Jul 262017
 
 July 26, 2017  Posted by at 9:24 am Finance Tagged with: , , , , , , , , ,  4 Responses »
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Jackson Pollock Greyed Rainbow 1953

 

The Rise And Fall Of The Property-Owning Democracy (FCFT)
Case-Shiller Home Prices Disappoint But Hit New Record High (ZH)
Australian Housing Affordability the Worst in 130 Years (Soos/David)
There Are More ‘Zombie’ Companies In Europe Now Than Pre-Lehman (CNBC)
Netherlands and UK Are Biggest Channels For Corporate Tax Avoidance (G.)
US Sanctions Have Taken A Big Bite Out Of Russia’s Economy (CNBC)
The Value of Everything (Jim Kunstler)
Bolivia’s President Declares ‘Total Independence’ from World Bank and IMF (AHT)
Germany Fails To Honour Its Part Of The Greek Bailout Deal (Bilbo)
Insolvent Greece Goes To Market 2.0 (Varoufakis)
Nine Out Of 10 People Call For ‘Plastic-Free Aisle’ In Supermarkets (Ind.)
Sperm Counts In The West Plunge By 60% In 40 Years (Ind.)

 

 

The article is somewhat confusing to me, bear of little brain and unpopular in China. But it’s good to make the point that bubbles spark poverty.

The Rise And Fall Of The Property-Owning Democracy (FCFT)

Sometime in the late 1980s, a friend who was on the libertarian right of the Conservative Party explained the idea of the property-owning democracy to me. The point, he said, was to detach the respectable working class from their poorer neighbours, encourage them to identify with the middle-class and thereby turn them into Tories. It worked for a while. Middle earners had been doing relatively well since the 1970s and home ownership was within the reach of many once mortgages became more readily available. Helped along by cheap council house sales, home ownership rose. In recent years, though, things have started shifting back the other way. The property-owning democracy is now looking like a one-off event rather than the ongoing process it was meant to be. Property analyst Neal Hudson pointed out that, as a proportion of all tenure, home ownership peaked in 2003 but mortgage ownership peaked in 1996. As older property owners paid off their housing debts, they were not being replaced at the same rate by new mortgagors.

[..] As the Resolution Foundation comments: The typical mortgagor AHC income is now twice that of the typical social renter, and over the past decade this income has grown by 17% compared to just 4% growth for the typical private renter. Even more than was the case before the financial crisis, the living standards split between those who own their own home and those who do not has become a key divide. While the proportion of households owning their own homes has fallen generally, that decline has been sharper among those on low to middle incomes. (Defined by the Resolution Foundation as working-age households with someone in work but with less than the median household income.) In the mid 1990s, over half of those on low to middle incomes were mortgagors. Now that has fallen to a third. Over the same period, private renting among this group rose.

Last week’s report on poverty and inequality by the Institute for Fiscal Studies notes that most of those in poverty (defined as income less than 60% of the median) are now from households where someone is in work. “[R]elative poverty among children and working-age adults has increased and, over the past 20 years or so, has increasingly become an in-work phenomenon due to declines in worklessness, low earnings growth and widening earnings inequality.”

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What bubble?

Case-Shiller Home Prices Disappoint But Hit New Record High (ZH)

Great news ‘Murica – your house has never been worth more than it was in May (according to Case-Shiller’s national home price index). On the slightly less silver-lining side of the equation, April’s 0.28% gain in price was revised to 0.18% MoM drop and May’s proint disappointed at just 0.1% rise MoM. The 20-city property values index increased 5.7% y/y (est. 5.8%). All cities in the index showed year-over-year gains, led by a 13.3% advance in Seattle, an 8.9% increase in Portland and a 7.9% gain in Denver.

After seasonal adjustment, Seattle had the biggest month-over-month increase, at 0.9%, while New York posted a 0.6% decline. “Home prices continue to climb and outpace both inflation and wages,” David Blitzer, chairman of the S&P index committee, said in a statement. “The small supply of homes for sale, at only about four months’ worth, is one cause of rising prices. New home construction, higher than during the recession but still low, is another factor in rising prices.”

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Just keep paying the piper.

Australian Housing Affordability the Worst in 130 Years (Soos/David)

The astronomical bubble in Australian housing prices has generated plenty of commentary regarding the current lack of affordability. This state of affairs clearly concerns aspiring home buyers everywhere, and Sydney and Melbourne in particular. First home buyers (FHBs) face almost insurmountable odds: the highest price to income and deposit to income ratios, the lowest savings rates, runaway dwelling prices, weak wage growth, including a political and economic establishment hell-bent on ensuring land prices keep on inflating no matter the wider cost to the economy. The legion of vested interests – basically 99% of commentators – choose to contend housing is actually more affordable today than back in the days of high mortgage interest rates, especially when rates peaked at 17% in 1989.

This is demonstrated by the standard mortgage payment to household income formula shown above, assuming 80% loan to value ratio (LVR). Their contention is bogus, however, because the metric is a static one, displaying mortgage payments to income at a particular point in time. The peak in 1989, for instance, is very high if, and only if, prices, interest rates and incomes remain constant over the life of the mortgage. Yet, these variables change by the next period. So, a more dynamic approach is required to assess housing affordability. The correct method was advocated by Glenn Stevens in 1997, Guy Debelle in 2004 and other economists like Dean Baker, who identified the US housing bubble and predicted the Global Financial Crisis in 2002. The important factor to consider is the effect wage inflation has upon mortgage payments.

While high mortgage interest rates result in large mortgage payments relative to income, this only occurs in the early years of the mortgage as high wage growth inflates away the burden. In contrast, borrowers facing high housing prices with low interest rates and poor wage growth face a greater burden across the life of the mortgage due to greater payments to income. This housing affordability analysis is applied to long-term annual data between 1880 and 2016, anchored to the median house price at an LVR of 80% at the start of each decade thereon. While data on mortgage interest rates and wage growth for the years after 2016 cannot be known, they are assumed to hold still at the present rates: 5.4% for the mortgage interest rate and 1.4% for wages. The following chart illustrates the outcome of applying this method, demonstrating the proportion of aggregate mortgage payments to household income over the 25 years of the mortgage. The results are overpowering.

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Well, that’s what Draghi’s QE guarantees.

There Are More ‘Zombie’ Companies In Europe Now Than Pre-Lehman (CNBC)

The ECB needs to beware of raising interest rates too quickly as there are a significant number of “zombie firms” in Europe that have become too dependent on cheap credit, according to analysis by the Bank of America Merrill Lynch. Barnaby Martin, head of European Credit Strategy at BofA Merrill Lynch, said businesses in Europe which have benefited from the ECB’s corporate bond purchase program would struggle once the bank raises interest rates, expected sometime in 2018. “The worst kept secret in the market is Mario Draghi is going to be tapering monetary policy next year and yet last week he was super, super dovish so I think that we’ve forgotten that monetary policy in Europe is on its way out,” he told CNBC on Tuesday, adding “there’s clearly political pressure for him to move away from this extraordinary era.”

“So the question becomes ‘can we handle a rapid rise in interest rates?’,” he said. ECB stimulus measures as part of its quantitative easing program designed to boost the European economy currently amount to €60 billion ($69.9 billion) a month. Some of this money goes into purchasing corporate bonds. While these purchases have enabled companies to continue to operate and invest, aiding a recovery in the European economy, the bank’s purchases have been credited for keeping ailing companies alive, hence the name “zombies.” The ECB started purchasing corporate bonds in June 2016 as part of its “corporate sector purchase program” (CSPP) and, as of June 7, 2017, its CSPP holdings stood at €92 billion, the bank said.

In a note examining “The rise of the Zombies” BofA Merrill Lynch’s credit strategists Martin, Ionnis Angelakis and Souhair Asba noted that 9% of non-financial companies in Europe (by market cap of Stoxx 600) are zombies, with “very weak interest coverage metrics.” “Note that this is still quite a high number: It was around 6% pre-Lehman, and fell to 5% in late 2013 after the peripheral crisis had faded,” they said. “The plethora of monetary support in Europe over the last 5 years has allowed companies with weak profitability to continue to refinance their debt and stave off defaults.” The analyst team also noted that bond issuance had been concentrated in “the hands of a few.” “Year-to-date, the top 20 bonds issuers have accounted for 40% of supply. In 2015 and 2016, the number was closer to 25%. The result has been that “superfirms” have been quietly building across the credit market,” they noted.

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“The Netherlands says they won’t let the UK be an offshore tax haven. That’s because they don’t want them taking their business.”

Netherlands and UK Are Biggest Channels For Corporate Tax Avoidance (G.)

Almost 40% of corporate investments channelled away from authorities and into tax havens travel through the UK or the Netherlands, according to a study of the ownership structures of 98m firms. The two EU states are way ahead of the rest of the world in terms of being a preferred option for corporations who want to exploit tax havens to protect their investments. The Netherlands was a conduit for 23% of corporate investments that ended in a tax haven, a team of researchers at the University of Amsterdam concluded. The UK accounted for 14%, ahead of Switzerland (6%), Singapore (2%) and Ireland (1%). Every year multinationals avoid paying £38bn-£158bn in taxes in the EU using tax havens. In the US, tax evasion by multinational corporations via offshore jurisdictions is estimated to be at least $130bn (£99bn) a year.

The researchers reported that there were 24 so-called “sink” offshore financial centres where foreign capital was ultimately stored, safe from the tax authorities. Of those, 18 are said to have a current or past dependence to the UK, such as the Cayman Islands, Bermuda, the British Virgin Islands and Jersey. The tax havens used correlated heavily to which conduit country was chosen by the multinational’s accountants. The UK is a major conduit for investments going to European countries and former members of the British Empire, such as Hong Kong, Jersey, Guernsey or Bermuda, reflecting the historical links and tax treaties enjoyed by firms setting up in Britain. The Netherlands is a principal conduit for investment ending in Cyprus and Bermuda, among others. Switzerland is used as a conduit to Jersey. Ireland is the route for Japanese and American companies to Luxembourg.

[..] Dr Eelke Heemskerk, who led the research, said that the work showed the importance of developed countries cleaning up their financial sectors. He said: “In the context of Brexit, where you have the UK threatening, unless they get a deal, to change their model to be attractive to companies who want to protect themselves from taxes, well, they are already doing it. “The Netherlands says they won’t let the UK be an offshore tax haven. That’s because they don’t want them taking their business.”

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Russia’s getting an invaluable lesson in self-suffciency. There’s nothing like it.

US Sanctions Have Taken A Big Bite Out Of Russia’s Economy (CNBC)

Congress moved Tuesday to step up sanctions on a shrinking Russian economy that is already struggling under the weight of low oil prices, high inflation and a battered currency that has sent capital fleeing. In response to Moscow’s interference in the 2016 U.S. presidential election, the House voted overwhelmingly to tighten existing economic sanctions imposed in 2014 following the Russian invasion of Crimea. Among other things, the measures freeze assets and prohibit transactions with specific Russian companies and individuals, restrict financial transactions with Russian firms, and ban certain exports that are used in oil and gas exploration or have possible military uses.

Those 2014 U.S. sanctions were paired with related measures imposed by the European Union, which placed restrictions on business with Russia’s financial, defense and energy sectors. Today, Russia’s economy is still feeling the harsh impact of those measures, which coincided with a crash in global oil prices that cut deeply into revenues from the country’s main export. The loss of oil revenues – a drop of as much as 60%, according to a 2017 Congressional Research Service report — helped spark a collapse in Russia’s currency, the ruble, sending the prices of Russian consumer goods soaring. The Russian economy has also been hurt by a wave of capital flight out of the country, as individual Russians sought to move money offshore and convert their shrinking rubles to dollars and euros to protect their wealth. That money flow slowed in 2014 as U.S. and European sanctions took hold.

Though U.S. sanctions have put pressure on the Russian economy, the impact on American business has been limited because Russia makes up less than 1% of U.S. exports. Only six U.S states count Russia as a significant market for goods and services. Washington, the most reliant, sells roughly 1% of its total exports to Russia, consisting mostly of machinery and farm products. That’s half the level before the 2014 sanctions took effect. European nations, which export greater volumes to Russia than the U.S., imposed their own set of sanctions response to the Crimean annexation.

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“The floundering non-elite masses have not learned the harsh lesson of our time that the virtual is not an adequate substitute for the authentic..”

The Value of Everything (Jim Kunstler)

We are looking more and more like France on the eve of its revolution in 1789. Our classes are distributed differently, but the inequity is just as sharp. America’s “aristocracy,” once based strictly on bank accounts, acts increasingly hereditary as the vapid offspring and relations of “stars” (in politics, showbiz, business, and the arts) assert their prerogatives to fame, power, and riches — think the voters didn’t grok the sinister import of Hillary’s “it’s my turn” message? What’s especially striking in similarity to the court of the Bourbons is the utter cluelessness of America’s entitled power elite to the agony of the moiling masses below them and mainly away from the coastal cities. Just about everything meaningful has been taken away from them, even though many of the material trappings of existence remain: a roof, stuff that resembles food, cars, and screens of various sizes.

But the places they are supposed to call home are either wrecked — the original small towns and cities of America — or replaced by new “developments” so devoid of artistry, history, thought, care, and charm that they don’t add up to communities, and are so obviously unworthy of affection, that the very idea of “home” becomes a cruel joke. These places were bad enough in the 1960s and 70s, when the people who lived in them at least were able to report to paying jobs assembling products and managing their distribution. Now those people don’t have that to give a little meaning to their existence, or cover the costs of it. Public space was never designed into the automobile suburbs, and the sad remnants of it were replaced by ersatz substitutes, like the now-dying malls. Everything else of a public and human associational nature has been shoved into some kind of computerized box with a screen on it.

The floundering non-elite masses have not learned the harsh lesson of our time that the virtual is not an adequate substitute for the authentic, while the elites who create all this vicious crap spend millions to consort face-to-face in the Hamptons and Martha’s Vineyard telling each other how wonderful they are for providing all the artificial social programming and glitzy hardware for their paying customers. The effect of this dynamic relationship so far has been powerfully soporific. You can deprive people of a true home for a while, and give them virtual friends on TV to project their emotions onto, and arrange to give them cars via some financing scam or other to keep them moving mindlessly around an utterly desecrated landscape under the false impression that they’re going somewhere — but we’re now at the point where ordinary people can’t even carry the costs of keeping themselves hostage to these degrading conditions.

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The kind of independence that tends to be bad for a man’s health.

Bolivia’s President Declares ‘Total Independence’ from World Bank and IMF (AHT)

Bolivia’s President Evo Morales has been highlighting his government’s independence from international money lending organizations and their detrimental impact the nation, the Telesur TV reported. “A day like today in 1944 ended Bretton Woods Economic Conference (USA), in which the IMF and WB were established,” Morales tweeted. “These organizations dictated the economic fate of Bolivia and the world. Today we can say that we have total independence of them.” Morales has said Bolivia’s past dependence on the agencies was so great that the IMF had an office in government headquarters and even participated in their meetings. Bolivia is now in the process of becoming a member of the Southern Common Market, Mercosur and Morales attended the group’s summit in Argentina last week.

Bolivia’s popular uprising known as the The Cochabamba Water War in 2000 against United States-based Bechtel Corporation over water privatization and the associated World Bank policies shed light on some of the debt issues facing the region. Some of Bolivia’s largest resistance struggles in the last 60 years have targeted the economic policies carried out by the IMF and the World Bank. Most of the protests focused on opposing privatization policies and austerity measures, including cuts to public services, privatization decrees, wage reductions, as well the weakening of labor rights. Since 2006, a year after Morales came to power, social spending on health, education, and poverty programs has increased by over 45%.

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A tour de force by Bill Mitchell. Germany’s profiting so much off of Greece’s despair that it can hide its own economic pitholes with it.

Germany Fails To Honour Its Part Of The Greek Bailout Deal (Bilbo)

Effectively the “German Federal Government – through KfW” is providing funds to Greece as part of the bailout. On May 20, 2014, the KfW issued a further press statement – Institution for Growth in Greece (IfG) – which further details the way in which German government bailout support is channeled through the KfW. For example, in relation to the “three planned IfG sub-funds … The Hellenic Republic and KfW — on behalf of the German Federal Government — will each contribute EUR 100 million in funding debt to this sub-fund.” Clear enough. The Süddeutsche Zeitung article says that since 2010, these loans granted to Greece through the KfW have generated 393 million euros of interest income net of refinancing costs [..] A handy sum. And what is more – the profits generated have not been transferred to the Greek government.

Further gains were made on the Greek bailouts via the ECB’s Securities Market Program (SMP), which has generated German gains of around $€952 million, through ECB distributions of the profits to the Member State central banks. A similar story appeared in the English-version of the Handelsbatt next day (July 12, 2017) – Germany Profits From Greek Debt Crisis. It essentially sourced the Süddeutsche Zeitung and made the story more accessible (repeating it in English). It says that: “The German government has long been accused by critics of profiting from Greece’s debt crisis. Now there are some new numbers to back it up: Loans and bonds purchased in support of Greece over nearly a decade have resulted in profits of €1.34 billion for Germany’s finance ministry.”

The issue became public because the Greens parliamentary representatives have challenged the morality of the German government’s decision not to redistribute the profits and the role played by the KfW. The Greens representative was reported as saying that: “The profits from collecting interest must be paid out to Greece … Wolfgang Schäuble cannot use the Greek profits to clean up Germany’s federal budget …” It has long been claimed that “Greece’s crisis has helped” Schäuble keep the German fiscal balance in surplus. The KfW have been part of that. We knew back in 2015 that the KfW was helping the Finance Ministry generate fiscal surpluses.

On March 5, 2015, the German daily newspaper Rheinische Post published a report – So geht es den Griechen wirklich – presented a summary of a 40-page document that the German Finance Ministry had provided in response to a demand for information from the Linksfraktion (German Left Party Die Linke). The Finance Ministry document conceded that: “Between 2010 to 2014, the KfW has paid out around 360 million euro in revenues to the German government and in the coming years the federal government is expecting around 20 million euro per year on interest revenues.”

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The Greek economy is worse than ever, but now people trust it?

Insolvent Greece Goes To Market 2.0 (Varoufakis)

Why do I refuse to be impressed by the news of Greece’s return to the markets? “It is because the Greek state and the Greek banks remain deeply insolvent. And, their return to the money markets is a harbinger of the next terrible phase of Greece’s crisis, rather than a cause for celebration”. The above was my answer in a BBC interview on 9th April… 2014! It is also the only answer that fits today’s announcement of Greece’s new bond issue. Indeed, why script a new article, when that old post offers a most helpful response to the question: “What should the world think of Greece’s new bond issue?”

The only thing I need to add to these circa 2014 posts is this: The Tsipras government today is simply rolling over precisely the same bond that the Samaras-Venizelos-Stournaras government issued in 2014 – the subject matter of my criticism above. This is a remarkable U-turn by Mr Tsipras and his ministers. In 2014 they had sided entirely with my criticism of the then government’s argument that Greece’s return to the markets, with the issue of that one bond, was a sign the country was achieving escape velocity from the gravitational pull of its debt-deflationary crisis. Now, they are not only parroting the same arguments as Samaras-Venizelos-Stournaras but they are, lo and behold, rolling over the same bond! I rest my case.

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It’s not that hard.

Nine Out Of 10 People Call For ‘Plastic-Free Aisle’ In Supermarkets (Ind.)

Nine out of 10 people want supermarkets to introduce a “plastic-free aisle”, according to a new poll amid rising concern about pollution. The survey – of 2,000 British adults by Populus – was commissioned by campaign group A Plastic Planet, which said it was clear that the public wanted an alternative to “goods laden with plastic packaging”. Evidence of the synthetic substance’s harmful effects on the natural world is growing. Since 1950, humans have produced 8.3 billion tons of the stuff, with 6.3 billion tons being sent to landfill sites or simply being dumped in what scientists described as an “uncontrolled experiment” on the planet. Plastic, which acts like a magnet for toxic chemicals in the environment, breaks down into tiny pieces that are capable of passing through animals’ gut walls and into their body tissue.

The UN warned in a report last year that “the presence of microplastic in foodstuffs could potentially increase direct exposure of plastic-associated chemicals to humans and may present an attributable risk to human health”. A third of seabirds in the North Sea were also found to be suffering “widespread breeding failure”, largely because of plastic waste. The new poll found 91% of people supported aisles free from plastic packaging and 81% said they were concerned “about the amount of plastic packaging that is thrown away in the UK”. Sian Sutherland, a co-founder of A Plastic Planet, said: “It’s becoming increasingly clear that the Great British public wants a fresh alternative to goods laden with plastic packaging. Too much of our plastic waste ends up in oceans and landfill.

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Am I a bad person for thinking that maybe this isn’t such a bad thing? Who wants more of us?

I like the term “semen parameters”. Name for a band. Double billing with Pussy Riot.

Sperm Counts In The West Plunge By 60% In 40 Years (Ind.)

Sperm counts have plunged by nearly 60% in just 40 years among men living in the West, according to a major review of scientific studies that suggests the modern world is causing serious damage to men’s health. Pesticides, hormone-disrupting chemicals, diet, stress, smoking and obesity have all been “plausibly associated” with the problem, which is associated with a range of other illnesses such as testicular cancer and a generally increased mortality rate. The researchers who carried out the review said the rate of decline had showed no sign of “levelling off” in recent years. The same trend was not seen in other parts of the world such as South America, Africa and Asia, although the scientists said fewer studies had been carried out there.

One expert commenting on the study said it was the “most comprehensive to date”, and described the figures as “shocking” and a “wake-up call” for urgent research into the reasons driving the fall. Writing in the journal Human Reproduction Update, the researchers – from Israel, the US, Denmark, Brazil and Spain – said total sperm count had fallen by 59.3% between 1971 and 2011 in Europe, North America, Australia and New Zealand. Sperm concentration fell by 52.4%. “Sperm count and other semen parameters have been plausibly associated with multiple environmental influences, including endocrine disrupting chemicals, pesticides, heat and lifestyle factors, including diet, stress, smoking and body-mass index,” the paper said. “Therefore, sperm count may sensitively reflect the impacts of the modern environment on male health throughout the life course.”

Read more …

Jul 242017
 
 July 24, 2017  Posted by at 8:40 am Finance Tagged with: , , , , , , , , ,  1 Response »
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Jackson Pollock The She Wolf 1943

 

We Are Now In The Frightening Endgame (Egon von Greyerz)
China’s Dollar Debt Specter Haunts Fed’s Policy Meetings (R.)
Federal Reserve Faces Prospect Of Global Monetary Policy Tightening (R.)
Bank of Japan Dot Plot Paints a Pessimistic Picture of Inflation (BBG)
European Banks Struggle To Solve Toxic Shipping Debt Problem (R.)
Saudi Economic Pain Will Test Resolve of Prince’s Reform Push (BBG)
While Hammond Looks For A Magic Money Tree, Labour Has Found One (G.)
Strip Mining the World (Robert Gore)
Alexis Tsipras: ‘The Worst Is Clearly Behind Us’ (G.)
European and African Ministers Discuss Plan To Tackle Flow Of Refugees (G.)
The Strange Similarity of Neuron and Galaxy Networks (Vazza & Feletti)

 

 

Sorry for you lovely summer day, but it’s time to get serious. Excellent read. “The gullibility of people today is exacerbated by the power of the internet and social media.”

We Are Now In The Frightening Endgame (Egon von Greyerz)

“Stock investors are rejoicing about stock markets making new highs in many countries, totally oblivious of the risks or the reasons. It seems that this is an unstoppable rally in a “new normal” market paradigm. No major increase is expected in the inflation rate or the historically low interest rates. The present rally has lasted 8 years since the 2009 low. There is virtually no fear in the stock market so investors see no reason why this favorable climate would not continue for another 8 years at least. Yes, of course it could. All that is needed is that governments worldwide print another $20-50 trillion at least and that global debt goes up by another $200-500 trillion. “The gullibility of people today is exacerbated by the power of the internet and social media. Anything we read is accepted as fact or the truth, while a major part of it is just fake news.

[..] The power of the internet and other media has facilitated spreading news and propaganda to billions of people and very few can distinguish if they hear or read “real” news or “fake” news. Anyone in government is incapable of telling the truth. Automatically when someone assumes an elected position their Pinocchio nose grows extremely long since their entire purpose is then to be all things to all people in order to be re-elected. This is why virtually no elected official has a backbone nor any morals or principles. Because if they had, telling the truth would make them unelectable.

[..] The system we now have is based on Fake News, Fake Money with no morals, no principles and no moral or ethical values. In spite of, or more correctly because of, all the lawyers, government legislation, compliance and regulations, the financial system is today functioning much worse than ever with more fraud, more government intervention and more manipulation of markets. Also, clients today are secondary. Instead, it is all about lining the pockets of the bankers with their multi-billion dollar deals and multi-million dollar bonuses and options. As we experienced in 2006-9, profits are for the bankers and losses for governments and customers. During that time of the Great Financial Crisis, many Investment Bankers received the same bonuses during the crisis years as before, in spite of the fact that most of them would have gone under without the government support they benefitted from to the extent of $25 trillion.

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Yellen is lost in China. How can they keep the dollar low in the face of this? And how long for? Trump likes it, China needs it. But the numbers say no.

China’s Dollar Debt Specter Haunts Fed’s Policy Meetings (R.)

In September 2015, the U.S. Federal Reserve cited risks from China as a key reason for delaying its first interest rate hike in a decade. A wall of Chinese debt maturing in the next few years could jolt the country back into the U.S. central bank’s policy deliberations. Two years ago, it was a collapse in Chinese stocks, a surprise yuan devaluation and shrinking foreign exchange reserves that roiled financial markets that delayed the Fed, but it did raise rates three months later and has tightened further since. Now, some see risks emerging in China’s dollar-denominated bonds that could give the Fed greater pause for thought as it raises rates, even as other central banks signal a shift from ultra-easy policy. To be sure, Fed officials have not publicly flagged China’s debt as a major risk in their policy discussions.

However, debt analysts point to the possibility of another September 2015 moment in which the Fed takes its cues from concerns about China. “Back then, I said that U.S. monetary policy is not made in Washington, it’s made in Beijing,” said Joachim Fels, global economic advisor at bond giant PIMCO. “China does have a major impact on monetary policies elsewhere … This year has been smooth sailing for global central banks because there were no shockwaves from China but I expect that to change if we think beyond the next few months.” The outstanding amount of dollar bonds issued by Chinese entities has grown almost 20 times since the 2008-09 global financial crisis to just over half a trillion dollars, according to data from the Bank for International Settlements.

Since September 2015, it has grown almost 50%. China’s dollar bonds are now almost a third of the emerging market total dollar issuance, up from a quarter in September 2015 and less than 5% before the Fed first began printing money in December 2008. A fifth of China’s dollar bonds mature within a year, according to BIS data. More than half are due in the next five, Thomson Reuters data show. If U.S. borrowing costs start rising as a result of the Fed’s exit from its unconventional monetary policy, that debt would have to be rolled over at higher costs, chipping away at the real economy in China. Alternatively, Chinese companies might decide to refinance their debt in local currency, creating weakening pressure on the yuan.

Either development would reverberate globally and create a major external challenge for Fed policy. For its part, the Fed doesn’t see any immediate dangers with China’s dollar debt. “You’ll find if you look at China they certainly have dollar-denominated debt but … you’ll see that they are not as reliant on external debt as people might have thought,” Dallas Fed chief Robert Kaplan said in Mexico City on Friday. Also, a significant portion of Chinese dollar borrowing makes economic sense – such as companies funding overseas investment projects. And if those dollars are converted into yuan, they could help ease any weakening pressure on the Chinese currency.

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They’re stuck. Nobody wants to admit it, but they are. One way out: a huge crisis, so they can put the blame there.

Federal Reserve Faces Prospect Of Global Monetary Policy Tightening (R.)

Prospects for tighter monetary policy in Europe and other countries could pose a fresh problem for the Federal Reserve when it meets next week to ponder its plan to reduce its $4.2 trillion bond portfolio purchased after the 2008 financial crisis. The Fed bought U.S. Treasuries and mortgage-backed securities (MBS) for about six years in a program known as “quantitative easing” which kept interest rates at record lows to spur borrowing and economic recovery. But at its June meeting this year, as well as raising interest rates for the third time in six months, the Fed also announced a plan to begin by letting $6 billion a month in Treasuries mature without reinvestment and to increase that amount at three month intervals up to $30 billion. Similarly, the Fed said it would run down its agency debt and mortgage backed securities by $4 billion a month until it reaches $20 billion.

Now, the ECB also appears likely to decide later this year on when to scale back its monthly bond purchases. When ECB President Mario Draghi first hinted at the prospect last month, world bond yields rose sharply for a while. Moreover, Canada’s central bank raised interest rates for the first time in seven years this month, and the Bank of England is expected to raise rates next year to combat rising inflation. The Fed led the way in tightening monetary policy as the global economy recovered from the 2008 recession but must now determine how plans by other central banks’ plans may affect their own policy. While a stronger European economy has been welcomed by the Fed, lessening risks to the global economy, a move by major central banks to all tighten monetary policy simultaneously has not been seen for a decade.

“The effects of ECB tapering are not limited” to euro zone countries, Cornerstone analyst Roberto Perli wrote recently. Draghi’s comments in June drove up 10-year Treasury yields US10YT=RR by the most since the U.S. election last November, and a move by the ECB to stop printing money could prompt the Fed to slow its plans for fear that financial conditions would tighten too fast. When Fed policymakers meet on July 25-26 they will need to decide a start date for reducing their bond holdings or leave more time to evaluate what Fed Governor Lael Brainard recently cited as a possible “turning point” in global monetary policy that may affect economic growth.

