Jan 092017
 
 January 9, 2017  Posted by at 10:34 am Finance Tagged with: , , , , , , , , , ,  7 Responses »
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AFP Photo/Johannes EISELE Giant Trump Chicken


Locating Fascism on the Home Map (Ford)
‘The Bull Market Is In Its Final Inning’ (CNBC)
Chinese Warns Trump: End One China Policy And China Will Take Revenge (R.)
It’s Gonna Be Huge: China Factory Hatches Giant Trump Chickens (AFP)
How Meaningful Will China “Opening Up” Markets To Foreigners Be? (BBG)
China Tightens Rules After Anti-Corruption Staff Caught Up In Graft (R.)
China’s Pyrrhic Growth Victory Spurs 2017 Shift To Contain Risks (BBG)
The Rise, Fall and Comeback Of China’s Economy Over The Last 800 Years (BI)
Australia Predicts Dramatic Fall In Iron Ore Prices (BBC)
FBI Arrests Volkswagen Exec on Conspiracy Charges in Emissions Scandal (NYT)
UK Motorists Launch Class-Action Suit Against VW (G.)
Le Pen: I’ll Come To Brussels And Dismantle France’s Relationship With EU (EUK)
Beppe Grillo Calls For Five Star Movement Vote On Quitting Farage Bloc (G.)
New Cold Snap, Heavy Snowfall Causes Problems Across Greece (Kath.)

 

 

Hear hear!

Locating Fascism on the Home Map (Ford)

In decadence and decline, the U,S. has produced two strong strains of fascism that now vie for supremacy. The First Black President, now outgoing, represents the “cosmopolitan, global obsessed” variety of fascist. Donald Trump hails from an older fascist strain, “crude and petty, too ugly for global prime time.” At this stage in history, the two corporate parties seem incapable of producing anything other than fascists of one kind or the other.

Barack Obama was a savior – of a drowning ruling class. Under his administration, Wall Street rose from near-death to new heights of speculative frenzy, awash in capital brutally extracted from the vanishing assets and past and future earnings of the vast majority of the population, or gifted in the form of trillions in free money at corporate-only Federal Reserve windows. The Big Casino, reduced to a rubble of its own contradictions in 2008, ushered in the New Year just shy of the once-fantastical 20,000 mark. Analysts credited Donald Trump’s victory for the bankers’ bacchanal, but it was Obama who made the party possible by overseeing the restructuring of the U.S. economy to accommodate and encourage the hyper-consolidation of capital – another way to describe the deliberate deepening of economic (and political) inequality. Having accomplished the mission assigned him by Wall Street in return for record-breaking contributions to his first campaign, Obama is said to be angling for a hot-money squat in Silicon Valley, the super-rich sector that was most supportive of his presidency.

Meanwhile, Hillary Clinton is melting quicker than the Wicked Witch of the West, principally due to the failure of traditionally Democratic working (and out of work) people of all races to turn out on November 8 – a perfectly understandable response to a party and a system that offers them absolutely nothing but grief, in ever quickening increments. The merciless downsizing of the American worker is a central element of Obama’s legacy. Real wages had been frozen or declining for decades. However, economic restructuring in the Age of Obama demanded that millions of workers be crushed all the way through the floor to a lower level of hell: temporary, contract, not-really-a-job, part-time “gig” employment. If the 1930s squatter shanty-towns called “Hoovervilles” were testaments to President Herbert Hoover’s economic policies, then the maddeningly precarious, no guaranteed hours, no benefits, zero job security, fraction of a shift, arbitrarily scheduled employment of today should be called ObamaJobs. A new study by economists at Princeton and Harvard universities shows that an astounding 94% of the 10 million jobs created during the First Black President’s two terms in office were ObamaJobs.

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“Risk has been priced out of the market..”

‘The Bull Market Is In Its Final Inning’ (CNBC)

As investors await the Dow Jones 20,000 with baited breath, one widely followed chart watcher believes the current market rally is actually on its last legs. On Friday, blue chip shares in the Dow Industrial Average flirted with the psychologically charged 20,000 level, which have largely been driven higher by anticipation over President-elect Donald Trump’s business-friendly policies. Yet a few observers think the party is nearly over, and the punch bowl is about to run dry. “Risk has been priced out of the market,” said Sven Henrick of NorthmanTrader.com on CNBC’s “Futures Now.” Henrich, who is known online as the Northman Trader, said that despite the abundance of optimism on the part of investors, technical indicators could be pointing to some near-term pain.

According to the Northman’s chartwork, every time the S&P 500 Index has hit new highs, it eventually retreats back towards its 25-day moving average line, which would translate to a 4% pullback from current levels. The S&P 500 has rallied 6% since the election, and hit an intraday record high on Friday. “I would expect that at some point there would be a buying opportunity for people who may want to invest in this market,” said Henrich. “But if this line breaks, we may see significantly more downside that we’ve seen in previous corrections as well.” What’s more, Henrich also believes that the S&P 500 has continued to trade in a “bearish wedge pattern” that began just after the end of the last recession.

The wedge pattern Henrich speaks of consists of two trend lines: One that runs along the S&P’s highs and a second that runs along its lows, that look to meet sometime in 2017. It is at that point that Henrich believes the rally will have run its course, and a downside will soon follow. On a fundamental basis, the Northman Trader is troubled by “record debt levels” that the global governments have incurred. “In 2016, the U.S. government ran a deficit of over $600 billion,” explained Henrich.” “If we now add tax cuts and stimulus spending, you’re either going to have to cut a significant amount of programs somewhere, or you’re going to end up with an even larger deficit.”

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For domestic use only?

Chinese Warns Trump: End One China Policy And China Will Take Revenge (R.)

State-run Chinese tabloid Global Times warned U.S. President-elect Donald Trump that China would “take revenge” if he reneged on the one-China policy, only hours after Taiwan’s president made a controversial stopover in Houston. Taiwanese President Tsai Ing-wen met senior U.S. Republican lawmakers during her stopover in Houston on Sunday en route to Central America, where she will visit Honduras, Nicaragua, Guatemala and El Salvador. Beijing had asked Washington not to allow Tsai to enter the United States and that she not have any formal government meetings under the one China policy. A photograph tweeted by Texas Governor Greg Abbott shows him meeting Tsai, with a small table between them adorned with the U.S., Texas and Taiwanese flags. Tsai also met Texas Senator Ted Cruz.

“Sticking to (the one China) principle is not a capricious request by China upon U.S. presidents, but an obligation of U.S. presidents to maintain China-U.S. relations and respect the existing order of the Asia-Pacific,” said the Global Times editorial on Sunday. The influential tabloid is published by the ruling Communist Party’s official People’s Daily. Trump triggered protests from Beijing last month by accepting a congratulatory telephone call from Tsai and questioning Washington’s commitment to China’s position that Taiwan is part of one China. “If Trump reneges on the one-China policy after taking office, the Chinese people will demand the government to take revenge. There is no room for bargaining,” said the Global Times.

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“..mimic his signature hand gestures with their tiny wings.”

It’s Gonna Be Huge: China Factory Hatches Giant Trump Chickens (AFP)

A Chinese factory is hatching giant inflatable chickens resembling Donald Trump to usher in the Year of the Rooster. The five-metre (16-foot) fowls sport the distinctive golden mane of the US president-elect and mimic his signature hand gestures with their tiny wings. Cartoon figures of animals from the Chinese zodiac are ubiquitous around Chinese New Year at the end of this month. The balloon factory is selling its presidential birds for as much as 14,400 yuan ($2,080) on Chinese shopping site Taobao for a 10-metre version.


A golden mane and tiny wings that mimic his hand gestures – the resemblence of inflatable chickens produced for the Chinese New Year to US President-elect is unmistakable (AFP Photo/Johannes EISELE)

“I saw his image on the news and he has a lot of personality, and since Year of the Rooster is coming up I mixed these two elements together to make a Chinese chicken,” factory owner Wei Qing told AFP. “It is so funny, so we designed it and tried to sell it and it turned out to be popular.” The cartoon balloon appeared to be based on a sculpture designed by US artist Casey Latiolais, which was unveiled at a shopping mall last month in Taiyuan, capital of the northern province of Shanxi. Wei said he was not aware that the American designer had created the original, but added that “there are some differences in the facial expression. And that one is glass. Ours is inflatable.”

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“If we do get any reforms this year, they are going to be Potemkin reforms. The veneer will look like they are moving to a market economy, and the reality will be anything but.”

How Meaningful Will China “Opening Up” Markets To Foreigners Be? (BBG)

China’s recent policy of opening its markets to foreigners is expected to continue this year, but there are questions about how meaningful the change will be amid a clampdown on money leaving the country. While China loosened restrictions on its interbank bond market and relaxed rules for offshore investors trading stocks, it also saw $762 billion head overseas in the first 11 months of last year, according to Bloomberg Intelligence estimates, as investors sought safety in foreign assets. That helped push the yuan down 6.5% against the dollar in 2016, the most since 1994. Seeking to stem the flow, mainland authorities tightened rules that contributed to MSCI Inc. refusing to add Chinese-listed shares to its global indexes.

China’s regulators have indicated that this year foreigners might be allowed to access commodity futures and bond derivatives, while MSCI will again consider adding mainland stocks. But concerns remain about how open China’s markets will be, especially on the issue of taking assets out of the country. The contrast highlights the tension authorities face between inviting more investment while keeping control of the financial sector. “I’d describe China’s strategy as a pipeline strategy. Essentially what they do is to create various pipelines of inflows and outflows,” said John Greenwood, London-based chief economist at Invesco Asset Management. “The problem is the flows are always in the opposite direction of what they want.”

Among last year’s steps, Beijing lifted almost all quotas on China’s interbank bond market and scrapped some constraints under the Qualified Foreign Institutional Investor program, which governs how offshore funds invest in mainland markets. The Shenzhen-Hong Kong stock exchange link, the second between the mainland and the former British colony, opened in December. Expectations then rose as an official with the People’s Bank of China said the central bank is committed to further opening the interbank market, including giving foreign investors access to foreign-exchange and interest-rate derivatives to hedge risks, and expanding trading hours. Even as China opens up to incoming funds, it has been clamping down on outflows.

