as well.” In response, the Ottoman government described the British as “the greatest enemy” of not only the sultan’s empire but also of Islam itself.

The Anglo-Russian Great Game, waged across the vast lands stretching from Europe to Central Asia during the nineteenth century, rendered the Ottoman Empire an invaluable strategic asset in the eyes of British policymakers. Although the British public frowned upon the Ottoman Turks’ “peculiar Oriental ways,” and regarded them as “uncivilized Mohammedan barbarians” for their treatment of Christian subjects, Whitehall recognized that they could serve as a bulwark against Russia. The Ottomans, likewise, recognized the value of having Britain as an ally given the looming threats posed by their neighbors, Russia and Austria. Though the Ottomans previously regarded the British as an untrustworthy non-Muslim power, the cooperation was a win-win venture, and the two powers agreed to partner economically and militarily. The strategic collaboration between them reached its zenith in 1853 when, along with other allies, they successfully waged war against Russia in Crimea.

America’s relative indifference to the Ottoman Empire and the early Turkish Republic was reminiscent of Otto von Bismarck’s famous remark that European Turkey “was not worth the bones of a single Pomeranian grenadier.” The United States and the Ottoman Empire fought World War I on opposite sides, but did not clash with each other. Moreover, while President Woodrow Wilson discussed the future of the Ottoman Empire in his Fourteen Points, the United States did not actively participate in its partition. In 1922–23, Washington merely sent observers to the Conference of Lausanne, which produced the final peace treaty between the victors of World War I and Turkey.

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Only Trump has congratulated him.

Erdogan Says He Doesn’t Care What Europe Thinks About Turkey’s Vote (BBG)

Turkish President Recep Tayyip Erdogan treated a crowd of supporters gathered outside his presidential palace on Monday evening to a speech laced with invective against Europe, saying his victory in a referendum on Sunday took place under conditions that were democratic beyond compare. Erdogan belittled both domestic and foreign critics of the voting process, which culminated in a slim majority of Turks approving changes to 18 articles of the constitution that concentrate more power in his hands. A monitoring group from the Organization for Security and Cooperation in Europe – which said the referendum took place on an “unlevel playing field” – “should know its place,” he said. “We don’t care about the opinions of ‘Hans’ or ‘George,’” Erdogan said, using the names as stand-ins for his European critics. “All debates about the constitutional referendum are now over.”

The OSCE’s head of mission, Tana de Zulueta, said on Monday that freedom of expression was inhibited during the campaign, that the conditions of the vote fell “well short” of international standards, and that the OSCE was inhibited from the election monitoring that it was invited to do. The vote was held under a state of emergency that’s been in place since just after a failed coup last July, and which Turkey’s security council will meet tonight to consider extending. Since the coup attempt, some 40,000 of Erdogan’s alleged opponents have been jailed, and at least 100,000 more fired by decree. The European monitoring organization’s criticisms were echoed by opposition parties inside Turkey, which are asking for the result of the vote to be annulled, as well as by the U.S. state department, whose spokesman Mark Toner cited “observed irregularities” in the way the election was carried out.

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Wonder how redacted the files are.

Opening Of UN Files On Holocaust Will ‘Rewrite Chapters Of History’ (G.)

War crimes files revealing early evidence of Holocaust death camps that was smuggled out of eastern Europe are among tens of thousands of files to be made public for the first time this week. The once-inaccessible archive of the UN war crimes commission, dating back to 1943, is being opened by the Wiener Library in London with a catalogue that can be searched online. The files establish that some of the first demands for justice came from countries that had been invaded, such as Poland and China, rather than Britain, the US and Russia, which eventually coordinated the post-war Nuremberg trials. The archive, along with the UNWCC, was closed in the late 1940s as West Germany was transformed into a pivotal ally at the start of the cold war and use of the records was effectively suppressed.

Around the same time, many convicted Nazis were granted early release after the anti-communist US senator Joseph McCarthy lobbied to end war crimes trials. Access to the vast quantity of evidence and indictments is timed to coincide with the publication on Tuesday of Human Rights After Hitler: The Lost History of Prosecuting Axis War Crimes by Dan Plesch, a researcher who has been working on the documents for a decade. The documents record the gathering of evidence shortly after the UN was founded in January 1942. They demonstrate that rape and forced prostitution were being prosecuted as war crimes in tribunals as far apart as Greece, the Philippines and Poland in the late 1940s, despite more recent suggestions that this was a legal innovation following the 1990s Bosnian conflict.

[..] By the late 1940s, the US and British governments were winding down prosecutions of Nazis. President Harry Truman made anti-communism, rather than holding Nazis to account, a priority, Plesch says. “Even action against the perpetrators of the massacre of British RAF officers attempting to escape from prison camp Stalag Luft III, a flight made iconic by films such as The Great Escape, was curtailed.”

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One of the most important questions we can ask ourselves, said polio vaccine pioneer Dr Jonas Salke, is “Are we being good ancestors?”

Critically Endangered Species Poached In World’s Protected Natural Sites (AFP)

Illegal poaching, logging and fishing of sometimes critically endangered species is taking place in nearly half of the world’s most protected natural sites, environmental campaigners WWF warned Tuesday. Natural world heritage sites such as Australia’s Great Barrier Reef, Virunga National Park in the Democratic Republic of Congo and the Galapagos Islands support large populations of rare plant and animal species. But in a report WWF said species listed by the Convention on International Trade in Endangered Species (CITES) faced the threat of illegal harvesting and trafficking in 45% of the more than 200 natural world heritage sites on the planet. “Natural world heritage sites are among the most recognised natural sites for their universal value,” said Marco Lambertini, head of WWF International.

“Yet many are threatened by destructive industrial activities and… their often unique animals and plants are also affected by overexploitation and trafficking,” he added, stressing that “unless they are protected effectively, we will lose them forever.” Almost a third of the world’s remaining 3,890 wild tigers and 40% of all African elephants are found in UNESCO-listed sites, which are often a last refuge for critically endangered species such as the Javan rhino in Indonesia, the report said. Illegal poaching, logging and fishing inside such sites is therefore “driving endangered species to the brink of extinction”, WWF warned. The species most at risk because of illegal activity within natural world heritage sites is probably the vaquita, the world’s smallest porpoise, which is indigenous to Mexico’s Gulf of California, Colman O’Criodain, WWF’s wildlife policy manager, told AFP.

While the vaquita itself is not being fished illegally, it is being caught in nets used to poach the totoaba – a giant Mexican fish coveted in China for its swim bladder, which itself is considered a threatened species. “When I started working on the issue of vaquita two years ago, there were 96 left. Now it is less than 30,” O’Criodain said, adding that at the current rate the tiny porpoise could be extinct within a year. According to Tuesday’s report, poaching of vulnerable and endangered animal species such as elephants, rhinos and tigers occurs in 42 of the UNESCO-listed natural sites, while illegal logging of rosewood, ebony and other valuable plant species happens in 26 of them. Illegal fishing, including of sharks and rays occurs in 18 of 39 listed marine coastal world heritage sites, it said.

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Until the world finally has the emergency UN conference I’ve been calling for, I don’t see this change. It’s a global issue, and no-one wants to touch it because it’s so politically toxic.

At Least 8,500 Migrants Rescued From Mediterranean In Three Days (CNN)

Italian authorities were still bringing migrants and refugees to shore Monday after one of the busiest weekends ever for rescue services operating in the central Mediterranean sea. At least 8,500 refugees and migrants were plucked from small boats over the past three days in 73 separate rescue operations, the Italian Coastguard told CNN Monday. Thirteen bodies were recovered, including a pregnant woman and an eight-year-old boy. It is not known how many died before they were sighted. One 35-year-old woman from the Ivory Coast was giving birth as she was pulled aboard a rescue ship, Italian newspapers reported. The youngest migrant rescued over the weekend was just two weeks old. Asar was rescued along with her mother by the Migrant Offshore Aid Station (MOAS).

The Sea-Eye, a German charity boat that helped bring to safety hundreds of people stranded on rubber dinghies off the coast of Libya Sunday said in a statement it still had 210 on board “crowded closely together, exposed to the wind, the waves and the cold without protection. It said the Italian tanker La Donna and the coast guard ship CP920 was now accompanying the boat, whilst it waits for two smaller boats from the Italian island of Lampedusa, to bring the migrants to shore. The Italian Coastguard said 1004 migrants rescued on the board the ship the Panther would be disembarked in Messina in Sicily shortly. Frontex, the European Border and Coast Guard Agency, said in a statement it rescued more than 1,400 migrants in the central Mediterranean in 13 search and rescue operations from Friday to Sunday.

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Apr 142017
 
 April 14, 2017  Posted by at 8:23 am Finance Tagged with: , , , , , , , , , , , ,  5 Responses »
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American Soldiers Observing Eruption of Mount Vesuvius 1944

 


‘Russia Thinks We’re Crazy, Completely Crazy’ (ZH)
We’re Heading Straight Into a Recession – Jim Rickards (MWS)
How’s This For Grade 1 Central Bank Hubris? (Albert Edwards)
Wall Street Fear Gauge Hits Fresh High For The Year (CNBC)
The Ethical Case For Taxing Foreign Home Buyers (Gordon)
UK Banks Crack Down On Credit Card Lending After Borrowing Binge (Tel.)
CIA Director Brands Wikileaks A ‘Hostile Intelligence Service’ (G.)
‘US Will Keep ‘Open Mind’ On Any IMF Aid To Greece’ (AFP)
American Energy Use, In One Diagram (Vox)
Macroscale Modeling Linking Energy and Debt (King)
Refugee Rescue Group Accuses EU Border Agency Of Plotting Against Them (AFP)
At Least 97 Migrants Missing As Boat Sinks Off Libya (AFP)
The Ultimate Lovebird (DM)

 

 

As Cohen indicates, Tillerson signed multi-billion contracts with Putin. That required a lot of trust. That trust is now being put at risk.

‘Russia Thinks We’re Crazy, Completely Crazy’ (ZH)

Lastly, Stephen Cohen, Professor of Russian studies at Princeton and NYU, an actual expert on China, weighed in, saying ‘Russia thinks we’re crazy, completely crazy.’ He even took some time to express his ‘disgust’ with Al Mattour, saying ‘your previous guest, I don’t mean to be rude to him. First of all, he doesn’t know what he’s talking about. And, secondly, he excludes the reality that Russia has a politics. And the politics in Russia today as we talk is […] the concern that America is preparing war against Russia. If not on Syria, then on the other two cold war fronts […] where NATO is building up in an unprecedented way. This is not good because they have nuclear weapons and because accidents happen.’

He then theorized what the conversation between Putin and Tillerson was like, pointing to the two having a history of trust together from the time Tillerson led Exxon Mobile. ‘Rex, says Putin, what in the world is going on in Washington?’ Professor Cohen, ominously, summed it up, ‘I’m not young. I’ve been doing this 40 years, sometimes as a Professor, sometimes inside. I have never been as worried as I am today about the possibility of war with Russia.’

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Any day now.

We’re Heading Straight Into a Recession – Jim Rickards (MWS)

Before the holiday weekend begins, best-selling author James Rickards joins Olivia Bono-Voznenko outside the NYSE to talk all about the markets and his latest book, “The Road to Ruin.” Jim discusses the currency wars, Trump’s turnaround on China & the Fed and an inevitable crisis amid a weak system.

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Though he defines it poorly, Edwards is right that deflation is still here.

How’s This For Grade 1 Central Bank Hubris? (Albert Edwards)

Peter Praet, the ECB’s chief economist said in a recent interview that, “Since the crisis, we have had serious concerns about deflationary risks on several occasions in the euro area, but now we can say they have disappeared.” Really? Has he seen the chart below, which shows core CPI in the Eurozone heading sharply lower and now approaching its all-time low seen at the start of 2015! Not only that, but Eurozone inflation expectations are also declining again, after surging in the aftermath of Donald Trump’s election. To be fair, Praet was focusing on the rise in headline inflation in the Eurozone, which touched 2% in February before dropping back in March to 1.5%.

After some 18 months bobbing around the zero mark, I can understand why central bankers might be heaving a sigh of relief, but for them to take credit for a recovery in headline inflation is totally disingenuous given it has been entirely driven by a recovery in the oil price. Similarly, Janet Yellen was quoted saying the Fed is “doing pretty well” in meeting its congressionally mandated goals of low and stable inflation and a full-strength labor market. It’s this sort of comment that has led Marc Faber to want to short central bankers, the only way being to buy gold. The increasing volume of central bank hubris may even explain the recent breakout of gold to the upside! It is not just eurozone inflation expectations that seem to be in retreat. The same thing is happening in the US too (see chart below).

I am always surprised how dominated 10y inflation expectations are by short-term movements in the oil price and headline inflation, but it was noticeable just how rapidly inflation expectations ran up in the wake of Trump’s election – way in advance of what might have been expected by the bounce in the oil price. One might have thought the surge in the oil price from its trough some 12-18 months ago might have had more impact on wage inflation, but so far that does not seem to be the case. Despite the euphoria in the markets about the “reflation trade”, survey inflation expectations have continued to drift downwards. One thing is certain: for central banks to call victory over deflation may prove very premature indeed. Nemesis awaits.

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Easter jitters.

Wall Street Fear Gauge Hits Fresh High For The Year (CNBC)

Stocks may be in for a deeper pullback, now that the so-called fear index is finally breaking out higher. The CBOE Volatility Index (.VIX), considered the best gauge of fear in the market, closed above its 200-day moving average for the first time since the election this week. The indicator jumped more than 2% Thursday afternoon at one point to a fresh high for the year. U.S. markets are closed for trading Friday for the Easter holiday. The recent spike in fear comes just as geopolitical risk heats up. The Pentagon said Thursday U.S. military forces dropped the largest non-nuclear bomb in Afghanistan, the first time the so-called mother of all bombs has ever been used in combat. U.S. stocks fell, with the S&P 500 and DJIA closed at two-month lows Thursday. “I’d say it’s probably more of a Trump trade [reversing] than the geopolitics, but going forward I think the geopolitics is the topic the market is focusing on,” said Andres Jaime at Barclays.

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Good argument: A foreign-buyer’s tax can be refunded to individuals to the extent they pay income taxes..

The Ethical Case For Taxing Foreign Home Buyers (Gordon)

Foreign capital is playing an important role in the real estate markets of Toronto and Vancouver, and has for some time. As political leaders debate its impact and possible policy measures to alleviate its attendant issues, it is important to think clearly about the ethics of foreign ownership. Predictably, those who want to stymie or avoid policy action in this area have alluded to “xenophobia” to deter critics. Even some well-intentioned people have given credence to these claims. Yet curtailing or taxing foreign ownership is not xenophobic, especially if policy is properly designed. Xenophobia is the irrational or unjustified fear of foreigners. Concerns about the impact of foreign ownership are about flows of money, not people, and they are certainly justified in Toronto and Vancouver.

Foreign ownership raises two main ethical problems. First, those who buy based on foreign income or wealth often have access to money in ways that are unavailable to local residents. This means that locals are potentially put into disadvantageous, or unfair, competition for real estate where they live. Second, people who buy property based on foreign income or wealth may not have contributed much in Canadian taxes, which is largely what makes the property so valuable in the first place. Canadian real estate has become an attractive place to stash international money for a variety of reasons – we don’t effectively enforce money laundering regulations, we have relatively low property-tax rates and the enforcement of capital gains taxes has been lax. But real estate in Canada is ultimately attractive because of the country’s stable institutions, its public infrastructure and its social cohesion.

These latter things are paid for, or fostered by, taxes collected from Canadians – income taxes in particular. At a minimum, then, Canadians should have preferential access to property ownership, since they are paying for what makes it so valuable. It is precisely for these reasons that we see nothing ethically problematic about charging foreign students more in tuition at Canadian universities. Residential property is no different. Concerns around foreign ownership are especially potent when money is arriving from societies where corruption is widespread, and when foreign money is playing a significant role in driving up prices. Both apply in the cases of Toronto and Vancouver.

[..] We can then better design a foreign-buyer’s tax, which is needed to calm Toronto’s frenzied market. A foreign-buyer’s tax can be refunded to individuals to the extent they pay income taxes – the amount they pay in the three years following a purchase, for instance. This makes it clear that the tax need not discourage entrepreneurial talent from abroad, as claimed by Toronto Mayor John Tory. This understanding of the issue also leads straightforwardly into the proposal by many economists in British Columbia, including my colleague Rhys Kesselman. Provincial governments should introduce an annual property surtax on expensive homes that can be offset by income taxes paid, while exempting seniors with sustained CPP contribution records. This continuous surtax would powerfully target foreign ownership, and would thereby reconnect the local housing market to the local labour market.