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The failure of Abenomics is taking on comical forms.

Bank of Japan Dot Plot Paints a Pessimistic Picture of Inflation (BBG)

Even a quick glance at the Bank of Japan’s latest inflation forecasts makes for disappointing reading. The BOJ pushed back its timetable for hitting 2% price gains for a sixth time since Governor Haruhiko Kuroda took over. And it cut its estimates for core CPI for this fiscal year and the next two. A close look at the individual projections of the board’s nine members released after its July 19-20 policy meeting is cause for even more pessimism. Eight of them see risks “tilted to downside” for their price forecast for fiscal 2019 – the year when the BOJ currently hopes to reach its inflation goal. Put another way, the chances of prices dropping below forecast are way higher than beating it. Downward pointing triangles in the dot plot below represent estimates from board members who see downside risks to their projection while circles indicate risks are evenly balanced.

There are no upward pointing triangles giving reason for optimism. When the BOJ released its previous dot plot in April, there were only six downward triangles for 2019. Kuroda said it’s “regrettable” that the BOJ has had to repeatedly push back the timing of when it will reach the inflation goal, while repeating that he still sees momentum to get there eventually. “The BOJ seems to be losing a lot of confidence in its inflation outlook,” Chotaro Morita, chief rates strategist at SMBC Nikko Securities, wrote in a report Friday. So what does this mean for policy? According to former BOJ executive director Hideo Hayakawa, the delay to fiscal 2019 is an acknowledgment that the central bank will continue stimulus even beyond 2020, as it’s very unlikely the BOJ would start cutting stimulus at the same time as the government makes a planned increase to the sales tax.

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Grossly overbuilt. No easy way out: “an estimated capital shortfall of $30 billion this year.”

European Banks Struggle To Solve Toxic Shipping Debt Problem (R.)

Dutch shipowner Vroon is finding talks with banks tough going as it tries to navigate a way out of a long slump in the shipping industry. But it is not an easy time for the lenders either. Vroon, a 127-year-old family-owned group which operates about 200 vessels and transports livestock, oil and other commodities, wants to extend its credit lines and adjust repayment schedules. But European banks that lent heavily to the sector when it boomed more than a decade ago have a heavy toxic debt burden following the 2008-09 global financial crisis and a shipping markets crash in 2010. Shipping firms and banks are caught in a vicious circle of debt, causing a credit crunch that is hindering the industry’s recovery. Overcapacity – a glut of available ships for hire – is a big concern, and another is a lack of profitability caused by problems such as slower demand and global economic turmoil.

One of the major companies, South Korean container line Hanjin, has gone under. “We have difficulty in meeting all repayment obligations that we have and that is what we are in discussion with our banks about. Those discussions are constructive but are not easy — not for us, or the banks,” Herman Marks, the chief financial officer at Vroon, told Reuters. “It is the lack of profitability for the industry that is causing the lack of availability of finance.” Shipping finance sources say the shipping industry, which transports 90% of the world’s goods including oil, food and industrial products such as coal and iron ore, has an estimated capital shortfall of $30 billion this year. Some banks are being driven out of shipping and those that remain are now more conservative in their financing, Marks said. “It is an industry that requires consolidation,” he added.

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One day we will know how poorly Saudi is doing. But not now.

Saudi Economic Pain Will Test Resolve of Prince’s Reform Push (BBG)

Saudi Arabia’s drive to reduce the economy’s reliance on oil has hit a snag: its reliance on oil. More than a year after the kingdom’s dominant leader, Crown Prince Mohammed bin Salman, unveiled a blueprint for the post-oil era, the drop in crude prices is making economists more skeptical about whether some of the plan’s medium-term targets can be met. The reason: lower oil revenue deprives the government of money needed to balance its books by 2020 while trying to stimulate growth to ease the transition’s burden on the population. IMF data released Friday underscored the challenge. The fund lowered its forecasts for Saudi economic growth this year to “close to zero.” Analysts at Citigroup, EFG-Hermes and Standard Chartered see a bleaker picture, expecting the economy to shrink for the first time since the global financial crisis in 2009.

Deeper economic pain will test the authorities’ resolve to pursue tough reform measures as they seek to go against the run of history, which suggests that successful diversification efforts depended largely on policies put in place before a price shock. “Unless you start seeing some economic growth drivers kicking in, which would really have to come from the government and would require higher oil prices, the pace of fiscal reforms would likely remain slower than in 2016,” when authorities cut spending and lowered costly subsidies, Monica Malik, chief economist at Abu Dhabi Commercial Bank, said in an interview. “We see the possibility of having a very low growth or stagnant economic environment with the deficit still remaining high,” she said. “This is a key risk.”

Brent crude prices have declined 15% this year to $48 a barrel, well below the level that the kingdom needs to balance its budget, as producers grapple with how to eliminate a global supply glut. Under an accord between OPEC and other major producers, Saudi Arabia has cut its output. The IMF revised its forecast for Saudi growth this year to 0.1% from 0.4%. And while it now expects non-oil GDP to grow 1.7% after stalling last year, the new figures compare with an earlier estimate of about 2%.

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Transaction tax. It will come.

While Hammond Looks For A Magic Money Tree, Labour Has Found One (G.)

If Hammond is to find money for higher public spending without increasing borrowing, he will either have to ditch government plans to reduce personal and corporate taxes or find new sources of revenue. One option would be for the government to embrace the idea of a financial transaction tax, AKA the Robin Hood tax. This idea, fleshed out in detail last week by Prof Avinash Persaud at an event in London, ticks all the right boxes. Persaud’s starting point is that Britain already has a financial transaction tax, and has had one for more than 300 years. It is called stamp duty, which is levied on the purchase of shares issued by British companies, and raises just over £3bn a year, half of it from citizens of other countries. Some trading activities are exempt from stamp duty and Persaud believes these exemptions should be restricted.

He also proposes that the tax should be broadened to cover transactions in corporate bonds and cash flows arising from equity and derivative transactions. He estimates that this would raise £4.7bn a year. One argument against a financial transaction tax is that it would lead to fewer transactions and so would not raise any money. Persaud said he accepted that the tax would change behaviour (indeed, that is part of the reason for having one), but that he had already made allowances for the reduction in activity in his calculations. If there was no change in behaviour, the tax would raise £13bn a year. Nor does he accept that a tougher stamp duty regime would lead to a relocation of business. Liability for the tax would depend on where the financial instruments were issued and who owned them.

A US investor, for example, would pay the tax on shares issued in the UK, but not on securities traded in the UK but not issued there. Likewise, a British investor would pay the tax on securities wherever they were issued and traded. Persaud, himself a former banker, thinks big finance is a bit of a racket. If a company wants to raise money in the City, the charges amount to 2% of the trade – a rate unchanged in more than 100 years. Put another way, all the efficiency gains since the late 19th century have been captured by those who run the industry rather than shared with the customers. It is hard to think of any other sector where this is true.

The Treasury has always been opposed to a financial transaction tax, in large part due to its institutional capture by the City. Official attitudes would change, though, with a Labour government. Why? Because Persaud’s presentation was organised by the Labour party and he was introduced by the shadow chancellor. While Spreadsheet Phil is looking for a magic money tree, John McDonnell has already found one.

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Can’t beat a good rant.

Strip Mining the World (Robert Gore)

The government is a strip mining operation, plundering the dwindling residual value of a once wealthy America. Forget ostensible justifications, policy is crafted to allow those who control the government to maximize their take and put the costs on their victims, leaving devastation in their wake. Wars are no longer about defending the country or even making the world safe for democracy. They are about appropriations, not to be won, but profitably prolonged. The Middle East and Northern Africa have been a mother lode. You would think their sixteen-year war in backward and impoverished Afghanistan would be a shameful disgrace for the military and the intelligence agencies. It’s not. They’ve milked that conflict for all its worth, and now brazenly talk about a “generational war”: many more years of more of the same.

We can also look forward to generational wars in Iraq, Syria, Libya, and Yemen. The strip miners are agitating for an Iranian foray. That’s got Into The 22nd Century written all over it, a rich, multi-generational vein, perhaps America’s first 100-year war. The only rival for richest mother lode is medicine. Health care is around 28% of the federal budget, defense 21%. Medical spending no longer cures the sick; it’s the take for insurance, pharmaceutical, and hospital rackets. The US spends more per capita on health care than any other nation (36% more than second-place Switzerland) but quality of care ranks well down the list. In education there is the same gap between per capita spending (the US ranks at or near the top) and value received, in this instance as measured by student performance.

What’s paid is out of all proportion to what’s received, especially at a time when computer and communications technology should be driving down the costs of education across the board. Indoctrination factories formerly known as schools, colleges, and universities dispense approved propaganda. For students, higher education is now on the government-sponsored installment plan. There’s a litany of excuses why Johnny, Joan, Juan, Juanita, Jamal and Jasmine can’t read, compute, or think, but lack of funding and student loans don’t wash. Education dollars fund teachers’ unions, their pensions, administrators, and edifice complexes; learning is an afterthought. This vein will play out as the pensions funds, and the governments that have swapped promises to fund them for educators’ votes, go bankrupt. Probably around the same time as the student loan bubble pops.

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Tsipras is trying to put the blame on Varoufakis. He won’t find that an easy road, even if many Greeks agree. And no, the worst is not behind either him or Greece.

Alexis Tsipras: ‘The Worst Is Clearly Behind Us’ (G.)

Today, Tsipras wants to dwell neither on Varoufakis – blamed widely by Greeks for the bungled “game of chicken” that led to the EU and IMF enforcing the harshest austerity measures yet – nor his nemesis, Germany’s finance minister, Wolfgang Schäuble. “Yanis is trying to write history in a different way,” he allows himself to say. “Perhaps the moment will come when certain truths are told … when we got to the point of reading what he presented as his plan B it was so vague, it wasn’t worth the trouble of even talking about. It was simply weak and ineffective.” Far from being a hate figure, Varoufakis held Schäuble in high esteem, Tsipras says. “I think he was his alter ego. He loved him. He respected him a great deal and he still respects him.”

Attempting to set the record straight, Tsipras says that while the Syriza government’s original strategy was one of collision politics – “in line with our mandate” – quitting the single currency, and by extension the EU, was never in question, even in the white heat of crisis when Athens was days away from default. “Leave Europe and go where … to another galaxy?” he quips. “Greece is an integral part of Europe. Without it, what would Europe look like? It would lose an important part of its history and its heritage.” Besides, Grexit would have amounted to acceptance of the “punishment plan” concocted by Schäuble that foresaw Athens taking “time out” of the bloc.

Compromise was the only option, says Tsipras, likening the measures that came with it to a ghastly medicine endured when life is at stake. “You hold your nose, you take it … You know that there is no other way … because you have tried everything else to survive, to stay alive.” Despite the firestorm of criticism he now endures, non-Greek observers say, the once firebrand leader has also shown courage in implementing policies he evidently loathes. Tsipras has managed to persuade many of those opposed to austerity to swallow the bitter pill that has kept Greece in the family of nations it has long identified with. The scenario of a “left parenthesis”, peddled by political enemies at the start of his tenure, has been put to rest.

[..] Ultimately, the great clash between Athens and the lenders keeping Greece afloat will be what is left imprinted on the collective memory, but Tsipras’s legacy, he says, will rest on something else. “It will be that I managed to take the country out of the bog in which it had been led by those who bankrupted it … and move ahead with a programme of deep reform.” That, at least, is the hope. For Greece has become an unpredictable place and, as with history itself, there are no straight lines. “No one,” he says, “can ever be sure that the crisis won’t come back.”

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They found a new term: regularize. As in: regularized refugees. This can only go horribly wrong.

European and African Ministers Discuss Plan To Tackle Flow Of Refugees (G.)

European and African ministers are to meet in Tunis on Monday to discuss a plan to try to regularise the flow of refugees from Africa to Europe to about 20,000, coupled with a much tougher strategy to deport illegal migrants from Italy and break up smuggling rings. The plan to regularise the migrant flow is being pushed by the UNHCR, the UN refugee agency, which warns that EU efforts to train the Libyan coastguard along with Italy’s intention to impose a new code of conduct on NGO rescue ships operating in the Mediterranean do not match the scale of the problem, or recognise the extent to which the flow of refugees and migrants is likely to become permanent. The aim is to set up screening systems for EU-bound migrants in countries en route to Libya, such as Mali, Niger, Burkina Faso, Ethiopia, Chad and Sudan.

The EU at a meeting in July set aside enough cash for 40,000 regularised refugees, with as many as half coming from claimants in Syria, and the remainder from Africa. Although the European commission has struggled to persuade all countries to take migrants after a similar scheme set up in following the 2015 migration crisis from Syria, the new scheme would represent a form of solidarity, and provide Italy with some relief. Italy is gripped by deep political and civil divisions on the issue, with more than 90,000 migrants reaching Italy from Libya this year. A reduction to 20,000 from Africa would represent a transformation.

Explaining the thinking, Vincent Cochetel, UNHCR’s new special envoy to the central Mediterranean, said: “We need to regularise the system and stop these dangerous journeys into Libya. Any remedy that focuses on trying to stop the flow of migrants at sea, such as a code of conduct for a NGOs, cannot be the solution. The issue has to be addressed earlier in the countries of origin and transit. “Italy also needs to be able to process claimants so the economic migrants are returned much more quickly, or else there will be no deterrent to travel to Italy. Only a third of the migrants reaching Italy are found to be in need of international protection.” He added that by the time migrants reached Libya it was often too late.

It is thought there are 300,000 Africans from outside Libya trying to get across to Europe or to get some work in Libya. They are living in Libyan detention centres or in warehouses or so-called “connection houses” in the hands of traffickers. The refugees need to be taken out of Libya and these detention centres so they can be processed elsewhere.

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Self-similarity. The ultimate fractals.

The Strange Similarity of Neuron and Galaxy Networks (Vazza & Feletti)

The total number of neurons in the human brain falls in the same ballpark of the number of galaxies in the observable universe.

Christof Koch, a leading researcher on consciousness and the human brain, has famously called the brain “the most complex object in the known universe.” It’s not hard to see why this might be true. With a hundred billion neurons and a hundred trillion connections, the brain is a dizzyingly complex object. But there are plenty of other complicated objects in the universe. For example, galaxies can group into enormous structures (called clusters, superclusters, and filaments) that stretch for hundreds of millions of light-years. The boundary between these structures and neighboring stretches of empty space called cosmic voids can be extremely complex. Gravity accelerates matter at these boundaries to speeds of thousands of kilometers per second, creating shock waves and turbulence in intergalactic gases.

We have predicted that the void-filament boundary is one of the most complex volumes of the universe, as measured by the number of bits of information it takes to describe it. This got us to thinking: Is it more complex than the brain? So we—an astrophysicist and a neuroscientist—joined forces to quantitatively compare the complexity of galaxy networks and neuronal networks. The first results from our comparison are truly surprising: Not only are the complexities of the brain and cosmic web actually similar, but so are their structures. The universe may be self-similar across scales that differ in size by a factor of a billion billion billion.

The task of comparing brains and clusters of galaxies is a difficult one. For one thing it requires dealing with data obtained in drastically different ways: telescopes and numerical simulations on the one hand, electron microscopy, immunohistochemistry, and functional magnetic resonance on the other. It also requires us to consider enormously different scales: The entirety of the cosmic web—the large-scale structure traced out by all of the universe’s galaxies—extends over at least a few tens of billions of light-years. This is 27 orde
rs of magnitude larger than the human brain. Plus, one of these galaxies is home to billions of actual brains. If the cosmic web is at least as complex as any of its constituent parts, we might naively conclude that it must be at least as complex as the brain.

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Jul 172017
 
 July 17, 2017  Posted by at 9:37 am Finance Tagged with: , , , , , , , , ,  3 Responses »
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Willem de Kooning Woman III 1953

 

Donald Trump Approval Rating At 70-Year Low (G.)
China Blacklists Winnie the Pooh (CNBC)
Private Equity Fund Once Valued at $2 Billion Is Now ‘Nearly Worthless’ (R.)
The Credit Bubble Only Seems To Blow Larger And Larger (Exp.)
United Arab Emirates Behind Hacking Of Qatari Media That Incited Crisis (AP)
Australia Moves To Dial Down Financial Stability Risks In Home Loans (R.)
EU: May Should Make Corbyn Part Of Brexit Negotiating Team (Ind.)
China: Ghost Cities and Ghost Recovery (Snider)
IMF To Insist On ‘Unsustainable Debt’, Says Greek Banks Need €10 Billion (K.)
Greek Taxpayers Have A Mountain Of Taxes To Climb (K.)
Other EU Nations Are Inviting Rich Greeks (K.)

 

 

Had to include this one just for the headline. Anything goes at the Guardian. And it’s a WaPo poll, so who cares? Still, did they poll him when he was a baby? But good for Trump that he’s been more popular all his life than he is now. Only way is up?!

Donald Trump Approval Rating At 70-Year Low (G.)

Donald Trump’s approval rating has plunged in a national poll, published on Sunday, that charts Americans’ perceptions of a stalling domestic policy agenda and declining leadership on the world stage. The Washington Post/ABC News poll, which put Trump’s six-month approval rating at a historic 70-year low, came amid mounting controversy over Russian interference in the 2016 election. It emerged on Saturday that Trump’s campaign committee made a payment to the legal firm representing the president’s eldest son almost two weeks before a meeting between Trump Jr and a Russian lawyer promising compromising information on Hillary Clinton was made public.

Trump now has a 36% approval rating, down six points from his first 100 days’ rating. The poll found that 48% believed America’s leadership in the world is weaker than before the billionaire took office, while support for Republican plans to replace Barack Obama’s Affordable Care Act was at just 24% compared with 50% who support the former president’s signature healthcare policy. Trump, who has spent the weekend at his private golf club in Bedminster, New Jersey, attempted to downplay the poll’s findings. On Sunday morning he used Twitter to claim, incorrectly, that “almost 40% [approval] is not bad at this time” and that the poll in question had been “just about the most inaccurate around election time!”.

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And while we’re selecting for headlines…

Wait, I just saw another one (not really a headline, but worth citing): “Today could be a good day to sell your tulips.”

China Blacklists Winnie the Pooh (CNBC)

Winnie the Pooh has been blacked out from Chinese social media in the lead-up to the country’s 19th Communist Party Congress this fall, the Financial Times reported Sunday. No official explanation was given, but the FT cited observers who said the crackdown may be related to past comparisons of the physical appearance of President Xi Jinping to the fictional bear. One observer said “talking about the president” appeared to be among activities deemed sensitive ahead of the upcoming party congress, when leadership renewal is expected. The following year, the comparison was extended to Xi’s meeting with Japanese Prime Minister Shinzo Abe, who was pictured as Eeyore, the sad donkey, alongside the bear.

Comparisons between Xi and Disney-owned Winnie the Pooh first circulated in 2013 during the Chinese leader’s visit with then U.S. President Barack Obama. A photo of Xi standing up through the roof of a parade car, next to a picture of Winnie the Pooh in a toy car, was named the “most censored image of 2015” by political consultancy Global Risk Insights. The FT report said posts with the Chinese name of the portly character were censored on China’s Twitter-like platform Sina Weibo. A collection of animated gifs featuring the bear were also removed from social messaging app WeChat, according to the FT.

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Why am I thinking we’ll see many more of these stories? It ain’t fun if it’s YOUR pension fund.

Private Equity Fund Once Valued at $2 Billion Is Now ‘Nearly Worthless’ (R.)

Wells Fargo and a number of other lenders are negotiating to take control of a hedge fund previously valued at more than $2 billion that is now worth close to nothing, according to a report from the Wall Street Journal. EnerVest, a Houston private equity firm that focuses on energy investments, manages the private equity fund that focused on oil investments. The fund will leave clients, including major pensions, endowments and charitable foundations, with at most pennies on the dollar, WSJ reported. The firm raised and started investing money beginning in 2013 when oil was trading at around $90 a barrel and added $1.3 billion of borrowed money to boost its buying power. West Texas Intermediate crude prices closed at $46.54 a barrel on Friday. “We are not proud of the result,” John Walker, EnerVest’s co-founder and chief executive, wrote in an email to the Journal.

Only seven private – equity fund s worth more than $1 billion have ever lost money for investors, according to data from investment firm Cambridge Associates cited in the report. Among those of any size to end in the red, losses greater than around 25% are extremely rare, though there are several energy-focused fund s in danger of doing so, according to public pension records. Clients included the J. Paul Getty Trust, John D. and Catherine T. MacArthur and Fletcher Jones foundations, which each invested millions in the fund , according to their tax filings, the Journal reported. Michigan State University and a foundation that supports Arizona State University also disclosed investments in the fund. The Orange County Employees Retirement System was also an investor and has reportedly marked the value of its investment down to zero.

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Story of our lives: “The Bank is trapped between rock-bottom rates and a hard place. So are the rest of us.”

The Credit Bubble Only Seems To Blow Larger And Larger (Exp.)

The decision by the Bank of England and other central bankers to slash interest rates to near zero after the financial crisis may have averted financial meltdown, but only by triggering another debt binge. British household debt recently soared to a record high of more than £1.5 trillion, after growing at the fastest pace since before the credit crunch, according to The Money Charity. The Bank of England is now forcing banks to strengthen their financial position by another £11.4 billion in the face of rapid growth in borrowing on credit cards, car finance and personal loans, up another 10 per cent over the last year. Record low mortgage rates have also driven house prices to dizzying highs.

The average UK property now costs 7.6 times earnings, more than double the figure 20 years ago, squeezing the next generation off the property ladder. The problem is getting more acute as rising inflation is pushing the Bank ever closer to hiking base rates for the first time in a decade. It needs to do something to deter yet more borrowing, and to offer some hope for hard-pressed savers. Its dilemma is that higher borrowing costs could finally prick the consumer debt bubble it has helped to create. The Bank is trapped between rock-bottom rates and a hard place. So are the rest of us.

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Why do I think I smell CIA? Then again, this is about a WaPo report, and who believes them? Anyway, can’t be the Russians, pretty sure they were otherwise occupied.

United Arab Emirates Behind Hacking Of Qatari Media That Incited Crisis (AP)

The United Arab Emirates orchestrated the hacking of a Qatari government news site in May, planting a false story that was used as a pretext for the current crisis between Qatar and several Arab countries, according to a Sunday report by The Washington Post. The Emirati Embassy in Washington released a statement in response calling the Post report “false” and insisting that the UAE “had no role whatsoever” in the alleged hacking. The report quotes unnamed U.S. intelligence officials as saying that senior members of the Emirati government discussed the plan on May 23. On the following day, a story appeared on the Qatari News Agency’s website quoting a speech by Qatar’s emir, Sheikh Tamim Bin Hamad al Thani, in which he allegedly praised Iran and said Qatar has a good relationship with Israel. Similarly incendiary statements appeared on the news agency’s Twitter feed.

The agency quickly claimed it was hacked and removed the article. But Saudi Arabia, the UAE, Bahrain and Egypt all blocked Qatari media and later severed diplomatic ties. The ongoing crisis has threatened to complicate the U.S.-led coalition’s fight against the Islamic State group as all participants are U.S. allies and members of the anti-IS coalition. Qatar is home to more than 10,000 U.S. troops and the regional headquarters of the U.S. Central Command while Bahrain is the home of the U.S. Navy’s 5th Fleet. President Donald Trump has sided strongly with Saudi Arabia and the UAE in the dispute, publicly backing their contention that Doha is a supporter of Islamic militant groups and a destabilizing force in the Middle East. Secretary of State Rex Tillerson recently concluded several days of shuttle diplomacy in the Gulf, but he departed the region without any public signs of a resolution.

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Horses, barns and fake news.

Australia Moves To Dial Down Financial Stability Risks In Home Loans (R.)

The Australian government is seeking to broaden the powers of the country’s prudential regulator to include non-bank lenders as concerns about financial stability take center stage amid bubble risks in the nation’s sizzling property market. A draft legislation released by the government on Monday, if passed, will help the Australian Prudential Regulatory Authority (APRA) dial down some of the risky lending in the A$1.7 trillion ($1.33 trillion) mortgage market, the size of the country’s economic output. Australia’s four biggest banks have already cut back on home loans in recent months and pulled away from institutional lending to real estate developers, as regulators force them to keep aside more capital and slow lending to speculative property investors.

Non-bank lenders have been quick to pick up the slack, with their loan-books expanding at a much faster clip than the banking sector’s 6.5 percent overall credit growth. This development is stoking concerns for authorities as a combination of record-high property prices and stratospheric household debt sit uncomfortably with slow wages growth. “APRA does not have powers over the lending activities of non-bank lenders, even where they materially contribute to financial stability risks,” Treasurer Scott Morrison and financial services minister Kelly O’Dwyer said in a joint statement. “Today, the government is releasing draft legislation for public consultation that will provide APRA with new powers. These new powers will allow APRA to manage the financial stability risks posed by the activities of non-bank lenders, complementing APRA’s current powers.”

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Brussels smells blood.

EU: May Should Make Corbyn Part Of Brexit Negotiating Team (Ind.)

Theresa May should make Jeremy Corbyn a member of her Brexit negotiating team, a top EU official has suggested. Guy Verhofstadt, the European Parliament’s Brexit coordinator, said the Prime Minister losing her majority in the general election was a “rejection” of her hard Brexit plan and other voices should be listened to as negotiations with the European Union get into full swing. The former Prime Minister of Belgium was critical of Ms May and described the election result as an “own goal”. He said it was now the Government’s responsibility to determine whether or not they would take the result into account when determining their negotiating position. “Brexit is about the whole of the UK. It will affect all UK citizens, and EU citizens in the UK. This is much bigger than one political party’s internal divisions or short term electoral positioning. It’s about people’s lives.”

“I believe the negotiations should involve more people with more diverse opinions. Some recognition that the election result was, in part, a rejection of Theresa May’s vision for a hard Brexit would be welcome.” Asked if that meant Ms May should include other party leaders in her negotiating team, a spokesman for Mr Verhofstadt said: “Absolutely.” Mr Verhofstadt was also highly critical of the manner in which Ms May has handled the negotiations thus far, describing her actions as “somewhat chaotic”, but stopped short of offering any advice. “I am not going to give Theresa May advice on the Brexit negotiations,” he told The Independent. “That is a matter for her and her government. However, in line with the European Parliament’s resolution, I do think that the negotiations need to be conducted with full transparency. But that is a general point.

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I think people just love the China miracle too much to let it go.

China: Ghost Cities and Ghost Recovery (Snider)

To the naked eye, it represents progress. China has still an enormous rural population doing subsistence level farming. As the nation grows economically, such a way of life is an inherent drag, an anchor on aggregate efficiency Chinese officials would rather not put up with. Moving a quarter of a billion people into cities in an historically condensed time period calls for radical thinking, and radical doing. In one official party plan, it was or has to happen before 2026. The idea has been to build 20 new cities for this urbanization, and then maybe 20 more. It led to places like Yujiapu in Tianjin. China’s answer to Manhattan was to include a replica Lincoln Center, a Rockefeller Center and even twin towers. Built to fit half a million, barely 100,000 live there. There are numerous other examples of these ghost cities, including Kangbashi dug out of the grassy plains of Inner Mongolia.

It is in every sense a modern marvel, 137 sq. miles of tower blocks and skyscrapers that sit almost entirely empty. There are now plans to build yet another one, south of the capital Beijing this time, to supposedly relieve pressure and pollution of that city’s urban sprawl. In the Xiongan New Area, this newest city will be three times the size of NYC, enough, if plans were ever to actually work out, to draw almost 7 million Chinese. These are mind-boggling numbers and end up making truly eerie places for the few times when their existence is allowed to be acknowledged in the mainstream. The reasons for them are really not hard to comprehend, however. The older ghost cities started out as pure demographics, a place for China’s new middle class to urbanize and economize. The more the rest of the world demanded for China to produce and ship, the more Chinese (cheap) labor it would all require.

And there had to be something other than slums for this to happen, else any such intrusive transformation risked what was and remains a delicate power balance. Then in 2008 suddenly the world paused in its love affair of Chinese-made goods. No problem, though, as Chinese officials assuming it was temporary merely sped up the process of building for the future, getting ahead of the curve, as it were. Surely China would need to after the full global recovery get right back on the same trajectory as before. That never happened, and though some economists in particular still believe it will, there isn’t the slightest sign of global demand getting nearly that far back. What do you do, then, if you are China? There is logic to keeping up the illusion, that the future will eventually look a lot like the “miracle” past, because what else would China Inc. otherwise do? If it won’t be building stuff for export to the West, then it will have to be building something.

No matter how many times in the Western media they say demand is robust, catching up, or resilient, the Chinese know better. “China’s overseas shipments rose from a year earlier as global demand held up and trade tensions with the U.S. were kept in check amid ongoing talks. At home, resilient demand led to a rise in imports. Demand for Chinese products has proven resilient this year as global demand holds up.” Chinese exports in June 2017 are estimated (currently) to have risen 11.3% year-over-year. It sounds like what was written above about the global condition. But in truth, 11% growth, as 15% or even 20% growth at this stage, keeps China in the ghost city state. It isn’t anything close to “resilient”, let alone enough to make up for lost time and absorb the empty cities already built.

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Angela Merkel owns Christine Lagarde.