Officials have banned the use of friends’ currency quotas, made it more difficult to buy insurance policies in Hong Kong and prepared restrictions on overseas acquisitions by Chinese companies. Grants of new quotas for domestic fund managers to invest overseas were frozen, according to data compiled by Bloomberg. The tightening of outflow rules makes it hard for some to say that the country is fully embracing financial reform. “We have already seen in China’s case, markets only work when they go up. You are not allowed to go down,” said Michael Every at Rabobank in Hong Kong. “If we do get any reforms this year, they are going to be Potemkin reforms. The veneer will look like they are moving to a market economy, and the reality will be anything but.”

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“500,000-plus corruption investigators..” Who are corrupt.

China Tightens Rules After Anti-Corruption Staff Caught Up In Graft (R.)

China’s top anti-corruption watchdog has tightened supervision of its 500,000-plus corruption investigators, after some of its own staff were caught in graft probes. The Central Commission for Discipline Inspection (CCDI) said in a statement on its website late on Sunday that a new regulation would be applied to procedures such as evidence collection and case reviews, without providing further details. “Trust cannot replace supervision,” the CCDI said in the statement, released after it held an annual 3-day meeting. “We must make sure the power granted by the (Communist) Party and the people is not abused,” it said.

State newspaper the China Daily, which did not indicate its sources, said the new regulation would set clear standards on how to handle corruption tips, how to handle ill-gotten assets, and would encourage audio and video recordings to be made throughout interrogations. More than 7,900 disciplinary officials have been punished for wrongdoing since 2012, the newspaper said, citing CCDI figures. Of those, 17 were CCDI staffers who were put under investigation for graft, it said. On Friday, state news agency Xinhua quoted Chinese President Xi Jinping as saying that the battle against corruption “must go deeper”, and called for the Communist Party to be governed “systematically, creatively and efficiently”.

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Stuck.

China’s Pyrrhic Growth Victory Spurs 2017 Shift To Contain Risks (BBG)

As China’s top leaders tallied the cost of another year of debt-fueled growth at a December meeting, the imperative for stability as a leadership reshuffle loomed later this year prompted an unexpected conclusion. The price was too high, the leaders agreed, according to a person familiar with the situation. The buildup of debt used to fuel smokestack industries from steel to cement had helped win the short-term battle for growth, but the triumph itself undermined the foundations of long-term expansion, the leaders decided, according to the person, who asked not to be named because the meeting was private. What followed was an order to central and local government officials that if they are forced to choose this year, stability must be the priority while everything else, including the growth target and economic reform, is secondary, said another four people familiar with the situation.

Other concerns aired at the meeting that contributed to the policy shift were the short-term risk of a confrontation with the U.S. under President-elect Donald Trump over trade or Taiwan, and longer-term challenges including how to spur the innovation needed to prevent economic stagnation as well as cleaning up toxic air that enrages and poisons citizens, said the person. Left unsaid was that economic growth underpins the legitimacy of Communist Party rule. “China’s reaching the point where it has to pick its poison and giving up a half%age point of growth would be far less politically damaging than instability in the bond or currency markets,” said David Loevinger, a former China specialist at the U.S. Treasury and now an analyst at fund manager TCW in Los Angeles. “Looking past the Party Congress later in the year, President Xi Jinping may realize that unlike his predecessor, Hu Jintao, he can’t kick the can to his successor, even more so if he plans on extending his term” beyond 2022.

At the December meeting, officials expressed alarm over the nation’s rapid accumulation of total debt, with some present noting that other nations have experienced crises after allowing debt to climb to about 300% of gross domestic product, the person said. China’s credit boom may have pushed overall debt at the end of 2016 to 265% of GDP. Also aired at the meeting was the risk that China falls into the so-called Thucydides trap, a theory attributed to the eponymous Greek philosopher that says a rising power will clash with an established force. So menacing is the array of economic and political challenges confronting the nation that some leaders at the meeting said there’s no prospect for yuan appreciation against the dollar until at least 2020, said the person. “Tapping the brakes may help avoid the economy skidding off the road,” said Frederic Neumann at HSBC in Hong Kong.

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Interesting point of view.

The Rise, Fall and Comeback Of China’s Economy Over The Last 800 Years (BI)

China’s economy led its European counterpart by leaps and bounds at the start of the Renaissance. China was so far ahead, in fact, that economic historian Eric L. Jones once argued that the Chinese empire “came within a hair’s breadth of industrializing in the fourteenth century.” At the start of the 15th century, China already had the compass, movable type print, and excellent naval capacity. In fact, Chinese Admiral Zheng He commanded expeditions to Southeast Asia, South Asia, Western Asia, and East Africa from about 1405-1433 – about a century before the Portuguese reached India. He also had ships several times the length of Christopher Columbus’ Santa Maria, the largest of Columbus’ three ships that crossed the Atlantic.

Still, it’s hard to understand the magnitude of the shift China’s economic fortunes have seen just with historical anecdotes. And so, in a recent note to clients, Macquarie Research’s Viktor Shvets included two fascinating charts showing the changes China saw over the last 800 years, which we included below. The first chart shows the estimated percent share of a given country’s economy as a part of the overall world economy. In the 15th and 16th centuries, China was about 25-30% of the global economy, but come 1950-1970, after the destruction of World War II and under the rule of Mao Zedong, it was under 5%. Today, its economy is about 17% of the global economy – roughly the same as the US.

The second chart compares GDP per capita in China, Japan, and the US to the British GDP per capita measured in 1990 US dollars. In this case, the British GDP per capita in each year is 100, so if a number from China, Japan, or the US is above 100, then its GDP per capita is greater than in Britain, and if the number falls below 100, per capita output is lower than that in Britain. As Shvets writes, on a per capita basis, China was the wealthiest part of the world in the 1200-1300s — aside from Italy. Even as late as the 1600s it was roughly on par with the Brits. However, after that, the GDP per capita relative to Britain declines all the way up to the 1970s, when it was below 10% of the British standard of living. Around 1990, it starts to pick up again, but it has yet to recover to levels seen in 1200-1600.

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And what does this say about China?

Australia Predicts Dramatic Fall In Iron Ore Prices (BBC)

Shares in Australian mining companies have fallen after the government forecasted a dramatic decline in iron ore prices. The government forecast an iron ore price of $46.70 a tonne by 2018, almost half the current level of $80. The current price is supported by resurgent demand from China. But the Department of Industry, Innovation and Science said that demand was unlikely to continue over the coming years. The department also lowered its forecast for iron ore exports by 2% to 832.2 million tonnes for the fiscal year 2016-17. Australia is the world’s biggest supplier of iron ore and shares in the country’s main mining companies fell after the report was released. Hardest hit was Fortescue Metals which fell more than 3% in early trade, while commodity giants BHP Billiton and Rio Tinto also saw their shares prices drop. In its forecast early last year, the department had predicted an iron ore price of $44.10 per tonne, but an increase in Chinese demand spurred the price to above $80.

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This guy’s been lying outright to US authorities.

FBI Arrests Volkswagen Exec on Conspiracy Charges in Emissions Scandal (NYT)

The Federal Bureau of Investigation has arrested a Volkswagen executive who faces charges of conspiracy to defraud the United States, two people with knowledge of the arrest said on Sunday, marking an escalation of the criminal investigation into the automaker’s diesel emissions cheating scandal. Oliver Schmidt, who led Volkswagen’s regulatory compliance office in the United States from 2014 to March 2015, was arrested on Saturday by investigators in Florida and is expected to be arraigned on Monday in Detroit, said the two people, a law enforcement official and someone familiar with the case. [..] In a statement, Jeannine Ginivan, a spokeswoman for Volkswagen, said that the automaker “continues to cooperate with the Department of Justice” but that “it would not be appropriate to comment on any ongoing investigations or to discuss personnel matters.”

Lawsuits filed against Volkswagen by the New York and Massachusetts state attorneys general accused Mr. Schmidt of playing an important role in Volkswagen’s efforts to conceal its emissions cheating from United States regulators. Starting in late 2014, Mr. Schmidt and other Volkswagen officials repeatedly cited false technical explanations for the high emissions levels from Volkswagen vehicles, the state attorneys general said. In 2015, Mr. Schmidt acknowledged the existence of a so-called defeat device that allowed Volkswagen cars to cheat emissions tests. Volkswagen eventually said that it had fitted 11 million diesel cars worldwide with illegal software that made the vehicles capable of defeating pollution tests. [..] James Liang, a former Volkswagen engineer who worked for the company in California, pleaded guilty in September to charges that included conspiracy to defraud the federal government and violating the Clean Air Act. But Mr. Schmidt’s arrest brings the investigation into the executive ranks.

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Settling the UK alone could cost VW £3.6 billion.

UK Motorists Launch Class-Action Suit Against VW (G.)

Thousands of British motorists have launched a lawsuit against Volkswagen over the “dieselgate” emissions scandal, in a claim that could end up costing the carmaker billions of pounds. The group of 10,000 VW owners has filed a class action lawsuit against the German car firm, seeking £30m, or £3,000 each. If VW ends up having to pay the amount to each one of the 1.2 million people in the UK who own affected cars, including its Skoda, Audi and Seat marques, it would cost the company around £3.6bn.The German firm has yet to reach a settlement with British and European owners affected by the scandal, in which the company admitted using “defeat devices” to cheat emissions tests, making its cars appears greener than they were.

It has not compensated British owners despite reaching a £15bn settlement with 500,000 US drivers, offering instead to fix affected vehicles. The class action suit, which is being led by law firm Harcus Sinclair, is expected to claim that drivers should be compensated because they paid extra for what they thought were clean diesel cars. In fact, the claimants will allege, the cars emitted far higher levels of NOx – a mixture of pollutants nitrogen oxide and nitrogen dioxide – than stated. Damon Parker, head of litigation at Harcus Sinclair, told the Daily Mail that claimants were “angry and believe that VW might get away with it”. “They feel that they have been left with no choice but to take legal action,” Parker said. “We have paved the way for consumers who trusted but were let down by VW, Audi, Seat and Skoda to seek redress through our courts.

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My guess is pollsters and media will get this as wrong as they got Brexit and Trump.

Le Pen: I’ll Come To Brussels And Dismantle France’s Relationship With EU (EUK)

Marine Le Pen announced her first foreign visit would be to Brussels to dismantle France’s relationship with the EU if elected president later this year. The National Front leader has been a long-time critic of the EU and has promised to push back the sprawling European superstate and take back sovereignty to France. The 48-year-old said: “I would go to Brussels to immediately launch negotiations allowing me to give back to the French people their sovereignty.” The right-wing leader attacked the faltering euro currency as one of the root problems of the EU and described her main economic proposals as “economic patriotism, intelligent protectionism and a return to monetary independence”. She added: “The euro is a major obstacle to the development of our economy.”