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I’ll believe it when I see it. Nobody wants to see the economy crash, they’ll stick with loose lending standards to prevent it.

UK Banks Crack Down On Credit Card Lending After Borrowing Binge (Tel.)

Britain’s credit card binge could be at an end as banks tighten up controls on consumer debt. Borrowing growth hit rates of more than 10pc over the past year, a pace not seen since the boom years before the financial crisis, but now banks are touching the brakes. The Bank of England has warned that a consumer debt could be more of a risk to banks than mortgage lending, should there be an economic downturn. Fierce competition to win new customers has led banks to offer more credit to customers with increasingly long interest-free periods.But banks have started tightening lending criteria for credit card applicants in a move of an intensity not seen since the depths of the financial crisis in 2008 and 2009.

A net balance of 33pc of lenders expect to tighten standards in the coming three-month period, according to Bank of England data. When unsecured loans are also included, a net balance of 27pc plan to scrutinise applications more closely. There was also a fall in the number of credit card applications approved in the first quarter of the year, and banks expect the number to remain roughly steady in the coming quarter. By contrast credit scoring criteria for secured loans, such as mortgages, is holding broadly steady. “The recent rapid growth in consumer credit could principally represent a risk to lenders if accompanied by weaker underwriting standards,” warned the Bank of England’s Financial Policy Committee this month.

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After first praising it.

CIA Director Brands Wikileaks A ‘Hostile Intelligence Service’ (G.)

Mike Pompeo, the director of the CIA, has branded WikiLeaks a “hostile intelligence service,” saying it threatens democratic nations and joins hands with dictators. In his first public remarks since becoming chief of the US spy agency in February, Pompeo focused on the group and other leakers of classified information like Edward Snowden as one of the key threats facing the United States. “WikiLeaks walks like a hostile intelligence service and talks like a hostile intelligence service. It has encouraged its followers to find jobs at CIA in order to obtain intelligence… And it overwhelmingly focuses on the United States, while seeking support from anti-democratic countries and organisations,” said Pompeo. “It is time to call out WikiLeaks for what it really is – a non-state hostile intelligence service often abetted by state actors like Russia.”

[..] Last month, WikiLeaks embarrassed the CIA and damaged its operations by releasing a large number of files and computer code from the agency’s top secret hacking operations. The data showed how the CIA exploits vulnerabilities in popular computer and networking hardware and software to gather intelligence. Counterintelligence investigators continue to try to find out who stole the files and handed them to WikiLeaks. Assange meanwhile criticized the US agency for not telling the tech industry and authorities about those vulnerabilities so they can be fixed. Pompeo said Assange portrays himself as a crusader but in fact helps enemies of the United States, including aiding Russia’s interference in last year’s presidential election.

“Assange and his ilk make common cause with dictators today. Yes, they try unsuccessfully to cloak themselves and their actions in the language of liberty and privacy; in reality, however, they champion nothing but their own celebrity. Their currency is clickbait; their moral compass, nonexistent.” However, Pompeo did not comment on how Trump has previously lavished praise on Assange for the information he has made public. Nor did Pompeo mention that he himself had cited and linked to WikiLeaks in a tweet attacking the Democratic Party. Pompeo at the time was a Republican congressman and member of the House Intelligence Committee. The CIA declined to comment on that.

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Translation: get it done.

‘US Will Keep ‘Open Mind’ On Any IMF Aid To Greece’ (AFP)

The US government will keep an “open mind” on any new loan package from the IMF for debt-burdened Greece, a senior US Treasury official said Thursday. Despite criticism of international organizations by the Trump administration, the comments allay concerns that US Treasury Secretary Steven Mnuchin could veto any large new aid package for Athens. “We’re looking for the Europeans to help Greece to resolve its economic problems, and we think the IMF can play a supportive role,” the official told reporters. “And we’ll look at any potential future agreement with an open mind.” IMF chief Christine Lagarde on Wednesday said Greece and its eurozone creditors have made progress towards a new loan package that includes debt relief, but that is something the fund has been saying for months without a final deal.

Greece last week accepted a tough set of reforms demanded by its eurozone creditors in hopes of securing a new loan in time to avert a looming debt default in July, although it still must finalize the details. Athens has been deadlocked for months over reforms, and budget targets, which has put the IMF and EU at loggerheads over the need for debt relief in order to ensure an economic recovery, and the government’s ability to repay its loans. The eurozone is under heavy pressure to end the feud in order to avert a chaotic default and inflicting damage on an already stalled Greek recovery. Greece has about €7 billion in debt repayments due in July. All the key officials involved in the talks are expected to be in Washington next week to attend the IMF and World Bank annual meetings.

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We waste. That’s what we’re good at.

American Energy Use, In One Diagram (Vox)

Every year, Lawrence Livermore National Laboratory LLNL produces a new energy flow chart showing the sources of US energy, what it’s used for, and how much of it is wasted. If you’ve never seen it before, it’s a bit of a mind-blower. Behold US energy in 2016: So much information in so little space! (It’s worth zooming in on a larger version.)

[..] a British thermal unit (BTU) is a standard unit of energy — the heat required to raise the temperature of a pound of water by 1 degree Fahrenheit. If you prefer the metric system, a BTU is about 1055 joules of energy. A “quad” is one quadrillion (a thousand trillion) BTUs. [..] a few things equivalent to a quad: 8,007,000,000 gallons (US) of gasoline, 293,071,000,000 kilowatt-hours (kWh), 36,000,000 metric tons of coal The US consumed 97.3 quads in 2016, an amount that has stayed roughly steady (within a quad or so) since 2000.

Perhaps the most striking feature of the spaghetti diagram — what everyone notices the first time they see it — is the enormous amount of “rejected” energy. Not just some, but almost two-thirds of the potential energy embedded in our energy sources ended up wasted in 2016. (And note that some scholars think LLNL is being too optimistic, and that the US is not even 31% efficient but more like 13%.) What’s more, the US economy is trending less and less efficient over time. Here’s the spaghetti diagram from 1970 (LLNL has been at this a long time):

Back then, we only wasted half our energy! It’s important to put this waste in context. It is not mainly about personal behavior or inefficient energy end use — keeping cars idling or leaving the lights on, that kind of thing. That’s a part of it, but at a deeper level, waste is all about system design. The decline in overall efficiency in the US economy mainly has to do with the increasing role of inefficient energy systems. Specifically, the years since 1970 have seen a substantial increase in electricity consumption and private vehicles for transportation, two energy services that are particularly inefficient. (Electricity wastes two-thirds of its primary energy; transportation wastes about three-quarters.)

There is loss inherent in any system that converts raw materials to usable energy, or transports or uses energy, of course. That follows from the second law of thermodynamics. And it’s true both narrowly (a car is an energy system) and broadly (a city is an energy system). It’s not possible to achieve perfect efficiency, or anything close to it. But surely we can do better than 31%! Sixty-six quads is a truly mind-boggling amount of energy to vent into the atmosphere for no good purpose. It really highlights the enormous potential of better-designed systems — especially better electricity and transport systems, along with better urban systems (i.e., cities) — to contribute to the country’s carbon reduction goals. We could double our energy use, with no increase in carbon emissions, just by halving our energy waste.

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I like this, and it’s high time energy became a part of economic modeling; Steve Keen is working on it too. BUT: to understand today’s predicaments, you have to look -seperately- at what has happened in financial markets. The debt binge was not a result of what went on with energy; it stood -and stands- on and by itself.

Macroscale Modeling Linking Energy and Debt (King)

What if you realized that the fundamental economic framework of macroeconomics is insufficient to inform our most pressing concerns? The world is dynamic, in constant change, yet most economic models (even the most widely used “dynamic” model) lack fundamental feedbacks that govern long-term trends (e.g., regarding role of energy) and make assumptions that prevent the ability to describe important real-world phenomena (e.g., financial-induced recessions). Monetary models of finance and debt often assume that natural resources (energy, food, materials) and technology are not constraints on the economy. Energy scenario models often assume that economic growth, finance and debt will not be constraints on energy investment.


Energy and food costs have declined since industrialization, but no longer

These assumptions must be eliminated, and the modeling concepts must be integrated if we are to properly interpret the post-2008 macroeconomic situation: unprecedented low interest rates, high consumer and private debt, high asset valuations, and energy and food costs that are no longer declining. As we attempt to understand newer and more numerous options (e.g., electric cars, renewables, information) regarding energy system evolution, it is paramount to have internally consistent macro-scale models that take a systems approach that tracks flows and interdependencies among debt, employment, profits, wages, and biophysical quantities (e.g., natural resources and population). There is a tremendous research need to develop a framework to describe our contemporary and future macroeconomic situation that is consistent with both biophysical and economic principles. Unfortunately, this fundamental integration does not underpin our current thinking.


U.S. consumer costs of fundamental needs (energy, food, housing, transport) are no longer declining

• Debt is money.

• Money is created when commercial banks lend money to businesses, not when the U.S. Treasury prints money or when Federal Reserve Bank lowers interest rates. Those government and Fed actions are reactions to the creation or destruction of money (e.g., paying back loans) within the real economy.

• Businesses seek new loans when economic opportunities are present. Thus, a growing economy can support more debt.

• Economic opportunities are present when consumers have disposable income to spend (and when innovative technologies supplant old technologies, thus lowering prices, and enabling growth).

• Consumers have more money to spend when core needs (e.g., food, energy, housing) are getting cheaper relative to incomes. Thus, if these core needs are no longer getting cheaper, this is an indication of the lack of income growth to support business investment. In turn banks stop lending because there are fewer viable business opportunities.

• The conclusion is that without decreasing food and energy costs to consumers, real incomes do not rise.

• This is a viable explanation of the post-2008 economy, but one ignored by practically all policy makers, economists, and advisors!

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Frontex is a disaster.

Refugee Rescue Group Accuses EU Border Agency Of Plotting Against Them (AFP)

A Spanish group which has been rescuing migrants in the Mediterranean since 2016 accused the EU’s border control agency Frontex on Wednesday of plotting to discredit private aid organisations in order to put off donors. Allegations by Frontex that donor-funded rescue vessels may have colluded with traffickers at the end of last year prompted Italian prosecutors to begin an informal investigation into their funding sources. “The declarations by Frontex and political authorities are intended to discredit our actions and erode our donors’ trust,” said Proactiva Open Arms head Riccardo Gatti. “They are trying to say that we support the smuggling or the traffickers themselves,” he said. In a report cited in December by the Financial Times daily, Frontex raised the possibility that traffickers were putting migrants out to sea in collusion with the private ships that recover them and bring them to Italy “like taxis”.

Prosecutors then publicly wondered at the amount of money being spent, though they stopped short of opening a formal probe. “We feel there’s someone who wants to put a spoke in our wheels, though we do not really know who is behind it,” Gatti said. The organization said it had nothing to hide. “We have 35,000 donors. Some are well known – like Pep Guardiola, the current manager of Manchester City – others are anonymous,” said Oscar Camps, Proactiva Open Arms director. He said the group had so far received €2.2 million euros in donations for an op in the Med that costs between €5,000 and €6,000 a day. Pro-Activa Open Arms also heavily criticized a deal signed in February between Italy and Libya which purportedly hopes to stem the flow of migrants from the coast of North Africa to Italy.

Gatti said the deal was made with only part of the 1,700 militias he said control Libya and would therefore be ineffective. Human rights watchers have also warned the accord would put the lives of those fleeing persecution and war in greater danger. “Everything is controlled by the militias in Libya, even the coast guard, and 30 percent of the financial flows in the country come from human trafficking,” he said. The deal is in doubt after it was suspended in March by Tripoli’s Court of Appeal. Nearly 25,000 migrants have been pulled to safety and brought to Italy since the beginning of the year in a sharp increase in arrivals.

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Happy Easter.

At Least 97 Migrants Missing As Boat Sinks Off Libya (AFP)

At least 97 migrants were missing after their boat sank on Thursday off the Libyan coast, a navy spokesman said. Survivors said the missing include 15 women and five children, General Ayoub Qassem told AFP. He said the Libyan coastguard had rescued a further 23 migrants of various African nationalities just under 10 kilometres (6 miles) off the coast of Tripoli. The boat’s hull was completely destroyed and the survivors, all men, were found clinging to a flotation device, he said. Those who had disappeared were “probably dead”, but bad weather had so far prevented the recovery of their bodies, Qassem added. An AFP photographer said survivors had been given food and medical care at Tripoli port before being transferred to a migrant centre east of the capital.

Six years since the revolution that toppled dictator Moamer Kadhafi, Libya has become a key departure point for migrants risking their lives to cross the Mediterranean to Europe. Hailing mainly from sub-Saharan countries, most of the migrants board boats operated by people traffickers in western Libya, and make for the Italian island of Lampedusa 300 km away. Since the beginning of this year, at least 590 migrants have died or gone missing along the Libyan coast, the International Organization for Migration said in late March. In the absence of an army or regular police force in Libya, several militias act as coastguards but are often themselves accused of complicity or even involvement in the lucrative people-smuggling business. More than 24,000 migrants arrived in Italy from Libya during the first three months of the year, up from 18,000 during the same period last year, according to the UN High Commissioner for Refugees.

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Easter feel good.

The Ultimate Lovebird (DM)

A stork has melted hearts in Croatia by flying to the same rooftop every year for 14 years – to be reunited with its crippled partner. The faithful bird, called Klepetan, has returned once again to the village of Slavonski Brod in east Croatia after a 5,000 mile migration. He spends his winters alone in South Africa because his disabled partner Malena cannot fly properly after being shot by a hunter in 1993. Malena had been found lying by the side the road by schoolteacher Stjepan Vokic, who fixed her wing and kept her in his home for years before helping her to build a nest on his roof. After placing her there, she was spotted by Klepetan 14 years ago. And now every year they are reunited in the spring. Klepetan keeps a very strict timetable, usually arriving back at the same time on the same day in March to be welcomed by locals.

But this year he was running six days late, causing panic among local media and fans of the stork couple. Such is the popularity of the pair that there is even a live feed on the main square in the capital Zagreb showing the two storks. There was huge excitement when stork-watchers saw what they thought was Klepetan circling over the nest, and then coming in to land. But the new arrival turned out to be a different stork that was attempting to woo Malena. She quickly attacked him and drove him off and continued to wait for Klepetan. Stjepan Vokic, whose roof the couple nest on, said: ‘She was pretty clear about the message, I doubt he will be back again.’ Vokic has taken care of Malena since she was first injured by hunters and says that she – like her partner – is now part of the family.

During the winter, Vokic keeps her inside the house, and then lets her go to the roof each spring where she patiently waits for her partner. This year, Malena made a rare flight and the couple were reportedly inseparable for hours. She does have the ability to make very short flights but her wing has not healed well enough for her to make the trip to Africa, or even to properly feed herself. Every summer, the pair bring up chicks, with Klepetan leading their flying lessons in preparation for the trip south in summer. The oldest recorded living stork was 39. Locals are hopeful the couple’s long relationship will continue for years to come.

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Apr 132017
 
 April 13, 2017  Posted by at 8:44 am Finance Tagged with: , , , , , , , , , ,  2 Responses »
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Eruption of Mount Vesuvius 1944

 


Former GM Vice Chair: I Think Tesla Is Doomed (CNBC)
It’s Time for Bank Hardball (Tan)
America In the Age of Hypocrisy, Hubris, and Greed (Frank)
Trump Flips On Five Core Campaign Promises In Under 24 Hours (ZH)
Trump Lays Groundwork for Federal Government Reorganization (BBG)
The Politics of the IMF (WF)
If An Electorate Falls In The Forest, Is Their Voice Heard? (DDMB)
NY Fed Boss May Have Blabbed During Blackout (Crudele)
The Potential For The Disastrous Rise Of Misplaced Power Persists (Assange)
No Greek Pensions Expected To Avoid Cuts (K.)
IMF Chief Lagarde Says ‘Halfway’ There On Greek Talks (R.)
Stop Pretending on Greek Debt (BBG)
Detention Of Child Refugees Should Be Last Resort, Brussels Says (G.)
Crucified Man Had Prior Run-In With Authorities (Petri)

 

 

More on the Ponzi.