IMF To Insist On ‘Unsustainable Debt’, Says Greek Banks Need €10 Billion (K.)

The IMF has again found that Greece’s debt is unsustainable under every scenario, according to the report the Executive Council will be discussing on Thursday to decide on the Fund’s participation in the Greek program, sources say. The word from Washington is that the Fund’s technocrats have included various scenarios in their debt sustainability analysis (DSA), including one that incorporates the eurozone’s commitments for short-term measures and a high primary surplus, but none see Greece’s debt becoming sustainable. Washington sources suggest that the Executive Council will tell the eurozone that unless creditors offer more debt-relief measures, the IMF will not be able to participate in the Greek program with funds.

The IMF’s baseline scenario is identical to the one presented in February, with the debt being unsustainable after 2030, as servicing it will require more than 20% of GDP. The IMF will also likely warn about weaknesses in the Greek credit system, claiming it will need additional funding of €10 billion. An IMF source said that the chances of the fund disbursing the €1.6 billion Athens has requested “are limited.” However, what it seems the Fund is really waiting for is whether a government more amenable to Greek debt relief will emerge from September’s elections in Germany, something that is not at all certain right now.

As things stand, we are probably heading for the worst combination, as Finance Minister Euclid Tsakalotos said in May: that the IMF is heeded only in its demands for more austerity and not for debt relief. This is why, according to IMF sources, the report to be discussed includes no time limit for the review of the debt’s sustainability that would determine the Fund’s definitive participation in the program.

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Tax arrears to the state are a huge problem in Greece. The EU is hellbent on aggravating the issue.

Greek Taxpayers Have A Mountain Of Taxes To Climb (K.)

Greek taxpayers are being stunned by the realization that demands concerning their 2016 incomes are up to twice as high as last year. Changes to the tax system have sent rates soaring for the 40% of taxpayers that have been notified of the additional tax they will have to pay. Changes in income brackets as well as in the brackets used for calculating the solidarity tax are mainly responsible for increasing taxpayers’ burden this year. This mainly concerns salaried workers and freelance professionals, as well as taxpayers with revenues from properties. In some cases the annual difference in the tax due is more than the difference between the incomes of 2015 and 2016.

For instance, a taxpayer with incomes of €66,000 in 2015 and €76,000 in 2016 is now forced to pay tax amounting to €21,646, against €10,692 last year. This means that the extra €10,000 he or she managed to earn last year is being siphoned off by the taxman. The huge amounts of tax due are virtually impossible to pay in the three installments (in July, September and November) foreseen by the government. Many taxpayers are considering signing up now for the 12-installment pay plan, while others fear they will simply fail to meet their obligations, particularly as the Single Property Tax (ENFIA) is also coming soon.

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Greece tax policy is decided in Brussels, not Athens. So how is it possible people pay much more in Greece than in other EU nations?

Other EU Nations Are Inviting Rich Greeks (K.)

Ever more European states are trying to attract rich Greeks and other European Union nationals suffering from overtaxation at home. Cyprus, Malta, Ireland, Luxembourg, Monaco, Portugal and the Netherlands, as well as bigger countries such as France, Spain and Italy, are offering generous incentives to bring on to their registers people with high incomes that would benefit their economies in a number of ways. The relocation “invitation” concerns Greek entrepreneurs as well, given the excessive taxation the government has imposed on them and the uncertainty regarding the future tax situation that high incomes will face.

The concept behind the tax policies adopted in other countries so as to attract wealthy citizens is focused on a steady annual lump sum tax and their exemption from any other burdens, except for those concerning their activities at their new tax home. Italy’s case is interesting, as it is a country in the hard core of the EU that has created a favorable framework: It allows rich individuals with large international incomes to become “non-doms” (ie paying tax without being residents) by paying an annual levy of €100,000 plus €25,000 for each family member. They are relieved of any other tax on incomes abroad or imported into Italy and only pay regular tax on activities within the country. This boosts revenues, the property market and consumption.

Read more …

Jul 132017
 
 July 13, 2017  Posted by at 8:56 am Finance Tagged with: , , , , , , , , ,  3 Responses »
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Vincent van Gogh Vineyards with a View of Auvers 1890

 

‘Investors Underestimate How Low The Bar Is For The Fed’ (CNBC)
Unwinding QE will be “More Disruptive than People Think” (WS)
I Wouldn’t Rule Out Another Financial Crisis – IMF’s Lagarde (CNBC)
The US Stock Market Is 66% Higher Than It Should Be (Kee jr)
Valuation Measures & Forward Returns (Lance Roberts)
Nonprime Mortgages Prove Leery Investors Are Finally Hungry Again (CNBC)
VISA takes its War on Cash to US Retailers (WS)
Greece To Exit EU’s Excessive Deficit Procedure (K.)
Brain Drain Gathers Pace as One in Three Greeks Looks for a Job Abroad
Germany Profits From Greek Debt Crisis (HB)
Defiant Varoufakis Ready to Face ‘Even Martial Court’ Over Plan B (GR)

 

 

What Yellen says is not so interesting. What lies beyond those carefully crafted speeches is.

BTW, no Trump today, but maybe we can start a separate gossip page.

“The Fed says it’s going to hike again this year, markets says 50-50. The Fed says three, four times next year, the market says it’s not going to happen at all..”

‘Investors Underestimate How Low The Bar Is For The Fed’ (CNBC)

Patrick Armstrong, the CIO at Plurimi Investment Managers, believes that very high valuations, an expected tightening in monetary policy and too much optimism over tax cuts and new fiscal spending should leave investors cautious on the United States. “Valuation doesn’t matter in the short term but at current CAPE (cyclically adjusted price to earnings, which gives a more clear indication of a stock price in comparison to average earnings over the last 10 years) of 29 times, U.S. equities have historically delivered negative real returns over periods of two to five years,” he said in an investment outlook published earlier this month. The U.S. Federal Reserve has begun normalizing its policy in the wake of improved economic growth and low unemployment levels.

According to Armstrong, the easy monetary policy of the past had boosted equities but this might change with the Fed’s plans to hike rates and reduce its balance sheet. “I think there was a clear warning in the last (meeting) minutes talking about risk premium, price earnings and investors haven’t acknowledged it, but when the Fed starts worrying about equity markets, as an equity investor they’ve given you that warning,” he told CNBC on Tuesday. The third reason to be “short” – where a trader takes a bet that prices will fall – on U.S. equities is the government’s plans on fiscal policy. President Donald Trump promised tax cuts and big infrastructure spending, which made U.S. equities rally since he took office last November. However, such policies are yet to reach the consultation stage and doubts have emerged over the president’s ability to deliver.

[..] Speaking to CNBC Tuesday, Armstrong suggested that investors aren’t listening to the U.S. Federal Reserve. “What investors are completely underestimating is how low the bar is for the United States Federal Reserve. They have told us what they intend to do, the markets don’t believe any of it,” Armstrong said. “The Fed says it’s going to hike again this year, markets says 50-50. The Fed says three, four times next year, the market says it’s not going to happen at all,” he added.

Read more …

Central banks are trying to get out before the blast. But in doing so they bring it forward. Were given far too much power.

Unwinding QE will be “More Disruptive than People Think” (WS)

“We’ve never had QE like this before, and we’ve never had unwinding like this before,” said JPMorgan CEO Jamie Dimon at the Europlace finance conference in Paris. “Obviously that should say something to you about the risk that might mean, because we’ve never lived with it before.” He was referring to the Fed’s plan to unwind QE, shedding Treasury securities and mortgage-backed securities on its balance sheet. The Fed will likely announce the kick-off this year, possibly at its September meeting. According to its plan, there will be a phase-in period. It will unload $10 billion the first month and raise that to $50 billion over the next 12 months. Then it will continue at that pace to achieve its “balance sheet normalization.” Just like the Fed “created” this money during QE to buy these assets, it will “destroy” this money at a rate of $50 billion a month, or $600 billion a year.

It’s the reverse of QE, with reverse effects. Other central banks are in a similar boat. The Fed, the Bank of Japan, and the ECB together have loaded up their balance sheets with $14 trillion in assets. Unwinding this is going to have some impact – likely reversing some of the asset price inflation in stocks, bonds, real estate, and other markets that these gigantic bouts of asset buying have caused. The Bank of Japan has been quietly tapering its asset purchases for a while to where it buys only enough to keep the 10-year yield barely above zero. And the ECB has tapered its monthly purchases by €20 billion earlier this year and is preparing the markets for more tapering. Once central banks stop buying assets, the phase starts when central banks try to unload some of those assets. The Fed is at the threshold of this phase.

Dimon was less concerned about the Fed’s rate hikes. People are too focused on rate hikes, he said, according to a Bloomberg recording of the conference. If the economy is strong, economic growth itself overcomes the issues posed by higher rates, he said. The economy has been through rate hikes many times before. They’re a known quantity. But “when selling securities in the market place starts,” that’s when it gets serious. “When that happens of size or substance, it could be a little more disruptive than people think,” he said. Whatever it will do, no one knows what it will do – because “it never happened before.”

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Don’t woryy, they serve the same lords.

I Wouldn’t Rule Out Another Financial Crisis – IMF’s Lagarde (CNBC)

The IMF’s Managing Director, Christine Lagarde, has said that she would not rule out another financial crisis in her lifetime, indicating that comments made recently by Federal Reserve Chair Janet Yellen may have been premature. “There may, one day, be another crisis,” Lagarde told CNBC Tuesday on the sidelines of a joint conference with the IMF and the Croatian National Bank in Dubrovnik. Lagarde’s comments responded to a statement made by Yellen a fortnight earlier in which she said she does not expect to see another financial crisis in her lifetime. “I plan on having a long life and I hope she (Yellen) does, too, so I wouldn’t absolutely bet on that because there are cycles that we have seen over the past decade and I wouldn’t exclude that,” Lagarde said.

She, however, noted the unpredictability of financial crises and said that finance ministers and policymakers should act with caution to prepare for such eventualities. “Where it will come from, what form it takes, how international and broad-based it will be is to be seen, and typically the crisis never comes from where we expect it,” she added. “Our duty, and certainly the message that we give to the finance ministers, to the policymakers, is ‘be prepared’. Make sure that your financial sector is under good supervision, that it’s well regulated, that the institutions are rock-solid, and anticipate at home with enough buffers so that you can resist the potential crisis.”

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And we will see undershoot on the way down. The Fed killing off price discovery will be a scourge on society.

The US Stock Market Is 66% Higher Than It Should Be (Kee jr)

I have, in previous articles here on MarketWatch, pointed out the fundamental risks in the U.S. stock market. I have identified the liquidity risks created by the ECB and the Federal Reserve in the tightening of monetary policy, in the reduction of the Fed’s balance sheet, and the likelihood that these risks will prick the asset bubble that the market is in today. Most people I speak and email with agree. The risks are high, as the price-to-earnings multiple of the S&P 500 (about 25, depending on the indicator) is far greater than its historical norm (14.5). The truth, however, is that no one knows for sure. But, still, people are apathetic. In fact, my experience over the past 20 years and through each of the past two major asset bubbles (the internet bubble in 2000 and the credit crisis in 2008-2009), is that the unanimous identification of an asset bubble did not take place until after the asset bubble had burst.

By that time, all of the major indices — the Dow Jones Industrial Average S&P 500, Nasdaq 100 and Russell 2000 — had already fallen. The result largely handcuffed investors to investments that were severely underwater. As luck would have it, though, after the credit crisis, the Fed’s policy-making body printed $2 trillion and, with that money, bought assets to prop up the economy and save investors from destruction. Largely, this perceived savior is probably why investors are so lethargic when it comes to the asset bubble that we are probably in right now. This bubble even seems to include real estate and bonds in addition to stocks, and it has been driven by fabricated central bank liquidity.

Admittedly, I cannot be sure what will happen. I do not know if this bubble will burst, and I do not know if central banks will come running to the rescue again, as they did after the credit crisis. Unfortunately, I do know a great deal of people who believe that the central banks of the world will simply print more money if the going gets tough again, but that is a seriously risky bet. With major indices coming off all-time highs and technical trading patterns (dojis) surfacing in long-term chart patterns last week, potential reversal signals are coming on a technical basis. As much as it is appealing to opt for relaxation and vacationing during the summer months, some time must be spent evaluating the conditions the market is facing right now.

In previous articles, I have offered alternatives to the traditional buy-and-hold methodology, and I think everyone should consider heading that way because strategies like “lock and walk” can work no matter what happens. The risks in the market today are extremely high for buy-and-hold investors because the liquidity picture is changing for the worse, and that is fundamental in nature. But longer-term technical observations point toward serious risks as well. My longer-term macroeconomic analysis, The Investment Rate, is offering warnings that this market is 66% higher than it should be. Given the changes in liquidity and technical observations happening now, those risk warnings should be heard with an acute ear.

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A whole bunch of Lance graphs again. Hard to choose. But pretty as the graphs are, they do not paint a pretty picture. They say BUBBLE.

Valuation Measures & Forward Returns (Lance Roberts)

[..] if the market can reverse the current course of weakness and rally above recent highs, it will confirm the bull market is alive and well, and we will continue to look for a push to our next target of 2500. With portfolios currently fully allocated, we are simply monitoring risk and looking for opportunities to invest “new capital” into markets with a measured risk/reward ratio. However, this is a very short-term outlook which is why “price is the only thing that matters.” “Price measures the current “psychology” of the “herd” and is the clearest representation of the behavioral dynamics of the living organism we call “the market.” But in the long-term, fundamentals are the only thing that matters. I have shown you the following chart many times before. Which is simply a comparison of 20-year forward total real returns from every previous P/E ratio.

I know, I know. “P/E’s don’t matter anymore because of Central Bank interventions, accounting gimmicks, share buybacks, etc.” Okay, let’s play. In the following series of charts, I am using forward 10-year returns just for consistency as some of the data sets utilized don’t yet have enough history to show 20-years of forward returns. The purpose here is simple. Based on a variety of measures, is the valuation/return ratio still valid, OR, is this time really different? Let’s see. Tobin’s Q-ratio measures the market value of a company’s assets divided by its replacement costs. The higher the ratio, the higher the cost resulting in lower returns going forward. Just as a comparison, I have added Shiller’s CAPE-10. Not surprisingly the two measures not only have an extremely high correlation, but the return outcome remains the same.

One of the arguments has been that higher valuations are okay because interest rates are so low. Okay, let’s take the smoothed P/E ratio (CAPE-10 above) and compare it to the 10-year average of interest rates going back to 1900. The analysis that low rates justify higher valuations clearly does not withstand the test of history.

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Substitute nonprime for subprime and you open a whole new can of suckers again. “No, these are fine and upstanding citizens. They just don’t have access to normal bank loans.” Gee, why is that?

Nonprime Mortgages Prove Leery Investors Are Finally Hungry Again (CNBC)

The appetite for riskier mortgages is rising, and a small cadre of investment firms is ready to feed it. Angel Oak Capital Advisors just announced its second rated securitization of nonprime residential mortgages this year, a deal worth just more than $210 million and its largest ever. Its first deal was slightly less, but demand from borrowers and investors alike is growing, and the securitizations are growing with it. Angel Oak is one of very few firms offering these private-label mortgage-backed securities — the ones that were so very popular during the last housing boom and which were later blamed for the financial crisis. Today’s nonprime loans, however, are nothing like the ones of the past. The government cracked down on faulty loan products, those with low teaser rates, negative amortization and no documentation.

Still, for the past decade investors wouldn’t touch anything that wasn’t government-backed. Only now are they seeing value and dipping their toes in again. The number of nonprime mortgage-backed securities “skyrocketed” in the second quarter of this year, according to Inside Mortgage Finance — a total of $1.08 billion of MBS backed by nonprime home loans. That was the strongest quarter for the sector since the financial crisis. It is still, however, nothing compared with the volume that caused the housing crash. “At one point during the housing boom, we had a third of all mortgage originations that were nonprime [subprime or Alt-A, the latter having low or no documentation]. We’re not going to be even 5% of the market if we have a record year this year. It still has a long, long way to go,” said Guy Cecala, CEO of Inside Mortgage Finance.

That is because while investors are hungry for yield, they are still very skeptical. The ratings agencies are as well. That makes it difficult for companies like Angel Oak, and its competitors — Lone Star and Deephaven Mortgage — to issue large quantities of nonprime MBS. Nonprime securitizations today are far less risky, consisting of loans that were underwritten far more stringently. Angel Oaks’ securitization does consist of both fixed- and floating-rate loans. “In addition to borrowers that had prior credit events, our loans are also for borrowers who are self-employed,” said Lauren Hedvat, capital markets director at Angel Oak. “They are of high credit quality, but they are not able to access mortgage products by the more traditional bank routes.”

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Start paying cash everywhere.

VISA takes its War on Cash to US Retailers (WS)

“We’re focused on putting cash out of business,” Visa’s new CEO Al Kelly said on June 22 at Visa Investor Day. Pushing consumers into digital and electronic payments is the company’s “number-one growth lever.” Visa has been dogged by the stubborn survival of cash and checks, despite widespread government and corporate efforts to kill them off. Globally, check and cash transactions totaled $17 trillion in 2016, Visa President Ryan McInerney said. Confusingly, that’s up 2% from a year earlier. So today, Visa rolled out a new initiative on its war on cash. It’s designed “for small business restaurants, cafés, or food truck owners,” and the like. In this trial, it will award up to $10,000 each to 50 eligible businesses (online businesses are excluded) when they commit to refusing cash payments.

Going “100% cashless,” as Visa calls it, means that consumers can only pay with debit or credit cards or with their smartphones. That’ll be the day. You go to your favorite taco truck, and when it comes time to pay, you pull out a wad of legal tender, only to be treated to an embarrassed nod toward a sign that says, “No Cash.” I’d walk. But Visa hopes that other folks will pull out their Visa-branded card or a smartphone with a payment app that uses the Visa system. This would help Visa extract its fees from the transaction. “We have an incredible opportunity to educate merchants and consumers alike on the effectiveness of going cashless,” Jack Forestell, Visa’s head of global merchant solutions, said in the press release, which touted a “study” that Visa recently “conducted” that “found that if businesses in 100 cities transitioned from cash to digital, their cities stand to experience net benefits of $312 billion per year.”

However dubious these “net benefits” may be, one thing is not dubious: Visa gets a cut from every transaction made via Visa-branded cards or digital payment systems that use Visa. The merchant pays the cut and then tries to pass it on to customers via higher prices. The total card fees normally range between 1% and 3%. Among the entities that get to divvy this moolah up are the bank that issued the visa card and the credit card network – such as Visa, MasterCard, and the like. Visa gets just a small piece of the pie, but if it is on every transaction, it adds up. And payments by cash and check seriously get in the way of a lot of money. In 2016, Visa extracted $15 billion from processing transactions globally without even carrying any credit risk (the banks have to deal with that).

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Purely symbolic. Everyone loves to present a meme of recovery, but it’s not there. Ironically, the move from deficit to -forced- surplus guarantees it. Greece should run a deficit now to boost its economy.

Greece To Exit EU’s Excessive Deficit Procedure (K.)

After eight years, Greece emerged on Wednesday from the European Commission’s process for countries with excessive deficit. The Commission proposed Greece’s exit from the process as its general government debt has dropped below the threshold of 3% of GDP. This is a largely symbolic move, but it does have some significance given that the government is planning to return to the bond markets for the first time since 2014. Economic Affairs Commissioner Pierre Moscovici gave a wink to the markets on Wednesday, saying that the disbursement of the tranche of 7.7 billion euros on Monday and the decision on the deficit is “good news that the markets ought to read,” even though he explained that what the investors do is not up to him.

Commission Vice President Valdis Dombrovskis called on Greece to capitalize on its achievements and continue to strengthen confidence in its economy, which is crucial as the country prepares its return to the credit markets. The Commission’s proposal for Greece’s emergence from the deficit procedure has to be ratified by the EU’s finance ministers, but has little practical use. Ultimately, Greece’s fiscal targets are dictated by the bailout agreement and not by the rules that apply to other eurozone members. As one European official told Kathimerini, “nothing changes essentially, the fiscal targets Greece must hit remain high and [yesterday’s] decision is only of a symbolic dimension.”

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Greece can only get worse, for many years into the future.

Brain Drain Gathers Pace as One in Three Greeks Looks for a Job Abroad

A new study highlights the problem in the Greek labor market as more than 30% of Greek unemployed say that they are actively seeking a job abroad. According to the annual survey by the firm Adecco titled “Employability in Greece,” the brain drain phenomenon has been increasing over the last three years. In 2015 only about 11% of unemployed respondents said that they were actively looking for a job abroad. This figure increased to 28% in 2016 and reached 33% this year. The responses show that the unemployed have different reasons to seek work abroad. Whereas in 2005, the main reason was the prospect of a better wage, in 2016 and 2017 the main reason given were better career opportunities.

The study conducted for the third year running, in collaboration with polling company LMG, was based on a sample of 903 people from the age of 18 to 67. According to other findings, 37% of respondents say that they have been out of the labor market for at least 12 months. Despite the slight improvement in official unemployment rates, the Adecco survey finds that there is an increasing number of people who state that they have been at least once without a job – 58% this year compared to 54% in 2016. According to the data, more than 1 out of 4 (28%) are out of the labor market, a higher rate compared with the previous two years.

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Money that could have helped Greece escape the claws of Schäuble et al. The pattern is not coincidental.

Germany Profits From Greek Debt Crisis (HB)

The German government has long been accused by critics of profiting from Greece’s debt crisis. Now there are some new numbers to back it up: Loans and bonds purchased in support of Greece over nearly a decade have resulted in profits of €1.34 billion for Germany’s finance ministry, which confirmed the number in response to a parliamentary query from the Green Party, according to a report by German daily Süddeutsche Zeitung. The profits come from a range of programs, running into the hundreds of billions, that Germany and other euro-zone countries have backed to keep Greece’s government and economy afloat since its massive debt crisis emerged in 2009. It includes, for example, a €393-million profit generated from a 2010 loan by the development bank KfW, which is owned by the German government.

The report also shows that Germany’s central bank, the Bundesbank, has received profits from the Securities Market Program (SMP), a now-defunct government bond-buying plan initiated by the ECB and run from 2010 to 2012. The ECB collected more than €1.1 billion in 2016 in interest payments on the nearly €20 billion-worth of Greek bonds it bought through the SMP, according to the report. This year, the figure will be €901 million, which will again be redistributed to the euro zone’s 19 member states. Since 2015, Germany has collected a total of €952 million in SMP profits. The new revelations drew strong criticism from the Greens Party, in opposition. “The profits from collecting interest must be paid out to Greece. [Finance Minister] Wolfgang Schäuble cannot use the Greek profits to clean up Germany’s federal budget,” Manuel Sarrazin, EU expert for the Green Party in the parliament, told the Süddeutsche newspaper.

Mr. Schäuble, a member of Chancellor Angela Merkel’s conservative Christian Democrats, has been cannily keeping Germany’s federal budget balanced over the past four years, taking on no new debt. Berlin’s surplus amounted to €6.2 billion in 2016 alone. Critics complain that Greece’s crisis has helped it achieve that goal. “It might be legal for Germany to profit from the crisis in Greece, but from a moral and solidarity perspective, it is not right,” Sven-Christian Kindler, budget policy spokesperson for the Green Party, also told the paper. Mr. Schäuble has said he is open to reducing Greece’s interest burden but has resisted calls to end them completely. His finance ministry has argued that, with inflation, deferring interest payments would eventually end up costing Greece’s creditors.

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There are many parties not too keen on such an investigation, and Varoufakis is not one of them.

Defiant Varoufakis Ready to Face ‘Even Martial Court’ Over Plan B (GR)

Undeterred over the controversy surrounding the new disclosures over the system of a parallel currency that was apparently considered by the government of Alexis Tsipras in 2015, Yanis Varoufakis said that he is ready to face any court to respond to the charges. Speaking in a radio show, Varoufakis, the finance minister at the time and the instigator of the parallel payments system or Plan B, said that Tsipras had a copy of the proposals from as early as 2012 when he was still in opposition. “I have handed the plan to Tsipras in 2012,” so it could become the government’s plan B if negotiations with Greece’s creditors collapsed.

Mr. Varoufakis said he was willing to accept any kind of judicial investigation into Plan B and his role in drafting it. “Let’s have a special court of inquiry, or even a martial court, or any other court, so all the facts can be revealed,” he said responding to calls from the opposition for a judicial inquiry. He also attacked the SYRIZA-led government for refusing to proceed with an investigation. The Varoufakis Plan B for the Greek economy in the event that the country clashed with creditors and went bankrupt was to partially pay civil servants with coupons. Parts of the plan were revealed last week by his financial advisor Glenn Kim.

Read more …

Jul 122017
 
 July 12, 2017  Posted by at 9:21 am Finance Tagged with: , , , , , , , , , , ,  2 Responses »
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Paul Cézanne The Card Players 1895

 

The Media’s Mass Hysteria Over ‘Collusion’ Is Out Of Control (WaPo)
Donald Trump’s Very Own Big, Fat, Ugly Bubble (Stockman)
Canada’s Housing Boom Expected to Spark Rate Rise (WSJ)
The Return Of The “Minsky Moment” (Rosso)
Martin Luther King’s Economic Dream Changed The Federal Reserve Forever (BI)
Russia Will Retaliate If US Does Not Release Property – Lavrov (R.)
Qatar’s First Shipment of Air-Lifted Cows Lands in Doha (BBG)
Greece’s Market Return May Be Imminent (R.)
NGOs Fearful Of Handing Island Refugee Camps To Greek State (K.)
EU Migrant Rescue Mission ‘Led To Increase In Deaths’ (Ind.)

 

 

The echo chamber smells trouble and starts eating its own tail. The WaPo turns on its co-conspirators.

The Media’s Mass Hysteria Over ‘Collusion’ Is Out Of Control (WaPo)

Hysteria among the media and Trump opponents over the prospect of “collusion” between the Trump campaign and the Kremlin may have hit its crescendo this week. That’s right: The wailing from the media and their allies about Donald Trump Jr.’s meeting with some “Kremlin-connected Russian lawyer” (whatever that means) may be the last gasp of this faux scandal. Good riddance. Predictably, the New York Times started the ball rolling with front-page coverage, going so far as to argue, “The accounts of the meeting represent the first public indication that at least some in the campaign were willing to accept Russian help.” As if this were some breakthrough moment. The Times followed up with a headline yesterday that the meeting request and subject matter discussed in the prior story were transmitted to Trump Jr. via an email.

Holy cow. The Times is so desperate to move the story that the meeting’s arrangement over email is being made into Page 1 news. You would have thought it had come through a dead drop under a bridge somewhere. And, of course, CNN has been apoplectic in its breathless coverage, running one story after another about this “development” on the air and online. But Politico takes the prize for the most over-the-top, made-up news, claiming that Donald Trump Jr.’s meeting could amount to a crime. As I have written before, there are always people hovering around campaigns trying to peddle information and traffic in supposed silver bullets. There should be nothing to report on when a private citizen who works at a campaign takes a meeting with a friend of a friend offering information about an opponent. And yet, the media wants to make it a smoking gun.

[..] Regarding the delusion that a crime actually occurred in any of this, my favorite allegation is that by having this meeting and listening to what was said, Donald Trump Jr. somehow could have violated the law. According to Politico, Trump Jr.’s “statements put him potentially in legal cross hairs for violating federal criminal statutes prohibiting solicitation or acceptance of anything of value from a foreign national, as well as a conspiracy to defraud the United States.” I’m just barely a lawyer, but I know over-lawyering when I see it. I mean, by that standard, what if someone walked into a campaign and suggested an idea that led to that candidate’s victory? Would it have been a crime to accept “a thing of value” in the form of an idea? Of course not. This whole thing is getting weird.

For many in the media and elsewhere, the collective grievances that they have against Trump personally, the White House as a whole and Trump’s policies somehow justify their zealous promotion of the “collusion scandal.” But not because the story is valid. Rather, the media know that they are not getting to Trump with anything else. Today, much of the “news coverage” of Trump and Co. is about payback. The media thinks they aren’t getting the truth and so they don’t have to deliver it either. It is a bad cycle that is not working for the White House or the media. With this much intensity, it is hard to see how this ends well..

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Rumor has it Gary Cohn will take over from Yellen.

Donald Trump’s Very Own Big, Fat, Ugly Bubble (Stockman)

The overwhelming source of what ails America economically is found in the Eccles Building. During the past three decades the Federal Reserve has fostered destructive financial mutations on Wall Street and Main Street. Bubble Finance policies have fueled an egregious financial engineering by the C-suites of corporate America. This bubble has skyrocketed to the tune of $15 trillion of stock buybacks, debt-fueled mergers deals and buyouts of the last decade. The Fed fostered a borrowing binge in the household sector after the 1980s. It eventually resulted in Peak Debt and $15 trillion in debilitating debts on the homes, cars, incomes and futures of what used to be middle class America. It also led politicians down the path of free lunch fiscal policy.

By monetizing $4.2 trillion of Treasury and GSE debt during the last three decades, the Fed numbed the US economy from effects of crowding out and rising interest rates that would have come from soaring government deficits. This left the public sector impaled on Peak Debt. Ever since Alan Greenspan launched Bubble Finance in the fall of 1987, public debt outstanding has increased by nearly 9 times. Measured against national output, the Federal debt ratio has risen from 47% to 106% of GDP. These actions have stripped-mined balance sheets and cash flow from main street businesses. The Fed has stifled economic growth while delivering multi-trillion windfalls into the hands of a few thousand speculators on Wall Street.