Le Pen mooted that she was in favour of maintaining a form of common currency mechanism between France and the EU to help prevent sharp currency fluctuations. Recent opinion polls predicted that Le Pen would finish second in April’s first round of voting – putting her through to the next round in a run-off against Les Repubicain’s François Fillon. If pollsters are correct, France would be guaranteed a right-wing leader after five years of left-wing leadership from Francois Hollande.

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Farage got his price, Grillo still has nothing. Weird to ally himself with Verhofstadt, but it’s how Brussels is set up: you either force yourself into some group or you don’t count.

Beppe Grillo Calls For Five Star Movement Vote On Quitting Farage Bloc (G.)

The founder of Italy’s populist Five Star Movement (M5S) has asked members to vote on splitting from a Eurosceptic bloc of MEPs co-chaired by Nigel Farage. Beppe Grillo, a comedian turned politician, said in a post on his blog that since Farage had led Ukip to Britain voting to leave the EU, the two parties no longer shared common goals and he recommended leaving the Europe of Freedom and Direct Democracy (EFDD). “Recent events in Europe, such as Brexit, have led us to reconsider the nature of the EFDD group,” Grillo wrote. “With the extraordinary success of the leave campaign, Ukip achieved its political objective: to leave the EU. “Let’s discuss the concrete facts: Farage has already abandoned the leadership of his party and British MEPs will leave the European parliament in the next legislature. Until then, our British colleagues will be focused on developing the choices that will determine the UK’s political future.”

Grillo and Farage forged an alliance over lunch in Brussels after 2014’s European elections, in which Ukip took the largest share of the vote in Britain and M5S came second in Italy after winning 17 seats. Both said at the time that the group was aimed at “restoring freedom and national democracy”, with Farage adding: “Expect us to fight the good fight to take back control of our countries’ destinies.” In a move that would see his party mesh with European liberals, Grillo has called an online referendum, scheduled for Sunday and Monday, on breaking away and instead forming a new group with the Alliance of Liberals and Democrats for Europe (ALDE), led by the former Belgian prime minister, Guy Verhofstadt, who is also the EU’s chief Brexit negotiator. Grillo has long called for a referendum on Italy’s membership of the euro currency, but not on Italy leaving the EU.

With ALDE’s 68 MEPs, the alliance could become the “third political force in the European parliament”, Grillo wrote, while pointing to the fact that his party had only voted alongside Ukip about 20% of the time within the past few years. He said the two shared values linked to “direct democracy, transparency, freedom and honesty”. “With our vote we can make a difference and influence the result of many important decisions to counter the European establishment,” Grillo added. Farage said in a statement: “In political terms it would be completely illogical for Five Star to join the most Euro fanatic group in the European parliament. The ALDE group doesn’t support referenda or the basic principle of direct democracy. ALDE are also the loudest voice for a EU army. I suspect if Five Star joins ALDE it’s support will not last long.” A Ukip spokesman said: “Both Ukip and Five Star are free to choose to stay or quit a political relationship. While it’s interesting that some Five Star MEPs adamantly wish to stay in the EFDD group, as adults we wish them all the best whatever they do.”

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The scandal spreads and deepens. Tens of millions have been handed to NGOs to prepare for winter, and they simply haven’t done it. While those of us that could make it happen don’t have the money. People have to die first?

New Cold Snap, Heavy Snowfall Causes Problems Across Greece (Kath.)

A new cold snap brought snowfall to many parts of the country, leaving the Sporades islands of Alonissos and Skopelos without a ferry connection to the mainland and the Aegean islands of Lesvos and Chios struggling to care for hundreds of migrants amid freezing temperatures. Schools remained closed in many parts of the country due to heavy snowfall, including in the northern suburbs of Athens. According to meteorologists, the bad weather is set to continue through Wednesday. From Monday evening, the cold snap is forecast to spread to eastern Macedonia, Thrace, Halkidiki, the northern Aegean, the Sporades and across Crete. Storms are also likely at sea.


Moria camp, Lesbos, Jan 7

Temperatures are set to drop to -16 degrees Celsius in western Macedonia. The icy conditions left many households in the Thessaloniki region without water as pipes froze or broke. Most schools in the region were to remain closed on Monday due to heavy snowfall and low temperatures. The cold snap has made road travel risky in many parts of the country with motorists advised to fit their cars with anti-skid chains in northern areas.


Moria camp, Lesbos, Jan 7

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Jan 052017
 
 January 5, 2017  Posted by at 10:22 am Finance Tagged with: , , , , , , , , ,  1 Response »
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Pablo Picasso The Dream 1932


Chinese Media Say ‘Big Sticks’ Await Trump If He Seeks Trade War (BBG)
Donald Trump Plans Revamp of Top US Spy Agency and CIA (WSJ)
Schumer Calls Eight Trump Cabinet Picks ‘Troublesome’ (BBG)
Ford’s Truck Trumps Mexico and Tesla (BBG)
So What’s The Big Idea, European Union? (G.)
Italy’s 5 Star Movement Part Of Growing Club Of Putin Sympathisers In West (G.)
Beppe Grillo Accuses Journalists Of ‘Manufacturing False News’ (DM)
Ukraine Moves To Blacklist Le Pen Over Crimea Comments (R.)
UK Credit Binge Approaching Levels Not Seen Since 2008 Crash (G.)
China Can’t Quit the Dollar (Balding)
India’s Cash Woes Are Just Beginning (BBG)
Head of Russian Central Bank Named European Banker of the Year (RT)
Steve Keen: Rebel Economist With A Cause (AFR)

 

 

Xi has all the state media, and all Trump has is Twitter. Isn’t it fun? Then again, for Xi to let the Global Times come with this sort of childish language is below him.

Chinese Media Say ‘Big Sticks’ Await Trump If He Seeks Trade War (BBG)

Chinese state media warned U.S. President-elect Donald Trump that he’ll be met with “big sticks” if he tries to ignite a trade war or further strain ties. “There are flowers around the gate of China’s Ministry of Commerce, but there are also big sticks hidden inside the door – they both await Americans,” the Communist Party’s Global Times newspaper wrote in an editorial Thursday in response to Trump’s plans to nominate lawyer Robert Lighthizer, who has criticized Beijing’s trade practices, as U.S. trade representative.

The latest salvo from state-run outlets followed others last month aimed at Peter Navarro, a University of California at Irvine economics professor and critic of China’s trade practices whom Trump last month named to head a newly formed White House National Trade Council. Those picks plus billionaire Wilbur Ross, the nominee for commerce secretary, will form an “iron curtain” of protectionism in Trump’s economic and trade team, the paper wrote. The three share Trump’s strong anti-globalization beliefs and seem unlikely to keep building the current trade order, it said, adding that they will be more interested in disrupting the world trade order.

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Don’t think they saw this coming. And that’s perhaps not so intelligent. The CIA leaked a lot of wild anti-Trump stuff during the election campaign, and now claims he MUST trust them. But if he leaves the same people in place, when will they turn on him again?

Donald Trump Plans Revamp of Top US Spy Agency and CIA (WSJ)

President-elect Donald Trump, a harsh critic of U.S. intelligence agencies, is working with top advisers on a plan that would restructure and pare back the nation’s top spy agency, people familiar with the planning said, prompted by a belief that the Office of the Director of National Intelligence has become bloated and politicized. The planning comes as Mr. Trump has leveled a series of social media attacks in recent months and the past few days against U.S. intelligence agencies, dismissing and mocking their assessment that the Russian government hacked emails of Democratic groups and individuals and then leaked them last year to WikiLeaks and others in an effort to help Mr. Trump win the White House.

One of the people familiar with Mr. Trump’s planning said advisers also are working on a plan to restructure the CIA, cutting back on staffing at its Virginia headquarters and pushing more people out into field posts around the world. The CIA declined to comment on the plan. “The view from the Trump team is the intelligence world [is] becoming completely politicized,” said the individual, who is close to the Trump transition operation. “They all need to be slimmed down. The focus will be on restructuring the agencies and how they interact.”

In one of his latest Twitter posts on Wednesday, Mr. Trump referenced an interview that WikiLeaks editor in chief Julian Assange gave to Fox News in which he denied Russia had been his source for the thousands of emails stolen from Democrats and Hillary Clinton advisers, including campaign manager John Podesta, that Mr. Assange published. Mr. Trump tweeted: “Julian Assange said ‘a 14 year old could have hacked Podesta’—why was DNC so careless? Also said Russians did not give him the info!”

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This will dominate the news going forward. Main question: what crazy stories will the WaPo come up with to discredit the nominees? Should be interesting. Meanwhile: YOU LOST, Schumer. Big time. Stop digging.

Schumer Calls Eight Trump Cabinet Picks ‘Troublesome’ (BBG)

Senate Democratic leader Chuck Schumer said his party views eight of Donald Trump’s Cabinet choices as being “the most troublesome” and wants at least two days of hearings for each of them. “We have asked for fair hearings on all of those nominees,” Schumer of New York told reporters Wednesday in Washington. “There are a lot of questions about these nominees.” Confirmation hearings begin next week for a number of the president-elect’s Cabinet picks, and several already overlap on a single day, Jan. 11. Majority Leader Mitch McConnell said minutes earlier that he hopes the Senate would be ready to confirm some of the nominees shortly after Trump is inaugurated on Jan. 20, just as it did when President Barack Obama first took office.

Under current Senate rules, Democrats can delay Senate confirmation of nominees but can’t block them on their own. Schumer’s office said the eight nominees targeted by Democrats for extra scrutiny are Rex Tillerson for secretary of State, Betsy DeVos for Education, Steven Mnuchin for Treasury, Scott Pruitt for the Environmental Protection Agency, Mick Mulvaney for budget director, Tom Price for Health and Human Services, Andy Puzder for Labor and Wilbur Ross for Commerce. Schumer said he wants their full paperwork before hearings are scheduled, adding that only a few have turned it in while most haven’t. Schumer said he also wants their tax returns, particularly because some are billionaires and given the potential for conflicts of interest.