Former GM Vice Chair: I Think Tesla Is Doomed (CNBC)

GM’s former Vice Chairman Bob Lutz dropped a whole lot of reality on some unsuspecting Tesla cheerleaders on CNBC this morning. “I am a well known Tesla skeptic. Somehow it’s levitating and I think it’s Elon Musk is the greatest salesman in the world. He paints this vision of an unlimited future, aided and abetted by some analysts. It’s like Elon Musk has been beamed down from another planet to show us mortals how to run a company.” “The fact is it’s a constant cash drain. They’re highly dependent on federal government and state incentives for money which constantly flows in. They have capital raises all the time.” “Even the high-end cars that they build now cost more to build than they’re able to sell them for.” “Mercedes, BWM, Volkswagen, GM, Audi and Porsche are all coming out with 300-mile [range] electric luxury sedans…I think they’re doomed.”

“Their upside on pricing is limited because everybody else sells electric vehicles at a loss to get the credits to be able to sell the sport utility vehicles and the pickup trucks. So that puts a ceiling on your possible pricing.” “And if he can’t make money on the high-end Model S and Model X’s which sell up to $100,000, how in the world is he going to make money on a $35,000 small car? Because I have news for you, 42 years of experience, the cost of a car doesn’t come down proportional to it’s price.” “If you have a situation where the cost of producing a car, labor and materials, is higher than your sell price, your business model is flawed. And it’s doomed and it’s going to fail.”

“The battery plant, in my estimation, is a joke. There are no cost savings from making a lithium ion plant bigger than other people lithium ion plants, because making lithium ion cells is a fully automated process anyway. So, whether you got full automative in a small building or 10x full automation in a big building, you’re not saving any money.”

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Break up the banks!

It’s Time for Bank Hardball (Tan)

Wall Street’s top executives should be pressed for substantive answers to harder-hitting questions about long-term performance. That’s a notion being trumpeted by well-known bank analyst Mike Mayo, who has never been one to shy away from criticizing the companies he covers. And boy, does he have a point. On Wednesday, Mayo published some questions he plans to ask Citigroup’s Chairman Michael O’Neill and CEO Michael Corbat at its annual general meeting later this month. They haven’t truly been held accountable for the lender’s mediocre returns, which includes its inability to meet a targeted return on tangible common equity of 10% by 2015, a goal that has since been pushed to 2019. Mayo’s solutions include another round of restructuring, or, if something is structurally wrong, perhaps the bank should break up.

Another valid question is why Citi feels the need measure its financial and share price performance against European lenders Barclays, Deutsche Bank and HSBC? (The question is somewhat rhetorical: It’s so the bank doesn’t place dead last, which it would on most metrics if compared with U.S. rivals). And oddly enough, it removes its weaker European counterparts for compensation comparison purposes. The same can’t be said for Bank of America, which in addition to reviewing its closest five U.S. competitors, evaluates the performance at worse-off European banks such as Credit Suisse and Royal Bank of Scotland as well as similarly-sized U.S.-based companies such as Coca-Cola and General Electric. This seems unnecessary and almost like an easy way to justify Chairman and CEO Brian Moynihan’s potentially outsized $20 million in annual pay.

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“For Americans who work for a living however, nothing ever seems to improve.”

America In the Age of Hypocrisy, Hubris, and Greed (Frank)

“The whole world wants to know about what the hell is happening with us. So let’s talk about it. I live in Washington now, and the people I live among have no idea how people live here in the Midwest, not the faintest idea… The last couple of years here in America have been a time of brisk prosperity according to official measurements, with unemployment down and the stock market up. For Americans who work for a living however, nothing ever seems to improve. Wages do not grow, median household income is still well below where it was in 2007. Economists have a way of measuring this, they call it the ‘labor share of the Gross National Product’ as opposed to the share taken by stockholders. The labor share of Gross National Product’ hit its lowest point since records were started in 2011, and then it stayed there right for the next couple of years.

In the fall of 2014, with the stock market hitting an all time high, a poll showed that nearly 3/4 of the American public believed that the economy was still in recession, because for them it was. There was time when average Americans could be counted upon to know correctly whether the country was going up or down, because in those days when America prospered, the American people prospered as well. These days things are different. Let’s look at it in a statistical sense. If you look at it from the middle of the 1930’s (the Depression) up until the year 1980, the lower 90% of the population of this country, what you might call the American people, that group took home 70% of the growth in the country’s income.

If you look at the same numbers from 1997 up until now, from the height of the great Dot Com bubble up to the present, you will find that this same group, the American people, pocketed none of this country’s income growth at all. Our share of these great good times was zero, folks. The upper 10% of the population, by which we mean our country’s financiers and managers and professionals, consumed the entire thing. To be a young person in America these days is to understand instinctively the downward slope that so many of us are on.”

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And gets away with it.

Trump Flips On Five Core Campaign Promises In Under 24 Hours (ZH)

Blink, and you missed Trump’s blistering, seamless transformation into a mainstream politician. In the span of just a few hours, President Trump flipped to new positions on several core policy issues, backing off on no less than five repeated campaign promises. In a WSJ interview and a subsequent press conference, Trump either shifted or completely reversed positions on a number of foreign and economic policy decisions, including the fate of the US Dollar, how to handle China and the future of the chair of the Federal Reserve.

Goodbye strong dollar and high interest rates In an announcement that rocked currency markets, Trump told the WSJ that the U.S. dollar “is getting too strong” and he would prefer the Federal Reserve keep interest rates low. “I do like a low-interest rate policy, I must be honest with you,” Mr. Trump said. “I think our dollar is getting too strong, and partially that’s my fault because people have confidence in me. But that’s hurting—that will hurt ultimately,” he added. “Look, there’s some very good things about a strong dollar, but usually speaking the best thing about it is that it sounds good.”

Labeling China a currency manipulator Trump also told the Wall Street Journal that China is not artificially deflating the value of its currency, a big change after he repeatedly pledged during his campaign to label the country a currency manipulator. “They’re not currency manipulators,” the president said, adding that China hasn’t been manipulating its currency for months, and that he feared derailing U.S.-China talks to crack down on North Korea. Trump routinely criticized President Obama for not labeling China a currency manipulator, and promised during the campaign to do so on day one of his administration.

Yellen’s future Trump also told the Journal he’d consider re-nominating Yellen to chair the Fed’s board of governors, after attacking her during his campaign.” I like her. I respect her,” Trump said, “It’s very early.” Trump called Yellen “obviously political” in September and accused her of keeping interest rates low to boost the stock market and make Obama look good. “As soon as [rates] go up, your stock market is going to go way down, most likely,” Trump said. “Or possibly.”

Export-Import Bank Trump also voiced support behind the Export-Import Bank, which helps subsidize some U.S. exports, after opposing it during the campaign. “It turns out that, first of all, lots of small companies are really helped, the vendor companies,” Trump told the Journal. “Instinctively, you would say, ‘Isn’t that a ridiculous thing,’ but actually, it’s a very good thing. And it actually makes money, it could make a lot of money.” Trump’s support will anger conservative opponents of the bank, who say it enables crony capitalism.

NATO Finally, Trump said NATO is “no longer obsolete” during a Wednesday press conference with NATO Secretary General Jens Stoltenberg, backtracking on his past criticism of the alliance. During the campaign, he frequently called the organization “obsolete,” saying did little to crack down on terrorism and that its other members don’t pay their “fair share.” “I said it was obsolete. It is no longer obsolete,” the president said Wednesday. Trump has gradually become more supportive of NATO after it ramped up efforts to increase U.S. and European intelligence sharing regarding terrorism.

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There could be some advantages to a clean-up, but guaranteed they’re going to screw this up by cutting at the wrong places.

Trump Lays Groundwork for Federal Government Reorganization (BBG)

President Donald Trump is issuing a presidential memorandum that will call for a rethinking of the entire structure of the federal government, a move that could eventually lead to a downsizing of the overall workforce and changes to the basic functions and responsibilities of many agencies. The order, which will go into effect Thursday, also will lift a blanket federal hiring freeze that has been in place since Trump’s first day in office almost three months ago and replace it with hiring targets in line with the spending priorities the administration laid out in March, said Mick Mulvaney, director of the Office of Management and Budget. The move is a part of Trump’s campaign pledge to “drain the swamp” and get rid of what the administration views as inefficiencies in the federal government, Mulvaney said.

It comes as the White House also is trying to curb the size of many government agencies through a proposed budget that calls for historically deep spending cuts to everything from medical research to clean-energy programs. The push to reshape the government as well as the budget cuts are almost certain to draw opposition from Congress. “We think at the end of the day this leads to a government that is dramatically more accountable, dramatically more efficient, and dramatically more effective, following through on the very promises the president made during the campaign and that he put into place on day one,” Mulvaney said. He said the administration is starting with a “blank sheet of paper” as to how the government should operate and has set up a website to solicit ideas.

One solution may be to organize it by function, like putting all areas that deal with trade under one department, or to break up large departments into a number of smaller agencies. As an example, Mulvaney said there are 43 different workforce-training programs across at least 13 agencies – without a single point person in charge of them – that could be brought under one roof. “We’re now transitioning into the smarter, more surgical plans of running the government,” Mulvaney said in an interview on MSNBC Wednesday morning.

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Useful background. “..the US also claimed the right to remain fully informed about the financial comings and goings of every single member state, thenceforth and permanently.”

The Politics of the IMF (WF)

At the historic New Hampshire-based Bretton Woods Conference of 1944, delegates from 44 nations across the globe came together to create the International Monetary Fund (IMF) and the World Bank. The former was officially founded on 27 December 1945 with 29 member countries; financial operations commenced on 1 March 1947. From that first meeting in New Hampshire, it was established that the thrust of the IMF’s mission would be to promote greater economic cooperation within the international arena. Though today the IMF maintains its mandate has remained as such, over the years the organisation has evolved alongside a changing global landscape, becoming an extraordinarily powerful organisation as a result.

[..] .. the US played an undeniably dominant role in establishing the IMF and dictating how it would operate. A crucial factor in its make up, and in the US’ ongoing influence within the organisation, was the distribution of voting power among member states. Rather than allocating votes in accordance with the size of a member’s population – which would be the most democratic approach to take – the US instead pushed for voting power to correspond with the volume of contributions made. Unsurprisingly, those contributions made by the US, the world’s biggest economy, were far greater than those of any other member state.

By contributing $2.9bn – double the amount made by the UK, the second biggest contributor at the time – the US was guaranteed twice the number of voting rights, together with veto privileges and a blocking minority. The manoeuvre enabled the superpower to secure near-absolute control of the IMF’s activities. In order to further consolidate its dominant role, the US also claimed the right to remain fully informed about the financial comings and goings of every single member state, thenceforth and permanently.

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“The longer the voices of the desperate go unheard, as just so many silently falling trees in the forest, the more piercing their cries will be in the end.”

If An Electorate Falls In The Forest, Is Their Voice Heard? (DDMB)

It was not until the June 1883 publication of the magazine The Chautauquan that the question was put as such: “If a tree were to fall on an island where there were no human beings would there be any sound?” Rather than pause to ponder, the answer followed that, “No. Sound is the sensation excited in the ear when the air or other medium is set in motion.” A vexatious debate has ensued ever since, one that eventually stumped the great Albert Einstein who finally declared “God does not play dice.” In recognizing this, Einstein also resolved himself to the quantum physics conclusion, that there is no way to precisely predict where individual electrons can be found – unless, that is, you’re Divine.

Odds are high that the establishment, which looks to ride away with upcoming European elections, is emboldened by quantum physics. The entrenched parties appear set to retain their power holds, in some cases by the thinnest of margins. What is it the French say about la plus ca change? Is it truly the case that the more things change the more they stay the same? Is this state of stasis sustainable, you might be asking? Clearly the cushy assumption is that the voices of those whose votes will not result in change will be as good as uncast, unheard and unremarkable. Except…and this is a big ‘except’ – time is on the side of the castigated and for one simple reason – they are young.

[..] And then there is the matter of the refugee crisis, the cost of which few in the United States fully appreciate. Faced with impossible living conditions and no access to work in Jordan, Turkey and Lebanon, hundreds of thousands have opted to risk the journey to Europe. In 2015, 1.3 million asylum seekers landed in Europe, half of whom traced their origins to Syria, Afghanistan and Iraq. That number plunged in 2016 to 364,000 owing mainly to a deal between the EU and Turkey which blocks the flow of migrants to Europe. The cost, not surprisingly, is enormous. Europeans spend at least $30,000 for every refugee who lands on her shores. By some estimates, the cost would have been one-tenth that, as in $3,000 per refugee, had the journey to Europe NOT been made in the first place.

[..] At some point demographics will start to matter. The situation in France is no doubt grave, with youth unemployment at nearly 24%. But that pales in comparison to Italy where 39% of its young workers don’t have jobs to go to, day in and day out. Older voters determined to keep the establishment intact will begin to die off. In their wake will be a growing majority of voters who are increasingly disenfranchised, disaffected and despondent. If there’s one lesson Europeans can glean from their allies across the Atlantic, it’s that bullets can be dodged, but not indefinitely. As we are learning the hard way, necessary reforms are challenging to enact. Avoidance, though, will only succeed in feeding anger and despair. The longer the voices of the desperate go unheard, as just so many silently falling trees in the forest, the more piercing their cries will be in the end.

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There’s a lot of that going on. Stanley Fisher does it too.

NY Fed Boss May Have Blabbed During Blackout (Crudele)

Back in 2011, I caught William Dudley, the president of the New York Federal Reserve Bank, having meetings he wasn’t supposed to have with some of Wall Street’s top players. And nobody cared. Nobody cared despite the fact that Dudley could have easily passed along all sorts of confidential information to these people, who would have immediately known how to profit enormously from what they were being told. I am mentioning this because the head of the Richmond, Va., Fed, Jeffrey Lacker, abruptly resigned last week for doing far less bad than Dudley might have done. Lacker says he took an October 2012 phone call from an analyst at an investment advisory firm and had a conversation about something the Fed was considering — the purchase of $40 billion worth of mortgage bonds — to try to help the economy.

[..]Lacker is a pipsqueak compared with Dudley, who has a permanent position on the Fed’s policymaking Open Market Committee — and whose bank controls the trading operations for the whole Fed. I looked it up, and Lacker’s conversation with the analyst didn’t occur during the Fed’s so-called blackout period, which starts a week before its policy meetings. As I wrote back in 2011, several of Dudley’s meetings did. During these blackout periods, Fed officials are supposed to clam up — and make no public pronouncements, which I assume would cover Dudley’s informal dinners. As I wrote back in January 2011, I have no way of knowing what Dudley discussed at his blackout-period meetings. But unless he and his guests sat mute and expressionless during their meetings, there’s a good likelihood that something could be gleaned from the New York Fed president’s remarks.

Just so those investigators in the “separate” investigation don’t have to go to any trouble, I’m going to repeat here some of what I wrote back then. At one of the questionable Dudley meetings, in March 2009, the Fed’s blackout period ran from March 10 to 18. On March 11, Dudley met with Jan Hatzius, chief economist of Goldman Sachs. Dudley had once worked at Goldman, so he and Hatzius were friends. Dudley’s calendar says it was an “informal meeting” that took place from 6 p.m. to 7 p.m. at the Pound and Pence restaurant near the New York Fed. That was on Dudley’s calendar, as was the notation “PRE-FOMC BLACKOUT PERIOD,” written in bold, all caps. So his assistant was clearly trying to warn him about restrictions. Let’s hope the separate investigation that Lacker mentioned is of the New York Fed. And, if they don’t already, investigators now know where to look.

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WikiLeaks wants the same thing as the WaPo? Are we sure?

The Potential For The Disastrous Rise Of Misplaced Power Persists (Assange)

The media has a long history of speaking truth to power with purloined or leaked material — Jack Anderson’s reporting on the CIA’s enlistment of the Mafia to kill Fidel Castro; the Providence Journal-Bulletin’s release of President Richard Nixon’s stolen tax returns; the New York Times’ publication of the stolen “Pentagon Papers”; and The Post’s tenacious reporting of Watergate leaks, to name a few. I hope historians place WikiLeaks’ publications in this pantheon. Yet there are widespread calls to prosecute me. President Thomas Jefferson had a modest proposal to improve the press: “Perhaps an editor might begin a reformation in some such way as this. Divide his paper into 4 chapters, heading the 1st, ‘Truths.’ 2nd, ‘Probabilities.’ 3rd, ‘Possibilities.’ 4th, ‘Lies.’

The first chapter would be very short, as it would contain little more than authentic papers, and information.” Jefferson’s concept of publishing “truths” using “authentic papers” presaged WikiLeaks. People who don’t like the tune often blame the piano player. Large public segments are agitated by the result of the U.S. presidential election, by public dissemination of the CIA’s dangerous incompetence or by evidence of dirty tricks undertaken by senior officials in a political party. But as Jefferson foresaw, “the agitation [a free press] produces must be submitted to. It is necessary, to keep the waters pure.” Vested interests deflect from the facts that WikiLeaks publishes by demonizing its brave staff and me. We are mischaracterized as America-hating servants to hostile foreign powers.