These rippling waves of financial mutation are why the US economy is visibly failing and why vast numbers of citizens in Flyover America voted for Donald Trump for president. Ironically, even as he stumbled to his victory on November 8, Trump barely recognized that the force behind all the economic failure that he railed against was the nation’s rogue central bank. Only when it occurred to him that Janet Yellen was doing everything possible to insure Clinton’s victory did he let loose an attack on the Fed. In his famous warning, he leveled that America was threatened by a big, fat, ugly bubble. [..] When Wall Street launched a phony Trump Reflation trade during the wee hours of election night, the Donald forgot all about the great bubble. In fact, he quickly embraced it as a sign that investors were enthusiastically embracing Trump-O-Nomics.

No new arrival in the Oval Office was ever more mistaken.

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Create the bubble with ZIRP, milk it for all you can, then walk out and leave millions with grossly overvalued assets as the economy sinks.

Canada’s Housing Boom Expected to Spark Rate Rise (WSJ)

The Bank of Canada is widely expected on Wednesday to raise its benchmark policy rate for the first time in seven years, signaling the Canadian economy is on the path to recovery after years of tepid growth following the global slump in commodities. Canada’s central bank, led by Gov. Stephen Poloz, is joining peers at the Federal Reserve, the Bank of England and the European Central Bank as they dial back on the extraordinary run of ultralow interest rates aimed at jump-starting the global economy in the aftermath of the recession of 2008-09. In Canada, which was hit with an income shock after the downturn in prices of oil and other commodities, low rates have resulted in an extended period of loose money that has fueled a housing boom in pockets of the country.

Some analysts say soaring real-estate prices, which have stretched affordability and forced official measures to curb investing, could be a factor driving Wednesday’s expected increase. Canadian housing starts rose 9.1% to a seasonally adjusted annual rate of 212,695 units in June, Canada Mortgage and Housing Corp. said on Tuesday. Amid recent growth in gross domestic product and robust job creation, Mr. Poloz has signaled he will remove stimulus this week, monetary-policy analysts said. That is even though inflation—at an annualized 1.3% rate in May—remains well below the central bank’s 2% target, and wage growth remains stubbornly low.

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See, I don’t know who Rosso means when he talks about people having forgotten Minsky. Are those the people whose investments he advises on?

The Return Of The “Minsky Moment” (Rosso)

As he was a proponent of a pliable system of reform which could be altered based on the innovative risk humans create, Minsky would have been disappointed to know that the interconnected global shadow banking web continues to expand, Federal Reserve policies have created a great misallocation of financial resources, price discovery of risk assets is basically non-existent and the segment of the population or Main Street that was a concern for him, suffers great wealth inequality and wage disparity. Several catalysts exist today that may remind investors of Minsky. Readers should remain vigilant and keep the following concerns in mind as they invest and manage their personal wealth. The Federal Reserve has appeared to gravitate from data dependent to data ignorant.

Economic data remains sub-par. Inflation has fallen below the Fed’s target of two percent, yet they appear in their statements, determined to continue hiking short-term rates. In theory, a rate-tightening cycle is designed to take the edge off, tap the brake on accelerating economic growth. So, with GDP running below the long-term average of three percent and the personal consumption expenditures or PCE Index, the Fed’s preferred measure of inflation slipping to 1.4% year-over-year in May, the lowest in six months, a question begs asking. Yellen, what are you putting a brake on? Based on the analysis below, the Fed has no reason to continue rate hikes this year. However, they seem hell-bent to ignore the data. Why?

The Fed may be on an unofficial mission to curb stock market speculation. Several Fed officials including Vice-Chairman Stanley Fischer and San Francisco Fed President John Williams have voiced their concerns over lofty stock market valuations. Regardless, of the Fed’s agenda to forge ahead with rate hikes, it’s crucial to remember that low interest rates have been the primary accelerant for stock market appreciation, not earnings growth; rising rates along the yield curve eventually puts a damper on the economy and sets up a prime catalyst for market correction. If the Fed moves too quickly or inflation heats up to warrant swifter action, then a Minsky Moment may be closer than pundits believe.

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Undoubtedly well meant, but it turned the Fed into a political instrument. Not a good thing.

Martin Luther King’s Economic Dream Changed The Federal Reserve Forever (BI)

Most Americans have watched or heard Martin Luther King’s famous “I Have a Dream” speech, delivered before the Lincoln Memorial in Washington in 1963. Few know his rousing call for racial equality was the culmination of an event called the March for Jobs and Freedom. This is crucial because it reveals the central, and largely unrecognized, role of the American civil rights movement of the 1960s on the US approach to economic policy. That included a more prominent role for government in economic stimulus policies and, importantly, a broader, jobs-focused mandate for the Federal Reserve. That role is the focus of a new report by a group of Fed policy activists known as Fed Up, a coalition of community and pro-poor groups that have been pushing the Fed to adopt a more consciously pro-full employment stance.

“From the 1930’s and through the rise of the civil rights movement, racial justice activists including Coretta Scott King, called for a coordinated federal effort to attain full employment,” says the report, published in conjunction with the liberal Center for Economic and Policy Research, referring to Martin Luther King’s wife, who continued his fight after his assassination in 1968. “They envisioned an economy where every person who seeks employment can secure a job. King joined Congressional leaders Augustus Hawkins and Hubert Humphrey in eventually passing the landmark 1978 Full Employment and Balanced Growth Act (Humphrey-Hawkins) which legally required the Fed to pursue maximum employment.” Before the act, the mandate had been limited to low, stable inflation. To this day, Fed Chair Yellen’s semi-annual address to Congress on monetary policy, which is taking place on Wednesday, is known as the Humphrey-Hawkins testimony.

Fed Up and CEPR argue that the employment mandate, while not fully realized, has already generated millions of additional jobs over time, particularly in poor communities, which are most affected by steep levels of persistent unemployment. “There can be no question that the Fed would never have allowed the late 1990s boom and the consequential sharp reduction in the unemployment rate if it did not have a full employment mandate,” the study argues after reviewing data from that period and the rationale used by then-chairman Alan Greenspan for keeping interest rates low despite falling unemployment. The debate remains highly relevant today given that some Fed officials, despite their duty to maintain maximum employment, have recently expressed curious worries about the unemployment rate falling too quickly.

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Expectation is Russia will expel 30 US diplomats.

Russia Will Retaliate If US Does Not Release Property – Lavrov (R.)

Russia will retaliate in a reciprocal manner if the United States does not heed its demands for a return of diplomatic assets, Foreign Minister Sergei Lavrov said on Tuesday. “We hope that the United States, as a country which promotes the rule of law, will respect its international obligations,” Lavrov told reporters after a meeting in Brussels with EU foreign policy chief Federica Mogherini. “If this does not happen, if we see that this step is not seen as essential in Washington, then of course we will take retaliatory measures. This is the law of diplomacy, the law of international affairs, that reciprocity is the basis of all relations.” He declined to answer when asked if that meant that Russia would expel U.S. diplomats and seize diplomatic property.

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Qatar flying in cows from Australia and fruit from Peru says a lot about what’s wrong with the world.

Qatar’s First Shipment of Air-Lifted Cows Lands in Doha (BBG)

The first batch of an anticipated 4,000 dairy cows was flown into Qatar Tuesday, five weeks after the start of a Saudi Arabia-led boycott of the Gulf country. A shipment of 165 cows, sourced from Germany and flying via Budapest, are ready to produce milk immediately and the product should reach local markets this week, according to a spokesman for Power International Holding, which is importing the animals. Other shipments will include cows from Australia and the U.S., and should arrive every three days, the company spokesman said Tuesday. In total, the bovine airlift is expected to bring in the 4,000 cows within about a month. Led by Saudi Arabia, Qatar has been accused of supporting Islamic militants, charges the sheikdom has repeatedly denied.

The boycott that started on June 5 has disrupted trade, split families and threatened to alter long-standing geopolitical alliances. The showdown has forced the world’s richest country per capita to open new trade routes to bring in food, building materials and equipment for its natural gas industry. As part of its response, Qatar has imported Turkish dairy goods along with Peruvian and Moroccan fruit. Until last month, most of the fresh milk and dairy products for Qatar’s population of 2.7 million was imported from Saudi Arabia. When all the cows purchased by Power International Chairman Moutaz Al Khayyat are flown in, his brand of milk will supply about 30 percent of the country’s needs

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What’s Schäuble up to now?

Greece’s Market Return May Be Imminent (R.)

Greece could return to financial markets in the next few weeks, investors and bankers close to the discussions told Reuters, raising private cash that would mark an important step towards ending its dependence on official funding next year. Athens’ largest creditor, the European Stability Mechanism, said on Monday that Greece should develop a strategy to end a three-year exile from markets before its current bailout program expires in mid-2018. Greek finance minister Euclid Tsakalotos met with investors in London last month and one of those funds, BlueBay Asset Management, said the volume of calls they are receiving from bankers about a potential deal suggest it’s very close. “Over the last few months we would get one call on this every couple of weeks (from bankers), but over the last 10 days it seems to be every day I’m getting a call asking about this particular topic,” BlueBay’s Mark Dowding told Reuters.

“One senses we are getting to a point where this feels more imminent. We could well expect to see a deal in the next couple of weeks before investors depart for their summer holidays.” Dowding said BlueBay holds Greek bonds and would buy a new bond issue if the price was attractive. Tsakalotos also met investors including the world’s biggest bond fund PIMCO and US-based asset manager Standish, sources close to those meetings told Reuters. [..] A senior Greek government official told Reuters last week that no decision had yet been made on the timing of a deal. A banker advising Greece on its market return told Reuters on condition of anonymity: “They (Greece) are monitoring the market and they are trying to do something right now, so I wouldn’t rule out a deal within the next week or two.”

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FIghts in the Lesbos Moria camp yesterday.

NGOs Fearful Of Handing Island Refugee Camps To Greek State (K.)

Seven top NGOs aiding refugees in Greece have issued a joint statement expressing their concerns over the handover of responsibilities at migrant camps on the Greek islands to the government as of August 1. The NGOs say the Greek government has released few details about how it plans to continue providing existing assistance to residents at the camps. A deterioration of living conditions and diminished access to essential services are the main concerns cited if the Greek government does not communicate a plan to the NGOs before the handover. Since the start of the year, more than 9,500 refugees and migrants have arrived on the Greek islands, where nearly 14,000 are currently stranded. “Without a transitional plan, vulnerable men, women and children will be put at greater risk,” the statement said.

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The EU: where people go to drown.

EU Migrant Rescue Mission ‘Led To Increase In Deaths’ (Ind.)

A major naval mission spearheaded by the EU has failed to tackle people smuggling in the Mediterranean and may even be leading to higher death tolls, a new report has found. Operation Sophia, launched in 2015, has had little effect in deterring migration and its mandate should not be renewed, according to findings by the House of Lords EU External Affairs Sub-Committee. But the report concludes that the operation’s search and rescue work which has saved the lives of many people should continue. The initiative, involving 25 EU member states including the UK, was set up in the wake of disasters in which hundreds of migrants drowned attempting to reach Europe.

Yet detection of irregular migrants on the central Mediterranean route was at its highest level in 2016, when 181,436 people arrived in Europe by this route — an increase of 18 per cent on 2015, when the figure was 153,842. A naval mission is the “wrong tool” to tackle irregular migration, which begins onshore, the assessment found. It claimed an unintended consequence of Operation Sophia’s destruction of vessels had been that the smugglers have managed to adapt, sending migrants to sea in unseaworthy vessels. This led to a tragic increase in deaths, with 2,150 in 2017 to date, the report added. But it also noted that Operation Sophia vessels have rescued more than 33,000 people since the start of the mission.

The report comes just days after Amnesty International said “reckless” EU operations were destroying smugglers’ safest boats in the Mediterranean and causing more refugee deaths. It claimed the EU had “turned its back” on the search and rescue strategy. A report by the human rights group argued that the search-and-rescue measures implemented in 2015 dramatically decreased the numbers of deaths at sea, but that EU governments had now shifted their focus to disrupting smugglers and preventing boats departing from Libya. It said the EU strategy was “exposing refugees and migrants to even greater risks at sea”, destroying so many of the wooden boats used by smugglers that huge numbers of people had now started making the crossing on less safe rubber dinghies.

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Jul 022017
 
 July 2, 2017  Posted by at 9:54 am Finance Tagged with: , , , , , , , , , ,  3 Responses »
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JMW Turner Lake Llanberis and Snowdon Color Study c.1800

 

Can The Bank of England Get Britain To Kick Its Cheap Credit Habit? (G.)
Britain ‘Is On The Brink Of The Worst House Price Collapse Since 1990s’ (DM)
China Tears Up Promises To UK And Shows The World Who Is In Charge (O.)
Court Ruling Sends Illinois Into Financial Abyss (ZH)
New Jersey Governor Chris Christie Orders Government Shutdown (CBS)
Only 2% of US Politicians Actually Want to Stop Arming Terrorists (Salles)
After Hersh Investigation, Media Connive in Propaganda War on Syria (CP)
How Do We Know that What Hersh Was Told Was True? (PCR)
‘Clean Coal’ Will Always Be a Fantasy (BBG)
Qatar Rejects Deadline Demands, Saying It Does Not Fear Military Action (G.)
Debt-Stricken Greece Gets Record Number Of Visitors (G.)
ECB To Inspect Greek Banks’ Progress On Cutting Bad Loans (R.)
Schaeuble Says Greek Governments To Blame For Pension Cuts (K.)

 

 

The BoE promoted, incited, cheap credit and the housing bubble by lowering rates. And now it has to kill off what it promoted? Who believes that? The role of central banks is truly poorly understood.

Can The Bank of England Get Britain To Kick Its Cheap Credit Habit? (G.)

One thing sure to upset Bank of England officials is any suggestion that the Old Lady of Threadneedle Street has gone soft on the banking industry and turns a blind eye to reckless lending. It brings back disturbing memories of the 2008 credit crunch, the chaos it brought to the economy and the damage it caused the institution’s reputation. Last week, the Bank of England, which has become the overarching regulator of the banking system, made a point of being tough on the banks following the publication of its latest financial stability report. It slapped a demand for more than £11bn of extra reserves on the major lenders – just in case the current economic slowdown should trigger a rise in defaults.

Governor Mark Carney also warned the lending industry that it should expect tougher rules on how it sells mortgages, car loans and credit cards should the current rise in borrowing rocket any further. But one question remains: can Carney and his troops tame the British consumer’s dependence on debt? The most recent figures would say the answer is no. Last week the Bank’s own figures showed that consumer credit grew by £1.7bn in May, the biggest increase since last November, and higher than the six-month average of £1.5bn. The annual rate at which UK consumers are loading up on their already heaving debt pile remained at 10.3% in the year to May. A look at the total stock of UK consumer credit shows that it reached £198bn in April.

That might seem small compared with the total amount of outstanding mortgage debt, which is around seven times larger, at £1.3trillion, but for banks, consumer credit accounts for a much higher proportion of losses. “Since 2007, UK banks’ total write-offs on UK consumer credit have been 10 times higher than on mortgages,” the BoE says. And all this rising debt comes at a time of extraordinary falls in the savings rate. The most recent GDP figures showed that households were putting aside rainy day money at the lowest rate on record. It is a situation that worries experts of all stripes – from Jane Tully, a senior director at the Money Advice Trust, the charity that runs National Debtline, to former Bank of England official Kate Barker, who was a member of the Bank’s interest rate-setting committee during the last crash.

Tully said: “We have already seen an 8% rise in the number of people helped by National Debtline by telephone this year, and all the signs are that demand for debt advice will continue to increase. The higher borrowing levels rise, the more households will be exposed to the risk of financial difficulty in the event of a downturn.” Barker is concerned that eight years of ultra-low interest rates are fuelling a dependence on cheap borrowing, without any end in sight. She says that the growth of car finance plans appears to be a side-effect of the clampdown in other areas of credit, in particular the tighter regulation of mortgages. “There is obviously an incentive to borrow, so as one area is clamped down on, the problem pops up in another,” she says.

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A 40% fall in prices sounds reasonable.

Britain ‘Is On The Brink Of The Worst House Price Collapse Since 1990s’ (DM)

House prices are teetering on the brink of a crash that could be as bad as the bust of the early 1990s, a leading expert has warned. There are already warning signs that prices are heading towards a near 40% plunge, warns Paul Cheshire, Professor of Economic Geography at the London School of Economics. It raises the alarming spectre of the return of ‘negative equity’ – when a house falls so far in value it is worth less than the mortgage – which hit one million people at the worst point in the 1990s. Speaking exclusively to The Mail on Sunday, Prof Cheshire, a former Government housing adviser, said: ‘We are due a significant correction in house prices. I think we are beginning to see signs that correction may be starting. ‘Historically, trends seem always to start in London and then move out across the rest of the country. In the capital, you are already seeing house prices rising less rapidly than in other parts of Britain.’

Such a shift could push many thousands of recent buyers into trouble. From 1989, the price boom fell apart over the next six years, with prices plunging by 37%. In its most recent figures, The National Association of Estate Agents reported the number of homes sold in May for less than the asking price rose to 77%. According to Prof Cheshire, the fall in real incomes – when wages fail to keep up with inflation – is likely to be the spark for a fall in house prices. Inflation hit 2.9% last month, while incomes only grew by 2.1%. Property experts and estate agents say the housing market in wealthier pockets of the country has been further hit by stamp duty hikes. Prof Christian Hilber of the LSE also warned: ‘If Brexit leads to a recession and/or sluggish growth for extended periods, then an extended and severe downturn is more likely than a short-lived and mild one.’ The Council of Mortgage Lenders said earlier this month that the housing market had ‘stalled’

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From bad to worse. The hubris boomerang.

China Tears Up Promises To UK And Shows The World Who Is In Charge (O.)

Xi Jinping’s tough talk in Hong Kong reflects growing self-confidence in China’s ability to shape world events and browbeat or ignore less powerful countries such as Britain. The Chinese president could have thrown a bone to the pro-democracy movement. He could have offered a sop on civil liberties and political rights to western opinion. Instead, he told Hong Kong who’s boss. Xi the hard man laid down the law according to Beijing. His message: fall into line, or else. His message to Britain was blunt, too, bordering on disdainful. China would not brook outside “interference” in the former colony. Forget about those guarantees of a free, open society painstakingly negotiated before the 1997 handover. “Any attempt to endanger China’s sovereignty and challenge the power of the central government is absolutely impermissible,” Xi said.

Under Xi’s bastardised version of the Basic Law, any criticism is henceforth forbidden, on pain of serious consequences. Boris Johnson received a stinging lesson in the new balance of power earlier in the week. “As we look to the future, Britain hopes that Hong Kong will make more progress toward a fully democratic and accountable system of government,” the foreign secretary intoned with uncharacteristic meekness. Johnson’s statement was shamefully deferential. He could, and should, have been more forceful about Beijing’s responsibilities and its own egregious, sometimes illegal meddling. But China took umbrage all the same. Liu Xiaoming, China’s ambassador in London, set Johnson straight: Hong Kong issues must henceforth be “handled properly” or overall ties would suffer.

Worse was to follow. On Friday, China’s foreign ministry formally renounced the 1984 Sino-British joint declaration, the basis on which Britain agreed to relinquish control of the colony. The two sides had agreed the treaty would remain in force for 50 years. “The Sino-British joint declaration, as a historical document, no longer has any practical significance, and it is not at all binding for the central government’s management over Hong Kong,” the spokesman Lu Kang declared. The Foreign Office swiftly rejected the demarche. But in his present bullish mood, Xi is not listening.

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Keeping up appearances is getting harder.

Court Ruling Sends Illinois Into Financial Abyss (ZH)

[..] the state remains without a spending plan, its tax receipts and outlays mostly on “autopilot”, leaving it with a record $15 billion of unpaid bills as it spent over $6 billion more than it brought in over the past year, and with $800 million in interest on the unpaid bills alone. The impasse has devastated social-service providers, shuttering services for the homeless, disabled and poor. The lack of state aid has wrecked havoc on universities, putting their accreditation at risk. However, in a “shocking” development, just hours remaining before the midnight deadline to pass the Illinois budget, and Illinois’ imminent loss of its investment grade rating, federal judge Joan Lefkow in Chicago ordered Illinois to come up with hundreds of millions of dollars it owes in Medicaid payments that state officials say the government doesn’t have, the Chicago Tribune reported.

Judge Lefkow ordered the state to make $586 million in monthly payments (from the current $160 million) as well as another $2 billion toward a $3 billion backlog of payments – a $167 million increase in monthly outlays – the state owes to managed care organizations that process payments to providers. While it is no secret that as part of its collapse into the financial abyss, Illinois has accumulated $15 billion in unpaid bills, the state’s Medicaid recipients had had enough, and went to court asking a judge to order the state to speed up its payments. On Friday, the court ruled in their favor. The problem, of course, is that Illinois can no more afford to pay the outstanding Medicaid bills, than it can to pay any of its $14,711,351,943.90 in overdue bills as of June 30. The backlog of unpaid claims the state owes to managed-care companies directly, as well as to the doctors, hospitals, clinics and other organizations “is crippling these providers and thereby dramatically reducing the Medicaid recipients’ access to health care,” Lefkow said in her ruling.

Friday’s court ruling, which meant that the near-insolvent state must pay an additional $593 million per month, may have been the straw that finally broke the Illinois camel’s back. “Friday’s ruling by the U.S. District Court takes the state’s finances from horrific to catastrophic,” Comptroller Susana Mendoza, a Democrat, said in an emailed statement after the ruling. [..] “A comprehensive budget plan must be passed immediately.” Realizing where all this is headed, she said that payments to bond holders won’t be interrupted. [..] As a result of the court decision, “payments to the state’s pension funds; state payroll including legislator pay; General State Aid to schools and payments to local governments – in some combination – will likely have to be cut.”

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ME, CT, IL and NJ. Who’s next, please?

New Jersey Governor Chris Christie Orders Government Shutdown (CBS)

New Jersey Gov. Chris Christie and the Democrat-led Legislature are returning to work to try to resolve the state’s first government shutdown since 2006 and the first under Christie. The Republican governor and the Democrat-led Legislature failed to reach an agreement on a new budget by the deadline at midnight Friday, CBS New York reports. In a news conference Saturday morning, Christie blamed Democratic State Assembly Speaker Vincent Prieto for causing the shutdown. “If there’s not a resolution to this today, everyone will be back tomorrow,” Christie said, calling the shutdown “embarrassing and pointless.” He also repeatedly referred to the government closure as “the speaker’s shutdown.” Christie later announced that he would address the full legislature later at the statehouse on Saturday.

Prieto remained steadfast in his opposition, reiterating that he won’t consider the plan as part of the budget process but would consider it once a budget is signed. Referring to the shutdown as “Gov. Christie’s Hostage Crisis Day One,” Prieto said he has made compromises that led to the budget now before the Legislature. “I am also ready to consider reasonable alternatives that protect ratepayers, but others must come to the table ready to be equally reasonable,” Prieto said. “Gov. Christie and the legislators who won’t vote ‘yes’ on the budget are responsible for this unacceptable shutdown. I compromised. I put up a budget bill for a vote. Others now must now do their part and fulfill their responsibilities.” Christie ordered nonessential services to close beginning Saturday. New Jerseyans were feeling the impact as the shutdown took effect, shuttering state parks and disrupting ferry service to Liberty and Ellis islands.

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Where the real power resides.

Only 2% of US Politicians Actually Want to Stop Arming Terrorists (Salles)

One of the few elected Democratic lawmakers with an extensive anti-war record, Rep. Tulsi Gabbard (D-Hawaii), has combined forces with Sen. Rand Paul (R-Kentucky) to push legislation through both the House and the Senate that would bar federal agencies from using taxpayer-backed funds to provide weapons, training, intelligence, or any other type of support to terrorist cells such as al-Qaeda, ISIS, or any other group that is associated with them in any way. The Stop Arming Terrorists Act is so unique that it’s also the only bill of its kind that would also bar the government from funneling money and weapons through other countries that support (directly or indirectly) terrorists such as Saudi Arabia. To our surprise – or should we say shame? – only 13 other lawmakers out of hundreds have co-sponsored Gabbard’s House bill. Paul’s Senate version of the bill, on the other hand, has zero co-sponsors.

While both pieces of legislation were introduced in early 2017, no real action has been taken as of yet. This proves that Washington refuses to support bills that would actually provoke positive chain reactions not only abroad but also at home. Why? Well, let’s look at the groups that would lose a great deal in case this bill is signed into law. With trillions of tax dollars flowing to companies such as Boeing, Lockheed Martin, and even IBM, among others, companies that invest heavily in weapons, cyber security systems, and other technologies that are widely used in times of war would stand to lose a lot – if not everything – if all of a sudden, the United States chose to become a nation that stands for peace and free market principles. For one, these companies have a heavy lobbying presence, ensuring that lawmakers sympathetic to their plight are elected every two years.

When the possibility of a new conflict appears on the horizon, these companies are the first to lobby heavily for action. But this dynamic isn’t a secret. We all know that the crony capitalist system that thrives in Washington, D.C., is the very bread and butter of politics in America. After all, President Dwight D. Eisenhower warned the nation in his farewell address in 1961 that “an immense military establishment and a large arms industry” were becoming the great powers behind U.S. politics, and that if we weren’t weary of this influence, we would risk living in a perpetual state of war. Still, we allowed it to take over. And there isn’t one industry powerful enough to counter this destructive authority. With the support of an army of well-established and connected millionaire lobbyists, the war machine operating in Washington is so powerful that anything can be turned into an existential threat.

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Obviously, if only 2% of US politicians are willing to stop the machine, it will march on. Ike may as well have said nothing.

After Hersh Investigation, Media Connive in Propaganda War on Syria (CP)

So what did Hersh’s investigation reveal? His sources in the US intelligence establishment – people who have helped him break some of the most important stories of the past few decades, from the Mai Lai massacre by American soldiers during the Vietnam war to US abuse of Iraqi prisoners at Abu Ghraib in 2004 – told him the official narrative that Syria’s Bashar Assad had dropped deadly sarin gas on the town of Khan Sheikhoun on April 4 was incorrect. Instead, they said, a Syrian plane dropped a bomb on a meeting of jihadi fighters that triggered secondary explosions in a storage depot, releasing a toxic cloud of chemicals that killed civilians nearby. It is an alternative narrative of these events that one might have assumed would be of intense interest to the media, given that Donald Trump approved a military strike on Syria based on the official narrative.

Hersh’s version suggests that Trump acted against the intelligence advice he received from his own officials, in a highly dangerous move that not only grossly violated international law but might have dragged Assad’s main ally, Russia, into the fray. The Syrian arena has the potential to trigger a serious confrontation between the world’s two major nuclear powers. But, in fact, the western media were supremely uninterested in the story. Hersh, once considered the journalist’s journalist, went hawking his investigation around the US and UK media to no avail. In the end, he could find a home for his revelations only in Germany, in the publication Welt am Sonntag. There are a couple of possible, even if highly improbable, reasons all English-language publications ignored Hersh’s story. Maybe they had evidence that his inside intelligence was wrong.

If so, they have yet to provide it. A rebuttal would require acknowledging Hersh’s story, and none seem willing to do that. Or maybe the media thought it was old news and would no longer interest their readers. It would be difficult to sustain such an interpretation, but at least it has an air of plausibility – except for everything that has happened since Hersh published last Sunday. His story has spawned two clear “spoiler” responses from those desperate to uphold the official narrative. Hersh’s revelations may have been entirely uninteresting to the western media, but strangely they have sent Washington into crisis mode. Of course, no US official has addressed Hersh’s investigation directly, which might have drawn attention to it and forced western media to reference it. Instead Washington has sought to deflect attention from Hersh’s alternative narrative and shore up the official one through misdirection.

That alone should raise the alarm that we are being manipulated, not informed. The first spoiler, made in the immediate wake of Hersh’s story, were statements from the Pentagon and White House warning that the US had evidence Assad was planning yet another chemical attack on his people and that Washington would respond extremely harshly if he did so. Here is how the Guardian reported the US threats: “The US said on Tuesday that it had observed preparations for a possible chemical weapons attack at a Syrian air base allegedly involved in a sarin attack in April following a warning from the White House that the Syrian regime would ‘pay a heavy price’ for further use of the weapons.”

And then on Friday, the second spoiler emerged. Two unnamed diplomats “confirmed” that a report by the Organisation for the Prohibition of Chemical Weapons (OPCW) had found that some of the victims from Khan Sheikhoun showed signs of poisoning by sarin or sarin-like substances.

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“How clear does an orchestration have to be before people are capable of recognizing the orchestration?”

How Do We Know that What Hersh Was Told Was True? (PCR)

If national security advisers gave Trump such excellent information about the alleged sarin gas attack, completely disproving any such attack, why was he given such bad advice about shooting down a Syrian war plane, or was it done outside of channels? The effect of the shootdown is to raise the chance of a confrontation with Russia, because Russia’s response apparently has been to declare a no-fly zone over the area of Russian and Syrian operations. How do we know that what Hersh was told was true? What if Trump was encouraged to order the Tomahawk strike as a way of interjecting the US directly into the conflict? Both the US and Israel have powerful reasons for wanting to overthrow Assad. However, ISIS, sent to do the job, has been defeated by Russia and Syria. Unless Washington can somehow get directly involved, the war is over.