The hearing for DeVos is scheduled for Jan. 11, “and we don’t have any information on her, and she in addition has a $5 million fine outstanding that she’s refused to pay,” Schumer said. Democrats have called on a political action committee led by DeVos to pay a $5.2 million fine imposed by Ohio officials over campaign finance violations in 2008. “There are so many issues about so many of them that to rush them through would be a disservice to the American people,” the Democratic leader said. While many of Obama’s nominees were confirmed quickly, his team had its paperwork in early, Schumer said.

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Our God is the car.

Ford’s Truck Trumps Mexico and Tesla (BBG)

On its first day back from the holidays, America’s auto industry began with a Mexican standoff and ended with Tesla just being off. Ford announced early on Tuesday it was scrapping plans to build a new plant in Mexico, apparently under pressure from President-elect Donald Trump. The PEOTUS then turned his signature industrial-policy-by-tweet on General Motors, threatening them over shipping Mexican-made Chevy Cruze cars back home .Meanwhile, after the market closed on Tuesday, Tesla Motors Inc. reported it missed its (reduced) guidance for vehicle deliveries in 2016. The stock fell in after-hours trading, as some were clearly caught by surprise – a reaction that, let’s face it, is itself a bit surprising at this point. In any case, a timely tour of the Gigafactory scheduled for Wednesday will no doubt snap the market’s attention back away from those pesky number thingies.

What links these stories is Ford’s other announcement on Tuesday morning, which got a bit lost in the shuffle; namely, its plans to electrify some of its marquee models – including the F-150 pickup truck.Rather than a battery-only version or even a plug-in hybrid model, Ford is committing merely to a basic hybrid version of the F-150 by 2020 – more Priusizing than Teslarizing it. So we aren’t about to see Ford’s trucks vanish from gasoline stations anytime soon. But this is still a big deal. The F-Series is America’s biggest-selling vehicle and represents one of every three full-size pickups sold. Also, pickups are archetypal gas guzzlers, and gas guzzlers are doing really well right now because of cheap gasoline. And even as Trump lobs Twitter-bombs at the car-makers’ foreign factories, his administration also looks likely to ease up on fuel-efficiency standards.

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So What’s The Big Idea, Guardian? How can you have your own Jennifer Rankin in Brussels, Thomas Kirchner and Alexander Mühlauer of Suddeutsche Zeitung and Cécile Ducourtieux of Le Monde, all contribute to a long article, and still not touch on a single one prime issue with the EU? How do you do it?

So What’s The Big Idea, European Union? (G.)

A few weeks ago, a significant anniversary in Maastricht slipped by almost unnoticed: 25 years ago, the historic treaty that ushered in the euro was drafted. But there was no fanfare, no commemoration in the European parliament, no mention at all by the commission. There was just a rather lacklustre speech by the EU president, Jean-Claude Juncker, in which he lamented that people were not sufficiently proud of what had been achieved on 9 December 1991. This air of resignation perfectly epitomises an EU in retreat. Battered, bothered and bewildered on all sides by a succession of crises – Brexit, the euro, refugees – the union is short of ideas, perhaps shorter than it has ever been. In his state of the union speech last autumn, the very best that Juncker could come up with was free Wi-Fi for every EU town and village by 2020, though even this sounded more like an aspiration than a concrete policy.

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Oh, wait, that hollow ‘article’ on the EU was just a lead in to this Guardian smear piece in the honored tradition of the WaPo. Up to and including “Russian interference in Italian elections”.

Italy’s 5 Star Movement Part Of Growing Club Of Putin Sympathisers In West (G.)

Ten years ago, in the wake of the murder of the leading Russian journalist Anna Politkovskaya, a popular comedian-turned-blogger in Italy named Beppe Grillo urged tens of thousands of his readers to go out and buy Putin’s Russia, her searing exposé of corruption under the leadership of Vladimir Putin. “Russia is a democracy based on the export of gas and oil. If they didn’t export that, they would go back to being the good old dictatorship of once upon a time,” Grillo wrote in a mournful 2006 post about the journalist’s murder. But today, Grillo’s position on Russia has radically changed. He is now part of a growing club of Kremlin sympathisers in the west – an important shift given that the comedian has become one of the most powerful political leaders in Italy and his Five Star Movement (M5S), the anti-establishment party he created in 2009, is a top contender to win the next Italian election.

[..] As the M5S’s rhetoric has become pro-Russian, it is simultaneously becoming more critical of the EU, including a vow to hold a referendum on the euro. Such a vote would be likely to have a destabilising effect on European unity, even if in practice it would be difficult to execute a departure from the single currency. Grillo has also called for a “review” of the EU’s open borders under the Schengen agreement, in response to the shooting in Milan of Anis Amri, the suspected terrorist behind last month’s attack on a Berlin Christmas market.

[..] Foreign diplomats in Rome said it was easy to overestimate the M5S’s chances of winning the next Italian election and that expected changes to Italy’s electoral rules would make an M5S victory difficult. That calculation is based on the fact that the M5S has always opposed forging governing alliances with other parties, which has made it impossible so far for the party to achieve a majority coalition in parliament. But a handful of diplomats have also suggested that the ruling Democratic party, which is still led by former prime minister Matteo Renzi, may not be fully alert to the potential threat of Russian interference in Italian elections, and is not as concerned about the issue as it should be.

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This is Italy, so what does the other side say? Fascism. To propose a public jury on what news is false is fascism. As Italy is no. 77 in the World Press Freedom Index. This will get very ugly.

Beppe Grillo Accuses Journalists Of ‘Manufacturing False News’ (DM)

The leader of Italy’s populist Five Star movement has caused a stir by accusing the country’s journalists of ‘manufacturing false news’. Comic Beppe Grillo, founder of the anti-euro movement, lashed out at print and TV journalists, accusing them of fabricating news to keep his party, the Five Stars, down. ‘Newspapers and television news programmes are the biggest manufacturers of false news in the country, with the aim of ensuring those who have power keep it,’ he said on his blog on Tuesday. He called for ‘a popular jury to determine the veracity of the news published,’ and said in cases of fake news ‘the editor must, head bowed, make a public apology and publish the correct version at the start of the programme or on the paper’s front page’.

Grillo said members of the general public ‘picked at random’ would be shown newspaper articles and programmes and asked ‘to determine their accuracy.’ The blog was accompanied by a montage of the banners and logos of Italy’s main newspapers and television news programmes. The media world was enraged by comments, as were politicians from Italy’s traditional parties. The news director of the private TG La7 channel, Enrico Mentana, said he would sue the comedian, while journalists’ union FNSI slammed the ‘lynching of all journalists’. The opposition Five Stars was running neck-and-neck with the ruling centre-left Democratic Party (PD) before Matteo Renzi’s downfall last month and Grillo is campaigning hard for the next general election, which could be held in coming months.

What Grillo is proposing ‘is called Fascism, and those who play it down are accomplices,’ PD senator Stefano Esposito said. The centre-right Forza Italia (FI) party, founded by ex-prime minister Silvio Berlusconi, said Grillo wanted a ‘minculpop 2.0’, a reference to the propaganda and censorship ministry under dictator Benito Mussolini. Grillo has had a difficult relationship with the media since launching the Five Stars (M5S) in 2009, banning members from appearing on talk shows and giving international media priority over their Italian counterparts at his rallies. His claim that journalists were to blame for the country’s poor standing on the World Press Freedom Index – where it ranks 77th – was dismissed by the editor in chief of the Repubblica daily.

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The Crimeans voted in huge numbers to join -stay with- Russia, but you can’t say that. Not even if it’s true and you live 2000 miles away. I doubt Le Pen was planning any trips to Kyiv anytime soon to begin with, but so who’s next? She can’t go to Poland anymore either soon? But still get elected president of France? Bring it on.

Ukraine Moves To Blacklist Le Pen Over Crimea Comments (R.)

Ukraine indicated on Wednesday it would bar French presidential candidate Marine Le Pen from entering the country after comments she made that appeared to legitimize Russia’s annexation of Crimea in 2014. Le Pen’s office dismissed the threat, saying she had no intention of visiting Ukraine. Kiev is nervous about the shifting political landscape in 2017. U.S. President-elect Donald Trump has adopted a friendlier tone toward Russia while another French presidential candidate, Francois Fillon, favours lifting sanctions against Moscow. Relations between Ukraine and Russia soured after Russia’s annexation of Crimea and the subsequent outbreak of pro-Russian separatist fighting in eastern Ukraine that has killed around 10,000 people, despite a ceasefire being notionally in place.

Alluding to Le Pen, the Ukrainian foreign ministry said in a statement: “Making statements that repeat Kremlin propaganda, the French politician shows disrespect for the sovereignty and territorial integrity of Ukraine and completely ignores the fundamental principles of international law. “…Such statements and actions in violation of the Ukrainian legislation will necessarily have consequences, as it was in the case of certain French politicians, who are denied entry to Ukraine,” it said. The far right leader was quoted by French television as saying Russia’s annexation of Crimea was not illegal because the Crimean people had chosen to join Russia in a referendum, a position Kiev vehemently disputes. The referendum was also declared illegal by the United Nations General Assembly.

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What keeps Britain together. Credit and whining. And fog. Boy, what a sorrowful place it’s becoming.

UK Credit Binge Approaching Levels Not Seen Since 2008 Crash (G.)

A credit boom that is close to levels not seen since the 2008 financial crash should set alarm bells ringing in Theresa May’s government, debt charities have warned. The latest figures from the Bank of England show unsecured consumer credit, which includes credit cards, car loans and second mortgages, grew by 10.8% in the year to November to £192.2bn, picking up pace on the previous month to grow at its fastest rate in more than 11 years. In September 2008, the month that Lehman Brothers collapsed and the banking crash triggered a worldwide recession, the level of UK consumer credit debt hit a peak of £208bn. Credit card debts, which accounted for £66.7bn of the total, hit a record high last month as Britons used the plastic to fund shopping as never before in the run-up to Christmas.

The debt charity StepChange said the rise in debt levels would leave thousands of families vulnerable to higher levels of inflation and changes in income from wage cuts, divorce or redundancy. Its head of policy, Peter Tutton, said: “Levels of outstanding borrowing are approaching the 2008 peak, and the growth rate of net lending is at its highest since 2005. Alarm bells should be ringing. “Previous experience shows how such increases in the levels of borrowing can leave households over-indebted and vulnerable to sudden changes in circumstances and drops in income that can pitch them into hardship. “Lenders, regulators and the government need to ensure that the mistakes made in the lead-up to the financial crisis are not repeated and that there are better policies in place to protect those who fall into financial difficulty.”