But in fact I harbor an overwhelming admiration for both America and the idea of America. WikiLeaks’ sole interest is expressing constitutionally protected truths, which I remain convinced is the cornerstone of the United States’ remarkable liberty, success and greatness. I have given up years of my own liberty for the risks we have taken at WikiLeaks to bring truth to the public. I take some solace in this: Joseph Pulitzer, namesake of journalism’s award for excellence, was indicted in 1909 for publishing allegedly libelous information about President Theodore Roosevelt and the financier J.P. Morgan in the Panama Canal corruption scandal. It was the truth that set him free.

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Madness.

No Greek Pensions Expected To Avoid Cuts (K.)

The Labor Ministry’s main plan to save 1% of GDP from 2019 pension expenditure provides for reductions even to very low pensions if the recalculation process shows a difference from the original calculation according to the previous method, the so-called “personal difference.” The ministry is trying to avoid having to impose very big cuts – the personal difference is estimated to range up to 40% – and sources say it is hoping to cap the reductions at 20 or 25%. The final decisions will be made when the creditors’ representatives return to Athens later this month.

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Lagarde wants Greece on its knees. She keeps insisting on more pension cuts, without any regard for the effects on Greek people. That will make the economy worse, not better. And she knows it.

IMF Chief Lagarde Says ‘Halfway’ There On Greek Talks (R.)

IMF chief Christine Lagarde on Wednesday said Greece was heading in the right direction on reforms but talks on its bailout and the IMF’s potential role in it were “only halfway through.” Greece and its international lenders are negotiating reforms the country needs to carry out to maintain a sustainable growth path in the years following the end of its bailout program, which ends in mid-2018. “What I have seen in the last couple of weeks is heading in the right direction. We are only halfway through in the discussions,” Lagarde told a conference in Brussels. Last week, eurozone finance ministers agreed the “overarching elements” of reforms needed in Greece in exchange for a new loan under its 86-billion-euro program, the third since 2010.

The new loan is needed to pay debt due in July. Talks are continuing and no date is fixed yet for the return of negotiators to Athens. The Greek government believes negotiators could go back to Greece after the IMF Spring Meetings on April 21-23. “We are still elaborating under what terms we could possibly give some lending to the country. We are not there yet,” Lagarde said, adding any IMF loan to Greece would have to abide by strict conditions. She said debt restructuring will be needed to guarantee the sustainability of Greek finances. The scope of the restructuring “will be decided at the end of the program,” but “the modalities have to be decided upfront,” Lagarde said.

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They have no interest in solving Greece’s problems.

Stop Pretending on Greek Debt (BBG)

Greece and its creditors say they’ve made progress in their endless negotiations over the country’s debts – enough to avoid a default on payments worth more than €7 billion in July. That’s good, but it was the easy part. The definitive settlement that Greece and the European Union both need still isn’t in sight. For the past seven years, the IMF and euro-zone institutions have supported Athens with loans in exchange for fiscal austerity and structural economic reform. This strategy has failed to break Greece’s vicious circle of a shrinking economy and higher debt. Europe needs to bring this spiral to an end without further delay – by putting Greece’s debts on a credibly downward path. The IMF has made it clear that it will only take part in a rescue program that includes a realistic assessment of debt sustainability.

This is a welcome break from the past: Time and again, creditors have deluded themselves that Greece can run implausibly high budget surpluses for years. Germany, especially, is keen to keep the IMF involved. With luck, Berlin might be willing to adjust the creditors’ proposals accordingly. Greece has gone through nearly a decade of punishing austerity. Its unemployment rate is still stuck near 25%. Last week’s deal includes further tax and pension reforms worth 2% of GDP. If consumers and companies are to spend and invest again, they must see an end to the tunnel. Economic necessity and political feasibility point to the same conclusion: Firm fiscal restraint is essential – but not so firm as to be self-defeating.

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It shouldn’t be a last resort, it should be no resort. This is the EU trying to deflect attention away from its own deplorable failings by pointing to Hungary. Don’t fall for it.

Detention Of Child Refugees Should Be Last Resort, Brussels Says (G.)

Detention of child refugees should be “a last resort”, the European commission has said, in remarks that will be seen as a rebuke to Hungary where asylum seekers, including minors, are being held in barbed-wire fenced camps. The statement from Brussels is part of a long awaited plan to protect child refugees in Europe. About 386,300 children made an asylum claim in the EU in 2016, a six-fold increase since 2010 that has left some countries struggling to cope. The EU plan comes one day after Germany announced it was halting refugee transfers to Hungary, until Budapest stops the systematic detention of all asylum seekers.

Under the EU’s Dublin regulation, asylum seekers are to be returned to the first country they registered in. Routine detention of refugees is banned. Hungary announced last month that all asylum seekers older than 14 would be kept in converted shipping containers on the border while their claims were assessed. About 110 people were living in the camps, including four unaccompanied children, and children with their families, when the UN refugee agency assessed the camps last week. The situation for asylum seekers had worsened since the new law came into effect, the UNHCR said, as the organisation also warned of “highly disturbing reports” of police violence meted out to refugees attempting to cross the border.

[..] Hungary already risks being taken to the European court of justice for failure to take in a mandatory quota of asylum seekers, a decision imposed on Budapest in September 2015. The clock is ticking towards a deadline to disperse 160,000 asylum seekers from Greece and Italy to other EU member states (excluding the UK) by September 2017. The EU’s most senior official on migration warned that Hungary risked being taken to the European court of justice if it failed to meet its target. “From September the relocation scheme is ending. This does not mean it is going to die. It will continue,” said Dimitris Avramopoulos, the European commissioner for home affairs, . “EU countries who do not want to be part of our policy, they will be confronted with measures we can take,” he said, in a coded reference to court action that could land governments with hefty fines.

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It’s that time of year.

Crucified Man Had Prior Run-In With Authorities (Petri)

The gentleman arrested Thursday and tried before Pontius Pilate had a troubled background. Born (possibly out of wedlock?) in a stable, this jobless thirty-something of Middle Eastern origin had had previous run-ins with local authorities for disturbing the peace, and had become increasingly associated with the members of a fringe religious group. He spent the majority of his time in the company of sex workers and criminals. He had had prior run-ins with local authorities — most notably, an incident of vandalism in a community center when he wrecked the tables of several licensed money-lenders and bird-sellers.

He had used violent language, too, claiming that he could destroy a gathering place and rebuild it. At the time of his arrest, he had not held a fixed residence for years. Instead, he led an itinerant lifestyle, staying at the homes of friends and advocating the redistribution of wealth. He had come to the attention of the authorities more than once for his unauthorized distribution of food, disruptive public behavior, and participation in farcical aquatic ceremonies. Some say that his brutal punishment at the hands of the state was out of proportion to and unrelated to any of these incidents in his record. But after all, he was no angel.

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Apr 112017
 
 April 11, 2017  Posted by at 9:11 am Finance Tagged with: , , , , , , , , ,  6 Responses »
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Carole Lombard 1934

 


54% Of Canadians Think Home Prices Will Never Fall (BNN)
Wild Housing Speculation Drives Entire Canadian Economy (WS)
Third of US Car Owners Can’t Afford Surprise Repairs (UT)
The Retail Apocalypse’s Terrifying Impact On One Corner Of Wall Street (BI)
China Is Playing a $9 Trillion Game of Chicken With Savers (BBG)
Currency-Issuing Governments Never Have To Worry About Bond Markets (Bilbo)
Recessions Are Never Desirable Events And Are Always Avoidable (Bilbo)
So Many Triggers (Thomas)
American Carnage – The New Landscape of Opioid Addiction (Caldwell)
How Erdogan’s Referendum Gamble Might Backfire (Spiegel)
Share of Member States in EU GDP (EC)
Austria FinMin Calls For €1 Billion EU Investment In Greece (R.)
JP Morgan Report Sees ‘Light At The End Of The Tunnel’ For Greece (Amna)
Refugee Community Center Set To Open On Lesvos (K.)

 

 

Stupefying. “Of those in the younger generation who are already in the housing market, more than four of every five plan to sell..”

54% Of Canadians Think Home Prices Will Never Fall (BNN)

More than half of the country believes home prices will never fall, according to a new poll from CIBC. Despite lofty valuations in the Toronto and Vancouver housing markets, 54% of respondents to the CIBC poll say housing prices will rise indefinitely, while only 40% think prices will decline over the course of the next five years. David Madani, senior Canadian economist at Capital Economics, thinks the unbridled optimism is just one more sign the Toronto housing market is in bubble territory. “The fact that the majority of Canadians still think home prices can continue to shoot up is sort of testament to the fact we’re in a full-blown housing bubble,” he said in an interview with BNN. According to the poll, those high prices are keeping homeowners on the sidelines, with 62% of respondents saying they’re reluctant to sell their home, lest they become buyers again.

Home prices in Toronto are up more than 30% over the course of the last year, and prices in Vancouver have risen more than 14%. Those who are looking to sell are largely of the baby boomer cohort, with more than two-thirds of respondents older than 55 saying they plan to downsize to a smaller home or condo. CIBC says boomers are motivated to sell not just due to the ease of maintaining a smaller home, but also as a boost to their retirement savings. What’s less clear is who they’re going to sell their home to: 52% of the millennial generation either don’t believe they’ll ever own a home, or are unsure if home ownership is in their future, according to the CIBC poll. Of those in the younger generation who are already in the housing market, more than four of every five plan to sell, with 63% complaining the mortgage and housing costs are making them cash-poor.

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It drives it and will make it crumble. But Justin isn’t listening.

Wild Housing Speculation Drives Entire Canadian Economy (WS)

Here’s another data point on the Canadian housing bubble, how immense it really is, and how utterly crucial wild housing speculation has become to the Canadian economy. Housing starts surged to 253,720 units in March seasonally adjusted, the highest since September 2007, according to Canada Mortgage & Housing Corp. Of them, 161,000 were multi-family starts of condos and rental units in urban areas. In Toronto, one of the hot beds of Canada’s house price bubble, housing starts jumped by 16,600 units, all of them condos and apartments, defying any expectation of a slowdown. Housing starts are an indication of construction activity, a powerful additive to the local economy with large secondary effects. Housing construction gets fired up by the promise of ever skyrocketing housing prices, and thus big payoffs for developers, lenders, real estate agents, and the entire industry.

National home price data covers up the real drama in certain cities, particularly Vancouver (British Columbia) and Toronto (Ontario), but it does show by how much Canadian housing prices have overshot the already lofty US housing prices. The chart below by Stéfane Marion, Chief Economist at Economics and Strategy, National Bank of Canada, compares US home prices per the Case-Shiller 20-City index to Canadian home prices per the Teranet-National Bank 26-market index. Both indices are based on similar methodologies of comparing pairs of sales of the same home over time. The shaded areas denote recessions in Canada. Note that during the housing crisis in the US, there was only a blip in Canada’s housing market:

How important is real estate and housing construction to the Canadian economy? Hugely important! It accounts for an ever larger proportion of the Canadian economy. For all of Canada, according to data by Statistics Canada, housing construction and real estate activities combined account for 15.5% of GDP, up from 14.7% in 2011. This chart shows housing construction and real estate activities in the largest four provinces as percent of the province’s GDP in 2015, and for Canada overall. StatCan data for 2016 are not yet available. Note British Columbia: 22% of its economy is based on residential construction and real estate activities – due to Canada’s number one housing hot-bed Vancouver:

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As I said last week: it seems there’s an article on this theme every week now.

Third of US Car Owners Can’t Afford Surprise Repairs (UT)

Nearly one-in-three American motorists cannot pay for vehicle repairs without taking on debt, according to a new study from AAA. The study estimates 64 million drivers could not pay out-of-pocket for an average repair bill of $500 to $600. There are about 210 million licensed motorists in the country, according to the U.S. Department of Transportation. About 76% of men said they could afford the expense, while only 62% of women could do the same. “We were a little shocked at the results,” said Michael Calkins, AAA manager of technical services. “That one-third of American drivers couldn’t afford the cost of a $500 auto repair is a little concerning.”

AAA suggests motorists adhere to a scrupulous vehicle maintenance schedule and set aside $50 a month to build a fund for maintenance and unexpected repairs. But some motorists don’t – or can’t. About one-third of U.S. drivers delay or skip recommended car maintenance, Calkins said, a possible lingering repercussion of the 2008 recession. Motorists pay later for putting off vehicle maintenance now, as worn-down parts increase the likelihood of costly roadside breakdowns, Calkins said. A car-care fund can help motorists stick to their maintenance schedules, but for many low-income families, $50 a month is a big ask, said Asley Orr, executive director of Good News Mountaineer Garage, a nonprofit that donates used cars to West Virginians who need transportation to work.

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Who owns the stores and malls? Who owns the debt that keeps them going until it doesn’t?

The Retail Apocalypse’s Terrifying Impact On One Corner Of Wall Street (BI)

One of the biggest waves of retail closures in decades is killing off malls across the US and taking some Wall Street investments with it. Struggling with online competition, huge retailers like Sears, JCPenney, and Macy’s are closing hundreds of stores that typically anchor malls, meaning they occupy the largest spaces at mall entrances and drive most shopper traffic. When a big store shuts down, it triggers a chain reaction that can end with the shopping mall being unable to collect enough rent to cover its debts, forcing it to default. By one measure, as many as a third of the malls in the US are at risk of facing this situation. This has become a nightmare for investors who are expecting to collect on those debts. They own bonds – called commercial mortgage-backed securities, or CMBSs – that are backed by the mall properties’ rents.

If this sounds familiar, that’s because it’s similar to one element of the financial crisis. Back then, mortgage-backed securities, which pooled homeowners’ mortgages into a multitrillion-dollar financial market, were part of the problem. They encouraged risky lending, and together with derivatives on the bonds that were ginned up by Wall Street, they left banks and investors with massive losses that threatened the financial system. Nobody is predicting anything that dire today, but CMBSs, which Morgan Stanley says account for nearly 10% of the $3.6 trillion commercial real-estate mortgage market, work similarly. They pool debt payments from several malls or other commercial properties and then splice them so that investors can buy the segment and take on the kind of risk they want.

What’s happening in the retail market, though, is worse than anyone who invested in the bonds could’ve imagined a few years ago. “Malls are hard to turn around once they go downhill,” said Steve Jellinek, vice president of CMBS analytical services for Morningstar Credit Ratings. As a result, many CMBS investments are getting wiped out, and “retail lending has really taken a beating,” he said. About $48 billion in loans backed by mall properties are at risk of default, according to Morningstar.

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This is how the Chinese see Beijing, first as full of hot air (true), and second as capable of making good on any and all losses (not true): “Cracking down on implicit guarantees is just like curbing home prices,” she says. “It’s something that the government needs to say, but it’s not something they will eventually do.”

China Is Playing a $9 Trillion Game of Chicken With Savers (BBG)

Like many individual investors in China, Yang Mo has no idea what’s in the wealth management products that make up a big chunk of her net worth. She says there’s really no point in finding out. Sure, WMPs invest in all kinds of risky assets, but the government would never let a big one fail, she explains. “It’s not how the Chinese government does things, and it’s not even Chinese culture,” says Yang, a 29-year-old public relations professional in Beijing. Hers is a common refrain in Asia’s largest economy, where savers have poured $9 trillion into WMPs and similar products on the assumption that they’ll get bailed out if the investments sour. Even after news in February that policy makers are drafting rules to make it clear that state guarantees don’t exist, Yang is undaunted.

She says she’ll only withdraw money from WMPs in the unlikely event that they start to suffer losses. “Cracking down on implicit guarantees is just like curbing home prices,” she says. “It’s something that the government needs to say, but it’s not something they will eventually do.” Yang’s steadfast faith in bailouts illustrates the dilemma for authorities as they try to reduce moral hazard and improve the pricing of risk in China’s financial system: It may require a major WMP blowup to shake investors out of their complacency, an event that could wreak havoc on banks that increasingly rely on the products for funding. [..] WMPs – a key part of China’s shadow banking system – are getting squeezed as the nation’s central bank increases interest rates to discourage excessive leverage.