The story Hersh was given also serves to damn Trump while absolving the intelligence services. Trump takes the hit for injecting the US directly into the conflict. Hersh’s story reads well, but it easily could be a false story planted on him. I am not saying that the story is false, but unless we learn more, it could be. What we do know is that the story given to Hersh by national security officials is inconsistent with the June 26 White House announcement that the US has “identified potential preparations for another chemical attack by the Assad regime.” The White House does not have the capability to conduct its own foreign intelligence gathering. The White House is informed by the national security and intelligence agencies. In the story given to Hersh, these officials are emphatic that not only were chemical weapons removed from Syria, but also that Assad would not use them or be permitted by the Russians to use them even if he had them.

Moreover, Hersh reports that he was told that Russia fully informed the US of the Syrian attack on ISIS in advance. The weapon was a guided bomb that Russia had supplied to Syria. Therefore, it could not have been a chemical weapon. As US national security officials made it clear to Hersh that they do not believe Syria did or would use any chemical weapons, what is the source for the White House’s announcement that preparations for another chemical attack by the Assad regime have been identified? Who lined up UN ambassador Nikki Haley and the UK Defence Minister Michael Fallon to be ready with statements in support of the White House announcement? Haley says: “Any further attacks done to the people of Syria will be blamed on Assad, but also on Russia & Iran who support him killing his own people.” Fallon says: “we will support” future US action in response to the use of chemical weapons in Syria.

How clear does an orchestration have to be before people are capable of recognizing the orchestration?

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Yeah, we really need Bloomberg editors’ opinions on matters they know nothing about. Mind you, carbon capture is an empty slogan.

‘Clean Coal’ Will Always Be a Fantasy (BBG)

“Clean coal,” always dubious as a concept and never proved as a reality, has now failed as business proposition. Southern Co. has decided to stop work on a process that would have captured carbon dioxide emissions from a coal plant in Mississippi. Giving up on the project, which was nearly $5 billion over budget and three years behind schedule, makes sense for Southern’s customers and shareholders. And giving up on carbon capture makes sense for the energy industry. The technology is too expensive and complicated to be deployed quickly or widely enough to appreciably protect the climate. The better way to cut back on carbon-dioxide emissions is far simpler: Use less coal. Luckily, that change is already under way. (Michael R. Bloomberg supports the Sierra Club’s Beyond Coal campaign, an effort to replace coal power with cleaner forms of energy.)

Carbon capture once seemed promising – even as recently as a decade ago, when coal fueled almost half of U.S. electricity generation. Back then, continued dependence on the dirty fuel looked inevitable, and a strategy to deal with its prodigious greenhouse-gas emissions seemed essential. Hence, utilities embarked on model coal plants that would capture the carbon dioxide before it could enter the atmosphere. Only a couple have been built, in addition to Southern’s in Kemper County, Mississippi, and none has established an economic case for carbon capture. The Petra Nova facility, in Texas, was reportedly finished on time and on budget, but its construction required a $190 million federal grant, and the carbon-capture unit requires a separate gas-fired power plant.

Canada’s Boundary Dam carbon-capture unit, meanwhile, has operated much less efficiently than expected, suffering multiple breakdowns and requiring expensive repairs. Unfortunately, such costs and complexities are unlikely to diminish very much, and few such facilities are likely to be built worldwide in the next 20 years. A new report issued by the Global Warming Policy Foundation concludes that carbon capture for coal-fired power has “no plausible economic future.”

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Is it time to cut the House of Saud down to size?

Qatar Rejects Deadline Demands, Saying It Does Not Fear Military Action (G.)

Qatar said on Saturday it does not fear any military retaliation for refusing to meet a Monday deadline to comply with a list of demands from four Arab states that have imposed a de-facto blockade on the Gulf nation. During a visit to Rome, foreign minister Sheikh Mohammed bin Abdulrahman Al Thani again rejected the demands as an infringement on Qatar’s sovereignty. He said any country is free to raise grievances with Qatar, provided they have proof, but said any such conflicts should be worked out through negotiation, not by imposing ultimatums. “We believe that the world is governed by international laws, that don’t allow big countries to bully small countries,” he told a press conference in Italy. “No one has the right to issue to a sovereign country an ultimatum.” Saudi Arabia, Egypt, Bahrain and the United Arab Emirates cut diplomatic ties with Qatar last month and shut down land, sea and air links.

They issued a 13-point list of demands, including curbing diplomatic ties to Iran, severing ties with the Muslim Brotherhood and shuttering the Al-Jazeera news network. They accuse Qatar of supporting regional terror groups, a charge Qatar denies. Al Thani rejected the demands and said they were never meant to be accepted. “There is no fear from whatever action would be taken; Qatar is prepared to face whatever consequences,” he said. “But as I have mentioned … there is an international law that should not be violated and there is a border that should not be crossed.” While in Rome, Al Thani met with Italian foreign minister Angelino Alfano, who backed the Kuwait-led mediation effort and urged the countries involved in the standoff to “abstain from further actions that could aggravate the situation”. He added that he hoped Italian companies could further consolidate their presence in Qatar.

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I read these things and think I must be missing something: “..Greece is braced for a record-breaking 30m holidaymakers this year..” and “For every extra 30 holidaymakers a job is created”.

That sounds like a lot of jobs. But seriously, a country that depends too much on tourism is not a healthy country. Not enough stability or resilience. The longer the US and EU wait, the more unstable Greece will become.

Debt-Stricken Greece Gets Record Number Of Visitors (G.)

Up high, above the hills of Arcadia, historic Dimitsana is on a roll. Its hotels are brimming, its cafes are full, and its footpaths and monasteries lure busloads of tourists decanted daily from other parts of the Peloponnese. Either side of the main road that splits the mountain village – in a world far removed from talk of emergency bailout funds, international stewardship and gruelling austerity – Greeks are hard at work, running boutique guesthouses, eateries and bars in the stone mansions that line Dimitsana’s cobbled streets. “Business is very good,” says Labis Baxevanos, the village’s deputy mayor, who owns a patisserie along the strip. “So good that a lot of younger couples have come to work here since the country’s economic crisis began.”

Debt-stricken Greece is braced for a record-breaking 30m holidaymakers this year, almost three times its population. Addressing the Panhellenic Exporters Association last week, the tourism minister Elena Kountoura said that between January and May there had been a noticeable increase in arrivals, revenues and occupancy rates with summer bookings in some areas rising by as much as 70%. Travel receipts grew by 2.4% or €23m (£20m). After eight years of grinding austerity, the influx is a tangible gift, on a par with the €8.5bn financial lifeline thrown Greece earlier this month to once again avert default. Dimitsana – once famous for the gunpowder mills that produced the firepower in the nation’s 1821 war of independence against Ottoman rule – is emblematic of the entrepreneurial spirit taking root as a result of the boom.

“Tourism is our lifejacket,” says Theonimfi Koraki, who opened a boutique hotel in the village last summer. “The aim now is diversity and drawing out the season all year round. Here in Arcadia the creation of the 75km-long Menalon [walking] trail has been hugely successful for example with foreign tourists. It has greatly helped the development of the region.” With the exception of shipping, tourism is Greece’s biggest foreign earner, the mainstay of an economy that has otherwise contracted by 27% since late 2009 when the country’s debt crisis began. The industry accounted for eight out of 10 new jobs in 2016, vital for a nation hit by crippling levels of unemployment. Bank of Greece figures show around 23.5 million tourists visited in 2015, generating €14.2bn of revenues, or 24% of gross domestic product. Last year, the country’s tourism confederation, SETE, announced arrivals of 27.5 million, an all-time high.

Increasingly, the sector has helped boost much-needed job creation, according to data released by the labour ministry. Recently, the prime minister, Alexis Tsipras, said April and May had been record months for tackling the problem with 92,000 and 89,500 jobs created respectively. For every extra 30 holidaymakers a job is created, say officials. They have been at pains to make the point as striking municipal waste workers not only unnerved tour operators this week but highlighted how important tourism is for the economy.

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Translation: the Troika is not done with Greece yet. The bad loans issue will be used to throw more Greeks out of their homes etc.

ECB To Inspect Greek Banks’ Progress On Cutting Bad Loans (R.)

The European Central Bank plans to inspect Greek banks this year to monitor their progress in working off their huge pile of unpaid loans, ECB director Sabine Lautenschlaeger said on Friday. Greek banks have been cutting their share of non-performing loans (NPL) to companies and households, which account for slightly more than half of their books as a result of a severe economic crisis, to meet targets set by the ECB. The ECB supervises Greece’s four largest banks, or significant institutions (SIs), and is one of the three bodies responsible for the country’s bailout, along with the European Commission and the IMF.

“The ECB will perform on-site missions at the Greek SIs during the second half of 2017, a period in which the main operational measures to address NPLs … have to be already implemented,” Lautenschlaeger said in a letter to IMF chief Christine Lagarde. She was responding to an IMF request for information on the ECB’s supervisory work in Greece in the context of a possible IMF program for the country. Greece secured a credit lifeline from euro zone governments earlier this month. The IMF offered Athens a standby arrangement but said it won’t disburse any money until it obtains greater detail on debt relief for the country.

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The best for last today. Schaeuble suggests that Greece could have cut elsewhere and still meet Troika demands. Like kill all health care and education, presumably.

Schaeuble Says Greek Governments To Blame For Pension Cuts (K.)

German Finance Minister Wolfgang Schaeuble has insisted in an interview that successive Greek governments were to blame for the pension cuts that have been enforced in Greece. The German minister stressed in an interview with Ta Nea newspaper on Saturday that the Greek governments are the ones that decided the mix of policies needed to achieve the country’s targets. He also said that the IMF will never be involved again in a program to rescue a European country. Referring to his Greek counterpart Euclid Tsakalotos, he said they communicate frequently, while he dismissed his flamboyant predecessor Yianis Varoufakis as someone he no longer can “take seriously.”

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Jul 012017
 
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Fred Lyon Terrific Street, Barbary Coast, San Francisco 1947

 

Bill To Remove Trump From Office Picks Up Democratic Support (DM)
Bank of America: The Fed Is Preparing To Make The Rich Poorer (ZH)
Debt Is the Third Benjamin Franklin Certainty (Stockman)
UK Household Incomes Fall Most In 40 Years, Savings Rates Crash (Ind.)
China’s Opening Of Bond Market May Spark ‘Massive Demand’ From Foreigners (CNBC)
Judge Orders Illinois To Pay Billions More Toward Medicaid (CT)
Maine Governor Won’t Sign Latest Budget Proposal, Will Allow A Shutdown (BDN)
Connecticut Social Service Agencies Brace for Deep Cuts With No Budget (AP)
America’s Pension Bomb: Illinois Is Just the Start (BBG)
An Awful Lot Of Americans Are A Walking Illinois Now (Jim Kunstler)
US Says Its Warning Appears To Have Averted Syrian Chemical Attack (R.)
Make No Mistake, We Are Already at War in Syria (Giraldi)
Qatar Crisis: Armed Conflict And Protracted Dispute Grow More Likely (CNBC)
Oliver Stone: Edward Snowden Is The “Most American Of Patriots” (ZH)
Billionaires And Aristocrats Biggest Beneficiaries Of EU Farm Subsidies (TLE)
Juncker: EU To Discuss More Migrant Help For Greece And Italy (R.)

 

 

I thought they were kidding, Daily Mail after all. But there are more reports on this. In a nutshell: the people who support this are much less capable of doing THEIR jobs than Trump is of doing his. They’re 100% delusional. And they lack a very essential respect for the American system and the Office of the President.

But it’ll all just keep coming. This is on the same day that both the NYT and AP feel forced finally to state that their Russiagate/hacking reporting has been based on nothing at all.

Bill To Remove Trump From Office Picks Up Democratic Support (DM)

A Democratic congressman has proposed convening a special committee of psychiatrists and other doctors whose job would be to determine if President Donald Trump is fit to serve in the Oval Office. Maryland Rep. Jamie Raskin, who also teaches constitutional law at American University, has predictably failed to attract any Republicans to his banner. But the U.S. Constitution’s 25th Amendment does allow for a majority of the president’s cabinet, or ‘such other body as Congress may by law provide,’ to decide if an Oval Office occupant is unable to carry out his duties – and then to put it to a full congressional vote. Vice President Mike Pence would also have to agree, which could slow down the process – or speed it up if he wanted the levers of power for himself.

The 25th Amendment has been around since shortly after the John F. Kennedy assassination, but Congress has never formed its own committee in case it’s needed to judge a president’s mental health. Raskin’s bill would allow the four Republican and Democratic leaders of the House and Senate to each choose a psychiatrist and another doctor. Then each party would add a former statesman – like a retired president or vice president. The final group of 10 would meet and choose an 11th member, who would become the committee’s chairman. Once the group is officially seated, the House and Senate could direct it through a joint resolution to conduct an actual examination of the president ‘to determine whether the president is incapacitated, either mentally or physically,’ according to the Raskin bill.

And if the president refuses to participate, the bill dictates, that ‘shall be taken into consideration by the commission in reaching a conclusion.’ Under the 25th Amendment, such a committee – or the president’s cabinet – can notify Congress in writing that a sitting president is unfit. In either case the vice president must concur, and he would immediately become ‘acting president.’ Presidents have voluntarily transferred their powers to vice presidents in the past, including when they are put under anesthesia for medical procedures. In the case of Raskin’s plan, the Constitution holds that both houses of Congress would hold a vote within three weeks. If two-thirds majorities in the House and Senate agreed that the president couldn’t discharge his duties, he would be dismissed.

Raskin’s plan could have a fatal flaw, however: Legal scholars tend to agree that when the Constitution’s framers first provided for the replacement of a president with an ‘inability to discharge the Powers and Duties of the Office,’ they weren’t talking about mere eccentricities. And when the 25th Amendment was sent to the states for ratification in 1965, the Senate agreed that ‘inability’ meant that a president was ‘unable to make or communicate his decisions’ and suffered from a ‘mental debility’ rendering him ‘unable or unwilling to make any rational decision.’ So far two dozen members of the House, all Democrats, have signed on to cosponsor the bill. Texas Rep. Sheila Jackson Lee, a far-left liberal Democrat, claimed Friday in a Fox Business Channel interview that Congress can remove ‘incompetent’ presidents. ‘The 25th Amendment is utilized when a president is perceived to be incompetent or unable to do his or her job,’ she said.

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Interesting idea, but how valid?:“Fed/ECB are now tightening to make Wall St poorer” because it is “no longer politically acceptable to stoke Wall St bubble.”

Bank of America: The Fed Is Preparing To Make The Rich Poorer (ZH)

Remember when – for years and years after the grand, global QE experiment started – any suggestion that central bankers are the primary cause behind global wealth inequality, and thus directly responsible for such political outcomes as Brexit and Trump – was branded as a conspiracy theory by bloggers living in their parents’ basement? We do, because we were accused over and over of just that (our position on the Fed and other central banks should be familiar to all by now). Well, as of this morning, none other than the chief investment strategist at BofA, Michael Hartnett, is a basement dwelling, tinfoil hatter because in his latest Flow Show report, writes that “central banks have exacerbated inequality via Wall St inflation & Main St deflation.”

Of course we knew that, you knew that, and pretty much everyone else knew that, but those whose jobs depended on not admitting it, kept their mouths shut terrified of pointing out that the central banking emperor is not only naked, but an idiot. Well, the seal has been broken, and even the biggest cowards from within the financial establishment, most of whom can be found on financial twitter for some inexplicable reason, can speak up now. However, it’s what Hartnett said next that was more notable, namely that the “massive outperformance of deflation assets versus inflation assets shows central bank failure in War on Deflation…they have failed to boost wage expectations, inflation expectation, “animal spirits” on Main St.”

And, according to the Bank of American, now that central banks are in full reverse mode, there are “two ways to cure inequality…you can make the poor richer…or you can make the rich poorer…” So for anyone still confused, about what is taking place right now, the “Fed/ECB are now tightening to make Wall St poorer” because it is “no longer politically acceptable to stoke Wall St bubble.” Sooner or later the market will get it, and when it does, those who sell first will be happy. Everyone else will be stuck with a market that is locked limited down, with no position sales possible indefinitely, maybe in perpetuity.

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“..the nation effectively performed a leveraged buyout (LBO) on itself during the last forty years. And that did temporarily add to the appearance of prosperity.”

Debt Is the Third Benjamin Franklin Certainty (Stockman)

Once upon a time people used to have mortgage burning ceremonies when later in their working years the balance on the one-time loan they took out in their 30s to buy their castle was finally reduced to zero. And there was no such thing as student loans, and not only because students are inherently not credit worthy. College was paid for with family savings, summer jobs, work study and an austere life of four to a dorm room. No more. The essence of debt in the present era is that it is perpetually increased and rolled-over. It’s never reduced and paid-off. To be sure, much of mainstream opinion considers that reality unremarkable — even evidence of economic progress and enlightenment. Keynesians, Washington politicians and Wall Street gamblers would have it no other way because their entire modus operandi is based not just on ever more debt, but more importantly, on ever higher leverage.

The chart below not only proves the latter point, but documents that over the last four decades rising leverage has been insinuated into every nook and cranny of the U.S. economy. Nominal GDP (dark blue) grew by 6X from $3 trillion to $18 trillion, whereas total credit outstanding (light blue) soared by 13X from $5 trillion to $64 trillion. Consequently, the national leverage ratio rose from 1.5X in 1980 to 3.5X today. My point today is not to moralize, but to discuss the practical implications of the nation’s debt-topia for Ben Franklin’s other two certainties — death and (especially) taxes. There’s no doubt that the modus operandi of the American economy has been transformed by the trends displayed in the below chart. It so happened that the 1.5X ratio of total debt-to-income (GDP) at the beginning of the chart was not an aberration.

It had actually been a constant for 100 years — except for a couple of unusual years during the Great Depression. It was also linked with the greatest period of capitalist prosperity, economic growth and rising living standards in recorded history. By contrast, today’s 3.5X debt-to-income ratio has two clear implications. First, the nation effectively performed a leveraged buyout (LBO) on itself during the last forty years. And that did temporarily add to the appearance of prosperity. But it also means that the U.S. economy is now lugging two turns of extra debt compared to the historic norm. Mainstream opinion, of course, says “so what?” The U.S. economy is lugging $35 trillion of extra debt, that’s what. That’s right. In the absence of the 40-year leverage aberration since the late 1970s, the chart below would show about $29 trillion of credit market debt (public and private) outstanding, not $64 trillion.

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Just don’t blame this on Brexit. It’s a much longer trajectory. Britain has been living above its weight for a long time, and austerity has made that much worse.

UK Household Incomes Fall Most In 40 Years, Savings Rates Crash (Ind.)

The aggregate real disposable income of UK households has fallen for three quarters in a row for the first time since the 1970s, according to the Office for National Statistics. The ONS said that the inflation-adjusted compensation of the household sector fell 1.4% in the first three months of 2017, reflecting spiking inflation and weak pay growth. It was the biggest decline since the first quarter of 2013 and followed a 0.4% fall in Q4 2016 and a 0.3% slip in Q3 2016. Three consecutive quarters of contraction is the worst run for the series since 1976-77. The ONS also said that the aggregate household savings rate collapsed to just 1.7%, down from 3.3% in the final quarter of 2016, and the lowest on record, although it said one-off tax payment factors might have distorted the latest reading.

Nevertheless, weak pay growth means that households have had to resort to running down their savings and borrowing to support consumption, which has almost single-handedly powered the overall economy since last June’s Brexit vote. “This is not sustainable and fuels the belief that weakened consumer spending is likely to hold back the economy over the coming months,” said Howard Archer of the EY Item Club. “With consumer confidence declining and banks reporting that they intend to restrict the supply of secured credit, the saving rate is more likely to rise than fall ahead,” said Samuel Tombs of Pantheon.

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Those foreigners would have to sell somthing first, we presume. There goes the S&P?!

China’s Opening Of Bond Market May Spark ‘Massive Demand’ From Foreigners (CNBC)

China’s move to open up its fixed income market to foreign investors will eventually unleash “massive” demand for the mainland’s bonds, the chief executive of the company that operates Hong Kong’s stock exchange, told CNBC on Friday. In May, regulators in Hong Kong and on the mainland approved a “bond connect” program to allow investors operating in Hong Kong to trade Chinese bonds, called a “northbound” flow, with a “southbound” flow of Chinese investment into Hong Kong to be considered later. Authorities also won’t cap the amount that foreigners can invest in China. “I think this is a huge breakthrough,” HKEx CEO Charles Li told CNBC’s “Squawk Box” on the anniversary of Hong Kong’s handover to China.

Li said that while large investors are already able to access the mainland fixed income market though existing programs, the bond connect would be fundamentally different. “People are now finally able to do it and able to do it in a way that is familiar, that is similar to the way we trade U.S. dollar Treasurys or other international treasury fixed income instruments,” he said. “That is something so new. That the demand, underlying demand, the potent demand are massive.” He noted that with China’s yuan being included in the IMF’s Special Drawing Rights (SDR) basket in November 2015, some investors must include at least some renminbi assets on their balance sheets. Inclusion in the SDR means the renminbi is now officially recognized as a reserve currency. “That will require massive reallocation of capital but over quite a long period of time,” Li said, saying foreign investment into Chinese bonds was “at the beginning of the beginning.”

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Not all of this will come out as bad as it may look tomorrow morning, but down the line it’s all a toxic swamp. In the short term, deep cuts to social programs.

Judge Orders Illinois To Pay Billions More Toward Medicaid (CT)

A federal judge on Friday ordered Illinois to start paying $293 million in state money toward Medicaid bills every month and an additional $1 billion over the course of the next year, worsening a cash-flow problem caused by two years of budget-free spending by state government. U.S. District Judge Joan Lefkow’s ruling came after lawyers representing Medicaid patients and attorneys for the state were unable to agree on a plan to deal with bills and pay down a $3 billion backlog owed to health care providers. The ruling requires the state to start promptly paying all new Medicaid bills, which is estimated at about $586 million per month, and to pay down $2 billion of its bill backlog in payments spread out over the course of the coming fiscal year. The federal government pays half of those costs, so the bottom line for the state will be $293 million per month and $1 billion in backlogged bill payments over the next year.

Comptroller Susana Mendoza’s office earlier in the week had offered to pay an additional $150 million per month, but the plaintiffs rejected it, saying it wasn’t enough. The $150 million would have only cost the state $75 million because of the federal match, and Mendoza’s office said that was all the state could spare while meeting other demands. Now, Mendoza said Friday’s ruling would cause her to likely have to cut payments to the state’s pension funds, state payroll or payments to local governments. Payments to bond holders won’t be interrupted, she said. “As if the governor and legislators needed any more reason to compromise and settle on a comprehensive budget plan immediately, Friday’s ruling by the U.S. District Court takes the state’s finances from horrific to catastrophic,” Mendoza said in a statement. “A comprehensive budget plan must be passed immediately.”

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Maine beat Illinois to it! Partial shutdown started today.

Maine Governor Won’t Sign Latest Budget Proposal, Will Allow A Shutdown (BDN)

Gov. Paul LePage said Friday that he won’t sign a state budget package endorsed Thursday night by a special panel, ensuring a partial shutdown of state government at midnight. The Republican governor’s opposition to the budget deal would force Maine’s first state government shutdown since 1991, which could stretch 10 days if LePage holds a budget bill for the full time the Constitution allows before he must act. A budget would go to him tonight if the Legislature can muster two-thirds votes in both chambers, but even that was a big “if” on Friday. LePage hosted House Republicans for a Friday morning meeting where he reportedly implored them to oppose the budget deal negotiated by Senate President Mike Thibodeau, R-Winterport, and House Speaker Sara Gideon, D-Freeport.

LePage told reporters his major objections were the overall cost of the budget package – around $7.1 billion – and that it proposes raising the state’s lodging tax from 9% to 10.5% without income tax cuts. However, the budget package currently under consideration contains an income tax cut of 3% because it eliminates the surtax on income above $200,000 per year for education which was approved by voters last year. LePage said “on June 30” – the deadline for Maine’s next fiscal year – “they’re trying to put a gun to the governor’s head,” but it won’t work. “This budget they have has no prayer, and if they’re hell-bent on bringing this budget down, we will shut down at midnight tonight and we will talk to them in 10 days,” LePage said.

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Whack-a-state.

Connecticut Social Service Agencies Brace for Deep Cuts With No Budget (AP)

Nonprofit social service agencies prepared Friday to cut programs, close facilities and lay off staff after Gov. Dannel P. Malloy signed an order that slashes funding to maintain essential state services after lawmakers couldn’t come to terms on a budget before the end of the fiscal year. Barry Simon, president and CEO of Oak Hill, said his Hartford-based agency which serves people with developmental disabilities has decided to close four group homes and consolidate two others. Oak Hill was already losing money on those programs and anticipated the problem would be acerbated by the additional state reimbursement cuts in Malloy’s executive order. “Because of this situation, we’re pulling the trigger because it’s only going to get worse,” he said. Simon said 26 individuals live at the six affected group homes, some as long as 20 years. Most are being moved into other facilities.

Meanwhile, Oak Hill is scaling back day programs and employment services for people currently receiving services. And Simon said his agency cut off new admissions two months ago, in anticipation of the state budget impasse. Malloy called it “regrettable” he had to sign the executive order. When it became clear an agreement wasn’t possible on a new, two-year state budget before the fiscal year ended, the Democrat urged the General Assembly to pass a three-month “mini budget” he created. Malloy said it would be less draconian than the executive order and give lawmakers more time to reach a budget deal. While Democratic and Republican state Senate leaders supported Malloy’s mini budget, House leaders did not. Democratic House officials instead offered an eleventh-hour, two-year budget they said can be ready for a vote July 18. Malloy, however, was unenthusiastic about the proposal.

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A healthy pension fund today should really be over 100% funded- because of future demographic expectations. Only South Dakota’s complies.

America’s Pension Bomb: Illinois Is Just the Start (BBG)

We’ve been hearing it for years: America’s public pensions are a ticking time bomb. Well, at long last, the state of Illinois is about to expose just how big this blowup could be. As of the 2015 fiscal year, Illinois had promised its employees $199 billion in retirement benefits. Right now, it’s $119.1 billion short. That gap lies at the center of a years-in-the-making fiscal mess that’s threatening to drop the state’s credit rating to junk-bond status. But Illinois is hardly alone. Connecticut and New Jersey—states that, to most of the world, seem like oases of prosperity—are under growing financial strain, too. We’ve ranked the states by the size of their funding gap. The lower the funding ratio, the more money the state has to come up with to meet its pension obligations.

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“The American people, by and large, have no more idea how false and fragile the financial arrangements of the nation are than the average eight-year-old has about why the re-po squad is towing away Daddy’s Ford-F150.”

An Awful Lot Of Americans Are A Walking Illinois Now (Jim Kunstler)

The preview of coming attractions is currently playing out in Illinois — soon to be joined by Connecticut, California, Kentucky, and many other bankrupt states. Illinois is dead broke. It can’t pay the contractors who fix things like roads and storm drains, and supply food to its prisons. It’s over $200-billion deep in pension obligations that will never be honored. Its Medicaid system is a shambles. It doesn’t even have the cash-on-hand to pay lottery winners (what happened to all the cash paid into the lottery by the suckers who didn’t win, which is supposed to pay off the winners?). The state legislature hasn’t passed a budget in three years. The governor and the mayor of Chicago and everybody else nominally in charge have no idea what they’re going to do about it. Think the federal government is going to just step in and save the day there?

They’d have to bail out every other foundering state and that’s just not going to happen, especially with that same federal government about to run out of cash money itself, with no resolution of the debt ceiling controversy that might allow it to even pretend to borrow more money by issuing treasury bonds that are instantly bought by the Federal Reserve — which, of course, is not an official government agency but a private banking consortium contracted to manage the nation’s money. Do you begin to see the outlines of the clusterfuck rising like a bad moon over the harvest season of 2017? The American people, by and large, have no more idea how false and fragile the financial arrangements of the nation are than the average eight-year-old has about why the re-po squad is towing away Daddy’s Ford-F150.

We’re just doing what we always do: gittin’ our summer on. Breaking out the potato salad and the Bud Lites – at least those who have enough mojo left in their MasterCards to charge the party supplies. An awful lot of Americans must be maxed out, though, people who actually used to work at things and get paid for it. Each one of them is a walking Illinois now, facing each dawning day with a bigger load of problems, more things they can’t pay for, and moving closer to the dreadful day when everything is gone, every chattel, every knickknack, the very roof over their head, and most particularly the belief that they live in a fair and decent society.

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Absurd theater 2017. Because: “The intelligence that prompted the administration’s warning to Syria this week was “far from conclusive,” said a U.S. official familiar with it. “It did not come close to saying that a chemical weapons attack was coming,” the official said.”

But Nikki Haley says: “I would like to think that the president saved many innocent men, women and children.”

US Says Its Warning Appears To Have Averted Syrian Chemical Attack (R.)

U.S. Defense Secretary Jim Mattis said on Wednesday that the Syrian government of President Bashar al-Assad appeared so far to have heeded a warning this week from Washington not to carry out a chemical weapons attack. Russia, the Syrian government’s main backer in the country’s civil war, warned that it would respond proportionately if the United States took pre-emptive measures against Syrian forces to stop what the White House says could be a planned chemical attack. The White House said on Monday it appeared the Syrian military was preparing to conduct a chemical weapons attack and said that Assad and his forces would “pay a heavy price” if it did so. The warning was based on intelligence that indicated preparations for such a strike were under way at Syria’s Shayrat airfield, U.S. officials said.