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All you need, as if it wasn’t obvious: “..the link between the yuan and the dollar remains as tight as ever. In November 2016, 98% of turnover in China’s foreign-exchange market took place between those two currencies.”

China Can’t Quit the Dollar (Balding)

China’s leaders are hardly disguising their fears about money leaving the country. They’ve just imposed new disclosure rules limiting how Chinese – who are allowed to convert up to $50,000 worth of yuan into foreign currency each year – can spend that money overseas. Simultaneously, they’re striving to tamp down worries about the tumbling yuan, which has fallen to an eight-year low against the U.S. dollar. At the end of December, the government added 11 currencies to the basket against which it now values the yuan. While the Chinese currency fell 6.5% against the dollar in 2016, its value measured against the broader basket has remained largely stable since July. The idea, at least in part, is to persuade ordinary Chinese that their nest eggs are safe in renminbi. Unfortunately, this latest effort isn’t likely to work any better than earlier ones.

The yuan remains inextricably bound to the U.S. dollar – and everyone knows it. The People’s Bank of China created the exchange-rate basket roughly a year ago. The goal was twofold – to shift attention away from the yuan’s precipitous decline against the dollar and to reduce China’s dependence on the U.S. currency. The latter was widely seen as humiliating – an affront to a rising superpower and the world’s second-largest economy. That resentment helped drive China’s effort – since stalled – to internationalize its currency. Yet any cursory review makes clear that the link between the yuan and the dollar remains as tight as ever. In November 2016, 98% of turnover in China’s foreign-exchange market took place between those two currencies. Flows of capital into and out of China show an only slightly less lopsided pattern.

Between them, the U.S. and Hong Kong dollars (the latter is hard-pegged to the U.S. currency) account for 91% of China’s non-yuan international bank transactions. The smaller currencies that make up nearly half of the basket comprise only 1.7% of international bank payments and receipts. Even the BIS estimates that 80% of China’s local loans in foreign currency are denominated in dollars. That’s the number that really matters: If the yuan continues to fall against the dollar, companies are going to have a harder time paying back those loans regardless of what the renminbi is or isn’t worth against the government’s official basket. All this is clear to ordinary investors. During my nearly eight years in China, I’ve never heard any Chinese citizen worry about the value of the yuan against the Emirati dirham.

So as long as the yuan continues to depreciate in dollar terms, Chinese are going to look for ways to get their money out of the country, despite any barriers the government might throw in their way. China’s options for preventing further outflows are limited. The PBOC could continue to deplete the country’s $3 trillion in foreign exchange reserves in an effort to prop up the yuan. That’s a risky game, though, as it reduces the stockpiles of hard currency needed to repay foreign-denominated debt and provide liquidity for international trade. As others have argued, reserves should be deployed strategically, not squandered defending bad policy.

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I see helicopter money. Digital basic income will come too late. At the every least half the people don’t even have plastic. And Modi can’t afford to wait for that.

India’s Cash Woes Are Just Beginning (BBG)

“Give me 50 days, friends,” Indian Prime Minister Narendra Modi asked citizens after he canceled 86% of the country’s currency notes. After Dec. 30, if Indians saw his decision as flawed, he promised to “suffer any punishment.” But, he said confidently, if they could bear 50 days of disruption, they would have the “India of their dreams.” It is now January. While Modi’s deadline has passed, the pain hasn’t. Indeed, it may just be beginning: Measured by the purchasing managers’ index, or PMI, Indian manufacturing actually began to contract last month for the first time in all of 2016. This can’t be blamed on sluggish global demand; the equivalent measure from China suggested that manufacturing there is expanding quicker than expected. Indian companies are suffering from supply-chain disruptions and customers with no cash in their wallets.

True, in some ways things aren’t as bad, at least in metropolitan India, as they were a few weeks ago. The lines at ATMs are shorter and the government even felt comfortable enough to raise the limits for ATM withdrawals from 2,500 rupees a pop to 4,500 rupees (from $37 to $66). But overall cash limits haven’t been eased; most Indians can still only withdraw 24,000 of their own hard-earned rupees – a little over $350 – a week, or 50,000 rupees if one has a business account. That’s simply not enough cash to keep supply chains going. Lines at ATMs thus aren’t the most useful indicator. Even if more cash is getting into the economy, the question is whether Indians are still artificially constrained in how much cash they can access. If so, things haven’t returned to “normal.” And the longer there’s a cash constraint, the larger the ripple effect on the economy.

Here’s a thought experiment, based on how informal, cash-based economies work. For the first or second month that you’re short of cash, your creditors and your debtors, the people you buy from and the people you sell to, are all short of cash as well. Plus, everyone knows the cash crunch isn’t your fault; it doesn’t reveal any adverse information about how healthy your business is or isn’t. So you extend and receive credit relatively easily. Things can run on such relationships for awhile in the informal economy. But when the outside world – the formal economy – intrudes, the system breaks down. When it comes time to pay your electricity bill, or a loan installment to the banks, you’re forced to call in your debts. You may not face enough formal demands in the first month or two to pose a problem. But as time passes, they add up.

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Way ahead of you! I wrote this in April 2015: Russia’s Central Bank Governor Is Way Smarter Than Ours.

Head of Russian Central Bank Named European Banker of the Year (RT)

Elvira Nabiullina, the head of Russia’s central bank, has been named the best Central Bank Governor in Europe in 2016 by the international financial magazine, The Banker. The influential publication praised her for having “helped steer the country through the difficulties,” with Russia “set to return to economic growth in 2017.” “Having started 2016 with consumer price inflation of 12.9% – highs not seen since 2008 – Ms Nabiullina highlighted the need to lower inflation to improve economic growth in Russia,” the outlet writes in an article dedicated to the award. Established in 1926, The Banker is considered one of the leading international finance magazines, read in almost 180 countries.

“Ms Nabiullina’s efforts saw the rate drop below 6% by the end of 2016,” the magazine writes. This, as inflation in Russia “had never fallen under 6,1%”, according to the publication, citing figures by the International Monetary Fund going back to 1992. Nabiullina said she viewed the past year as a kind of turning point with regard to inflation. “Importantly, in 2016 there was a turning point in the sentiment of the population and professionals regarding inflation expectations,” she is quoted as saying by the outlet. “At the beginning of 2016, inflation expectations of market participants were well above our target, but now they have reduced to close to our [end-2017] 4% inflation target, at between 4.5% and 4.7%.”

In December last year, the chief of the IMF, Christine Lagarde lauded Nabiullina for doing “a fantastic job” while tackling the financial problems in Russia, and inflation in particular. Nabiullina served as economic adviser to Russian President Vladimir Putin between 2012 and 2013, when she was appointed to head Russia’s Central Bank. She was Minister of Economic Development and Trade for 5 years from September 2007 to May 2012. Forbes rates Nabiullina 56th among the world’s 100 most powerful women. In 2015, Nabiullina was named central bank governor of the year by Euromoney magazine.

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Even on vacation he still finds a way to get his face in the media.

Steve Keen: Rebel Economist With A Cause (AFR)

Keen’s views and policy prescriptions remain firmly and proudly unconventional – unworkable even. But as somebody who saw the GFC coming when most did not, and as a long-time disciple of the now in-vogue Austrian economist Hyman Minsky, it may be that Keen’s economic views are finally entering mainstream thought. In a sign of the times, none other than the new chief economist of the World Bank, Paul Romer, has admitted that “for more than three decades, macroeconomic theory has gone backwards”. In a piece titled The trouble with macroeconomics, Romer in September wrote that “theorists dismiss mere facts by feigning an obtuse ignorance about such simple assertions as ‘tight monetary policy can cause a recession’.”


Australian private and government debt as a percentage of GDP. Steve Keen

And there is a strong need for fresh remedies. There is more debt in the world now than before the GFC – a crisis precipitated by excess borrowing. Low and zero interest rates and unconventional monetary policies such as QE have pumped up asset prices but done little to spark productivity gains or business investment in advanced economies. Private debt in Australia is now equivalent to around 210% of GDP, from 180% in 2007. Australian households are more indebted than ever, the RBA says. Keen is perhaps most critical of central bankers’ unwillingness to incorporate the link between credit growth and financial stability into their decision making. “Conventional economic thinking completely ignores where money comes from,” Keen says. “All this theory is effectively based on the idea that money is like nuts that chipmunks drop from trees and you can run out of it and if you don’t have enough of it you are going to starve over winter, and it’s a completely naive view of a monetary economy.”

While he acknowledges that RBA governor Philip Lowe has signalled a greater emphasis on “financial stability”, household indebtedness still continues to climb. “The Reserve Bank were so backward in their thinking. Their argument was, ‘oh well, the level of debt doesn’t matter because the households that have the debt are wealthy and they can continue servicing it’. But the real problem is demand for the economy comes out of turnover of the existing money plus credit. “Now, if you are relying on credit growth being equivalent to 15% of GDP, which is where it was in Australia just over six months ago, you’ve got to continue borrowing that 15% of GDP every year to maintain that trajectory. “If you simply stabilise, then, bang!, 15% of demand disappears. And that’s what we face and what I think will happen [in 2017].”

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Dec 072016
 
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Arthur Gerlach Children point towards Christmas toys at The Fair Department Store, Chicago 1940

 

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

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

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

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

Carney Lays Out Vision to Revive Benefits of Globalization

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

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

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

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

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

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

 

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

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

 


Wikipedia

 

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

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

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

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

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

 

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

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

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

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

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

 

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

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

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

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

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

Nov 272016
 
 November 27, 2016  Posted by at 10:14 am Finance Tagged with: , , , , , , , , , ,  1 Response »
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Unknown Paris 1900


This Is The Greatest Suckers’ Rally Of All Time: David Stockman (CNBC)
More Than Half Of New Yorkers One Paycheck Away From Homelessness (Gothamist)
US Thanksgiving, Black Friday Store Sales Fall 10.4%, Online Rises (R.)
Dollar to Benefit if $2.5 Trillion in Cash Stashed Abroad Is Repatriated (WSJ)
China’s Property Frenzy And Surging Debt Raises Red Flag For Economy (AFP)
India’s Rural Economy Hit Hard As Informal Lending Breaks Down (R.)
UK MPs Launch New Attempt To Interrogate Tony Blair Over Iraq (G.)
First Brexit then Trump. Is Italy Next For The West’s Populist Wave? (G.)
Clinton Camp Splits From White House On Jill Stein Recount Push (G.)
Justin Trudeau Ridiculed Over Praise Of ‘Remarkable’ Fidel Castro (G.)
Military Veterans Seek New Role In South Africa Poaching War (AFP)

 

 

Sell everything!