That’s not only putting pressure on products that use borrowed funds to meet their fixed return targets, it’s also weighing on the Chinese bond market, where WMPs allocate the biggest portion of their funds. For as long as they can, banks will make investors whole when WMPs run into trouble because they fear the reputational damage of a failed product, according to Hong. At some point, though, WMP shortfalls may be too large for the banks to cover, forcing policy makers to decide whether they’re willing to allow losses. Intervention is becoming less likely, if the new draft rules are anything to go by. Regulators are working on language that would make clear there are no state guarantees on asset-management products – which include WMPs, trusts, mutual funds and other products – people familiar with the matter said in February.

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Snippets from a great and long article by Australian economist Bill Mitchell. Everything they tell you about austerity is a lie.

Currency-Issuing Governments Never Have To Worry About Bond Markets (Bilbo)

How many times have you heard a politician claim they had to cut government spending and move the fiscal balance to surplus because they had to engender the confidence of the bond markets. Apparently, this narrative alleges that if bond markets are not ‘confident’ (whatever that means) then they will stop begging treasury departments for more debt issues and the government, in question, will run out of money and then pensions will stop being paid and the public service will be sacked and public trains and buses will stop running and before we know it the skies will blacken and collapse on us. The narrative ignores the usual statistics that bid-to-cover ratios are typically high (hence my ‘begging’ terminology) which are supplemented by well documented cases where the bond dealers (including banks etc) do actually beg central banks to stop driving yields down in maturity segments where these characters have pitched their “business model” (read: where they make the most profits).

The facts are exactly the opposite to the neo-liberal pitch. Currency-issuing governments never need to worry about how bond markets ‘feel’. Essentially, the bond markets are irrelevant to the ability of such a government to design and implement its fiscal plans. And, the central bank always can counteract any tendencies that the bond markets might seek to impose where governments do actually issue debt. [..] Nothing a student learns in a mainstream macroeconomics course at university (at any level – and the deception becomes worse the in later years as the student enters graduate school) about the relative powers of governments and bond markets is true. [..] So next time you hear an economist or a politician talk about how bond markets have to be satisfied and they use that as a justification for hacking into public spending (and driving up unemployment and poverty rates) you know they are lying and are frauds.

The bond traders never have to be satisfied. They can be forced to live on crumbs by the central bank if it so chooses. [..] The narrative that asserts that governments have to assuage the sentiments of the bond markets – which is an oft-repeated claim to justify job-destroying and poverty-inducing austerity – is just fake. It is a lie. It is just one of many lies that the elites use to pursue their biased austerity. Biased because they never advocate cutting spending or government support that helps them. They just support cuts that help the most disadvantaged who have little political voice and so can be disregarded. The point is that currency-issuing governments never have to worry about bond markets. And it would be better if the government eliminated the public debt market altogether – then the bond traders would have to do something productive for a living and get off the corporate welfare teat!

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More Bill Mitchell.

Recessions Are Never Desirable Events And Are Always Avoidable (Bilbo)

Bloomberg published an article last week (April 7, 2017) that it should not have published given that the article offers only fake knowledge to its readership. The article in question – Australia’s Delayed Recession Fallout Is Showing Up in Its Jobs Data – carried the sub-title “There may be trouble ahead” and purported to argue that because the Australian government’s fiscal stimulus allowed our nation to avoid a recession in 2009 we now have to ‘pay the piper’ and take our medicine and suffer a recession anyway. The proposition is ridiculous to say the least. The article uses as authority some nonsensical statements from a “business management consultant”, who doesn’t appear to have a very sound grasp of either history or what is actually going on. This is another case of misinformation.

The fact is that the Australian government’s fiscal stimulus in 2008 and 2009 saved the economy from recession. The current slowdown and parlous labour market is not some delayed effect from that. Rather, it is because the Australian government caught the ‘fiscal surplus bug’ obsession, and began a misguided pursuits of surpluses, irrespective of what the external and private domestic sectors were doing. It caused an immediate slowdown and all the virtuous dynamics that were accompanying the stimulus-led growth (for example, fall in household debt and the rise in the household saving ratio) were reversed, as we would expect. Far from being delayed effects, the poor jobs data is because current fiscal policy is too restrictive. Simple solution: expand the discretionary fiscal deficit (preferably with a large-scale public sector job creation strategy).

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“..Deutsche is ten times larger than Lehman Brothers..”, ” (90% of Deutsche’s revenue has been from derivative trading, which is what brought down Lehman.)”

So Many Triggers (Thomas)

Deutsche Bank has announced that it will create more shares, selling them at a 35% discount. Existing shareholders have not been pleased and, in the first four days since the offer was announced, the value of existing shares dropped by 13% as shareholders began dumping them. So why on earth would Germany’s foremost bank do something so rash? Well, in recent years, the bank has been involved in many arbitrations, litigations, and regulatory proceedings as a result of fraudulent activities, including the manipulation of markets. Having been found guilty, they presently owe $7.2 billion to the US Department of Justice and are now facing an additional $10 billion litigation bill. Unfortunately, the bank is already broke and, should Deutsche actually be able to sell the new shares, the $8.6 billion they hope to receive will still not save them from bankruptcy.

Business has also not been so good. They’ve lost nearly $2 billion in the last two years, instituted a hiring freeze, cut bonuses by 80%, and are facing a $2.5 million civil penalty to pay to the Commodity Futures Trading Commission for failure to report transactions and, not surprisingly, have been downgraded. The German government has stated that they will not bail out Deutsche and, indeed, under the EU agreement, they cannot do so. It’s safe to say that Germany’s largest bank will soon go the way of the dodo. For those who don’t live in Europe, this may not seem all that significant. However, Deutsche is the bank that funds the euro system, which they can now no longer do. Further, Deutsche is ten times larger than Lehman Brothers, an American bank that famously went down in 2008, heralding in that year’s economic crash. (90% of Deutsche’s revenue has been from derivative trading, which is what brought down Lehman.)

Upon the collapse of Deutsche Bank, four major US banks would be expected to become insolvent in a matter of days. The ripples would then continue to spread outward into the economic system as a whole. For many years, I’ve made repeated reference to the fact that the Western powers have been headed south economically, repeatedly relying on strategies that would provide short-term gain but would ultimately create long-term pain. They’ve been remarkably consistent and steadfast in this trend and, at this point, Deutsche is merely the latest trigger that may bring down the system.

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Chilling.

American Carnage – The New Landscape of Opioid Addiction (Caldwell)

There have always been drug addicts in need of help, but the scale of the present wave of heroin and opioid abuse is unprecedented. Fifty-two thousand Americans died of overdoses in 2015—about four times as many as died from gun homicides and half again as many as died in car accidents. Pawtucket is a small place, and yet 5,400 addicts are members at Anchor. Six hundred visit every day. Rhode Island is a small place, too. It has just over a million people. One Brown University epidemiologist estimates that 20,000 of them are opioid addicts—2% of the population. Salisbury, Massachusetts (pop. 8,000), was founded in 1638, and the opium crisis is the worst thing that has ever happened to it. The town lost one young person in the decade-long Vietnam War. It has lost fifteen to heroin in the last two years.

Last summer, Huntington, West Virginia (pop. 49,000), saw twenty-eight overdoses in four hours. Episodes like these played a role in the decline in U.S. life expectancy in 2015. The death toll far eclipses those of all previous drug crises. And yet, after five decades of alarm over threats that were small by comparison, politicians and the media have offered only a muted response. A willingness at least to talk about opioid deaths (among other taboo subjects) surely helped Donald Trump win last November’s election. In his inaugural address, President Trump referred to the drug epidemic (among other problems) as “carnage.” Those who call the word an irresponsible exaggeration are wrong.

Jazz musicians knew what heroin was in the 1950s. Other Americans needed to have it explained to them. Even in the 1960s and 1970s, with bourgeois norms and drug enforcement weakening, heroin lost none of its terrifying underworld associations. People weren’t shooting it at Woodstock. Today, with much of the discourse on drug addiction controlled by medical bureaucrats, it is common to speak of addiction as an “equal-opportunity disease” that can “strike anyone.” While this may be true on the pharmacological level, it was until quite recently a sociological falsehood. In fact, most of the country had powerful moral, social, cultural, and legal immunities against heroin and opiate addiction. For 99 percent of the population, it was an adventure that had to be sought out. That has now changed.

America had built up these immunities through hard experience. At the turn of the nineteenth century, scientists isolated morphine, the active ingredient in opium, and in the 1850s the hypodermic needle was invented. They seemed a godsend in Civil War field hospitals, but many soldiers came home addicted. Zealous doctors prescribed opiates to upper-middle-class women for everything from menstrual cramps to “hysteria.” The “acetylization” of morphine led to the development of heroin. Bayer began marketing it as a cough suppressant in 1898, which made matters worse. The tally of wrecked middle-class families and lives was already high by the time Congress passed the Harrison Narcotics Tax Act in 1914, threatening jail for doctors who prescribed opiates to addicts. Americans had had it with heroin. It took almost a century before drug companies could talk them back into using drugs like it.

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Referendum on April 16: “..some pollsters see the “no” camp ahead by as much as 10%.”

How Erdogan’s Referendum Gamble Might Backfire (Spiegel)

Support for the presidential system is crumbling. Erdogan may be giving the impression that the entire country is behind him, with his speeches resembling religious masses. On Sunday a week ago, tens of thousands cheered him on in Ankara. But some pollsters see the “no” camp ahead by as much as 10%. Even previously loyal Erdogan supporters, including party functionaries, don’t understand why the president so desperately wants this referendum. According to polls, one third of AKP voters are fluctuating between yes and no. The new system would concede powers to the president that even the nation’s founder, Mustafa Kemal Atatürk, didn’t have.

The president would be able to appoint ministers and 12 of 15 constitutional judges, and he would have the power to dissolve parliament any time he wanted to. The position of prime minister would also be eliminated. Erdogan claims the reform is necessary to secure stability and prevent further coup attempts. But he already has more power than any other politician in recent Turkish history. Campaign posters plasterd with Erdogan’s visage hang everywhere in Bursa. The balconies are decorated with Turkish flags and vehicles drive through the streets blaring AKP election songs. The AKP is trying to create excitement, and that shouldn’t be too difficult here in Bursa. The city is Turkey’s fourth-largest and a higher-than-average share of residents voted for the AKP in the November 2015 parliamentary election.

For a long time, the residents of Bursa were the way Erdogan wanted them to be: hard-working and pious. The city has developed into an industrial center and the government built brand new residential neighborhoods, with shopping malls and mosques. But since the attempted coup, the economy has collapsed and many storefronts now stand empty. Mumcu’s cousin, who runs a textile company, says that his revenue has dropped from €50 million to €2 million in the past year.

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Germany and France are half of EU GDP. The rest are mere pawns.

Share of Member States in EU GDP (EC)

In 2016, the GDp of the European Union (EU) amounted to €14 800 billion (bn) at current prices. Over half of it was generated by three Member States: Germany, the United Kingdom and France. With a GDP worth €3 100bn in 2016, Germany was the leading EU economy, accounting for over a fifth (21.1%) of EU GDP. It was followed by the United Kingdom (16.0%), France (15.0%), Italy (11.3%), Spain (7.5%) and the Netherlands (4.7%). At the opposite end of the scale, eleven Member States had a GDP of less than 1% of the EU total. They were: Malta, Cyprus, Estonia, Latvia, Lithuania, Slovenia, Croatia, Bulgaria, Luxembourg, Slovakia and Hungary. As regards the 19 Member States which form the euro area, their cumulated GDP stood at €10 700 bn in 2016, meaning that they accounted all together for 72.5% of the EU GDP. Germany (29.2%) and France (20.7%) made up half of the euro area GDP.

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Schäuble is shaking his head.

Austria FinMin Calls For €1 Billion EU Investment In Greece (R.)

The European Union should consider a one-billion-euro special investment programme to spur growth in debt-ridden Greece, Austria’s finance minister told daily Der Standard in an interview published on Monday. Hans Joerg Schelling said Greece would only be able to get back on track and regain access to capital markets if it was able to generate sustainable growth in the mid- and long-term. It was important to help the country participate in a pick-up in growth in the euro zone, he added. There was no immediate comment from Athens which has called for more help and debt relief as it struggles to cope with its financial crisis and attain a budget surplus of 3.5% of economic output, excluding debt servicing outlays next year.

“You must assess whether to start a big investment programme through the European Investment Bank or maybe with the (European bailout fund) ESM… to get an additional boost (for the Greek economy),” the paper quoted Schelling as saying. “I would define a scale of one billion euros.” Schelling, seen as a possible successor to Eurogroup President Jeroen Dijsselbloem, said one project could be an investment in renewable energy to make Greece less dependent on energy imports. The European Investment Bank (EIB) launched a one billion euro credit line to Greek banks in December, mainly to be used for on-lending to small and medium sized companies and firms promoting youth employment.

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JP Morgan doesn’t understand the state the Greek economy is in.

JP Morgan Report Sees ‘Light At The End Of The Tunnel’ For Greece (Amna)

The decision reached by Eurozone finance ministers in Malta concerning Greece increases the chances of a solution for completing the second review of the Greek programme before May 22, according to a report by J. P. Morgan released on Monday. The U.S. banking and financial services giant said the decisions appears to have clarified most of the obstacles that were delaying talks for concluding the review and point to a higher possibility of a good outcome for Greece. J.P. Morgan’s central scenario, to which it gives an 85 pct probability, predicts that the next step will be the return of the institutions’ missions to Greece to finalise the technical details that will support a staff-level agreement (SLA).

If its predictions are correct, the report said, there will be great progress over the next few weeks, while the sequence of events will be the signature of the SLA, passing of the measures agreed by the Greek Parliament and the completion of the review ensuring future disbursements and further details on debt relief measures. As a part of this positive scenario, J.P. Morgan said, it was also expected that Greece will become eligible for inclusion in the ECB’s quantitative easing programme in the summer. “We give an 85 pct probability to this development. This is the most positive result for the Greek bond market and we expect that 10-year Greek bonds will have price/yield rations of about 85 euros/5.5-6 pct with this scenario,” the report says. Even if the worst of the three scenarios it has drawn up should be proved right, J.P. Morgan said that an accident leading to Grexit was extremely unlikely after last Friday’s decisions and that in its medium-term outlook on Greek bonds “the reward for the risk remains attractive.”

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Fantastic. The Automatic Earth and its very generous readers play a substantial role in this. Thank you so much for making it possible.

Refugee Community Center Set To Open On Lesvos (K.)

Just a 10-minute walk from the municipal-run camp of Kara Tepe and a bit over a half-hour from the Moria migrant camp north of Mytilene, the capital of Lesvos, a community center currently under construction on a 1.5-acre site aspires to become a magnet for individuals stranded on the eastern Aegean island by offering a wide range of activities. Run by the Swiss Cross charity, the center, which is set to open in the coming days, was built by migrants with the help of volunteers who arrived here from different parts of Europe. The project is called “One Happy Family.” The facility will provide a coffee shop (complete with nargile), a home cinema, a library and a garden.

The O Allos Anthropos (Fellow Man) group has agreed to provide about 1,000 servings of food [daily]. The entire project will cost 200,000 euros, which includes rent for the first 12 months. “The Swiss are very good at organizing, while the Greeks are good at hospitality, so great things can come out of that mix,” Achilleas Peklaris, a writer and journalist now working for Swiss Cross, told Kathimerini. After doing charity work in Thessaloniki, northern Greece, Swiss Cross moved to Lesvos, prompted by the tragic deaths of Moria camp residents living outdoors in tents in freezing conditions this past winter.

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Apr 092017
 
 April 9, 2017  Posted by at 8:32 am Finance Tagged with: , , , , , , , , ,  7 Responses »
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Paul Gauguin Avenue de Clichy 1889

 


Central Banks “Took Over” Markets In 2009; In December “Unwind” Begins (ZH)
‘No Bubble, No Pop’: Why Banks Are As Safe As Houses (WAus)
Greek Gloom As Economy Stalls Amid Latest Bout Of EU Wrangling (G.)
The Picture Of Our Economy Looks A Lot Like A Rorschach Test (NYT)
Steve Keen And Michael Hudson: Fixing The Economy (EI)
Trump’s ‘Wag the Dog’ Moment (Robert Parry)
Former DIA Colonel: “US Strikes On Syria Based On A Lie” (IntelT)
Congresswoman Tulsi Gabbard On Syria (Fox)
How Marine Le Pen Could Win (Pol.)
Privacy Experts Say CIA Left Americans Open To Cyber Attacks (IBT)
Rising Waters Threaten China’s Rising Cities (NYT)

 

 

“What do credit traders look at when they mark their books? Well, these days it is fair to say that they have more than one eye on the equity market.”