“It appears that they took the warning seriously,” Mattis said. “They didn’t do it,” he told reporters flying with him to Brussels for a meeting of NATO defense ministers. He offered no evidence other than the fact that an attack had not taken place. Asked whether he believed Assad’s forces had called off any such strike completely, Mattis said: “I think you better ask Assad about that.” Washington accused Syrian forces of using the Shayrat airfield for a chemical weapons attack in April. Syria denies this. The intelligence that prompted the administration’s warning to Syria this week was “far from conclusive,” said a U.S. official familiar with it. “It did not come close to saying that a chemical weapons attack was coming,” the official said.

[..] Russian Foreign Minister Sergei Lavrov said on Wednesday that Moscow will respond if the United States takes measures against Syrian government forces. “We will react with dignity, in proportion to the real situation that may take place,” he said at a news conference in the city of Krasnodar. Lavrov said he hoped the United States was not preparing to use its intelligence assessments about the Syrian government’s intentions as a pretext to mount a “provocation” in Syria. [..] In Washington, the U.S. ambassador to the United Nations, Nikki Haley, credited Trump with saving Syrian lives. “Due to the president’s actions, we did not see an incident,” Haley told U.S. lawmakers. “I would like to think that the president saved many innocent men, women and children.”

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Suggestion: look at this through Russian eyes. They don’t think Trump is crazy, they think all of America is.

Make No Mistake, We Are Already at War in Syria (Giraldi)

Donald Trump has been in office for five months and it would appear that at least some of the outlines of his foreign policy are beginning to take shape, though that may be exaggeration as no one seems to be in charge. The “America First” slogan seemingly does not apply to what is developing, as actual U.S. interests do not appear to be driving what takes place, and there does not seem to be any overriding principle that shapes the responses to the many challenges confronting Washington worldwide. The two most important observations that one might make are both quite negative. First, lamentably, the promised détente with Russia has actually gone into reverse, with the relationship between the two countries at the lowest point since the time of the late, lamented Hillary Rodham Clinton as Secretary of State.

Second, we are already at war with Syria even though the media and Congress seem blissfully unaware of that fact. We are also making aggressive moves intended to create a casus belli for going to war with Iran, and are doubling down in Afghanistan with more troops on the way, so Donald Trump’s pledge to avoid pointless wars and nation-building were apparently little more than glib talking points intended to make Barack Obama look bad. The situation with Russia can be repaired as Vladimir Putin is a realist head of state of a country that is vulnerable and willing to work with Washington, but it will require an end to the constant vituperation being directed against Moscow by the media and the Democratic Party. That process could easily spin out for another year with all parties now agreeing that Russia intervened in our election even though no one has yet presented any evidence that Russia did anything at all.

Syria is more complicated. Senators Tim Kaine and Rand Paul have raised the alarm over American involvement in that country, declaring the U.S. military intervention to be illegal. Indeed it is, as it is a violation of the United Nations Charter and the American Constitution. No one has argued that Syria in any way threatens the United States, and the current policy is also an affront to common sense: like it or not Syria is a sovereign country in which we Americans have set up military bases and are supporting “rebels” (including jihadis and terrorists) who are seeking to overthrow the legitimate government. We have also established a so-called “de-confliction” zone in the southeast of the country to protect our proxies without the consent of the government in Damascus. All of that adds up to what is unambiguously unprovoked aggression, an act of war.

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Expect Russia to react to this too, and soon.

Qatar Crisis: Armed Conflict And Protracted Dispute Grow More Likely (CNBC)

A diplomatic crisis on the Arabian Peninsula is turning into a protracted standoff, and some analysts now say the risk of armed conflict is emerging. The dispute between Qatar, a major natural gas exporter, and its neighbors is now entering its fifth week. Saudi Arabia, the United Arab Emirates, Egypt and Bahrain cut diplomatic ties with Qatar and implemented a partial blockade on June 5 in a bid to bring the tiny Persian Gulf monarchy in line with Saudi-dominated foreign policy. Some analysts initially thought the parties would seek a resolution by the end of the Muslim holy month of Ramadan, but last week, the anti-Qatar alliance issued a series of harsh demands. “It’s escalated to a stage where it’s very difficult for both sides to back down,” Firas Modad, analyst at IHS Markit, told CNBC this week.

The demands include non-starters such as shutting down Al Jazeera news and closing a Turkish military base. The coalition also calls on Qatar to end its alleged ties to terrorist groups and political opposition figures in Gulf nations and Egypt. It demanded Qatar pay reparations and submit to compliance reviews going forward. Qatar has rejected the demands. That is likely to trigger a series of additional economic and political sanctions against the government in Doha, causing the impasse to stretch out for months, risk consultancy Eurasia Group concluded in a briefing this week. “The crisis will continue to escalate before the Qatari leadership ultimately adjusts its policy positions, or in a slightly less likely scenario, opts to cement an alliance with Turkey and closer ties with Iran,” Eurasia Group said.

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Or the Most Patriotic of Americans?

Oliver Stone: Edward Snowden Is The “Most American Of Patriots” (ZH)

Director Oliver Stone, who’s recently released series “The Putin Interviews” stirred up controversy among liberals who accused him of being a Russian propagandist, appeared on the Liberty Report with former Texas Congressman Ron Paul to discuss the documentary, his views about former NSA contractor Edward Snowden, and why the US’s aggressive approach to containing the purported threat posed by Russia has led to a breakdown in relations between the two powers. Stone said he’s been “interested” in Russia since being raised as a conservative in New York City, claiming that his father instilled a “fear” of Communism and Russians in him at a young age. In the early 1980s, Stone visited the country for the first time as a screenwriter with the idea of interviewing several dissidents. He has returned several times since.

In particular, Stone has become interested in the case of Snowden, whom he praised as “the most American of patriots.” “I was interested in Russia – I went back into the 2000s. The Snowden story occupied me. And of course, it’s so ironic that he the most American of patriots is living in Moscow because he has to. It’s the only country in the world that would give him asylum – in other words it’s the only country in the word that can deny the US what it wants which is Snowden.” “[Putin] explained to me that Russians wanted an extradition treaty with the US for years, but nothing doing, because there are a lot of Russian criminals in America who stole money from Russia. He did nothing wrong in Russian terms so they gave him asylum – now its 3 years 5 years whatever its going to be. I wish Ed well I really do.”

Stone also shared a story about watching the movie “Dr. Strangelove” with Putin, who he said was greatly moved. “I showed him the movie Dr. Strangelove…and he watched it very serious about it. He said this movie was very accurate of that time and it’s still accurate today.” Circling back to the issue of nuclear deterrents, Stone said he’s worried that rising tensions around the world could trigger a “nuclear confrontation.” “I’m saying I have reached that age when I am not really concerned about what happens to me but… it’s not just about the US, but about the whole planet and I feel a nuclear confrontation, an accident, could happen tomorrow. But you put ABMs in Poland and Romania – that’s a gigantic mistake.”

“An ABM can be converted overnight from a defensive missile to an offensive missile. They’re surrounded from the North the East and the West by US missiles and we don’t seem to realize it.” Stone says he’s “scared for America,” explaining that many US citizens prefer to blindly accept media spin that’s favorable to the US establishment, without questioning it, or trying to understand Russia’s point of view. “It’s a good thing I went through JFK when I was younger…there’s been a lot of controversy around my movies. I’m scared not for myself because I’m at that age, they can’t destroy me anymore, but I’m scared for America, I’m afraid they’ve lost their sense. I’m afraid there’s a lack of foresight and leadership.”

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EU farm budget is about €1 trillion. While Greece’s health care system and social programs are being murdered underpressure from the same EU.

Billionaires And Aristocrats Biggest Beneficiaries Of EU Farm Subsidies (TLE)

20% of the 100 largest payments under the European Union’s “direct” subsidy system now go to people or families on the Sunday Times Rich List. According to a new investigation by Energydesk billionaires and aristocrats last year scooped up an even greater proportion of the UK’s biggest farm subsidy payouts, with “basic payments” to the Top 100’s Rich List recipients totalling £11.2 million in 2016 – up from £10.6 million the previous year. Direct EU subsidies – now known as “basic payments” – have attracted criticism for largely rewarding landowners simply for owning land, rather than paying farmers to invest in environmental or other “public goods”. The National Trust – which itself received £1.6m in basic payments last year – said the system needed fundamental reform, even if it meant the trust getting less income for its land.

Richard Hebditch, the trust’s external affairs director, said: “Rather than being paid for how much land you happen to farm, a new model which delivers clear public benefit from the money being spent is within reach after Brexit. “Farmers should receive a fair market price for safe and sustainable supplies of food, with public funding paying for the crucial role of protecting vulnerable natural resources, caring for our heritage and landscape and helping address issues like flooding and climate change.” Ironically, the farm business owned by prominent Brexit-backing billionaire inventor Sir James Dyson is now the biggest for-profit recipient of direct EU farm subsidies in the UK. Beeswax Dyson Farming netted £1.6 million under the basic payment scheme last year – up from £1.4 million in 2015. According to the Rich List, Sir James and family are worth £7.8 billion, and he is a bigger landowner than the Queen, with holdings of around 25,000 acres.

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Nobody takes Juncker serious anymore.

Juncker: EU To Discuss More Migrant Help For Greece And Italy (R.)

The EU executive will discuss further measures with Italy and Greece in the coming week to help the Mediterranean states deal with irregular migrants, European Commission President Jean-Claude Juncker said on Friday. Asked at a news conference what, in particular, the Commission might do to help Italy, where arrivals from Libya are up a third on a year ago, Juncker said: “I will see with the Italian prime minister, with the Greek prime minister, during the coming week what further efforts the Commission can line up to relieve Italy and Greece in their difficult struggles.” He recalled that he had described both countries as “heroic” and said he had discussed the issue on Thursday at a meeting in Berlin with Italian Prime Minister Paolo Gentiloni and leaders of other big EU states which are members of the global G20.

“I said Italy and Greece … cannot be left alone in this refugee crises,’ Juncker told reporters in Tallinn, where he was meeting the Estonian government as it takes on the six-month presidency of European Union ministerial councils. He rejected any suggestion the Union had failed to help the countries where most refugees and migrants are arriving, noting EU funds allocated to Italy and Greece and border guard and other personnel sent to help process those arriving. The Commission on Thursday threw its weight behind a plea by Italy for fellow EU states to allow rescue boats carrying migrants to dock in their ports.

EU diplomats said they were looking at Italian concerns over how private charities are picking up people just off the Libyan coast. Some see that as encouraging more to take to the sea. The rescue organisations complain of unfair criticism. About 10,000 people have been rescued over the past three days. Italy has taken in 82,000 people so far this year. Voters dealt a blow to the ruling party in local elections last week, opting for groups promising a tougher line on immigration. The Commission has signalled readiness to give Italy more cash to help with increased arrivals, though officials and diplomats in Brussels are sceptical there would be any swift agreement for other EU states to take in the private boats.

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Jun 302017
 
 June 30, 2017  Posted by at 9:35 am Finance Tagged with: , , , , , , , , , ,  7 Responses »
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Claude Monet Impression Sunrise 1872

 

Trump Travel Ban Goes Into Effect Amid New Court Challenge (BBG)
Yes, Ms. Yellen…There Will Be Another Financial Crisis (Roberts)
Car Deals: Must Be Subprime, Must Finance Through Chrysler Capital (Mish)
Signs Of An Auto Bubble: Dealer Offers “Low Credit Score Discount” (ZH)
Japan May Industrial Output Slumps At Steepest Pace In Over 6 Years (R.)
Bob Woodward Chides NYT, Mainstream Media: ‘Fair Mindedness is Essential’ (DC)
Russia-gate Is A Scandal In Search Of A Specific Crime (Robert Parry)
New York Times Forced To Retract Longstanding Lie About Russian Hacking (M.)
Maria Bartiromo Slams John Podesta Over His Ties To Russia (PFW)
Comey Friend Unveils “Smoking Gun” Nothingburger (ZH)
Peace is Popular (Ron Paul)
Greece Garbage Cleanup Begins As Workers Halt Strike Action (K.)
Italy Threatens To Turn Away Foreign NGO Ships With Rescued Migrants (dpa)
Closing Italian Ports ‘A Cry For Help’, Say Weary Crew Of Rescue Boat (G.)

 

 

Let’s have it, so the courts can hold all points of view against the light of the law.

Trump Travel Ban Goes Into Effect Amid New Court Challenge (BBG)

The Trump administration’s revised travel ban faced a new court challenge as soon as it took effect Thursday after the president’s signature immigration policy already weathered months of protests, legal wrangling and delays. A new set of restrictions on refugees and immigrants from six predominantly Muslim countries took effect at 8 p.m. EDT. The administration said the rules should help prevent the chaotic airport scenes witnessed when President Donald Trump’s initial order was abruptly imposed in January. But a half-hour before the ban took effect, Hawaii asked a judge to clarify whether the government violated instructions from the U.S. Supreme Court in defining who’s covered by the ban and who’s excluded.

If implemented as intended, the travel restrictions would allow Trump to declare partial victory on his campaign promise to stem the flow of refugees and travelers from nations he deems a security risk. Lower court decisions to uphold two of his proposed travel bans were early, public defeats for the administration in its initial weeks. To minimize disruptions this time, the State Department, Homeland Security Department and Justice Department coordinated in advance to establish clearer guidelines for thousands of consular officers, airlines and travelers. And unlike in January, when hundreds of travelers arriving in the U.S. were turned back or detained at airports, those already holding a valid visa will be let in. “The American public could have legitimate concerns about their safety when we open our doors,” State Department spokeswoman Heather Nauert said at a briefing Thursday.

“We want to open our doors to people who are willing to go through proper screening measures and who want to be here and want to be productive members of our society.” The latest effort followed a U.S. Supreme Court ruling this week that travelers from the six nations – Iran, Libya, Somalia, Sudan, Syria and Yemen – with “bona fide” connections in the U.S. be exempted from the travel ban. That definition was interpreted to mean that travelers with specific, close family members in the U.S., including spouses, children, and siblings, could be let in. But people whose closest connections are grandparents, aunts and uncles could be barred. Students or travelers with business or professional ties from the affected countries also are exempt if they can show a relationship that’s formal and documented, and not based on an intent to evade the ban.

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She’s gotta go. That was just too crazy. A few points and graphs from Lance’s longer article.

Yes, Ms. Yellen…There Will Be Another Financial Crisis (Roberts)

That is a pretty bold statement to make considering that every one of her predecessors failed to predict the negative consequences of their actions. Will there will be another “Financial Crisis” in our lifetimes? Yes, it is virtually guaranteed. The previous “crisis” wasn’t about just “an asset gone bad,” but rather the systemic shock caused by a “freeze” in the credit markets when Lehman Brothers filed for bankruptcy. Counterparties evaporated, banks froze lending and the credit market ceased to function. Credit, not the stock market, is the “lifeblood” of the economy. Of course, it is all good now because the Fed says so with Ms. Yellen placing a great amount of faith in the Fed’s own carefully constructed, and recently released results, of “bank stress tests.” Interestingly, EVERY bank passed with flying colors. In other words, the Millennial generation has now passed the baton of “Everybody Gets A Trophy” to the banking sector. [..] Here is why Janet Yellen is wrong in believing another “Financial Crisis” can’t occur:

Catalyst 1: Delinquency & Defaults We are already seeing the early warning signs with delinquency rates rising and commercial lending on the decline in both consumer and commercial and industrial loans. [..] Of course, this also includes the credit problems of the collapse in Commercial Real Estate which is grossly leveraged at a time when prices have begun to stagnate with an oversupply of inventory sitting on the ground.

Catalyst 2: Leverage & Robots It isn’t just bank loans which will catalyze the coming financial crisis. It is also, be the massive surge in debt and leverage over the last eight years including student loans, credit cards, corporate debt and margin loans. As I discussed recently in the “Illusion Of Liquidity:” “The illusion of liquidity has a dangerous side effect. The process of the previous two debt-deleveraging cycles led to rather sharp market reversions as margin calls, and the subsequent unwinding of margin debt fueled a liquidation cycle in financial assets. The resultant loss of the ‘wealth effect’ weighed on consumption pushing the economy into recession which then impacted corporate and household debt leading to defaults, write-offs, and bankruptcies.”

Catalyst 3: Pensions Lastly, and a point clearly missed by Ms. Yellen in her quest to dismiss financial crisis risks, is the $3 Trillion “Pension Crisis” that is just one sharp downturn away from imploding. The cresting of the “baby boom” generation now puts these massively underfunded pensions at risk of a “run on assets” during the next downturn which could send the entire system into chaos. Of course, this problem can be directly traced to the malfeasance of pension fund managers, and pension boards, which used excessively high return rates to lower costs of contributions.

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Lenders need new loans something desperate.

Car Deals: Must Be Subprime, Must Finance Through Chrysler Capital (Mish)

Reader Brian emailed an ad for huge discounts on cars. The fine print is rather amusing: Must be subprime and must finance through Chrysler Capital. Frequently, when you see an ad “only x available at this price”, there are really none available at that price. They all went to friends of the dealer. I called about the 2017 Patriot and there were still some left but they were “going fast”. The ad reads “Primary customer must have a FICO score below 620 and must finance through Chrysler Capital” I asked what happens if my credit score was above 620. As expected, I could not get that price. For someone with a credit score of 800 the price jumps to $13,485.

I asked what happens if I pay all cash. That price is $13,995. I asked about prepayment penalties and California does not allow them. Still, the MSRP is $21,760 and you can get one for $13,995. That is a discount of 35.7% off the MSRP. I do not know what this model typically sells for, but that seems like a hefty discount. A subprime buyer can pay $11,995. That is a discount of 44.9% off MSRP. Since there are no prepayment penalties, one could immediately pay it off in theory. In practice, someone with a credit score below 620 is extremely unlikely to be in a position to pay the loan off immediately.

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Don’t forget: when loans are paid back, money disappears from the system.

Signs Of An Auto Bubble: Dealer Offers “Low Credit Score Discount” (ZH)

If you’re still on the fence about whether the auto market in this country is anything but a massive bubble being propped up by extremely loose credit underwriting standards, then we think we’ve just found some definitive evidence for you. As Jalopnik noted earlier today, at first glance the following advertisement for a $55,000 truck from a dealership in Texas looks fairly ‘normal’…an extremely high starting MSRP at the top followed by a series of incentive offers that make the vehicle look “affordable.” But, take a closer look and we think you just might find something rather disturbing…that’s right, a $1,500 discount offered only to people with “Low Credit Scores.”

Ordinarily, of course, lender/dealer financing incentives like these would be offered to folks with good credit, because…well, that’s at least somewhat logical, but it seems as though this particular dealer has already sold a $55,000 truck to everyone with good credit and is looking to ‘creatively’ broaden it’s addressable market. Meanwhile, looking at the fine print, it seems as though this incentive is particularly targeted at subprime borrowers with credit scores below 620. “April 2017 Pricing on all new vehicles may include up to $1500 in finance rebates that have certain credit requirements to be able to claim this rebate. The finance office is Credit Score based and you must be below 620 to qualify. If you are over a 620 you must add up to $1500 to the price. Varies by make and model. Not all units are eligible for this rebate. Call Dealer for Details.”

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Rollercoaster territory. Wonder why. +4.0% in April, -3.2% in May, expected + 2.8% in June and -0.1% in July.

Japan May Industrial Output Slumps At Steepest Pace In Over 6 Years (R.)

Japan’s industrial output fell 3.3% in May from the previous month due to lower production of cars and construction equipment, preliminary government data showed on Friday, in a sign of a temporary lull in manufacturing activity. The result compared with the median estimate of a 3.2% decline in a Reuters poll of economists. It followed a 4.0% increase in April, which was the fastest increase in almost six years, the data from the Ministry of Economy, Trade and Industry showed. Manufacturers surveyed by the ministry expect output to rise 2.8% in June and fall 0.1% in July.

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I’m sort of sorry I feel inclined to delve into US politics, but enough is enough. “..maybe more essential is a game plan for reporting this and going to Moscow and finding the bookkeeper.”

Bob Woodward Chides NYT, Mainstream Media: ‘Fair Mindedness is Essential’ (DC)

Famed investigative journalist Bob Woodward criticized the media’s open bias toward President Trump on Tuesday in remarks following a screening of “All The President’s Men” in Washington, D.C. Woodward, the reporter who broke the Nixon Watergate scandal the media now loves to compare to the Trump administration, said it’s crucial the press retain the trust of the public, and execute a deep “fair-mindedness” when reporting. He pointed to a list of Trump’s “lies” compiled by The New York Times in which some of the president’s are misjudged as an example of overt bias, after he was asked about the media’s treatment of Trump in a Q&A session at Landmark E Street Cinema. “[Number three on the list] was that Trump said he was on the cover of Time magazine 14 or 15 times when it was in fact 11 times,” Woodward said. “… That’s not a lie.”

He likened Trump’s statement instead to someone getting pulled over for speeding and telling the police officer that they were driving the speed limit. “Tone matters, and headlines matter, and you want people to [trust you],” he said. “[It] really betrays the anti-Trump media bias,” Woodward added, regarding the media’s coverage of the investigation into Russian meddling in the election. “I think a kind of brief, deeply fair-mindedness is essential, but as essential or maybe more essential is a game plan for reporting this and going to Moscow and finding the bookkeeper.” The bookkeeper was a reference to a key source for Woodward and Carl Bernstein in their Watergate coverage. Woodward has been a consistent voice for journalism in recent months, calling the Buzzfeed dossier “a garbage document” and saying that the Comey investigation was “not yet Watergate,” contradicting frequent mainstream claims.

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Great history lesson on previous US scandals.

Russia-gate Is A Scandal In Search Of A Specific Crime (Robert Parry)

So how do Watergate and Iran-Contra compare and contrast with Russia-gate? One key difference is that in Watergate in 1972-73 and Iran-Contra in 1985-86, you had clear-cut crimes (even if you don’t want to believe the two “prequels” from 1968 and 1980, respectively). In Watergate, five burglars were caught inside the DNC offices on June 17, 1972, as they sought to plant more bugs on Democratic phones. (An earlier break-in in May had installed two bugs, but one didn’t work.) Nixon then proceeded to mount a cover-up of his 1972 campaign’s role in funding the break-in and other abuses of power. In Iran-Contra, Reagan secretly authorized weapons sales to Iran, which was then designated a terrorist state, without informing Congress, a violation of the Arms Export Control Act. He also kept Congress in the dark about his belated signing of a related intelligence “finding.”

And the creation of slush funds to finance the Nicaraguan Contras represented an evasion of the U.S. Constitution. There was also the attendant Iran-Contra cover-up mounted both by the Reagan White House and later the George H.W. Bush White House, which culminated in Bush’s Christmas Eve 1992 pardons of six Iran-Contra defendants as special prosecutor Lawrence Walsh was zeroing in on possible indictment of Bush for withholding evidence. By contrast, Russia-gate has been a “scandal” in search of a specific crime. President Barack Obama’s intelligence chieftains have alleged – without presenting any clear evidence – that the Russian government hacked into the emails of the Democratic National Committee and of Hillary Clinton’s campaign chairman John Podesta and released those emails via WikiLeaks and other Internet sites. (The Russians and WikiLeaks have both denied the accusations.)

The DNC emails revealed that senior Democrats did not maintain their required independence regarding the primaries by seeking to hurt Sen. Bernie Sanders and help Clinton. The Podesta emails pulled back the curtain on Clinton’s paid speeches to Wall Street banks and on pay-to-play features of the Clinton Foundation. Hacking into personal computers is a crime, but the U.S. government has yet to bring any formal charges against specific individuals supposedly responsible for the hacking of the Democratic emails. There also has been no evidence that Donald Trump’s campaign colluded with Russians in the hacking. Lacking any precise evidence of this cyber-crime or of a conspiracy between Russia and the Trump campaign, Obama’s Justice Department holdovers and now special prosecutor Robert Mueller have sought to build “process crimes,” around false statements to investigators and possible obstruction of justice.

In the case of retired Lt. Gen. Michael Flynn, Trump’s first national security adviser, acting Attorney General Sally Yates used the archaic Logan Act of 1799 to create a predicate for the FBI to interrogate Flynn about a Dec. 29, 2016 conversation with Russian Ambassador Sergey Kislyak, i.e., after Trump’s election but before the Inauguration. The Logan Act, which has never resulted in a prosecution in 218 years, was enacted during the period of the Alien and Sedition Acts to bar private citizens from negotiating on their own with foreign governments. It was never intended to apply to a national security adviser of an elected President, albeit before he was sworn in. But it became the predicate for the FBI interrogation — and the FBI agents were armed with a transcript of the intercepted Kislyak-Flynn phone call so they could catch Flynn on any gaps in his recollection, which might have been made even hazier because he was on vacation in the Dominican Republic when Kislyak called.

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“The “17 intelligence agencies” lie had been completely, thoroughly debunked for weeks..”

New York Times Forced To Retract Longstanding Lie About Russian Hacking (M.)

Seventeen intelligence agencies: if you’ve been following the maniacal #TrumpRussia coverage to any extent, you’ve heard this phrase used uncritically, time and again, regardless of your ideological loyalties. Pundits, papers and rank-and-file establishment loyalists have been unquestioningly regurgitating the nonsensical line that 17 intelligence agencies confirmed Russian interference in the US elections ever since Hillary Clinton made that baseless assertion in a debate back in October. The innate absurdity of the claim was immediately attacked by WikiLeaks and anti-establishment outlets who pointed out that this would necessarily need to involve full investigations from agencies like the Coast Guard, the DEA and the Energy Department in order to be true.

Nevertheless, many high-profile pro-establishment outlets like Politifact and USA Today found Clinton’s claims to be 100% true on the grounds that James Clapper, then-Director of National Intelligence and notorious Russophobic racist, “speaks on behalf of” all 17 intelligence agencies. To this day Politifact stands by its false claim on the basis of that same spurious assertion. It turns out, however, that in addition to Clapper’s office there were only three intelligence agencies involved in that assessment, not 17, and that the conclusions were drawn not by the actual agencies in full, but by a mere two dozen loyalists from those agencies hand-selected by Russophobic eugenicist Clapper himself. The great Robert Parry notes in his Consortium News article about this point, “as any intelligence expert will tell you, if you ‘hand-pick’ the analysts, you are really hand-picking the conclusion. For instance, if the analysts were known to be hard-liners on Russia or supporters of Hillary Clinton, they could be expected to deliver the one-sided report that they did.”

As reported by Parry, we have known about these facts since they emerged from Clapper’s racist face hole on May 8, and they were confirmed by former CIA Director John Brennan on May 23. And yet at a California technology conference on May 31, Hillary Clinton repeated the same lie she’s been spouting since October: “Seventeen agencies, all in agreement, which I know from my experience as a Senator and Secretary of State, is hard to get. They concluded with high confidence that the Russians ran an extensive information war campaign against my campaign, to influence voters in the election. They did it through paid advertising we think; they did it through false news sites; they did it through these thousand agents; they did it through machine learning, which you know, kept spewing out this stuff over and over again. The algorithms that they developed. So that was the conclusion.”

The “17 intelligence agencies” lie had been completely, thoroughly debunked for weeks, and yet not a soul called Clinton out on her brazen lie within the establishment press. Indeed, establishment pundits like Megyn Kelly continued to repeat the lie, and have continued to do so throughout the month of June. All this changed when CNN was sent reeling by a 1–2–3-punch combination ensuing from its horrendously propagandistic Russia coverage, which has seen three of its journalists lose their jobs and sent the network into international disgrace. All of a sudden we are seeing establishment outlets getting a lot more conscientious about what they choose to publish about the Russian Federation, and today we saw none other than the New York Times posting the very first retraction of this long-debunked lie that we have seen in establishment media.

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Even the New York TImes has issued a correction repudiating the “17 intelligence agencies” meme. There’s a James Clapper testimony video in which he says it was only CIA, NSA and FBI, “not all 17”. But Podesta just keeps using it. One creepy individual, if you ask me.

Maria Bartiromo Slams John Podesta Over His Ties To Russia (PFW)

Even after James O’Keefe and Project Veritas essentially blew the lid right off the fake ‘Russia hacked the election’ narrative, Hillary Clinton’s former campaign chairman, John Podesta, doubled down on the debunked narrative when challenged by Fox News’ Maria Bartiromo on his ties to a Kremlin-backed company. Podesta met behind closed doors on Tuesday with the members of the House Intelligence Committee as part of the panel’s investigation into supposed Russian efforts to meddle in the presidential election. When asked what he could tell the Thursday Fox audience about the House Intel meeting, Podesta explained that the panel wanted to know “what had happened to me and the effect on the campaign … the effect of the Russian interference in our democratic process.”

“They’re probing what actually happened, whether if there was collusion and what we’re going to do about,” Podesta told Bartiromo. “They asked me not to get into specific questions that they asked me and my specific answers but in general terms, they’re taking a bipartisan look at this stage.” Fox Host Maria Bartiromo then chimes in with a question that digs sharply into the skin of Podesta. “Don’t you find it odd that there’s been so much attention on the Trump Campaign and the Trump associates and potential collusion with the Russians when in fact it’s really the Democrats who have deeper and stronger ties to Russia,” Bartiromo said. “I mean John I have to ask your own situation..”

Bartiromo then goes on to break down how Podesta joined the board of the board of a small energy company in 2011 which later received $35 million from a Kremlin-funded entity. According to Bartiromo, Podesta also owns 75,000 shares in a Russian company and failed to disclose this to the Obama administration. And this is where things got heated…

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Accusing the dead. Low.