This Is The Greatest Suckers’ Rally Of All Time: David Stockman (CNBC)

The Trump rally raged on this week with all major U.S. indexes hitting record highs, but despite the historic run, David Stockman is doubling down on his call for investors to sell everything. “This 5% eruption is meaningless. It’s some robo machine trying to tag new highs,” Stockman said Tuesday on CNBC’s “Fast Money,” in a dismissal of the S&P 500 rally. “I see a recession coming down the pike in 2017. The stock market is going to go down and it’s going to stay down long and hard because, for the first time in 25 years, there’s nothing to bail it out.” This echoed the initial call Stockman made Nov. 3, when he urged investors to sell stocks and bonds before the presidential election. However, since the Nov. 8 election, the Dow Jones industrial average has gained 4% en route to surpassing 19,000.

Additionally, the S&P 500 and Nasdaq also hit record highs in the same time period, gaining 3% and 4%, respectively. Yet Stockman, who was director of the Office of Management and Budget under President Ronald Reagan, reaffirmed that markets are heading for disaster. “My call stands. Sell the stocks, sell the bonds, get out of the casino,” Stockman explained to CNBC in an off-camera interview. “Bonds have already cratered by nearly $2 trillion worldwide and have miles to go. This isn’t a rotation into stocks, either. It’s the greatest sucker’s rally ever.” Stockman, author of “Trumped: A Nation on the Brink of Ruin… And How to Bring It Back,” lamented that there will be no Trump stimulus or Reagan-style boom.

He further added that he expects “an unprecedented fiscal bloodbath” resulting from the $20 trillion worth of debt that the U.S. currently has on the books. “This isn’t Ronald Reagan with a clean $1 trillion balance sheet and with a fluke GOP and a Southern Democratic coalition that only materialized because he got shot,” Stockman said in reference to John Hinkley Jr. attempting to assassinate Reagan in Washington, D.C., in 1981. “Nor is it LBJ in 1965 with a thundering electoral mandate and a massive congressional majority for the Great Society.” On the contrary, Stockman, who initially predicted that Trump would win the election, added that Washington will be in chaos by June. This is because he anticipates ongoing disruptions from the tea party, which Stockman doesn’t foresee as allowing additional deficit increases.

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“..landlords are increasingly claiming “chronic rent delinquency” after just a single late payment..”

More Than Half Of New Yorkers One Paycheck Away From Homelessness (Gothamist)

More than half of all New Yorkers don’t have enough money saved to cover them in the event of a lost job, medical emergency, or other disaster, according to a new report by the Association for Neighborhood & Housing Development. Nearly 60% of New Yorkers lack the emergency savings necessary to cover at least three months’ worth of household expenses including food, housing, and rent, but that statistic isn’t spread evenly across the five boroughs. The Bronx has the highest rate of families without adequate emergency savings: in Mott Haven, Melrose, Hunts Point, Longwood, Highbridge, South Concourse, University Heights, Fordham, Belmont, and East Tremont, 75% of families have inadequate emergency savings.

The Staten Island neighborhoods of Tottenville and Great Kills have the lowest rate, with just 41% of families lacking the funds necessary to cover three months’ worth of expenses. Without these savings, families who face emergencies could be at risk of eviction, foreclosure, damaged credit, and even homelessness. In Brooklyn, families in Brownsville (70%), Bed-Stuy (67%), Bushwick (68%), East New York (67%), and South Crown Heights/Prospect Heights (67%) are the most at-risk—in Manhattan, an average of 67% of families in Harlem, Washington Heights, and Inwood lack necessary savings. In Queens, the neighborhoods with the highest%age of these households were Elmhurst/Corona (64%), Rockaway/Broad Channel (60%), Sunnyside/Woodside (59%), and Jackson Heights (59%).

As DNAinfo notes, advocates say that rental assistance is crucial in preventing homelessness citywide, especially in neighborhoods where rents rise faster than incomes—many of which overlap with the neighborhoods where families lack adequate savings. And although an increase in rental assistance services like the one proposed by Queens Assemblyman Andrew Hevesi could cost the cost $450 million in state and federal funding, it would be more cost-effective than allowing more families to enter the chronically underfunded shelter system. Many tenants don’t know where to get emergency rental assistance, which can prevent them from falling behind on their rent. And landlords are increasingly claiming “chronic rent delinquency” after just a single late payment, which allows them to begin eviction proceedings earlier on than they would otherwise.

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“Net sales on Black Friday slid 10.4% for brick-and-mortar chains..”

US Thanksgiving, Black Friday Store Sales Fall 10.4%, Online Rises (R.)

Sales and traffic at U.S. brick-and-mortar stores on Thanksgiving Day and Black Friday declined from last year, as stores offered discounts well beyond the weekend and more customers shopped online. Internet sales rose in the double digits on both days, surpassing $3 billion for the first time on Black Friday, according to data released on Saturday. Data from analytics firm RetailNext showed net sales at brick-and-mortar stores fell 5.0% over the two days, while the number of transactions fell 7.9%. Preliminary data from retail research firm ShopperTrak showed that shopper visits to such stores fell a combined 1% during Thanksgiving and Black Friday when compared with the same days in 2015.

The data highlights the waning importance of Black Friday, which until a few years ago kicked off the holiday shopping season, as more retailers start discounting earlier in the month and opened their doors on Thanksgiving Day. “We knew it (holiday season) was going to be off to a slow start,” Shelley Kohan, vice president of retail consulting at RetailNext, said. “The first couple of weeks with the election were a complete distracter from the normal course of business and…a warmer climate in November may have made the sales more stubborn,” she said, adding that she saw sales picking up in December.

Net sales on Black Friday slid 10.4% for brick-and-mortar chains, according to RetailNext. “Stores that opened on Thursday were not very busy on Black Friday,… and while the Thanksgiving Day opt-outs were busier on Black Friday, they didn’t see the crowds they saw in previous years,” NPD group’s Chief Industry analyst Marshal Cohen said. Still, total holiday season sales are expected to jump 3.6% to $655.8 billion this year, according to the National Retail Federation, due to a tightening job market.

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Only if buybacks are banned.

Dollar to Benefit if $2.5 Trillion in Cash Stashed Abroad Is Repatriated (WSJ)

Part of $2.5 trillion in profits held overseas by companies such as Apple and Microsoft could be heading back to the U.S., a move analysts say could further fuel the U.S. dollar’s powerful rally. U.S. corporations have been holding billions in earnings and cash abroad to avoid paying a 35% tax that would be levied whenever the money is brought home. President-elect Donald Trump has said he would propose a one-time cut of the repatriation tax to 10% to lure money back to the U.S. that can be spent on hiring, business development and funding Mr. Trump’s fiscal stimulus proposals. Market optimism that the stimulus plan can generate U.S. economic growth and push the Federal Reserve to raise interest rates has buoyed the dollar against a basket of major trading partners toward 14-year-highs since the Nov. 8 presidential election.

Now, some say the prospect of companies repatriating perhaps hundreds of billions of dollars could offer more impetus to the U.S. currency’s rally. “However small, however big this flow of money will be, it will be positive for the case of dollar strength,” said Daragh Maher at HSBC. “There will most likely be an inflow into dollars.” When a company repatriates earnings from abroad, it may have to exchange the local currency for the U.S. dollar. The $2.5 trillion hoard of overseas earnings is highly concentrated in the technology and pharmaceutical sectors, according to Capital Economics. Microsoft held about $108 billion in earnings overseas as of 2015, while pharmaceutical giant Pfizer had $80 billion. General Electric had $104 billion overseas, according to Capital Economics. Analysts note that many companies already hold their overseas earnings in U.S. dollar assets, which would mute the demand for dollars.

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Famous last words: “The notion that Chinese people do not like to borrow is clearly outdated..”

China’s Property Frenzy And Surging Debt Raises Red Flag For Economy (AFP)

Chinese household debt has risen at an “alarming” pace as property values have soared, analysts have said, raising the risk that a real estate downturn could wreak havoc on the world’s second largest economy. Loose credit and changing habits have rapidly transformed the country’s famously loan-averse consumers into enthusiastic borrowers. Rocketing real estate prices in major Chinese cities in recent years have seen families’ wealth surge. But at the same time they have fuelled a historic boom in mortgage lending, as buyers race to get on the property ladder, or invest to profit from the phenomenon. Now the debt owed by households in the world’s second largest economy has surged from 28% of GDP to more than 40% in the past five years.

“The notion that Chinese people do not like to borrow is clearly outdated,” said Chen Long of Gavekal Dragonomics. The share of household loans to overall lending hit 67.5% in the third quarter of 2016, more than twice the share of the year before. But this surge has raised fears that a sharp drop in property prices would cause many new loans to go bad, causing a domino effect on interest rates, exchange rates and commodity prices that “could turn out to be a global macro event”, ANZ analysts said in a note. While China’s household debt ratio is still lower than advanced countries such as the US (nearly 80% of GDP) and Japan (more than 60%), it has already exceeded that of emerging markets Brazil and India, and if it keeps growing at its current pace will hit 70% of GDP in a few years.

It still has some way to go before it outstrips Australia, however, which has the world’s most indebted households at 125% of GDP. The ruling Communist party has set a target of 6.5-7% economic growth for 2017, and the country is on track to hit it thanks partly to a property frenzy in major cities and a flood of easy credit. But keeping loans flowing at such a pace creates such “substantial risks” that it could be a “self-defeating strategy”, Chen said. China’s total debt – including housing, financial and government sector debt – hit 168.48 trillion yuan ($25 trillion) at the end of last year, equivalent to 249% of national GDP, according to estimates by the Chinese Academy of Social Sciences, a top government think tank.

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“..the informal sector accounts for [..] 80% of employment..”

India’s Rural Economy Hit Hard As Informal Lending Breaks Down (R.)