Central Banks “Took Over” Markets In 2009; In December “Unwind” Begins (ZH)

Citigroup’s crack trio of credit analysts, Matt King, Stephen Antczak, and Hans Lorenzen, best known for their relentless, Austrian, at times “Zero Hedge-esque” attacks on the Fed, and persistent accusations central banks distort markets, all summarized best in the following Citi chart… have come out of hibernation, to dicuss what comes next for various asset classes in the context of the upcoming paradigm shift in central bank posture. In a note released by the group’s credit team on March 27, Lorenzen writes that credit’s “infatuation with equities is coming to an end.” “What do credit traders look at when they mark their books? Well, these days it is fair to say that they have more than one eye on the equity market.”

Understandable: after all, as the FOMC Minutes revealed last week, even the Fed now openly admits its policy is directly in response to stock prices. As the credit economist points out, “statistically, over the last couple of years both markets have been influencing (“Granger causing”) each other. But considering the relative size, depth and liquidity of (not to mention the resources dedicated to) the equity market, we’d argue that more often than not, the asset class taking the passenger seat is credit. Yet the relationship was not always so cosy. Over the long run, the correlation in recent years is actually unusual. In the two decades before the Great Financial Crisis, three-month correlations between US credit returns and the S&P 500 returns tended to oscillate sharply and only barely managed to stay positive over the long run..

Rudolf E. [email protected]
Replying to @zerohedge
Here is a chart of the well being of the American middle-class and poor over the same period.

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“Tell a European you think there’s a housing bubble and you’ll have a reasonable discussion,” Grantham said. “Tell an Australian and you’ll have World War III…”

‘No Bubble, No Pop’: Why Banks Are As Safe As Houses (WAus)

The housing sector is therefore picking up the slack, and as far as the Westpac chair can discern the underlying demand is real. “That’s why I believe there is no bubble — there is huge demand from local and offshore buyers,” he says. “But that doesn’t mean we’re not looking at things like the capacity to pay interest and repay principal, so we don’t have any issues with the measures announced (on March 31). “APRA has its mandate; we have ours. But we have no interest in lending to people who can’t repay.” That’s the reasoned analysis from Norris and Maxsted, and Henry mostly concurs. If you’re after the full Catherine wheel experience, try taking the alternative position as a market-leading fund manager or economist and warning the public about an inflating property bubble. Legendary US investor Jeremy Grantham did just that, vowing in 2012 he would never do it again. “Tell a European you think there’s a housing bubble and you’ll have a reasonable discussion,” Grantham said. “Tell an Australian and you’ll have World War III. Been there, done that!”

Local economist Steve Keen entered the fray in 2009, likening the experience to “having my genitals cut off”, while hedge fund managers have lost so much money short-selling Australian banks because they expected the bubble to pop that it’s been called the “widow maker’s” trade. True to his word, Grantham failed to respond to an email inviting him to trigger World War III. Keen, who has relocated to Britain but was in Australia this week, has no such hesitation, saying it is abundantly clear that we’re in a debt-fuelled housing bubble that has only a year or two to run before it pops. “We’re in hock to the banks and we depend on endless rising levels of credit,” the economics professor says. “Credit can continue rising but eventually you reach a peak and the gas runs out.”

Denmark, according to Keen, reached its world-record peak in 2010 at a household debt-to-GDP ratio of 139 per cent. While Australia is currently at 123 per cent, the country has some headroom because the corporate sector has deleveraged and the RBA still has some policy ammunition with the 1.5 per cent cash rate. Keen reckons we have two years, at most, before unravelling in a similar, catastrophic way to Ireland in the financial crisis. However Phil Ruthven, the experienced forecaster and founder of IBISWorld, says low interest rates mean that debt servicing is the lowest it’s been in 50 years. “But we do need to increase supply, and we do need to warn home buyers of the dangers of going too deep into debt when interest rates are rising,” Ruthven says.

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“They no longer have the means to meet basic needs, with consumption of milk and bread right down and payment of electricity bills at an all-time low.”

Greek Gloom As Economy Stalls Amid Latest Bout Of EU Wrangling (G.)

Eight years into Greece’s ordeal to escape bankruptcy, thousands of Communist party sympathisers packed into Syntagma Square in Athens on Friday to protest at the latest concessions made by Alexis Tsipras’s leftist government to keep the country afloat. Massed before parliament in the fading light of day, they did what they had come to do: rail against the cuts that loom in return for further disbursement of the emergency aid now needed to avert economic collapse. The serial drama of Greece’s debt repayments will reach a climax again when loans of €7.5bn mature in July. That communist-aligned unionists can still muster such protests is testament to the party’s zealous determination to make itself heard. Most Greeks gave up demonstrating long ago.

Two years short of a decade in freefall, and with little prospect of recovery, the nation has succumbed to protest fatigue. With the exception of pensioners – the great losers in Greece’s assault by austerity – anger has been replaced by malaise, the lassitude that strikes when loss becomes commonplace. Friday’s protest, one of more than 60 nationwide, came within hours of Europe escaping another dose of Greek drama after eurozone finance ministers announced that bailout talks – stalled as Athens bickered over the terms of its latest compliance review with lenders – could finally resume. International auditors representing the bodies behind the three bailout packages the country has received since May 2010 are expected to return to Greece on Monday. Once technical issues are addressed, the delayed bailout payment will be disbursed, ensuring default is averted in July.

In exchange, the once fiercely anti-austerity Tsipras has signed up to further reforms worth €3.6bn, the equivalent of 2% of GDP, to be put into effect once the current programme ends next year. “It is in the nature of every agreement for there to be compromises,” said Greek finance minister Euclid Tsakalotos, who faces the thankless task of having to sell the prospect of more pension cuts and tax rises to sceptical leftists in the ruling Syriza party when it convenes on Sunday. “There are things that will upset … the Greek people.” After more than a year of hard talk and bluster – the review was meant to have been concluded in February 2016 – the government once again conceded on its own red lines, reflecting Athens’s overarching policy of keeping Greece in the heart of the eurozone. Tsipras, who fought hard to ensure countermeasures can also be taken to offset losses if economic indicators are better than expected, was quick to sound optimistic. “The Greek economy,” he announced, “is ready to leave the crisis behind it.”

But the breakthrough falls far short of the all-inclusive package the government was hoping for. Once again, promises of reducing the country’s staggering debt pile – at 180% of GDP, the biggest impediment to real economic recovery – will have to wait. [..] Unemployment has increased from 23.2% to 23.5%, with investors – the only guarantee of soaking up such an oversupply of labour – staying away. In a repeat of the chaos that beset the country’s financial system at the height of the crisis in 2015, an estimated €2.5bn of deposits left Greek banks in January and February. Consumption is also down. “The 37% of Greeks at risk of poverty and social exclusion really cannot make ends meet,” said Aliki Mouriki, a leading Greek sociologist. “They no longer have the means to meet basic needs, with consumption of milk and bread right down and payment of electricity bills at an all-time low.”

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That’s what you get for publishing made-up reports all the time, NYT.

The Picture Of Our Economy Looks A Lot Like A Rorschach Test (NYT)

Economics has a foundation in hard numbers – employment, inflation, spending – that has largely allowed it to sidestep the competing partisan narratives that have afflicted American politics and culture. But not anymore. Since Donald J. Trump’s victory in November, consumer sentiment has diverged in an unprecedented way, with Republicans convinced that a boom is at hand, and Democrats foreseeing an imminent recession. “We’ve never recorded this before,” said Richard Curtin, who directs the University of Michigan’s monthly survey of consumer sentiment. Although the outlook has occasionally varied by political party since the survey began in 1946, “the partisan divide has never had as large an impact on consumers’ economic expectations,” he said.

At the same time, familiar economic data points have become Rorschach tests. That was evident after the government’s monthly jobs report on Friday; Republicans’ talking points centered on a 10-year low in the unemployment rate, while Democrats focused on a sharp decline in job creation. “I find it stunning, to be honest. It’s unreal,” said Michael R. Strain, director of economic policy studies at the conservative American Enterprise Institute in Washington. “Things that were less politicized in the past, like how you feel about the economy, have become more politicized now.” Indeed, the night-and-day views underscore yet another front on which Americans remain polarized five months after the election, and with President Trump nearing his 100th day in office.

[..] The University of Michigan researchers have their own way of measuring the gulf between the two viewpoints and how quickly it has flipped. Among Republicans, the Michigan consumer expectations index was at 61.1 in October, the kind of reading typically reported in the depths of a recession. Confident that Mrs. Clinton would win, Democrats registered a 95.4 reading, close to the highs reached when her husband was in office in the late 1990s and the economy was soaring. By March, the positions were reversed, with an even more extreme split. Republicans’ expectations had soared to 122.5, equivalent to levels registered in boom times. As for Democrats, they were even more pessimistic than Republicans had been in October.

As at the voting booth, the split in perceptions could have real-world consequences. If behavior tracks the recession-era sentiment among Democrats, who account for 32% of respondents in the survey, prophecies could quickly become self-fulfilling by affecting spending and investing decisions. “If one-third of the population cut their consumer spending by 5%, you get a recession,” said Alan Blinder, a Princeton economist who served in the Clinton administration and advised Al Gore and Hillary Clinton on economic policy during their Democratic presidential campaigns. “I don’t think it will happen, but it’s not beyond the realm of the possible.”

To be sure, even if Democratic consumers pulled back, that wouldn’t necessarily bring on a recession. A burst of spending by bullish Republicans, who equal 27% of those polled by the Michigan researchers, could counteract much of that drag. And independents, who are the largest cohort in the survey, at 41%, remain fairly optimistic about future growth. It is rare for “rising optimism to coexist with increasing uncertainty,” said Mr. Curtin, the Michigan expert. “The current level of optimism clearly indicates that no economywide spending retrenchment is underway, but the prevailing level of uncertainty will limit growth in discretionary spending.”

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Great conversation between two great economists. Very much worth a full read.

Steve Keen And Michael Hudson: Fixing The Economy (EI)

Michael Hudson: If you don’t cancel the debts, they’re going to keep growing, and all of the growth and national income is going to go to the creditors. So the fact is that the debts aren’t owed to the “we” – the 99%. The debts are owed to the 1%. 1% of the population has 75% of the financial assets. All their growth has occurred since 1980. So the question is, who are you going to save? The economy or the banks? If you don’t cancel the debts, they’re going to keep growing, and all of the growth and national income is going to go to the creditors. When President Obama came in, he promised that he was going to write down the debts – especially the junk mortgages – to the actual real value of the homes that the junk mortgage people had taken out.

Or and set the debt service – the money you have to pay every month to pay the mortgage, amortization, and principal, and interest to what the normal rental value of this would be. Well, as soon as he was elected, he dropped it all. He invited the bankers to the White House and said, boys, I’m the only guy standing between you and the pitchforks out there. Don’t worry, I can deliver my constituency to you. So, basically, the Democratic Party broke its voters into a black constituency, a women’s constituency, a LGBTQ constituency, and they’re all for Wall Street. Instead of saving the economy, Obama bailed out and saved the banks by keeping the debts in place. And once you have to pay that, it’s curtains. In the end, everybody’s going to end up in Greece. Greece is where you’re going, if you don’t.

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“I’m hearing from sources on the ground in the Middle East, people who are intimately familiar with the intelligence that is available who are saying that the essential narrative that we’re all hearing about the Syrian government or the Russians using chemical weapons on innocent civilians is a sham.”

“People in both the agency [the CIA] and in the military who are aware of the intelligence are freaking out about this because essentially Trump completely misrepresented what he already should have known – but maybe he didn’t – and they’re afraid that this is moving toward a situation that could easily turn into an armed conflict..”

Trump’s ‘Wag the Dog’ Moment (Robert Parry)

On Thursday night, Secretary of State Rex Tillerson said the U.S. intelligence community assessed with a “high degree of confidence” that the Syrian government had dropped a poison gas bomb on civilians in Idlib province. But a number of intelligence sources have made contradictory assessments, saying the preponderance of evidence suggests that Al Qaeda-affiliated rebels were at fault, either by orchestrating an intentional release of a chemical agent as a provocation or by possessing containers of poison gas that ruptured during a conventional bombing raid. One intelligence source told me that the most likely scenario was a staged event by the rebels intended to force Trump to reverse a policy, announced only days earlier, that the U.S. government would no longer seek “regime change” in Syria and would focus on attacking the common enemy, Islamic terror groups that represent the core of the rebel forces.

The source said the Trump national security team split between the President’s close personal advisers, such as nationalist firebrand Steve Bannon and son-in-law Jared Kushner, on one side and old-line neocons who have regrouped under National Security Adviser H.R. McMaster, an Army general who was a protégé of neocon favorite Gen. David Petraeus. In this telling, the earlier ouster of retired Gen. Michael Flynn as national security adviser and this week’s removal of Bannon from the National Security Council were key steps in the reassertion of neocon influence inside the Trump presidency. The strange personalities and ideological extremism of Flynn and Bannon made their ousters easier, but they were obstacles that the neocons wanted removed.

[..] Alarm within the U.S. intelligence community about Trump’s hasty decision to attack Syria reverberated from the Middle East back to Washington, where former CIA officer Philip Giraldi reported hearing from his intelligence contacts in the field that they were shocked at how the new poison-gas story was being distorted by Trump and the mainstream U.S. news media. Giraldi told Scott Horton’s Webcast: “I’m hearing from sources on the ground in the Middle East, people who are intimately familiar with the intelligence that is available who are saying that the essential narrative that we’re all hearing about the Syrian government or the Russians using chemical weapons on innocent civilians is a sham.” Giraldi said his sources were more in line with an analysis postulating an accidental release of the poison gas after an Al Qaeda arms depot was hit by a Russian airstrike.

“The intelligence confirms pretty much the account that the Russians have been giving … which is that they hit a warehouse where the rebels – now these are rebels that are, of course, connected with Al Qaeda – where the rebels were storing chemicals of their own and it basically caused an explosion that resulted in the casualties. Apparently the intelligence on this is very clear.” Giraldi said the anger within the intelligence community over the distortion of intelligence to justify Trump’s military retaliation was so great that some covert officers were considering going public. “People in both the agency [the CIA] and in the military who are aware of the intelligence are freaking out about this because essentially Trump completely misrepresented what he already should have known – but maybe he didn’t – and they’re afraid that this is moving toward a situation that could easily turn into an armed conflict,” Giraldi said before Thursday night’s missile strike. “They are astonished by how this is being played by the administration and by the U.S. media.”

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The picture is pretty clear by now.

Former DIA Colonel: “US Strikes On Syria Based On A Lie” (IntelT)

Donald Trump’s decision to launch cruise missile strikes on a Syrian Air Force Base was based on a lie. In the coming days the American people will learn that the Intelligence Community knew that Syria did not drop a military chemical weapon on innocent civilians in Idlib. Here is what happened.

• The Russians briefed the United States on the proposed target. This is a process that started more than two months ago. There is a dedicated phone line that is being used to coordinate and deconflict (i.e., prevent US and Russian air assets from shooting at each other) the upcoming operation.

• The United States was fully briefed on the fact that there was a target in Idlib that the Russians believes was a weapons/explosives depot for Islamic rebels.

• The Syrian Air Force hit the target with conventional weapons. All involved expected to see a massive secondary explosion. That did not happen. Instead, smoke, chemical smoke, began billowing from the site. It turns out that the Islamic rebels used that site to store chemicals, not sarin, that were deadly. The chemicals included organic phosphates and chlorine and they followed the wind and killed civilians.

• There was a strong wind blowing that day and the cloud was driven to a nearby village and caused casualties.

• We know it was not sarin. How? Very simple. The so-called “first responders” handled the victims without gloves. If this had been sarin they would have died. Sarin on the skin will kill you. How do I know? I went through “Live Agent” training at Fort McClellan in Alabama.

• There are members of the U.S. military who were aware this strike would occur and it was recorded. There is a film record. At least the Defense Intelligence Agency knows that this was not a chemical weapon attack. In fact, Syrian military chemical weapons were destroyed with the help of Russia.

This is Gulf of Tonkin 2. How ironic. Donald Trump correctly castigated George W. Bush for launching an unprovoked, unjustified attack on Iraq in 2003. Now we have President Donald Trump doing the same damn thing. Worse in fact. Because the intelligence community had information showing that there was no chemical weapon launched by the Syrian Air Force. Here’s the good news. The Russians and Syrians were informed, or at least were aware, that the attack was coming. They were able to remove a large number of their assets. The base the United States hit was something of a backwater. Donald Trump gets to pretend that he is a tough guy. He is not. He is a fool.

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Tulsi is being drowned out by the trigger happy Democrats. But she actually served in the Middle East.