Comey Friend Unveils “Smoking Gun” Nothingburger (ZH)

For about a week now, Benjamin Wittes, the Brookings Institution senior fellow and noted ally of former FBI Director James Comey, has been taunting the Trump administration with tweets suggesting that another ‘bombshell’ story, presumably related to the Russia investigation, was in the works and set to drop any minute. Of course, people took notice of the warnings because Wittes posted similar tweets just before the New York Times published their now infamous story on Comey’s memos So what was the “bombshell” story? It seems to have come in the form of a rather bizarre, and thoroughly difficult to follow, Wall Street Journal article entitled “GOP Operative Sought Clinton Emails From Hackers, Implied a Connection to Flynn.”

To summarize the ‘bombshell’, the story is about a long-time Republican opposition researcher, 81-year-old Peter W. Smith, who apparently set out on a mission to find Hillary’s 30,000 emails which the FBI confirmed had gone missing. In his efforts to find those emails, he scoured hacking chat rooms looking for clues and/or hackers that might be able to help him. The WSJ alleges that Smith may or may not have been working with Michael Flynn but, in the end, they found absolutely nothing. To summarize even further, a guy tried to find Hillary’s missing emails and failed…HALT THE PRESSES! Of course, the goal of the story is to paint some sinister plot that involved Smith and Michael Flynn enlisting the help of some Russians to hack the 2016 election…thus ‘proving’ the collusion angle.

Unfortunately, the story seems to prove the exact opposite which is, if Flynn was really running around on some wild goose chase looking for Hillary’s missing 30,000 emails by chatting up hackers on a message board then we have to assume that means he wasn’t in any way connected to the original hack which ended up on WikiLeaks. [..] Of course, it’s only deeper in the story that the WSJ admits they have no idea if Flynn was even involved with Smith…but no one reads an entire article so it’s fairly irrelevant. “What role, if any, Mr. Flynn may have played in Mr. Smith’s project is unclear. In an interview with The Wall Street Journal, Mr. Smith said he knew Mr. Flynn, but he never stated that Mr. Flynn was involved.” [..] Meanwhile, the WSJ confirms that Smith died last month at the age of 81. So there you have it…all the makings of another salacious, ‘bombshell’ story with multiple references to Russians, hackers, collusion, shady dealings with Michael Flynn, etc, yet still no evidence of pretty much anything.

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“95% of employees at the State Department, Pentagon, CIA, NSA, and the rest of the alphabet soup agencies do not come and go with elections.”

Peace is Popular (Ron Paul)

Peace is popular. That was Ron Paul’s message to our audience in Texas earlier this spring, and it has been his consistent message since first running for Congress in the 1970s. So why do seemingly endless wars remain such a stubborn feature of the American presidency, with the shameful complicity of Congress? Americans who supported Trump did so overwhelmingly because he promised a populist “America First” approach to both domestic and foreign policy. Every poll shows that the domestic economy, culture wars, and immigration were the animating issues of the election – not our ongoing military misadventures in the Middle East. Nobody voted for an escalation of US involvement in Syria, nobody voted to ramp up the never-ending war in Afghanistan by dispatching the Mother of All Bombs, and nobody voted to resurrect an absurd decades-old conflict with North Korea.

Yet President Trump has done all of these things, largely abandoning the noninterventionist promises of Candidate Trump. Perversely, ordering a missile attack on a Syrian air base was the first and only act that earned him praise from his enemies at organs like the New York Times and Washington Post. “He’s finally acting presidential” they gushed. To understand Trump’s departures from his campaign rhetoric is to understand the very nature of politics and the bureaucratic state. Nobody goes to Washington to “run” the government. Washington runs them. Trump, ostensibly the biggest outsider to win the presidency in modern American history, cannot overcome the entrenched foreign policy establishment any more than he can overcome gravity. 95% of employees at the State Department, Pentagon, CIA, NSA, and the rest of the alphabet soup agencies do not come and go with elections.

They, along with the vast apparatus of defense contractors, are not going anywhere. Permanent war and interventionism requires permanent funding. And like all tax-funded enterprises, war is inherently anti-capitalist. It diverts resources, swells state bureaucracies, and hides the horrific human and economic costs in a cloak of patriotism and platitudes about America’s role in the world. When we hear Vice President Pence talk about “rebuilding the arsenal of democracy,” he really means it. Ludwig von Mises saw German war socialism up close as a lieutenant in the Austro-Hungarian army during the Great War. Under Wehrwirtschaftslehre, the German doctrine of war economics, the normal calculations of capitalist businessmen go out the window. Costs, quality, demand, and profit become wholly secondary to the overriding goal of preparing the nation for war.

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After 2 weeks. Forecast for Athens today: 43ºC (110ºF). Ditto for the weekend.

Greece Garbage Cleanup Begins As Workers Halt Strike Action (K.)

Municipal garbage collectors Thursday started the long and unpleasant task of picking up thousands of tons of trash that has been rotting under the sun for the past two weeks after unionists decided to call off strike action demanding job security. As fears of a threat to public health spiked Thursday amid an intensifying heat wave, the union representing protesting workers, POE-OTA, announced that they would be ending their action. The decision came on the day of a 24-hour strike by POE-OTA workers who pressed on with the walkout despite having wrested concessions from the government earlier in the week. Local authorities in Athens, Thessaloniki and other cities are now expected to rehire thousands of sanitation workers whose short-term contracts have expired.

According to sources, the Interior Ministry is on Friday to issue a circular to local authorities across the country, calling for the implementation of an amendment approved in Parliament on Wednesday which foresees the extension of workers’ short-term contracts. It remains unclear how POE-OTA will react, however, if municipalities end up hiring fewer than the 6,150 people currently employed on short-term contracts in sanitation. Meanwhile contract workers have to clean up the mess in the streets. According to Giorgos Broulias, deputy mayor of Athens, it will take at least four days to pick up all the trash. “It will then take even more days for parts of the capital to be washed down with cleansing agents and disinfectants,” he told Kathimerini.

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I even saw a number of 20,000 arrivals so far this week.

Italy Threatens To Turn Away Foreign NGO Ships With Rescued Migrants (dpa)

Italy is poised to instruct its ports to turn away foreign ships carrying rescued migrants unless other EU countries agree to greater burden-sharing on refugee arrivals, a senior government source said Wednesday. The threat would apply to ships run by NGOs but not to foreign state units operating under EU border agency Frontex and EU naval mission Eunavfor Med Sophia, the source told dpa. The same source said Italy’s ambassador to the EU, Maurizio Massari, was sent to meet EU Migration Commissioner Dimitris Avramopoulos to deliver the message that “Italy is dealing with a serious situation and Europe cannot turn the other way.” “The ambassador highlighted that Italy’s efforts have been enormous and well beyond international obligations [and] under the current circumstances it is difficult for our authorities to allow further disembarkations of migrants,” an Italian diplomat added.

It was not immediately clear whether the ban against foreign NGO ships could be enacted legally. It could affect several German vessels operated by German sea rescue charities, such as Jugend Rettet and Sea Watch. “We are a bit worried by this idea,” said Michele Trainiti, sea rescue coordinator for the Doctors Without Borders (MSF). The medical charity operates two boats in the Mediterranean, including one with a non-Italian flag. He said diverting vessels to France, for example, “would require many more days of navigation with people in very precarious situations,” which current MSF rescue vessels “are not equipped for.”

Rome’s hard-line message filtered out following the record rescue of nearly 10,000 migrants since the weekend, and in the wake of Prime Minister Paolo Gentiloni’s failure at last week’s EU summit to convince partners to take in more asylum seekers. It also came in the wake of a Sunday local election rout for the ruling centre-left Democratic Party, which several commentators blamed on public discontent with rising immigration and government proposals to grant citizenship to children of foreign residents.

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Europe is morally and politically gapingly empty.

Closing Italian Ports ‘A Cry For Help’, Say Weary Crew Of Rescue Boat (G.)

As 1,032 people plucked from the Mediterranean prepared to disembark the MS Aquarius onto southern Italian soil on Thursday, bringing refugee and migrant arrivals to more than 12,000 this week, those who had rescued them said they understood why Rome was threatening to close its ports to such vessels. “Officially, we haven’t heard anything from the Italian government … but if this is indeed the case, if anything it sounds more like a cry for help from the Italian government towards the EU,” said Marcella Kraay, a Dutch coordinator with Médecins Sans Frontières, as the ship arrived at Porto di Corigliano in Calabria. “And that goes along with what we’ve always asked for, which is for the EU to organise dedicated search and rescue in the Mediterranean. Until that happens we are forced to be out there because people are in danger, they’re going to drown if we’re not there.”

The last week has seen a surge of refugees arriving on humanitarian rescue ships. The Aquarius, which has been been undertaking risky year-round search and rescue missions in waters north of Libya since 2015, set a new record on Tuesday as it recovered more than 1,000 people in just one day. More than 5,000 people arrived in Italy on Monday alone, according to the International Office for Migration. The Italian government, which came under pressure from a strong challenge from the centre-right in local elections this week, has responded by giving its EU ambassador a mandate to raise the issue with the European commission – including the possibility it could close its ports to the ships. A commission spokeswoman said it supported Italy’s “call for a change in the situation” and the bloc’s migration ministers would tackle the matter next week.

“Over the last few months we’ve heard so many things said that were going to happen, or that should happen, or politicians basically gearing up for elections, that it doesn’t make me feel all that much right now,” said Kraay on board the Aquarius, which is chartered by the German-French charity SOS Méditerranée. “Let’s cross that bridge when we get there … until now we just need to stay focussed on doing our job.”

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Jun 262017
 
 June 26, 2017  Posted by at 9:29 am Finance Tagged with: , , , , , , , , , ,  3 Responses »
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Pablo Picasso Etude Pour Mercure 1924

 

The Next Global Crash Could Arrive ‘With A Vengeance’ – BIS (CNBC)
Push On With The ‘Great Unwinding’, BIS Tells Central Banks (R.)
Japanese Banks at Risk as Borrowing in Dollars Doubles – BIS (BBG)
Four Pronged Proposal to End Japanese Deflation (Mish)
Japan’s Bond Market Grinds To A Halt (ZH)
“It’ll Be An Avalanche”: Hedge Fund CIO Sets The Day Of The Next Crash (ZH)
A Stock Market Crash Scenario (CH Smith)
The Fed Is Going to Cause a Recession (James Rickards)
US Dollar Will Strengthen on Fed Hikes – Credit Agricole (CNBC)
The $1.5 Trillion US Business Tax Change Flying Under the Radar (WSJ)
Two Failed Italian Banks Split Into Good And Bad Banks, Taxpayers Pay (G.)
Investors Call For Greece To Accelerate Reforms (K.)
Germans Fearing China’s World Order? Worry About The EU Instead (CNBC)
China’s Hydropower Frenzy Drowns Sacred Mountains (AFP)

 

 

“..the end may come to resemble more closely a financial boom gone wrong..”

The Next Global Crash Could Arrive ‘With A Vengeance’ – BIS (CNBC)

A new financial crisis is brewing in the emerging economies and it could hit “with a vengeance”, an influential group of central bankers has warned. Emerging markets such as China are showing the same signs that their economies are overheating as the US and the UK demonstrated before the financial crisis of 2007-08, according to the annual report of the Bank for International Settlements (BIS). Claudio Borio, the head of the BIS monetary and economic department, said a new recession could come “with a vengeance” and “the end may come to resemble more closely a financial boom gone wrong”. The BIS, which is sometimes known as the central bank for central banks and counts Bank of England Governor Mark Carney among its members, warned of trouble ahead for the world economy.

It predicted that central banks would be forced to raise interest rates after years of record lows in order to combat inflation which will “smother” growth. The group also warned about the threat poised by rising debt in countries like China and the rise in protectionism such as in the US under Donald Trump, City AM reported. Chinese corporate debt has almost doubled since 2007, now reaching 166% of GDP, while household debt rose to 44% of GDP last year. In May, Moody’s cut China’s credit rating for the first time since 1989 from A1 to Aa3 which could potentially raise the cost of borrowing for the Chinese government. The BIS’s credit-to-GDP gap indicator also showed debt, which is seen as an “early warning indicator” for a country’s banking system, is rising far faster than growth in other Asian economies such as Thailand and Hong Kong.

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“The BIS identified four main risks to the global outlook in the medium-term. A sudden flare-up of inflation which forces up interest rates and hurts growth, financial stress linked to the contraction phase of financial cycles, a rise in protectionism and weaker consumption not offset by stronger investment.”

Push On With The ‘Great Unwinding’, BIS Tells Central Banks (R.)

Major central banks should press ahead with interest rate increases, the Bank for International Settlements said on Sunday, while recognizing that some turbulence in financial markets will have to be negotiated along the way. The BIS, an umbrella body for leading central banks, said in one of its most upbeat annual reports for years that global growth could soon be back at long-term average levels after a sharp improvement in sentiment over the past year. Though pockets of risk remain because of high debt levels, low productivity growth and dwindling policy firepower, the BIS said policymakers should take advantage of the improving economic outlook and its surprisingly negligible effect on inflation to accelerate the “great unwinding” of quantitative easing programs and record low interest rates.

New technologies and working practices are likely to be playing a roll in suppressing inflation, it said, though normal impulses should kick in if unemployment continues to drop. “Since we are now emerging from a very long period of very accommodative monetary policy, whatever we do, we will have to do it in a very careful way,” BIS’s head of research, Hyun Song Shin, told Reuters. “If we leave it too late, it is going to be much more difficult to accomplish that unwinding. Even if there are some short-term bumps in the road it would be much more advisable to stay the course and begin that process of normalization.” Shin added that it will be “very difficult, if not impossible” to remove all those bumps. The BIS identified four main risks to the global outlook in the medium-term. A sudden flare-up of inflation which forces up interest rates and hurts growth, financial stress linked to the contraction phase of financial cycles, a rise in protectionism and weaker consumption not offset by stronger investment.

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The death of the dollar has been greatly exaggerated.

Japanese Banks at Risk as Borrowing in Dollars Doubles – BIS (BBG)

Japanese banks have more than doubled their borrowing and lending in dollars since 2007, leaving them vulnerable to funding shocks such as those that exacerbated the last financial crisis, the Bank for International Settlements warned in a report released Sunday. Assets denominated in dollars on the balance sheets of Japanese banks surged to about $3.5 trillion by the end of 2016, the coordinating body for the world’s central banks said in its annual report about the global economy. Those exceed liabilities in dollars by about $1 trillion, creating a massive so-called long position in the currency. The report also cited Canadian lenders for following a similar trend, almost doubling their dollar exposure since the crisis. Their net long positions reached almost $200 billion, the BIS said.

European firms, by contrast, have reduced exposure to dollars since the crisis, the report said. German banks, which had among the highest net dollar positions in 2007, now have matching assets and liabilities denominated in the currency after cutting dollar assets by about half. During the financial crisis, European banks’ net dollar exposures, which peaked at $2 trillion, ended up causing several firms to collapse when funding sources dried up and their efforts to dump U.S. mortgage-related assets led to huge losses. Even as post-crisis regulation has strengthened banks’ capital resources to cope with such losses and some funding has shifted to more stable sources, risks haven’t been completely eliminated, according to the Basel, Switzerland-based group.

[..] the biggest portion of dollar funding for non-U.S. banks – $4.1 trillion – now comes from deposits outside the U.S., according to BIS data. That shift toward offshore dollar deposits also presents risks because the Federal Reserve’s funding backstop during the 2008 crisis wouldn’t be present in non-U.S. jurisdictions if dollar funds became scant, the BIS said. The Fed provided $538 billion of emergency loans to European banks that lost dollar funding from U.S. sources during the 2008 crisis ..

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Is Mish missing out on confidence as a factor? You can lead a horse to water, but…

Four Pronged Proposal to End Japanese Deflation (Mish)

Negative Sales Taxes People hoard cash, especially the miserly wealthy. We need to unlock that cash and put it to work. To free up this money, I propose negative sales taxes. The more you spend, the more money you get back as a direct tax credit against income taxes. I leave specific details to economists Larry Summers and Paul Krugman. What can possibly go wrong?

One Percent Tax Per Month on Government Bonds Negative interest rates are in vogue. However, all negative interest rates have done is to get those with money to hoard bonds. Bond buyers effectively bet on capital gains of still more negative rates. Phooey! Just yesterday I noted Bank of Japan Corners 33% of Bond Market: All Japanese Bonds, 40 Years and Below, Yield 0.3% or Less. 33% cornering of the bond market is truly inadequate as this sentiment implies: Makoto Yamashita, a strategist for Japanese interest rates at Deutsche Bank’s securities unit in Tokyo said “There are investors who have no choice but to buy.” We need to end this “no choice” hoarding sentiment right here, right now. I have just the solution. Tax government bonds at the rate of 1% per month.

No one will want them. Hedge funds and pension plans will dump sovereign bonds en masse. This will allow governments to buy every bond in existence immediately, if not sooner. As soon as the government corners the bond market (at effectively zero cost), debt and interest on the debt will truly be owed to itself. Once the bond market is 100% cornered, I propose government debt be declared null and void annually. This would effectively wipe out the entirety of Japan’s debt. Japan’s debt-to-GDP ratio would immediately plunge from 250% to 0%.

National Tax Free Lottery Japan desperately needs to get people to spend, continually. Once again, I have a logical proposal. For every purchase one makes on a credit card, that person gets a free lottery ticket for a weekly drawing worth $10,000,000 tax free. Each week, a random day of the week is selected and separately a random taxpayer ID is selected. If the person drawn made a credit card purchase exceeding $10 on the day of the week drawn, they win $10,000,000 tax free. If there is no winner, the amount rolls over. This beautiful plan will cost no more than $520 million annually, peanuts these days.

Hav-a-Kid Demographics in Japan are a huge problem. Although various incentives have been tried, none of them have gone far enough. I propose a reduction in income taxes for everyone starting a family. The following scale applies. One new child: 50% reduction in income taxes for a period of ten years. Two new children: 100% reduction in income taxes for a period of twenty years. Three new children: Subsidized housing, free healthcare, free schooling, and no income taxes for thirty years. Those with one new child in the last five years get full credit if they add at least one more child in the next five years.

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Well, Mish does have the answer to that above: One Percent Tax Per Month

Japan’s Bond Market Grinds To A Halt (ZH)

The Bank of Japan may or may not be tapering, but that may soon be moot because by the time Kuroda decides whether he will buy less bonds, the bond market may no longer work. As the Nikkei reports, while the Japanese central bank ponders its next step, the Japanese rates market has been getting “Ice-9ed” and increasingly paralyzed, as yields on newly issued 10-year Japanese government bonds remained flat for seven straight sessions through Friday while the BOJ continued its efforts to keep long-term interest rates around zero. The 10-year JGB yield again closed at 0.055%, where it has been stuck since June 15m and according to data from Nikkei affiliate QUICK, this marks the longest period of stagnation since 1994, Because what comes after record low volatility? Simple: market paralysis.

And that’s what Japan appears to be experiencing right now as private bondholders no longer dare to even breathe without instructions from the central bank. Meanwhile, the implied volatility of JGBs tumbled to the lowest level since January 2008 for the same reason we recently speculated may be the primary driver behind the global collapse in volatility: nobody is trading. This means that trading in newly issued 10-year debt has become so infrequent that broker Japan Bond Trading has seen days when no bonds trade hands. It’s not just cash bonds that find themselves in trading limbo: trading in short-term interest rate futures has also thinned and on Tuesday of last week the Nikkei reports that there were no transactions in three-month Tibor futures – the first time that has happened since such trading began in 1989.

As more market participants throw in the towel on a rigged, centrally planned market, the result will – no could – be a further loss of market function, and a guaranteed crash once the BOJ and other central banks pull out (which is why they can’t). As the Nikkei politely concludes, “if the bond and money markets lose their ability to price credit based on future interest rate expectations and supply and demand, the risk of sudden rate volatility from external shocks like a global financial crisis will rise.” Translation: in a world where only central banks trade, everyone else is destined to forget forget what trading, and certainly selling, means.

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“..when the global credit impulse reverses, it’ll be a cascade, an avalanche. And I pin the tail on that donkey to be Valentine’s Day 2018.”

“It’ll Be An Avalanche”: Hedge Fund CIO Sets The Day Of The Next Crash (ZH)

While most asset managers have been growing increasingly skeptical and gloomy in recent weeks (despite a few ideological contrarian holdouts), joining the rising chorus of bank analysts including those of Citi, JPM, BofA and Goldman all urging clients to “go to cash”, none have dared to commit the cardinal sin of actually predicting when the next crash will take place. On Sunday a prominent hedge fund manager, One River Asset Management’s CIO Eric Peters broke with that tradition and dared to “pin a tail on the donkey” of when the next market crash – one which he agrees with us will be driven by a collapse in the global credit impulse – will take place. His prediction: Valentine’s Day 2018. Here is what Peters believes will happen over the next 8 months, a period which will begin with an increasingly tighter Fed and conclude with a market avalanche:

“The Fed hikes rates to lean against inflation,” said the CIO. “And they’ll reduce the balance sheet to dampen growing financial instability,” he continued. “They’ll signal less about rates and focus on balance sheet reduction in Sep.” Inflation is softening as the gap between the real economy and financial asset prices is widening. “If they break the economy with rate hikes, everyone will blame the Fed.” They can’t afford that political risk. “But no one understands the balance sheet, so if something breaks because they reduce it, they’ll get a free pass.”

“The Fed has convinced itself that forward guidance was far more powerful than QE,” continued the same CIO. “This allows them to argue that reversing QE without reversing forward guidance should be uneventful.” Like watching paint dry. “Balance sheet reduction will start slowly. And proceed for a few months without a noticeable impact,” he said. “The Fed will feel validated.” Like they’ve been right all along. “But when the global credit impulse reverses, it’ll be a cascade, an avalanche. And I pin the tail on that donkey to be Valentine’s Day 2018.”

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One must remember there are no markets left. That makes talking about them dicey.

A Stock Market Crash Scenario (CH Smith)

After 8+ years of phenomenal gains, it’s pretty obvious the global stock market rally is overdue for a credit-cycle downturn, and many research services of Wall Street heavyweights are sounding the alarm about the auto industry’s slump, the slowing of new credit and other fundamental indicators that a recession is becoming more likely. Next February is a good guess, as recessions and market downturns tend to lag the credit market by about 9 months. My own scenario is based not on cycles or technicals or fundamentals, but on the psychology of the topping process, which tends to follow this basic script:

When there are too many bearish reports of gloomy data, and too many calls to go long volatility or go to cash, the market perversely goes up, not down. Why? This negativity creates a classic Wall of Worry that markets can continue climbing. (Central banks buying $300 billion of assets a month helps power this gradual ascent most admirably.) The Bears betting on a decline based on deteriorating fundamentals are crushed by the steady advance. As Bears give up, the window for a Spot of Bother decline creaks open, however grudgingly, as central banks make noises about ending their extraordinary monetary policies by raising interest rates a bit (so they can lower them when the next recession grabs the global economy by the throat). As bearish short interest and bets on higher volatility fade, insiders go short.

A sudden air pocket takes the market down, triggered by some bit of “news.” (Nothing like a well-engineered bout of panic selling to set up a profitable Buy the Dip opportunity.) And since traders have been well-trained to Buy the Dips, the Spot of Bother is quickly retraced. Nonetheless, doubts remain and fundamental data is still weak; this overhang of negativity rebuilds the wall of Worry. Some Bears will reckon the weakened market will double-top, i.e. be unable to break out to new highs given the poor fundamentals, and as a result we can anticipate a nominal new high after the Wall of Worry has been rebuilt, just to destroy all those who reckoned a double-top would mark The Top. Mr. Market (and the central banks) won’t make it that easy to reap a fortune by going short.

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I think the Fed has already done that. By manoeuvering themselves into a position they cannot escape from.

The Fed Is Going to Cause a Recession (James Rickards)

Why did the Federal Reserve (Fed) hike rates last week, and what will its policy look like in the future? They’re trying to prepare for the next recession. They’re not predicting a recession, they never do, but they know a recession will come sooner rather than later. This expansion is 96 months old. It’s one of the longest expansions in U.S. history. It’s also the weakest expansion in U.S. history. A lot of people say, “What expansion? Feels like a depression to me.” I think it is a depression defined as depressed growth, but we’re not in a technical recession and haven’t been since June 2009. So it’s been an eight-year expansion at this point, but it won’t fare well, and the Fed knows that. When the U.S. economy goes into recession, you have to cut interest rates about 3% to get the United States out of that recession. Well, how do you cut interest rates by 3% when you’re only at 1%?

The answer is, you can’t. You’ve got to get them up to 3% to cut them back down, maybe to zero, to get out of the next recession. So that explains why the Fed is raising interest rates. That’s the fourth rate hike getting them up to 1%. They would like to keep going; they would like to get them up to 3, 3.5% by 2019. My estimate is that they’re not going to get there. The recession will come first. In fact, they will probably cause the recession that they’re preparing to cure. So let’s just say we get interest rates to 1% and now you go into recession. We can cut them back down to zero. Well, now what do you do? You do a new round of QE. The problem is that the Fed’s balance sheet is so bloated at $4.5 trillion. How much more can you do—$5 trillion, $5.5 trillion, $6 trillion—before you cause a loss of confidence in the dollar? There are a lot of smart people who think that there’s no limit on how much money you can print. “Just print money. What’s the problem?”

I disagree. I think there’s an invisible boundary. The Fed won’t talk about it. No one knows what it is. But you don’t want to find out the hard way. [..] You probably want to get from $4.5 trillion, down to $2.5 trillion. Well, you can’t sell any treasury bonds. You destroy the market. Rates would go up, putting us in recession, and the housing market would collapse. They’re not going to do that. What they’re going to do is just let them mature. When these securities mature, they won’t buy new ones. They won’t roll it over, and they actually will reduce the balance sheet and make money disappear. They’re going to do it in tiny increments, maybe $10 billion a month or $20 billion a month. They want to run this quantitative tightening in small increments and pretend nothing’s happening. But that’s nonsense. It’s just one more way of tightening money in a weak economy; it will probably cause a recession.

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Views on the dollar are all over the place.

US Dollar Will Strengthen on Fed Hikes – Credit Agricole (CNBC)

While investors seem to have come to a consensus view that the U.S. dollar rally is coming to an end, Credit Agricole has offered a contrarian take: There is room for the greenback to strengthen. David Forrester, the bank’s FX strategist told CNBC Monday that markets have been predominantly focused on U.S. inflation data and pricing in an overly cautious Federal Reserve. But, he thinks the Fed will be more hawkish than what is currently expected, which will support the U.S. dollar. “The Fed seems to have changed its policy response function. Yes it’s going to pay attention to the data, but less so. It now wants to get its rates normalized so that it actually has room to cut rates in the next downturn,” Forrester said.

“Let’s not forget here: The U.S. expansion, while being soft, is actually pretty mature so the Fed is getting lined up here in preparation for the next downturn. That’s why we think they’re going to hike rates and we will see a steepening of the U.S. Treasury curve and that will be supportive of the U.S. going forward.” Credit Agricole expects the Fed to hike rates once more this year, followed by three times in 2018. U.S. inflation — still below its 2% target despite a low unemployment rate — has been a key point in the argument on whether the Fed should continue normalizing rates. Forrester said the divergence between the unemployment rate and inflation is not unique to the U.S. Globally, economies face structural issues such as ageing populations and automation replacing jobs, which could increase the risks of a recession.

But, he said U.S. inflation should pick up on the back of further wage growth and a rebound in oil prices. “We expect the U.S. economy to continue to recover and strengthen, we will believe in the Philips curve in the U.S. We do expect wages growth to accelerate and inflation expectation(s) to pick back up. So all-in-all, we do expect that re-steepening,” he said. The Philips curve relates to a supposed inverse relationship between the level of unemployment and the inflation rate. Forrester’s views are in contrast to that of many analysts, who expect weakness in the U.S. dollar. Ken Peng, Asia investment strategist at Citi Private Bank, told CNBC’s “Squawk Box” that the greenback is headed for a “new cycle” after a six-year rally since 2011. He added that the dollar weakness will be “one of the greatest market trends” for global investors.

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Desperately seeking something.

The $1.5 Trillion US Business Tax Change Flying Under the Radar (WSJ)

Republicans looking to rewrite the U.S. tax code are taking aim at one of the foundations of modern finance—the deduction that companies get for interest they pay on debt. That deduction affects everyone from titans of Wall Street who load up on junk bonds to pay for multibillion-dollar corporate takeovers to wheat farmers in the Midwest looking to make ends meet before harvest. Yet a House Republican proposal to eliminate the deduction has gotten relatively little sustained public attention or lobbying pressure. Thanks in part to the deduction, the U.S. financial system is heavily oriented toward debt, which because of the tax code is often cheaper than equity financing—such as sales of stock. It also is widely accessible. In 2015, U.S. businesses paid in all $1.3 trillion in gross interest, according to Commerce Department data, equal in magnitude to the total economic output of Australia.