Life was good for Mitharam Patil, a wealthy money lender from a small village in the Indian state of Maharashtra. Small-time financiers like Patil would typically lend cash to farmers and traders every day, providing a vital source of funding for a rural economy largely shut out of the banking sector, albeit at interest rates of about 24%. All that came crashing down on Nov. 8, when Prime Minister Narendra Modi banned 500 and 1,000 rupee ($7.30-$14.60) banknotes, which accounted for 86% of currency in circulation. The action was intended to target wealthy tax evaders and end India’s “shadow economy”, but it has also exposed the dependency of poor farmers and small businesses on informal credit systems in a country where half the population has no access to formal banking.

Patil was stuck with 700,000 rupees ($10,144) of worthless cash. He can also only withdraw up to 24,000 rupees from his account every week, barely enough for his own personal needs given he also works as a farmer. That is bad news for farmers and traders who had come to depend on Patil, despite his high interest rates, given that bank branches are located far from the village, while the process to obtain loans is long and cumbersome. It may also hurt India’s economy, as the informal sector accounts for 20% of GDP and 80% of employment. The country is due to report July-September GDP on Wednesday. “Sowing of winter crops has been started and farmers badly need money. But I couldn’t lend (to) them due to restrictions on withdrawal,” Patil said.

Some farmers and small businesses say India’s informal credit system has ground to a virtual halt, despite government measures to steer more funds to them, including 230 billion rupees in crop loans. Not only are money lenders struggling to lend, they are also struggling to get paid. Saumya Roy, CEO of Vandana Foundation, a micro finance firm, said it has encountered difficulties in collecting payments from borrowers, which will have a knock-on effect on how much they can lend to others. “We can’t go on lending and suffer losses,” she said. “How can we force people to pay back when they don’t have money to buy food. How will they pay us?”

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That should be fun.

UK MPs Launch New Attempt To Interrogate Tony Blair Over Iraq (G.)

A cross-party group of MPs will make a fresh effort to hold Tony Blair to account for allegedly misleading parliament and the public over the Iraq war. The move, which could see Blair stripped of membership of the privy council, comes as the former prime minister tries to re-enter the political fray, promising to champion the “politically homeless” who are alienated from Jeremy Corbyn’s Labour and the Brexit-promoting government of Theresa May. The group, which includes MPs from six parties, will put down a Commons motion on Monday calling for a parliamentary committee to investigate the difference between what Blair said publicly to the Chilcot inquiry into the war and privately, including assurances to then US president George W Bush.

Backing the motion are Alex Salmond, the SNP MP and former first minister of Scotland; Hywel Williams, Westminster leader of Plaid Cymru; and Green party co-leader Caroline Lucas. Senior Tory and Labour MPs are also backing the move, which reflects widespread frustration that the publication of the Chilcot report in July, after a seven-year inquiry, did not result in any government action or accountability for Blair. Salmond said some MPs believe that senior civil servants were “preoccupied with preventing previous and future prime ministers being held accountable”. He said: “An example should be set, not just of improving government but holding people to account.”

He pointed to last week’s Observer story revealing that, according to documents released under the Freedom of Information Act, the inquiry was designed by senior civil servants to “avoid blame” and reduce the risk that individuals and the government could face legal proceedings. Salmond also noted that documents show many officials involved in planning the inquiry, including current cabinet secretary Sir Jeremy Heywood, were involved in the events that led to war. The new motion will be debated on Wednesday in Commons time allotted to the SNP.

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What Renzi’s Dec. 4 constitutional referendum tries to achieve: “They’re sealing the system off so it can’t be changed in the future.”

First Brexit then Trump. Is Italy Next For The West’s Populist Wave? (G.)

On a bitterly cold evening, MPs and senators representing the Five Star Movement (M5S), launched by Beppe Grillo, the comedian-turned-political rabble rouser, implored a packed piazza to use a referendum on the constitution on Sunday 4 December to send the prime minister, Matteo Renzi, packing. Renzi, the telegenic, youthful leader of the centre-left Democratic party (PD), has placed his authority behind proposals to limit the powers of the senate, Italy’s second chamber. His plan involves cutting the number of senators from 315 to 100, all of whom would be appointed – rather than elected, as at present – and restricting their power to influence legislation.

Since 1948 the Italian constitution has preserved a perfect balance of powers between the two houses of parliament, frequently leading to legislative gridlock in Rome. Renzi claims that slimming down the role of the senate will, along with other reforms to strengthen executive power, finally free governments to govern. Crucially, he has indicated he will step down if the vote goes against him. In other eras, a dry and technical debate might have preoccupied a few constitutional cognoscenti. But these are not ordinary times in western democracies. In Ferrara’s Piazza Trento e Trieste, Alessandro Di Battista, a rising star of Grillo’s movement, issued a populist call to arms. Renzi’s referendum, he told the crowd, was just the latest gambit by a political class determined to insulate itself from the people it should serve.

“This unelected senate will be constituted by the arselickers of the various parties”, said Di Battista, “and by those who are in trouble with the courts and need parliamentary immunity. They’re sealing the system off so it can’t be changed in the future.” Such a devious manoeuvre should, he said, come as no surprise: “There are two Italys: on the one side the very wealthy few who look after themselves, and on the other the masses who live every day with problems of transport and public health.” As his audience launched into a favourite Five Star chant, “A casa! A casa!” (“Send them home”), Di Battista referenced the political earthquake that was in everyone’s mind. “The election of Donald Trump is the American people’s business,” he said. “But what that election does show is that so many citizens are simply not taking the establishment’s bait any more.”

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Did Stein really raise more money for this than for her entire 2016 campaign?

Clinton Camp Splits From White House On Jill Stein Recount Push (G.)

Hillary Clinton’s presidential campaign said on Saturday it would help with efforts to secure recounts in several states, even as the White House defended the declared results as “the will of the American people”. The campaign’s general counsel, Marc Elias, said in an online post that while it had found no evidence of sabotage, the campaign felt “an obligation to the more than 64 million Americans who cast ballots for Hillary Clinton”. “We certainly understand the heartbreak felt by so many who worked so hard to elect Hillary Clinton,” Elias wrote, “and it is a fundamental principle of our democracy to ensure that every vote is properly counted.”

In response, President-elect Donald Trump said in a statement: “The people have spoken and the election is over, and as Hillary Clinton herself said on election night, in addition to her conceding by congratulating me, ‘We must accept this result and then look to the future.’” Wisconsin began recount proceedings late on Friday after receiving a petition from Jill Stein, the Green party candidate. Stein claims there are irregularities in results reported by Wisconsin as well as Michigan and Pennsylvania, where she plans to request recounts next week, having raised millions of dollars from supporters. Trump called Stein’s effort a “scam” and said it was “just a way … to fill her coffers with money, most of which she will never even spend on this ridiculous recount”. “The results of this election should be respected instead of being challenged and abused,” he added, “which is exactly what Jill Stein is doing.”

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I bet you there’s hardly a single American -or European- who knows Cuba has been one of Canada’s most popular holiday destinations for many years.

Justin Trudeau Ridiculed Over Praise Of ‘Remarkable’ Fidel Castro (G.)

Justin Trudeau, the Canadian prime minister, has been mocked and criticised over his praise of the late Cuban leader Fidel Castro. Following the death of Castro, Trudeau, whose father had a close relationship with the revolutionary, released a statement mourning the loss of a “remarkable leader”. Castro, who died on Friday aged 90, won support for bringing schools and hospitals to the poor but also created legions of enemies for his ruthless suppression of dissent. Trudeau’s comments were markedly more positive than most western leaders, who either condemned Castro’s human rights record or tip-toed around the subject. Instead, Trudeau warmly recalled his late father’s friendship with Castro and his own meeting with Castro’s three sons and brother – Raul, Cuba’s current president – during a visit to the island nation earlier this month.

“While a controversial figure, both Mr Castro’s supporters and detractors recognized his tremendous dedication and love for the Cuban people who had a deep and lasting affection for ‘el Comandante’,” Trudeau said in the statement. He called Castro “larger than life” and “a legendary revolutionary and orator”. Fidel Castro was an honorary pall bearer at the 2000 funeral of Trudeau’s father, former prime minister Pierre Trudeau. In 1976, the senior Trudeau became the first Nato leader to visit Cuba under Castro’s rule, at one point exhorting “Viva Castro!”. “I know my father was very proud to call him a friend and I had the opportunity to meet Fidel when my father passed away,” Trudeau said.

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Better be careful with private armies getting involved.

Military Veterans Seek New Role In South Africa Poaching War (AFP)

In another life, Lynn was a sniper in Afghanistan, Damien trained paramilitary forces in Iraq, and John worked undercover infiltrating drug cartels in central America. Now all three are back in action, this time fighting what they describe as a “war” against poachers in southern Africa as the killing of rhinos escalates into a crisis that threatens the survival of the species. In 2008, less than 100 rhinos were poached in South Africa, but in recent years numbers have rocketed with nearly 1,200 killed in 2015 alone. Faced with such slaughter, conservationists and government authorities have been desperately searching for ways to protect the animals.

Many ideas have been tried, including drones, tracking dogs, satellite imagery, DNA analysis, hidden cameras and even cutting horns off live animals before poachers can get to them. But the killing has continued, and now military veterans from the United States, Australia and elsewhere have been drafted to bring their expertise to the uphill battle to save the rhinos. “You have animals who are targeted by people using automatic weapons,” Damien Mander, a former Australian Navy special forces officer, told AFP. “You can not go to the communities and ask them nicely to stop. This is a war. We are fighting a war out there.”

Read more …

Jul 062016
 
 July 6, 2016  Posted by at 10:56 am Finance Tagged with: , , , , , , , ,  12 Responses »
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LOOK Detroit’s 1960 look. Sneak preview of the new models. Dodge Polara 1959

Remember the referendum in April in which voters in the Netherlands rejected the EU-Ukraine trade deal? Seems forever ago, doesn’t it? But to date nothing has been done with the outcome of the vote, even though Dutch law requires a government to implement referendum outcomes as swiftly as possible.

PM Mark Rutte told parliament this week that ‘changing’ the deal would be very difficult, and that talks on the topic in the European Council ‘don’t make him happy’. Since one of the things Rutte has demanded from the EU is a pledge that Ukraine will not become an EU member, none of this should be surprising.

But more importantly, the Dutch didn’t vote for Rutte to renegotiate the deal, they outright rejected it. Ergo, Rutte is playing fast and loose with the integrity and credibility of the Dutch legal and political systems as much as the FBI does with America’s in the Clinton email sleight of hand, and as later today Britain will do with its credibility following the Chilcot report on Tony Blair et al.