Congresswoman Tulsi Gabbard On Syria (Fox)

The cost of war is profound. I’m opposed to the escalation of the counterproductive regime change war in Syria because it will lead to the deaths of more innocent men, women and children. Terrorist groups like al-Qaeda and ISIS, the strongest forces on the ground in Syria, will continue to increase their strength and influence over the region in the vacuum of a central government.

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The French detest their political system even more than Americans do theirs. It’s very possible abstentions will decide the elections. And Le Pen voters WILL go to the ballot box.

How Marine Le Pen Could Win (Pol.)

Could Marine Le Pen become France’s next president? A quick look at polling trends suggests that at first blush at least, the answer is “no.” [..] But for Serge Galam, a French physicist who predicted Donald Trump’s election in the United States, polls are missing out on an important factor: abstention — and specifically, how it affects voter turnout for different candidates. He argues that abstention, which a poll by CEVIPOF showed could be as high as 30%, is likely to be decisive in a “dirty” campaign dominated by scandals. “Obviously, nothing is done yet but her election is becoming very likely,” said Galam, a researcher with the French National Center for Scientific Research who also studies public opinion at the CEVIPOF political science institute. “I’m taking a scientific view of this — she needs a turnout differential of about 20% to win.”

[..] If Le Pen is projected to lose the runoff by 41 to 59%, for example, Galam argues that Le Pen could still win if the turnout rate for her voters is 90% versus 70% for her rival, for an overall turnout rate of 79%. In other words, the National Front leader could benefit because a substantial number of people who say they will vote for her rival may not actually go to the polls. Equally, if Le Pen is projected to lose by 45 to 55% in the runoff, she could win if turnout for her is 85% versus 70% for her rival, for an overall turnout of 77%. If overall turnout is 76%, then Le Pen would need a turnout of 90% versus 65% for her rival, and so on.

Some polls have Le Pen lagging behind Macron or Fillon by more than 30 percentage points, which would make her victory near impossible. But others show her within striking distance, with a lag of less than 20 points. If she can shrink the gap, then the challenge for Le Pen will be to mobilize a greater proportion of her supporters than her rivals. In this regard, Galam argues that Le Pen has a shot. For different reasons, he says, both Macron and Fillon aroused intense feelings of “aversion” among some voters, with a large proportion of Macron voters saying they could change their mind on election day. Negative or ambivalent feelings could translate into weaker turnout for them on election day.

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Newsweek wakes up to a 2 week old report from IBT.

Privacy Experts Say CIA Left Americans Open To Cyber Attacks (IBT)

WikiLeaks release of the latest cache of confidential C.I.A. documents as part of an ongoing “Vault 7” operation exposed some of the U.S. government’s hacking and digital espionage capabilities—this time having to do with iPhones and other smart devices used by hundreds of millions of people across the globe. But cyber security experts and computers scientists are raising concerns over the C.I.A.’s disregard of safety measures put in place for discovering these dangerous flaws in smart gadgets. The federal agency has kept its discovery of many exploits (software tools targeting flaws in products, typically used for malicious hacking purposes) a secret, “stockpiling” that information rather than reporting it to multinational corporations, throwing millions of Americans into the crosshairs of a dangerous, intergovernmental spying game in the process.

“What’s critical to understand is that these vulnerabilities can be exploited not just by our government but by foreign governments and cyber criminals around the world, and that’s deeply troubling,” said Ashley Gorski, an American Civil Liberties Union staff attorney working on the civil rights group’s national security project. “Our government should be working to help the companies patch vulnerabilities when they are discovered, not stockpiling them.” The C.I.A. knew its own classified documents had been floating around the dark web for at least a year and was well aware the hacking capabilities it was using to break into everyday tech could also have been employed by hostile foreign networks. Russian President Vladimir Putin’s Kremlin reportedly orchestrated a sprawling governmental operation in an attempt to influence the 2016 U.S. presidential election, which featured several cyber attacks on email servers and devices used by members of the Democratic Party.

The government enacted the Vulnerabilities Equities Process to reduce the unnecessary stockpiling of exploits. The procedure was meant to provide guidelines for agencies like the C.I.A. for notifying companies when dangerous issues are discovered in their devices. The measure was put in place during the Obama administration to prevent cyber attacks from terrorist networks and foreign governments, including Russia and China. But the C.I.A. completely ignored the Vulnerabilities Equity Process, instead exploring ways to use exploits for their own purposes, according to the Electronic Frontier Foundation, an international nonprofit digital rights group that reviewed a copy of the practice after filing a Freedom of Information Act request. “It appears the CIA didn’t even use the [Vulnerabilities Equity Process],” said Cindy Cohn, executive director of the Electronic Frontier Foundation. “That’s worrisome, because we know these agencies overvalue their offensive capabilities and undervalue the risk to the rest of us.”

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There is so much wrong in China’s urbanization it’s hard to decide where to start.

Rising Waters Threaten China’s Rising Cities (NYT)

The rains brought torrents, pouring into basements and malls, the water swiftly rising a foot and a half. The city of Dongguan, a manufacturing center here in the world’s most dynamic industrial region, was hit especially hard by the downpour in May 2014. More than 100 factories and shops were inundated. Water climbed knee-high in 20 minutes, wiping out inventory for dozens of businesses. Next door in Guangzhou, an ancient, mammoth port city of 13 million, helicopters and a fleet of 80 boats had to be sent to rescue trapped residents. Tens of thousands lost their homes, and 53 square miles of nearby farmland were ruined. The cost of repairs topped $100 million. Chen Rongbo, who lived in the city, saw the flood coming. He tried to scramble to safety on the second floor of his house, carrying his 6-year-old granddaughter. He slipped. The flood swept both of them away.

Flooding has been a plague for centuries in southern China’s Pearl River Delta. So even the rains that May, the worst in the area in years, soon drifted from the headlines. People complained and made jokes on social media about wading through streets that had become canals and riding on half-submerged buses through lakes that used to be streets. But there was no official hand-wringing about what caused the floods or how climate change might bring more extreme storms and make the problems worse. A generation ago, this was mostly farmland. Three vital rivers leading to the South China Sea, along with a spider’s web of crisscrossing tributaries, made the low-lying delta a fertile plain, famous for rice. Guangzhou, formerly Canton, had more than a million people, but by the 1980s, China set out to transform the whole region, capitalizing on its proximity to water, the energy of its people, and the money and port infrastructure of neighboring Hong Kong.

Rushing to catch up after decades of stagnation, China built a gargantuan collection of cities the size of nations with barely a pause to consider their toll on the environment, much less the future impact of global warming. Today, the region is a goliath of industry with a population exceeding 42 million. But while prosperity reshaped the social and cultural geography of the delta, it didn’t fundamentally alter the topography. Here, as elsewhere, breakneck development comes up against the growing threat of climate change. Economically, Guangzhou now has more to lose from climate change than any other city on the planet, according to a World Bank report. Nearby Shenzhen, another booming metropolis, ranked 10th on that World Bank list, which measured risk as a percentage of GDP.


Shenzhen was transformed in a few decades from a small fishing village into a city of millions.

Read more …

Apr 082017
 
 April 8, 2017  Posted by at 8:13 am Finance Tagged with: , , , , , , , , , ,  1 Response »
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Dorothea Lange Wife of sharecropper in town to sell crop at tobacco auction, Douglas Georgia 1938

 


US Credit Card Debt Tops $1 Trillion For The First Time In A Decade (ZH)
Store Wars: US Retail Sector Is Shedding Jobs Like It’s A Recession (MW)
Apparel Retailers Lead The Charge Out Of Brick-And-Mortar (Forbes)
Wall Street Is Making It Harder to Buy a Car (BBG)
US Jobs Growth Slumps To 98,000 In March (MW)
Millions Of Americans Desperate To Trade Part-Time Work For Full-Time (MW)
Toronto Real Estate Is In A Bubble Of Historic Proportions (Rosenberg)
Rosenberg: Toronto Housing Bubble ‘On Par With What We Had In The US’ (BNN)
Could Europe Copy America’s Supersized Corporate Debt? (BBG)
Syrian Gas Attack is a Lie: “Stop Your Governments!” – Russia (FR)
US Missile Strikes in Syria Cross Russian ‘Red Lines’ (RI)
Greece On Course To Avoid Debt Default As Athens Agrees Pension Cuts (Tel.)
Letting People Drown Is Not A European Value (EUO)

 

 

On top of auto and student loans, both already well over $1 trillion. Get a fork and turn ’em over.

US Credit Card Debt Tops $1 Trillion For The First Time In A Decade (ZH)

Unlike last month’s unexpectedly week consumer credit report, which saw a plunge in revolving, or credit card, debt moments ago the Fed, in its latest G.19 release, announced that there were few surprises in the February report: Total revolving credit rose by $2.9 billion, undoing last month’s $2.6 billion drop – the biggest since 2012 – while non-revolving credit increased by $12.3 billion, for a total increase in February consumer credit of $15.2 billion, roughly in line with the $15 billion expected. However, while in general the data was uneventful, there was one notable milestone: in February, following modest prior revisions, total revolving/credit card debt, has once again risen above the “nice round number” of $1 trillion for the first time since January 2007… where it now joins both auto ($1.1 trillion) and student ($1.4 trillion) loans, both of which are well above $1 trillion as of this moment.

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It IS a recession.

Store Wars: US Retail Sector Is Shedding Jobs Like It’s A Recession (MW)

The U.S. retail industry is shedding jobs at an unparalleled pace outside of recession and stands to lose many more as the industry continues to shrink its physical footprint, a response to the shift in consumer shopping habits away from purchasing in stores and malls in favor of e-commerce. The U.S. retail sector lost 60,600 jobs in February and March, the worst two months for the sector since the tail end of 2009, according to Labor Department data. The category called general merchandise stores – Target, J.C. Penney and the like – has shed jobs for five consecutive months. Media reports have tallied more than 3,500 store closures for 2017, with retailers including J.C. Penney, Sears, Macy’s and others announcing that they are shutting doors and making job cuts.

Ralph Lauren has outlined the next phase of its turnaround effort, which includes shutting stores and cutting jobs. Bankruptcies and liquidations have also picked up, with Payless ShoeSource just this week announcing nearly 400 store closures. Wet Seal, Aeropostale, Sports Authority, and Hhgregg are among the many other retailers that have either filed for bankruptcy or liquidated. The current state of retail, which is weighed by less foot traffic, more promotions, and increased competition, particularly from Amazon.com, suggests that additional closures are on the horizon. The U.S. simply has too many stores, according to a report from Cowen & Company titled “Retail’s Disruption Yields Opportunities – Store Wars!,” which found that up to 2,000 stores should close.

“[W]e expect online penetration of apparel to increase to 35% to 40% from 20%, yielding closures of 20% at oversized chains,” the report said. Cowen analysts say there are about 1,200 malls in the U.S. and they represent about 15% of retail square footage. Cowen anticipates that up to about 20%, or 240 malls, will close or be repurposed, with anchor store closures and the rise of digital among the primary drivers.

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The Amazon bubble. Killing off America’s last remaining meeting places.

Apparel Retailers Lead The Charge Out Of Brick-And-Mortar (Forbes)

This week, Payless ShoeSource filed for bankruptcy, joining many other U.S. apparel brands, including The Limited and Wet Seal, that have sought Chapter 11 protection in recent months. These three chains alone will shutter almost 1,000 stores. Fung Global Retail & Technology estimates that all of the major U.S. store closures announced so far this year total 2,507. That total is just for announcements made in the three months through April 4, 2017, yet it already dwarfs the 1,674 store closures we recorded across major U.S. chains in all of 2016. Closures are impacting multiple sectors: electronics is represented by RadioShack, furniture and appliances by Hhgregg, office products by Staples and healthcare by CVS. Apparel, however, is leading the charge out of brick-and-mortar. We calculate that apparel retailers and department stores account for 2,060 (82%) of the 2,507 closures announced so far this year.

What can we infer from this surge in store closures? We see three principal takeaways: Weak demand for apparel persists. The most obvious conclusion from the recent bankruptcy filings is that apparel retailers continue to feel the impact of subdued consumer demand. American shoppers have been flush with cash thanks to low gas prices, but they have chosen to spend on cars and their homes rather than on fashion. The latest retail sales data from the U.S. Census Bureau show that apparel specialist stores saw a 1% year-over-year decline in sales in February. There is little reason to think shoppers will switch back to apparel as interest rates rise and if fuel prices creep up.

Second, pure-play retailing is fashionable again. Amid all the talk of omnichannel retailing and Internet pure plays opening brick-and-mortar stores, we are now seeing a trend of retailers going the opposite way, moving from operating stores to selling only online. Bebe is one such retailer that is planning to become an Internet pure play. The Limited considered a similar plan but is no longer selling online after filing for bankruptcy. Third, more retailers are facing reality. Not all store closures are being forced by bankruptcies. J.C. Penney and Macy’s, for instance, are slimming down their store networks in order to prepare for the future. We expect more retailers to join them in recognizing a need for fewer stores. Accordingly, we do not expect this year’s store-closure count to stop at 2,507.

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Just in time economy?!

Wall Street Is Making It Harder to Buy a Car (BBG)

On countless occasions in recent years, the U.S. auto industry has relied on cheap and easy credit from Wall Street to get it through rough patches. Not this time. With both bad loans and interest rates on the rise, financial institutions are becoming more selective in doling out credit for new-car purchases, adding to the pressure for automakers already up against the wall with sliding sales, swelling inventories and a used-car glut. “We’ve been having a party for a few years and it was fun,” said Maryann Keller, an industry consultant in Stamford, Connecticut. “Now lenders are getting back to basics.” Many figure they have to. For one thing, subprime borrowers have been falling behind on their car-loan payments at a rate not seen since just after the 2008 financial crisis.

Delinquencies for auto debt of all stripes have been climbing, with the value of those behind for at least 30 days swelling to $23.3 billion in December, a 14% jump from a year earlier, according to the Federal Reserve. This helps explain why 10% of senior bank-loan officers said they expect to pull back on extending credit to car buyers this year, according to a Fed survey. Expectations are that terms will toughen for loans the vast majority of Americans need to buy new vehicles as the Fed boosts benchmark rates. “There are only so many people wanting a new car and only so much capital available,” said Daniel Parry, CEO of Praxis Finance and co-founder of Exeter Finance, a subprime lender. “Manufacturers and lenders will have to reset to reduced volume levels.”

The reset has already started, with auto sales dipping in each of the first three months of the year. In March, the annualized pace, adjusted for seasonal trends, slowed to 16.6 million from 16.7 million a year earlier, according to Autodata Corp. Analysts had projected it would accelerate to about 17.2 million. Now Goldman Sachs economists figure there’s only demand for about 15 million per year, they said in an April 4 report. The industry set a record by selling 17.6 million cars and trucks in 2016 and has been on a seven-year growth streak. But General Motors, Ford and others had to pile on discounts and incentives to keep the expansion going, with both their finance arms and third-party lenders giving them a boost with easy credit. “This has come full circle,” Keller, the consultant, said. “We’ve created an auto market of 17.5 million vehicles based on accommodating credit. There will be consequences.”

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Whaddaya think? Yup, weather.

US Jobs Growth Slumps To 98,000 In March (MW)

The U.S. created just 98,000 new jobs in March to mark the smallest gain in almost a year, a sign the labor market is not quite as strong as big hiring gains earlier in 2017 suggested. The unemployment rate, meanwhile, fell to 4.5% from 4.7% and touched a nearly 10-year low despite the slowdown in hiring. U.S. stocks ended the session pretty much where they started as investors sifted through the March employment report. The U.S. had added more than 200,000 jobs in January and February, but hiring in weather-sensitive industries such as construction was helped by unusually high temperatures in the dead of winter.

Many economists were skeptical the recent pace of job creation was sustainable after a six-year hiring boom that chopped the unemployment rate in half and ignited growing complaints among companies about a shortage of skilled workers to fill open jobs. As a result, economists polled by MarketWatch had estimated the number of new jobs created in March would taper off to 185,000 in the third month of Donald Trump’s young presidency. Instead the decline was even steeper, speared by plunging employment in a beleaguered retail industry. “The 200,000-plus numbers reported for job gains in January and February always seemed a bit outlandish,” said Steven Blitz, chief U.S. economist at TS Lombard. Added economist Harm Bandholz of UniCredit: “Most of this is weather related and correct for exaggerated strengths seen earlier in the year.”

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It’s going so well, get me come shades.