Getting rid of the deduction for net interest expense, as House Republicans propose, would alter finance. It also would generate about $1.5 trillion in revenue for the government over a decade, according to the Tax Foundation, a conservative-leaning think thank. The plan would raise money to help offset Republicans’ corporate tax cuts and reduce a “huge bias” toward debt financing, said Robert Pozen, a senior lecturer at MIT’s Sloan School of Management. That bias, he said, hurts companies built around innovation, which tend to not have the physical assets that banks usually require as collateral. [..] Midsize businesses may also get squeezed. “The people that utilize debt, they utilize it because they don’t have the cash and they don’t have the access to equity,” said Robert Moskovitz, CFO of Leaf Commercial Capital, which finances businesses’ purchases of items like copiers and telephone systems.

“A dry cleaner in Des Moines, Iowa? Where is he going to get equity? He can’t do an IPO.” The idea behind the Republican plan is to pair the elimination of this deduction with immediate deductions for investments in equipment and other long-lived assets. Party leaders expect the capital write-offs would encourage more investment and growth and greater worker productivity, but not the debt often associated with it.

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Dijsselbloem et al made a big circus about how taxpayers would never again foot the bill. It was never worth a thing.

“German conservative MEP Markus Ferber (EPP): “With this decision, the European Commission accompanies the Banking Union to its deathbed. The promise that the tax payer will not stand in to rescue failing banks anymore is broken for good. I am very disappointed that the commission has approved this course of action. By doing so the Commission has massively undermined the credibility of the Banking Union. If the common set of rules governing banking resolution is so blatantly ignored, there is no point in negotiating any further on a common deposit insurance scheme. The precondition for a working Banking Union is a common understanding of its rules. If such a basic common understanding is lacking, there is no point in further deepening the Banking Union and mutualising risk.”

Two Failed Italian Banks Split Into Good And Bad Banks, Taxpayers Pay (G.)

The Italian government is stepping in to wind up two failing lenders and prevent a bank run, at a total cost of up to €17bn. After an emergency cabinet meeting on Sunday, ministers agreed to a decree splitting Veneto Banca and Banca Popolare di Vicenza into ‘good’ and ‘bad’ banks, keeping branches open. The ‘good’ assets are being acquired by Italy’s biggest retail bank, Intesa Sanpaolo, with the Italian government handing about €5bn to Intesa as part of the deal. The lenders will then be liquidated, which leaves the state footing the bill for bad loans on both banks’ books, plus restructuring costs.

The Italian government would provide state guarantees worth up to €12bn to cover potential losses at the ‘bad’ bank, Pier Carlo Padoan, the finance minister, told reporters in Rome. That means the total cost could reach €17bn. Padoan added that both banks would operate normally on Monday. The deal is meant to ward off the threat of a bank run, by reassuring nervous savers and deterring them from withdrawing their funds when branches reopen. Paolo Gentiloni, Italy’s prime minister, insisted that the decree fully respected EU rules, even though taxpapers are no longer meant to stump the cost to rescue a failing bank. The funds will come from a €20bn fund created last year to help struggling lenders, so will not affect Italy’s public borrowing, according to the government.

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Lower pensions solve everything.

Investors Call For Greece To Accelerate Reforms (K.)

The return of investor confidence in Greece will require time and the acceleration of the government’s reform program, foreign fund managers told Greek officials during two investment conferences that took place in the last couple of weeks in New York and London with the participation of Greek listed firms. In their meetings with hundreds of funds from the US and Europe, the representatives of Greek companies said that while the recent Eurogroup decision may have banished uncertainty about Greece, the government will need to put in some serious effort and work in addressing the issues of speed and efficiency. This was after Greece had failed to secure any debt-easing measures, while the entry of Greek bonds to the ECB’s QE remains pending.

The main subject at the two investment events was the titanic effort being made by Greek banks to reduce the bad loans in their portfolios. As for the Athens stock market, Alpha Finance noted in its presentation at the 6th Greek Investment Forum in New York on June 21-22 that “there is a light at the end of the tunnel.” The Alpha Bank subsidiary noted that “the Greek market has recorded bigger returns than its European peers and prospects appear very encouraging as Greece has beaten its fiscal targets and restored investor confidence in the timetable of the Greek [bailout] program.”

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“the U.S. will not be indifferent to the mistreatment of the long suffering Greece. That is America’s key strategic base in the Mediterranean, and a location of new military installations on the island of Crete to monitor the Middle East.”

Germans Fearing China’s World Order? Worry About The EU Instead (CNBC)

Criticizing what he saw as Washington’s isolationist bent, German Finance Minister Wolfgang Schäuble voiced a concern in a speech earlier this month that the West could be threatened as China (and Russia) might fill the void. That, he feared, “would be the end of our liberal world order.” He also said that the U.S. was no longer willing to act as a “guardian of global order,” apparently because Washington withdrew from the agreement on climate change, and it allegedly showed no interest for cooperative migration and security policies. The U.S. Department of State has probably something to say about that, but I wish Schäuble were at least partly right. Arguably, the U.S. could cut back on some foreign engagements and pay more attention to pressing domestic problems.

That said, I wonder how the German minister fails to see that the U.S. is all over the map in active, proxy and hybrid warfare — Afghanistan, the Middle East and North Africa, Korean Peninsula, Central and Eastern Europe and the South China Sea. What else would he want? A nuclear war with China and Russia? Germany may wish to think about whether it is in its interest to fuel and broaden the points of friction with the United States. In my view, Berlin should leave the big power dealings alone. Washington and Beijing are engaged on a broad range of issues to build a historically unique relationship between an established superpower and a runner-up that needs space to develop and contribute to the world in peace and harmony. In trying to do that, the two countries are blazing totally new trails of modern statecraft.

Ubiquitous analogies of Sparta (an established power) and Athens (a rapidly developing strategic competitor), and their ensuing Peloponnesian War, are worthless in the case of countries with huge nuclear arsenals and ground, sea, air and airspace delivery vehicles. So, yes, Germany should leave that alone and get over its fury at Washington’s decision to stop the hemorrhage of foreign trade accounts that are killing jobs, incomes and whatever is left of American manufacturing industries. China got that message and is doing something about it. In the first four months of this year, American export sales to China soared 16.1%. By contrast, U.S. exports to the EU, which account for one-fifth of the total, barely eked out a 2.7% increase.

Germany has to make up its mind with regard to the European integration. Bullying the Visegrad Group (and Baltic States) — a task that Germany has subcontracted to France due to dark pages of its history — and pillorying Greece (a task Germany was eager to continue) won’t work. These countries will run to the U.S. for cover, as some of them are doing now by demanding large contingents of U.S. armed forces on their soil. Also, the U.S. will not be indifferent to the mistreatment of the long suffering Greece. That is America’s key strategic base in the Mediterranean, and a location of new military installations on the island of Crete to monitor the Middle East.

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Proud supporters of the Paris Agreement.

China’s Hydropower Frenzy Drowns Sacred Mountains (AFP)

Beijing is building hydropower at a breakneck pace in ethnically Tibetan regions as part of an ambitious undertaking to reduce the country’s dependence on coal and cut emissions that have made it the world’s top polluter. China had just two dams in 1949, but now boasts some 22,000 – nearly half the world total – in all but one of the country’s major waterways. Mountains and rivers are revered as sacred in Tibetan Buddhism, and the extensive construction, which began in 2014, has alarmed locals who believe they can only live peacefully if the nature around them is protected. “Last year, people said that a big forest fire happened because they blasted a road into the holy mountain, and it took revenge,” said villager Tashi Yungdrung, who tends a small herd of yaks in the pastures above her stone, square-windowed home.

Most would not dare remove so much as a single stone from the mountain Palshab Drakar, an important pilgrimage site, she said. Villagers are bracing for mass relocations, an experience that has previously caused havoc elsewhere in China. Beginning in the 1990s, more than a million were moved for the Three Gorges Dam, the world’s largest in terms of capacity, with thousands still mired in poverty. Plans posted at the Lianghekou construction site showed that 22 power plants will be built along the Yalong, a Yangtze tributary, collectively capable of generating 30 gigawatts of electricity – a fifth of China’s current total installed hydropower capacity. Li Zhaolong, a Tibetan from Zhaba village, said he received 300,000 yuan ($44,000) in government compensation to build a new home on higher ground, where he will move next year.

But the 28,000 yuan moving fee his family received per person will not last long once their crops are submerged and they have no other sources of income. “Before we were farmers, and now we have no land,” said Li. [..] Some 80% of China’s hydropower potential lies along the high-flow, glacier-fed rivers of the Tibetan plateau, but dams there bring minimal local benefits because most of the power goes to smog-choked cities in the east, according to the non-governmental organisation International Rivers. Construction worker Zeng Qingtao said the state-owned Power Construction Corporation had brought in some 10,000 employees, but none are locals. “We can’t hire Tibetans. They aren’t reasonable,” he said.

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Jun 252017
 
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Marc Riboud Paris 1953

 

Dems Push Leaders To Talk Less About Russia (Hill)
UK Housing Crisis Threatens A Million Families With Eviction By 2020 (G.)
The Answer Is Wages, Not Capital (Angusto)
Not All Fossil Fuels Are Going Extinct (BBG)
Reclaiming Public Services (TNI)
Contagion from the 2 Friday-Night Bank Collapses in Italy? (DQ)
Health Spending In Greece Down 40% In 2009-2015 (Amna)
Moody’s Raises Greece’s Sovereign Bond Rating After Bailout (AFP)
Greece, A Guinea Pig For A Cashless And Controlled Society (MPN)
Monsanto And Bayer Are Maneuvering To Take Over The Cannabis Industry (WT)

 

 

Endlessly ironic that publications like the Hill write on this. They are more responsible for all the nonsense than any politicians are.

Dems Push Leaders To Talk Less About Russia (Hill)

Frustrated Democrats hoping to elevate their election fortunes have a resounding message for party leaders: Stop talking so much about Russia. Democratic leaders have been beating the drum this year over the ongoing probes into the Trump administration’s potential ties to Moscow, taking every opportunity to highlight the saga and forcing floor votes designed to uncover any business dealings the president might have with Russian figures. But rank-and-file Democrats say the Russia-Trump narrative is simply a non-issue with district voters, who are much more worried about bread-and-butter economic concerns like jobs, wages and the cost of education and healthcare.

In the wake of a string of special-election defeats, an increasing number of Democrats are calling for an adjustment in party messaging, one that swings the focus from Russia to the economy. The outcome of the 2018 elections, they say, hinges on how well the Democrats manage that shift. “We can’t just talk about Russia because people back in Ohio aren’t really talking that much about Russia, about Putin, about Michael Flynn,” Rep. Tim Ryan (D-Ohio) told MSNBC Thursday. “They’re trying to figure out how they’re going to make the mortgage payment, how they’re going to pay for their kids to go to college, what their energy bill looks like. “And if we don’t talk more about their interest than we do about how we’re so angry with Donald Trump and everything that’s going on,” he added, “then we’re never going to be able to win elections.”

Ryan is among the small group of Democrats who are sounding calls for a changing of the guard atop the party’s leadership hierarchy following Tuesday’s special election defeat in Georgia — the Democrats’ fourth loss since Trump took office. But Ryan is hardly alone in urging party leaders to hone their 2018 message. Rep. Tim Walz (D-Minn.) has been paying particularly close attention to voters’ concerns because he’s running for governor in 2018. The Russia-Trump investigation, he said, isn’t on their radar. “I did a 22-county tour. … Nobody’s focusing on that,” Walz said. “That’s not to say that they don’t think Russia and those things are important, [but] it’s certainly not top on their minds.”

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Elections it is then. A rudderless society.

UK Housing Crisis Threatens A Million Families With Eviction By 2020 (G.)

More than a million households living in private rented accommodation are at risk of becoming homeless by 2020 because of rising rents, benefit freezes and a lack of social housing, according to a devastating new report into the UK’s escalating housing crisis. The study by the homelessness charity Shelter shows that rising numbers of families on low incomes are not only unable to afford to buy their own home but are also struggling to pay even the lowest available rents in the private sector, leading to ever higher levels of eviction and homelessness. The findings will place greater pressure on the government over housing policy following the Grenfell Tower fire disaster in west London, which exposed the neglect and disregard for people living in council-owned properties in one of the wealthiest areas of the capital.

The Shelter report highlights how a crisis of affordability and provision is gripping millions with no option but to look for homes in the private rented sector due to a shortage of social housing. Shelter says that in 83% of areas of England, people in the private rented sector now face a substantial monthly shortfall between the housing benefit they receive and the cheapest rents, and that this will rise as austerity bites and the lack of properties tilts the balance more in favour of landlords. Across the UK the charity has calculated that, if the housing benefit freeze remains in place as planned until 2020, more than a million households, including 375,000 with at least one person in work, could be forced out of their homes. It estimates that 211,000 households in which no one works because of disability could be forced to go.

Graeme Brown, the interim chief executive at Shelter, said: “The current freeze on housing benefit is pushing hundreds of thousands of private renters dangerously close to breaking point at a time when homelessness is rising.” A total of 14,420 households were accepted by local authorities as homeless between October and December 2016, up by more than half since 2009 – with 78% of the increase since 2011 being the result of people losing their previous private tenancy. Local authorities are under a legal obligation to find emergency accommodation, such as in bed and breakfasts.

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A kernel of truth does not a good reasoning make.,

The Answer Is Wages, Not Capital (Angusto)

As in any other religion, faith lies behind capitalism. Faith that capital is a panacea always and in any situation: to push economic growth or to help less developed countries to catch up. Yet the fact is that the EU countries that were the main receivers of cohesion funds, before the extension to the East, later became rescued countries – and we have never before had as much capital on tap along with current low growth.

Both these facts should be enough to break the faith in capital or, at least, to recognise its limits. Let’s see those limits in the above-mentioned causes. The virtue of capital transfers to help low developed countries is based in old Marshall Plan history, which attributes the successful German recovery after WW2 to USA loans. Sure, those loans helped, but the necessary knowledge was already there and the capital transfers allowed the Germans to rebuild their supply capacity. Conversely, in the EU rescued countries, entering the EU came with a local supply capacity destruction, in Schumpeterian terms, for which cohesion funds were unable to compensate. As a result, their domestic demand outstripped internal supply and trade deficits became recurrent until the financial crash.

The key element was not capital but knowledge and its absence or availability in both situations; something very obvious but all too often forgotten. If capital has any virtue it comes from its origin: the capacity to produce output sufficient to recover the inputs used, to satisfy consumption needs and to save a part to be invested as new inputs for raising future output. It means that the virtue is not in the savings/capital itself but in the capacity to generate it. That’s why capital transfers that simply increased the receivers’ inputs provision, without increasing the output/input ratio –or system efficiency–, were in the end wasted money. To avoid this, it would have been necessary to increase the receivers’ efficiency, which is much more correlated with parameters like educational levels than with capitalization! Again, knowledge is the key question.

Furthermore, capital on its own is not only unable to help less developed countries catch up on their wealthier peers but it’s also unable to propel economic growth on its own, as we are now seeing. After years of letting profits grow at the cost of wages, hoping that greater capital would bring greater growth, now we hear companies claiming that they do not invest because they do not have sufficient demand to justify the investment. The clear solution would be to increase wages, but no single company will do it out of fear that the others won’t follow suit. In fact, what any company hopes is that the others increase wages and salaries but not itself. That’s why a global agent is needed: trade unions and the public administration! The latter to increase its spending to guarantee full employment and the former profiting from full employment to bargain higher salaries.

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Bloomberg’s valiant attempt to make you see it doesn’t understand energy. Well done!

Not All Fossil Fuels Are Going Extinct (BBG)

Bloomberg New Energy Finance’s latest New Energy Outlook points the way to a sunny, windy future for the global electric power industry. That doesn’t mean that fossil fuels (or nuclear power) will vanish. It also doesn’t mean that all fossil fuels are the same. The future of natural gas and coal is a tale of two resources — one a story of rising fortunes, the other of slow decline. The latest outlook on natural gas is brighter than ever: BNEF’s forecast for gas shows a higher estimate for consumption in 2040 than in previous years, with a short decline at the end of this decade.

Coal is a different matter. Coal demand is expected to peak late next decade, then decline almost every year to reach a low of 3.1 billion metric tons in 2040, about 25% lower than at its peak.

This long-term outlook is nuanced, as it should be. The aggregated demand for each fuel from 2020 to 2040 has not changed much in three successive New Energy Outlook reports. Total gas consumption has only increased 6% since the 2015 report, while coal consumption from 2020 to 2040 – despite the plunge that is now expected, as noted above – has only changed 3.5%, and was exactly the same in 2016. However, the shape of that coal curve is still important, even if the volume hasn’t changed much. A coal mine that opens today could have a 60-year life, but it is likely to be one fraught with oversupply and competition from other coal producers, as well as other technologies. So how does the 2017 New Energy Outlook for gas and coal compare to how major oil companies and the International Energy Agency see it? For gas, everyone agrees: Consumption grows. Shell expects gas consumption to more than double and, perhaps not surprisingly, Exxon Mobil and BP also expect consumption to increase at least 50%. BNEF’s expectations are a bit more muted.

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Looks a tad hippyish, but as I’ve said a million times, no society should ever sell its basics to anyone. It’s lethal.

Reclaiming Public Services (TNI)

Reclaiming Public Services is vital reading for anyone interested in the future of local, democratic services like energy, water and health care. This is an in-depth world tour of new initiatives in public ownership and the variety of approaches to deprivatisation. From New Delhi to Barcelona, from Argentina to Germany, thousands of politicians, public officials, workers, unions and social movements are reclaiming or creating public services to address people’s basic needs and respond to environmental challenges. They do this most often at the local level. Our research shows that there have been at least 835 examples of (re)municipalisation of public services worldwide since 2000, involving more than 1,600 municipalities in 45 countries.

Why are people around the world reclaiming essential services from private operators and bringing their delivery back into the public sphere? There are many motivations behind (re)municipalisation initiatives: a goal to end private sector abuse or labour violations; a desire to regain control over the local economy and resources; a wish to provide people with affordable services; or an intention to implement ambitious climate strategies. Remunicipalisation is taking place in small towns and in capital cities, following different models of public ownership and with various levels of involvement by citizens and workers. Out of this diversity a coherent picture is nevertheless emerging: it is possible to build efficient, democratic and affordable public services. Ever declining service quality and ever increasing prices are not inevitable. More and more people and cities are closing the chapter on privatisation, and putting essential services back into public hands.

Ulli Sima, Vienna City Councilor for the Environment and Wiener Stadtwerke: “As early as 2001, Vienna protected drinking water with a constitutional decision. Municipal services must remain public and should not be sacrificed to private profit. We want to ally with other cities for strong municipal servicest.” Eloi Badia, the Barcelona Councilor for presidency, water and energy: “It is important to demystify the process of privatisation that has been launched in recent years by several governments, because it’s a model that has not proved its efficiency, failing to offer a better service or a better price.”

Célia Blauel, President of Eau de Paris and Deputy Mayor of Paris in charge of the environment, sustainable development, water and the energy-climate plan: “Bringing local public services under public control is a major democratic issue, especially for such essential services as energy or water. It means greater transparency and better citizen supervision. In the context of climate change, it can contribute to leading our cities toward energy efficiency, the development of renewables, the conservation of our natural resources, and the right to water. ”

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Yesterday I wrote: “To paraphrase Juncker: “When things get serious in Europe, no rules or laws are immune to lies.”

Today, Don Quijones says: “..when things get serious in the EU, laws get bent.”

That ends to the Cyprus model before it was even truly inaugurated.

Contagion from the 2 Friday-Night Bank Collapses in Italy? (DQ)

When things get serious in the EU, laws get bent and loopholes get exploited. That is what is happening right now in Italy, where the banking crisis has reached tipping point. The ECB, together with the Italian government, have just this weekend to resolve Banca Popolare di Vicenza and Veneto Banca, two zombie banks that the ECB, on Friday night, ordered to be liquidated. Unlike Monte dei Pachi di Siena, they will not be bailed out primarily with public funds. Senior bondholders and depositors will be protected while shareholders and subordinate bondholders will lose their shirts. However, as the German daily Welt points out, subordinate bondholders at Monte dei Pachi di Siena had billions of euros at stake, much of it owned by its own retail customers who’d been sold these bonds instead of savings products such as CDs. So for political reasons, they were bailed out.

Junior bonds play a smaller role at the two Veneto-based banks. According to the Welt, the two banks combined have €1.33 billion (at face value) in junior bonds outstanding. They last traded between 1 cent and 3 cents on the euro. So worthless. Only about €100 million were sold to their own customers, not enough to cause a political ruckus in Italy. So they will be crushed. The good assets and the liabilities, such as the deposits, will be transferred to a competing bank. According to a rescue plan apparently drawn up by investment bank Rothschild that surfaced a few days ago, Intesa Sao Paolo, Italy’s second largest bank, would get these good assets and the deposits (liabilities), for the token sum of €1, while all the toxic assets (non-performing loans) would be shuffled off to a state-owned “bad bank” – and thus, the taxpayer.

According to the Italian daily Il Sole 24 Ore, the bad bank would be left holding over €20 billion of festering assets. “Intesa gets a free gift, the state takes on all the bad stuff and the taxpayer pays,” said at the time Renato Brunetta, parliamentary leader for former prime minister Silvio Berlusconi’s Forza Italia party. It is testament to just how desperate the situation has become in Italy’s banking crisis. The country’s largest lender, Unicredit, is in no position to help out: it had to raise €13 billion of new capital earlier this year just to keep itself afloat. Whether the deal with Intesa is still possible after the ECB’s decision to liquidate the banks, and what form this deal, if any, will take, and how much the taxpayer will have to fork over, and how to sugarcoat this in the most palatable terms is what the Italian government is currently trying to hammer out in its emergency meeting.

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How anyone can label this anything but ‘criminal’ is beyond me.

Health Spending In Greece Down 40% In 2009-2015 (Amna)

Health spending in Greece plunged 40% in the 2009-2015 period, Deloitte said in a survey released on Thursday. According to the survey, health spending fell to €14.1 billion in 2014, hit by a significant shrinking in medical/pharmaceutical coverage by the state and the social insurance system. It also stressed that this sharp decline mostly hit pharmacies and other professionals in the health sector and less the country’s hospitals. Hospital spending fell to €6.2 billion in 2015, from €9.0 billion in 2009, for an average annual decline of 6.0%, while average annual decline in the retail sector reached 7.0% and 9.0%, respectively. Deloitte said the state social insurance system covers 59.1% of total health spending in Greece, with patients covering 35.5% -a %age significantly higher compared with other European countries (UK 9.5%, France 6.7%, Italy 21.7%).

3.7% of total health spending is covered by private insurance contracts. Private hospitals were also hit during the 2009-2015 period, leading to more consolidation as the number of private hospitals fell by 6.0% and their size grew by around 1.0%. The total number of private and state hospitals in Greece was 283, mostly in Attica, offering 45,900 beds. The survey said that the number of beds surpassed demand by at least 18%. The survey noted that health spending recovered slightly to €14.7 billion in 2015 and stressed that international investors were showing strong interest for business deals in Greece.

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Want Moody’s to be nice to you? Slash your health system by 40%.

Moody’s Raises Greece’s Sovereign Bond Rating After Bailout (AFP)

Credit ratings agency Moody’s late Friday raised Greece’s long-term issuer rating to “Caa2” from “Caa3” after eurozone governments extended a credit lifeline to the country. Moody’s also changed its outlook to “positive”, up from “stable” previously, saying it saw signs that the heavily indebted country’s economy was stabilising. It pointed to a mid-June agreement reached by Greece’s creditors to relaunch an aid plan to the country, which had been blocked for months due to disagreements between eurozone countries – especially Germany – and the IMF. The move reduces the spectre of a short-term crisis, after eurozone governments agreed to give Greece a new credit lifeline of some €8.5 billion ($9.5 billion). Moody’s said it expected Greece’s debt ratio to stabilise this year at 179% of GDP, adding that growth should return to the economy this year and next.

Greece returned to growth in the first quarter of 2017, with a 0.4% increase in GDP, according to figures revised upwards in early June. “It is too early to conclude that economic growth will be durable,” Moody’s said. The IMF, which links financial aid to debt relief, has also signed an “agreement in principle” to allow immediate assistance that avoids a payment crisis in Athens this summer. It said Thursday that negotiations with creditors for debt reduction had “made progress”. “If we did not think there was a good chance of reaching a debt deal, we would not have chosen that route,” an IMF spokesman said. Moody’s also raised the long-term country ceilings for foreign-currency and local-currency bonds to B3 from Caa2.

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Another kernel of truth that proves writing articles is not that easy.

Greece, A Guinea Pig For A Cashless And Controlled Society (MPN)

The IMF, which day after day is busy “saving” economically suffering countries such as Greece, also happens to agree with this brave new worldview. In a working paper titled “The Macroeconomics of De-Cashing,” which the IMF claims does not necessarily represent its official views, the fund nevertheless provides a blueprint with which governments around the world could begin to phase out cash. This process would commence with “initial and largely uncontested steps” (such as the phasing out of large-denomination bills or the placement of upper limits on cash transactions). This process would then be furthered largely by the private sector, providing cashless payment options for people’s “convenience,” rather than risk popular objections to policy-led decashing.

The IMF, which certainly has a sterling track record of sticking up for the poor and vulnerable in society, comforts us by saying that these policies should be implemented in ways that would augment “economic and social benefits.” These suggestions, which of course the IMF does not necessarily officially agree with, have already begun to be implemented to a significant extent in the IMF debt colony known officially as Greece, where the IMF has been implementing “socially fair and just” austerity policies since 2010, which have resulted, during this period, in a GDP decline of over 25%, unemployment levels exceeding 28%, repeated cuts to what are now poverty-level salaries and pensions, and a “brain drain” of over 500,000 people—largely young and university-educated—migrating out of Greece.

Indeed, it could be said that Greece is being used as a guinea pig not just for a grand neoliberal experiment in both austerity, but de-cashing as well. The examples are many, and they have found fertile ground in a country whose populace remains shell-shocked by eight years of economic depression. A new law that came into effect on January 1 incentivizes going cashless by setting a minimum threshold of spending at least 10% of one’s income via credit, debit, or prepaid card in order to attain a somewhat higher tax-free threshold. Beginning July 27, dozens of categories of businesses in Greece will be required to install aptly-acronymized “POS” (point-of-sale) card readers and to accept payments by card.

usinesses are also required to post a notice, typically by the entrance or point of sale, stating whether card payments are accepted or not. Another new piece of legislation, in effect as of June 1, requires salaries to be paid via direct electronic transfers to bank accounts. Furthermore, cash transactions of over €500 have been outlawed. In Greece, where in the eyes of the state citizens are guilty even if proven innocent, capital controls have been implemented preventing ATM cash withdrawals of over €840 every two weeks. These capital controls, in varying forms, have been in place for two years with no end in sight, choking small businesses that are already suffering.

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Inevitable. Chemists go where they smell money.

Monsanto And Bayer Are Maneuvering To Take Over The Cannabis Industry (WT)

You may remember hearing back in September that Bayer, the largest pharmaceutical company in the world, made a deal to buy out Monsanto for $66 billion. Although Monsanto was voted the most evil company in the world in 2013 and its reputation has continued to fall since, Bayer still went ahead with the buyout. A merger between these two companies is unsurprising, as though they both have long histories of involvement with Nazism and chemical weapons like agent orange which have devastated Vietnam since the war. In fact, Bayer began as a break-off company of the infamous IG Farben, which produced the chemical weapons used on the Jews during the Nazi reign. After the war, Farben was forced to break up into several companies, including BASF, Hoeschst, and Bayer.

Soon after at the Nuremberg trials, 24 Farben executives were sent to prison for crimes against humanity. However, in a matter of just 7 years each of them was released and began filling high positions in each of the former Farben companies, and many of them began working for the Russian, British, and American governments through a joint intelligence venture called “Operation Paperclip”: (“IG (Interessengemeinschaft) stands for “Association of Common Interests”: The IG Farben cartel included BASF, Bayer, Hoechst, and other German chemical and pharmaceutical companies. As documents show, IG Farben was intimately involved with the human experimental atrocities committed by Mengele at Auschwitz. A German watchdog organization, the GBG Network, maintains copious documents and tracks Bayer Pharmaceutical activities.” – Alliance for Human Research Protection)

After all these years, Bayer is now richer and more powerful than their predecessor company I.G. Farben ever was. According to Big Buds Magazine, Monsanto and Scotts Miracle-Gro have a “deep business partnership” and plan on taking over the cannabis industry. Hawthorne, a front group for Scotts, has already purchased three of the major cannabis growing companies: General Hydroponics, Botanicare, and Gavita. Many other hydroponics companies have also reported attempted buyouts by Hawthorne. (“They want to bypass hydroponics retail stores…When we said we won’t get in bed with them they said, ‘Well, we could just buy your whole company like we did with Gavita and do whatever we want.’” – Hydroponics Lighting Representative) Jim Hagedorn, CEO of Scotts Miracle-Gro, has even said that he plans to “invest, like, half a billion in [taking over] the pot business… It is the biggest thing I’ve ever seen in lawn and garden.”

He has also invested in companies such as Leaf, which grows cannabis in an electronically regulated indoor terrarium accessible via smartphone. It is logical that Bayer, being the parent company, would work together with Monsanto in order to share secrets which would advance mutual business. Many people in the cannabis industry have been warning about this, including Michael Straumietis, founder and owner of Advanced Nutrients. (“Monsanto and Bayer share information about genetically modifying crops,” Straumietis notes. “Bayer partners with GW Pharmaceuticals, which grows its own proprietary marijuana genetics. It’s logical to conclude that Monsanto and Bayer want to create GMO marijuana.” – Michael Straumietis)

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