Millions Of Americans Desperate To Trade Part-Time Work For Full-Time (MW)

Millions of Americans don’t want to work part-time. The U.S. economy added just 98,000 jobs in March, the smallest gain in nearly a year, after adding more than 200,000 jobs in January and February. Economists predicted that the number of jobs created in March would hit 180,000, so the actual figures fell far short of that. Unemployment fell to a 10-year-low of 4.5% in March from 4.7% in February, but the “real” unemployment rate that includes part-time workers who would rather work full-time and job hunters who gave up searching for work was 8.9%, although this was also down from 9.2% in February. Part-time work is still a contentious alternative for many workers. On Thursday, Amazon said it will create 30,000 part-time jobs in the U.S. over the next year, nearly double the current number. Of those, 25,000 will be in warehouses and 5,000 will be home-based customer service positions.

Amazon said in January it would create 100,000 full-time jobs over the next 18 months, according to a separate announcement made in January. Last year, Amazon’s world-wide workforce grew by 48% to 341,400 employees. In the U.S., it has over 70 “fulfillment centers” and 90,000 full-time employees. There were some 5.6 million involuntary part-time workers in March 2017, little changed from the month before, but down from 6.4 million a year earlier, according to the Bureau of Labor Statistics. That number is up from 4.5 million in November 2007, but way off a peak of 8.6 million in September 2012. These figures are almost entirely due to the inability of workers to find full-time jobs, leaving many workers to take or keep lower-paying jobs, according to the Economic Policy Institute, a nonprofit think-tank in Washington, D.C. And 54% of the growth in these involuntary part-time jobs between 2007 and 2015 were in retail, leisure and hospitality industries, the EPI said.

[..] Perhaps not surprisingly, involuntary part-time workers tend to earn less than their voluntary part-time counterparts. Approximately 40% of involuntary part-time workers report a total family income of less than $30,000, compared with just 18% of the latter and 29% of the population as a whole, according to an earlier report published in 2015 by Rutgers University. More than four out of every five involuntary part-time workers says it’s hard to save for retirement and about seven out of every 10 say they earn less money than they and their family need to get by and pay bills.

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It’s too late to gently deflate.

Toronto Real Estate Is In A Bubble Of Historic Proportions (Rosenberg)

The concerns about froth in Toronto’s housing market are not likely to subside given the sticker-shock from the latest report from the Toronto Real Estate Board. As per the March report, the average single-detached house in the Greater Toronto Area (GTA) sold for $1,214,422 last month up from $910,375 in March of last year – that is a 33% YoY surge, and follows a 16% run-up over the prior 12 months. Whatever the term is for an acceleration in an already parabolic curve, well, that is what we have on our hands today. And it isn’t just detached homes seeing this degree of rapid price appreciation — the benchmark single-family home selling price was up 29% YoY, the benchmark townhouse price was up 28% and the condo/apartment composite was up 24%. This is a bubble of historic proportions.

Not only to have home prices in the GTA now absorb an unprecedented 13 years of median family income, but to have 30%-ish run-ups against a backdrop of a 2% inflation rate, wages that are barely going up 2% as well, and nominal GDP growth of around 4%. This should put 30% into some sort of perspective when we conclude that what we have on our hands is a near three standard deviation event. That alone qualifies as a bubble — if you don’t like that term, then call it a giant sud. In the past, Toronto home prices went up at an annual rate of 4% in real terms, in the past year they have surged by nearly 30%. [..] it goes without saying that if the name of the game is to tame the flame then have the foreign investor share the blame. A tax on foreign transactions, as was already done in Vancouver, seems like a pretty good idea.

And the government can at the very least use the revenues to either provide greater tax incentives to build and/or provide tax relief for the low/mid income entry-level buyer who is struggling to cobble together the funds for a down payment. So yes, in this sense, I would be advocating a Robin Hood style of economic policy. Indeed, what may be needed is a very progressive tax on foreign buying of local residential real estate in the bid to cool demand and reverse the exponential surge in home prices – a surge that is creating tremendous social problems by crowding out young families (or individuals) from chasing the homeownership dream (a typical response is for these folks is to go out and buy a condo instead, but the reality is that average prices here have also skyrocketed 24% in the past year and are in a bubble of their own).

Everyone says that the Bank of Canada cannot raise interest rates to curb the excess demand because of the deleterious effect this would have on the economy writ large (for example, taking the Canadian dollar back up to or above 80 cents which would thwart our export competitiveness which has become a longstanding role of the central bank). Be that as it may, the home price surge in the GTA over the past year has impaired homeowner affordability to such an extent that it is basically the equivalent of the Bank of Canada having raised rates 150 basis points – actually a 200 basis point increase if you were to look at what home prices have done to affordability ratios over the past two years …

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“Where home prices are in Toronto, they absorb 13 years of average family income. That is completely abnormal. We’ve never seen this before.”

Rosenberg: Toronto Housing Bubble ‘On Par With What We Had In The US’ (BNN)

Gluskin Sheff Chief Economist David Rosenberg is joining the growing chorus of calls for government intervention into the Toronto housing market. In an interview on BNN, Rosenberg, who correctly called the U.S. housing bubble in 2005, said the massive deviation from historical norms has him drawing comparisons between the two situations. “This bubble is on par with what we had in the States back in ’05, ’06, ’07,” he said. “We have to actually take a look at the situation. The housing market here is in a classic price bubble. If you don’t acknowledge that, you have your head in the sand.” Rosenberg warned unchecked increases in home prices are becoming a social issue. “It’s not an equity, it’s not a bond – it’s where people live,” he said. “Where home prices are in Toronto, they absorb 13 years of average family income. That is completely abnormal. We’ve never seen this before.”

Rosenberg said he’d be singing a different tune if price increases were running in line with any of the usual economic fundamentals, such as job growth, rising incomes, or nominal GDP growth. “We’re out of equilibrium, and when we’re out of equilibrium, or there’s some sort of market failure, are there grounds there for government intervention? I think even the most ardent libertarian would say ‘yes,’” he said. Rosenberg said there are a trio of levers the government can pull to cool down the market. Authorities can address supply, which he said has already been “kiboshed.” Interest rates can be raised, but Rosenberg doesn’t believe the Bank of Canada will do that. Or new policy can be drafted to address the prevalence of speculation.

“These are not prices driven by the local fundamentals – this is the foreign buyer coming in,” Rosenberg said. “Toronto has really emerged as a first-class city, not just politically, not just culturally and economically, but also in terms of being a major financial centre. But if you’re going to ask me at this stage, ‘do we need to approach taxation of this capital coming in differently to curb the demand?’ [That’s] absolutely right.”

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In a word: YES.

Could Europe Copy America’s Supersized Corporate Debt? (BBG)

Unilever CEO Paul Polman must have had one eye focused across the Atlantic when he unveiled his revamp of the consumer goods giant this week. And not just because erstwhile suitors 3G Capital, Kraft Heinz and Warren Buffett will have been watching. In an effort to appease shareholders, Polman also ripped a couple of pages from any U.S. CEO’s post-crisis playbook: load more debt on the balance sheet and buy back lots of your own shares. So Unilever will lift its net debt to Ebitda ratio from 1.3 to 2 and buy back 5 billion euros ($5.3 billion) of stock.In Europe, that counts as relatively bold. Faced with anemic economic growth since the global financial crisis, non-financial companies here have typically been reluctant to take on more debt, as the chart below shows.

They’re also far less likely to buy back stock: U.S. corporations repurchased more than $530 billion of stock last year. In Europe the total was a fraction of that.Polman seems to have belatedly recognized the obvious: having a lightly geared balance sheet makes a company vulnerable to a takeover. That’s especially true if the buyer is holding dollars and your stock is priced in relatively cheap euros or pounds.

Of course there’s an argument what Polman is doing is common sense. Debt is cheap compared to equity, so Unilever’s balance sheet is simply becoming more efficient. Having more debt shouldn’t pose a problem for Unilever as its earnings power is considerable. People still need to buy soap and deodorant, even in a recession.Still, this sets a rather uncomfortable precedent. Polman rebuffed Kraft Heinz’s $143 billion bid in part because he’s no fan of financial engineering. It would be a shame if other European companies now drew the conclusion that to remain independent they need to indulge in some financial engineering of their own. Especially if they load up on too much debt just as the current economic cycle starts to look long in the tooth.

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She’s crystal clear.

Syrian Gas Attack is a Lie: “Stop Your Governments!” – Russia (FR)

On April 7th, US warships delivered an illegal blow to a Syrian airbase in Homs. Their justification was the recent “chemical weapon” attack on behalf of the Syrian government in Idlib. The Kremlin condemned the strike as an act of aggression against a sovereign state, and a violation of international law. Meanwhile, at the UN, representatives of Western governments attempt to push through a resolution that is based on information taken out of thin air. It includes the removal of Assad, whether or not he was behind the attack.

It is noteworthy, that the only real source of information on what took place, are the videos made by the White Helmets, an infamous propaganda organisation as it pertains to the Syrian civil war. In this clip, Maria Zakharova calls on Western respresenatives/ journalists to hear Russia, and what it has to say. The attack against the Syrian government, much like the Ghouta gas attack in 2013, which precipitated the Syrian civil war, is a giant facade for the military industrial warhawks in the US, to put their money where their mouth is.

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“Putin has a cool mind and we may anticipate that the Russian response will come at a time of his choosing and in a manner that is appropriate to the seriousness of the U.S. offense. Look for this before the end of the month.”

US Missile Strikes in Syria Cross Russian ‘Red Lines’ (RI)

My days as apologist for Donald Trump’s backsliding on his electoral campaign promise of a new direction in foreign policy are over. From being the solution, he has become an integral part of the problem. And with his bigger than life ego, petulance and stubbornness, Commander-in-Chief Trump is potentially a greater threat to world peace than the weak-willed Barack Obama whom he replaced. Trump has ignored Russian calls for an investigation into the alleged chemical gas attack in Idlib province before issuing conclusions on culpability, as happened within hours of the event. He has accepted a narrative that is very possibly a false flag produced by anti-government rebels in Syria, disseminated by the White Helmets and other phony NGO’s paid from Washington and London.

He ordered the firing of 50 or more Tomahawk missiles against a Syrian Government air base in Homs province, thereby crossing all Russian “red lines” in Syria. Until this point, the Kremlin has chosen not to react to all signs coming from Washington that Trump’s determination to change course on Russia and global hegemony was failing. The wait-and-see posture antedated Trump’s accession to power when Putin overruled the dictates of protocol and did not respond to Obama’s final salvo, the seizure of Russian diplomatic property in the U.S. and the eviction of Russian diplomats. The Russians also looked the other way when the new administration continued the same Neocon rhetoric from the tribune of the UN Security Council and during the visits of Vice President Pence, Pentagon boss Mattis and Secretary of State Tillerson to Europe.

However, the missile attack in Syria is a game changer. The pressure on Vladimir Vladimirovich Putin to respond in kind is now enormous. Putin has a cool mind and we may anticipate that the Russian response will come at a time of his choosing and in a manner that is appropriate to the seriousness of the U.S. offense. Look for this before the end of the month. In the meantime, we who have been hoping for a change of direction, for the rooting out of the Neocons and Liberal hawks directing the Deep State should drop what we are doing, and help form a grass roots political statement that Donald Trump and the political establishment will hear loud and clear.

A mass letter-writing campaign to Congress and the White House? A march on Washington? One way or another, the White House must be told that arranging foreign policy moves out of purely domestic calculations, such as likely happened yesterday puts the nation’s very existence at risk. Acting tough, striking out at Russia and its allies, is not the way to form a coalition to pass a tax reform act. The same may be said of an alternative reading of the missile attack yesterday: that it was intended as a message to visiting Chinese President Xi that should there be no joint action to restrain North Korea, the United States will act alone and with total disregard for international law. Either logic in the end is a formula for suicide.

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I predict very large demonstrations, and quite possibly more violent ones. This could well be the end of Tsipras, and of SYRIZA; there’s no credibility left. They should have fought for the people.

Greece On Course To Avoid Debt Default As Athens Agrees Pension Cuts (Tel.)

Greece is on course to avoid a debt default this summer after creditors reached a deal with Athens on reforms including pension cuts and tax changes that will continue until the end of the decade. Jeroen Dijsselbloem, who leads the group of eurozone finance ministers, said creditors had reached an agreement in principle on the “size, sequencing and timing” of Greek reforms. The agreement also paves the way for the IMF to join the country’s third, €86bn bail-out programme. The Eurogroup chief said “significant progress” had been made in all areas, with debt inspectors expected to return to Greece shortly to “put the last dots on the ‘i’s and to reach a full staff-level agreement as soon as possible”.

A final agreement among finance chiefs will unlock a fresh tranche of rescue funds, enabling Athens to pay back around €6bn to creditors in July, including the ECB. “We’ve solved all the big issues,” said Mr Dijsselbloem. “The big blocks have now been sorted out and that should allow us to speed up and go for the final stretch.” The measures, which include controversial cuts to pensions and a widening of the tax base, amount to 2pc of Greek GDP in 2019 and 2020. Greece will be able to implement “parallel expansionary measures” if the economy is strong enough, said Mr Dijsselbloem. He said discussions on medium-term debt relief would not be discussed at a political level until a full agreement is reached and approved by the Greek government, which has a slim majority.

The pension cuts are likely to spark a fresh wave of protests across the country. Euclid Tsakalotos, the Greek finance minister, said austerity measures would be legislated “in the coming weeks”. “There are things that will upset the Greek people,” he said. Mr Tsakalotos said the government would also adopt stimulus measures in parallel, which will be “activated” if Athens meets its fiscal targets. Gerry Rice, a spokesman at the IMF, welcomed the “important progress” made in recent weeks, but said it still needed “satisfactory assurances” on debt sustainability before the Fund would seek board approval to participate in Greece’s third rescue programme.

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There is so much in the way of international law and UN conventions to protect refugees, but none of it has any meaning in Brussels.

Letting People Drown Is Not A European Value (EUO)

595. A nice round number, right? It refers to the dead and missing in the central Mediterranean, mostly between Libya and Italy, in the first three months of 2017. The known dead died from drowning, exposure, hypothermia, and suffocation. Horrible, agonising deaths. 24,474. This is a nicer number. It refers to the women, men, and children who made it safely to Italy this year, all of them plucked from flimsy, overcrowded boats by European vessels. Many were rescued by teams from nongovernmental organisations patrolling international waters just off Libya, where most migrant boats depart. Those groups – including Doctors Without Borders (MSF), Migrant Offshore Aid Station (MOAS), SOS Mediterranee, Proactiva Open Arms, Sea-Watch and others – are now being accused of encouraging boat migration. Or worse, of collusion with people smugglers.

The EU border agency, Frontex, has suggested that the presence of rescue operations by nongovernmental groups is a pull factor, encouraging people to take the dangerous journey in hopes of rescue. A prosecutor in Catania, Sicily, has opened an inquiry into the funding streams for these groups, indicating a suspicion that they may be profiting illicitly from the movement of people in search of safety and better lives. This is the latest cruel twist in the EU’s response to boat migration from Libya. It reflects concern over increasing numbers of people embarking from Libya, the strain on the reception system in Italy and beyond, and the rise of xenophobic populism in many EU countries. But blaming the lifesavers ignores history, reality, and basic morality.

As MSF’s Aurelie Ponthieu explained, the NGO group rescuers are not “the cause but a response” to an ongoing human tragedy. Even before the significant increase in numbers in 2015, tens of thousands of people have been risking their lives in unseaworthy boats in the Mediterranean for decades; almost 14,000 have died or been reported missing since 2011. After the October 2013 Lampedusa tragedy, in which 368 people lost their lives, there was increased talk among organisations about mounting rescue missions in the central Mediterranean. In 2015, that became a reality, in large part because the end of the Italian navy’s humanitarian rescue mission Mare Nostrum and the gaps in its poor replacement by the EU border agency Frontex. People embark on these dangerous journeys for myriad reasons; they are fleeing persecution, violence, and poverty, and moving toward freedom, safety, and opportunity.

Both pull and push factors are always in play when people are on the move. Insofar as more freedoms, liberties, and policies grounded in respect for human rights – including vital rescue-at-sea operations – serve as pull factors, these should not be sacrificed in the name of limiting migration. The presence of EU vessels just off Libyan waters has changed the dynamic of boat migration. There is more hope of rescue, and smugglers have adopted even more unscrupulous tactics like using inflatable (throw-away) Zodiacs instead of wooden boats and providing only enough fuel to reach international waters. But to question the humanitarian imperative of rescue at sea is to discard our most basic respect for life. And the logic of those who criticise the rescue operations as a pull factor is that the groups should stop rescuing people and let them drown to discourage others from coming.

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