As if the Brexit fall-out hasn’t done enough damage to that credibility. One might get the distinct impression that the powers-that-be could get awfully annoyed with the riff-raff out there wanting a say in their own lives. But the riff-raff don’t just want a say anymore, they are getting mighty annoyed with the powers-that-be too.

And that is guaranteed to increase if more ‘incidents’ happen like FBI director Jim Comey’s announcement yesterday that Hillary won’t be charged. At some point credibility must come with accountability, or else. The Hillary files bring the US awfully close to that point, as well as to ‘or else’.

Eric Zuesse explains very well why that is:

In Clinton Case, Obama Administration Nullifies 6 Criminal Laws

There can be no excuse for Obama’s depriving the public, via a grand jury decision, of the right to determine whether a full court case should be pursued in order to determine in a jury trial whether Hillary Clinton’s email system constituted a crime (or several crimes) under U.S. laws. The Obama Administration’s ‘finding’ that “clearly intentional and willful mishandling of classified information” would need to have been proven, in order for her to have been prosecuted under any U.S. criminal law, is a flagrant lie..

[..] anyone who in the future would be charged with violating any one of those six laws could reasonably cite the precedent that Ms. Clinton was not even charged, much less prosecuted, for actions which clearly fit the description provided in each one of those U.S. criminal laws. Anyone in the future who would be charged under any one of these six laws could prove discriminatory enforcement against himself or herself.

It is highly irresponsible for any government to play such games, and it’s skating on the edge of the law, something a government should always attempt to avoid. That is essential.

Someone who’s not known to be overly bothered by accountability or integrity is everybody’s favorite wino, European Commission President Jean-Claude Juncker. But Juncker, whatever else may be wrong with him, is not a stupid man. And unless I’m gravely mistaken, he has just saddled the European Union with a problem that could well trigger its undoing.

What happened was that at some point last week, reports started coming out that several parties, especially in Germany, were planning to oust Juncker from his plush job. He read them too, of course. And he may have gotten other signals as well in Brussels backrooms.

Then, Germany and France began to clamor for their parliaments to have a say in the ratification of CETA, the Comprehensive Economic and Trade Agreement between the EU and Canada. And Juncker must have seen his chance for revenge. Because yesterday he announced that all 27 parliaments of EU member nations get to have a crack at CETA.

That is Pandora’s box, and I don’t believe for a second that Juncker is not aware of it. Here’s what Deutsche Welle had to say:

EU Commission: CETA Should Be Approved By National Parliaments

European Commission chief Jean-Claude Juncker is expected to scrap plans to fast-track a trade agreement with Canada through the EU. After pressure from Germany and France, Juncker appears to be backtracking. Juncker will reportedly propose a mixed agreement – one that requires both the approval of the European parliament and national legislatures – at an European Commission meeting on Tuesday. Last week he was reported saying he “personally couldn’t care less” whether lawmakers get to vote on the deal. A report in the Financial Times noted that Germany and France wanted their national parliaments to be involved, which would inevitably lengthen the process.

That Juncker quote indicates something had been brewing for a while. Given the position he’s in, it’s quite funny, though

The deal was scheduled to be signed at the end of October during a summit in Brussels with Canadian Prime Minister Justin Trudeau, and it was due to be implemented in 2017. Trade ministers in Germany, France, Italy, the Netherlands and UK have reportedly said they will support the Comprehensive Economic and Trade Agreement, or CETA. CETA is similar to the agreement under negotiation between the EU and US and has drawn strong criticism in EU countries. Canadian and EU leaders concluded CETA in 2014, but implementation was delayed due to last-minute objections in Europe. This was related to an investment protection system to shield companies from government intervention.

Yes, CETA is TTiP on a smaller scale. A sort of test. The nonsensical audacity of ‘an investment protection system to shield companies from government intervention’ says it all.

With opposition to the EU’s impending free trade deal with Canada apparently growing, German Chancellor Angela Merkel said recently that the German parliament should be consulted on the EU’s free trade deal with Canada. “It is a highly political agreement that has been widely discussed,” said Merkel, adding that the “Bundestag is allowed to be involved of course… in national decisions”. German Economy Minister Sigmar Gabriel told the Tagesspiegel daily that Juncker’s comment was “incredibly stupid” and “would stoke opposition to other free trade deals,” including with the US. German media has also described Juncker’s position as badly timed given the growing skepticism among European voters about the EU.

What Gabriel actually said was that Juncker was “unglaublich töricht”, I looked it up. And it wasn’t his reaction to a ‘comment’, but to Juncker’s initial decision to NOT let national parliaments get their say on CETA. It’s brilliant and hilarious, isn’t it? I think I think quite a bit higher of Juncker now.

Because it was Germany itself that insisted they wanted the Bundestag to get involved (under domestic pressure). But they thought that would be it, that and the French parliament. And Jean-Claude threw it right back in their faces. Since they were going to get rid of him anyway, he decided to leave them the perfect parting gift, the ultimate poisoned chalice.

Getting back to the Dutch referendum on EU and Ukraine, one of the things to know about how this works is that the Dutch can ask for a referendum not on any topic, but only on bills the government sends to parliament to discuss. CETA will now be such a case, and a referendum looks at least quite possible.

I don’t know what comparable legislation is in other EU countries, but no doubt in many countries it’s enough to have their parliaments discuss the issue, to cause havoc. That will mean huge delays and/or worse (just what Juncker initially sought to prevent).

The ‘worse’ in this regard -in the eyes of the politicians- is the possibility of referendums, on CETA, and then on TTiP. And before you know it somewhere in Europe such a referendum will be combined with the question whether the country where it’s held should Remain in the EU or Leave it. It seems for all intents and purposes, inevitable.

How the EU can be kept together is a behemoth conundrum already, even without all these new issues. But now we can be absolutely sure that Brexit is only the beginning.

Beppe Grillo’s Five Star Movement (M5S) came out as no. 1 in a poll in Italy yesterday. When I visited Beppe almost 5 years ago in Genoa he was still torn over the EU and the euro, but he has since made up his mind: he’s determined to take Italy out of the unholy Union. Europe’s powers-that-be are in for troubled times.

And Jean-Claude Junker will be sitting somewhere in the world in a beach chair by one of his luxurious summer homes, with a big smile on his face and a stiff drink in his hand.

Sep 182015
 
 September 18, 2015  Posted by at 9:57 am Finance Tagged with: , , , , , , , ,  8 Responses »
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John Vachon Assassin of Youth November 1938


The Fed Gives Growth a Chance (NY Times ed.)
Fed Delay Looks Like 2013 All Over Again-Rate Hike in December? (Bloomberg)
Fed Rate Decision Roils Emerging-Market Currencies (WSJ)
It’s a New World: How China Growth Concerns Kept the Fed on Hold (Bloomberg)
Europe Lacks Strategy to Tackle Crisis, but Refugees March On (NY Times)
Losing Control Of Refugees, Croatia Closes Serbia Border Crossings (Reuters)
Croatia’s Resources Stretched as Thousands of Refugees Arrive (Bloomberg)
OPEC Assumes Oil Price Will Recover Gradually to $80 in 2020 (Bloomberg)
Defaults Mount in Beleaguered US Energy Industry (WSJ)
Central Banks’ Lesson: Easy Money Alone Isn’t a Growth Salve (WSJ)
China Outflows Said To Surpass A Staggering $300 Billion In Just 75 Days (ZH)
China’s Top Financial Firms Get Green Light for $3 Billion IPOs (WSJ)
Here’s Why China Could Drag The US Into Recession (Fortune)
Primary Dealers Rigged Treasury Auctions, Investor Lawsuit Says (Bloomberg)
Bitcoin Is Officially a Commodity, According to US Regulator (Bloomberg)
Beppe Grillo Gets One Year Jail Sentence for “Defamation” (Tenebrarum)
Scorching Year Continues With the Hottest Summer on Record (Bloomberg)

No, this is not the Onion. But it sure is funny, and not just the headline, try this one: “..the economy shows no signs of overheating..”

The Fed Gives Growth a Chance (NY Times ed.)

The Federal Reserve did the right thing on Thursday when it opted not to begin raising interest rates. By holding steady, the Fed is acknowledging, correctly, that the economy shows no signs of overheating. Price inflation, for example, has been below the Fed’s 2% target for years and shows no signs of accelerating. The Fed also acknowledged the dampening effect global economic weakness and financial-market volatility may have on the American economy. In the past, the Fed played down those dangers, assuming they would be transitory or bearable. In the statement released after its policy-making committee meeting, it shifted, saying international and financial conditions could slow the domestic economy, making an interest-rate increase to restrain the economy unnecessary, at least for now.

In one important respect, however, the Fed appears to be doing the right thing for the wrong reasons. Judging from its statement and its economic projections, the Fed believes that the labor market has largely returned to health. That suggests it will be poised to raise rates as soon as the global headwinds abate. But the labor market is not healthy, and until it is, rate increases would be premature. Unemployment, at 5.1% in August, is still higher than it was before the recession. The share of part-time workers who need full-time jobs is still elevated, while the share of working-age adults with jobs is still well below its prerecession level. Most telling, broad wage growth — the clearest sign of labor market health — has been virtually nil during the six-year-old recovery.

The Fed is supposed to conduct policy in a way that fosters full employment, meaning rates should not be raised until jobs and wages are on a robust growth trajectory. But it seems more concerned with its mandate to fight inflation. That focus would be questionable even if there were nascent signs of inflation; in the absence of any signs, it is indefensible. In fact, inflation has been so low for so long now, it could run somewhat above the Fed’s target for an extended period without being disruptive and, in the process, allow wages to grow in line with productivity.

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Just the fact that after two years we’re still stuck in the same spot should say plenty.

Fed Delay Looks Like 2013 All Over Again-Rate Hike in December? (Bloomberg)

Federal Reserve Chair Janet Yellen shows signs of taking a page out of her predecessor’s policy playbook as she inches toward the central bank’s first interest rate increase in nine years: Delay action in September only to move in December. While the Fed on Thursday opted to keep rates pinned near zero for now, Yellen told a press conference that most policy makers still expect to raise rates this year. She highlighted the strength of the U.S. economy, tying the decision to delay liftoff to fresh uncertainty about the outlook abroad and to financial market turbulence over the past month. “I do not want to overplay the implications of these recent developments, which have not fundamentally altered our outlook,” she said. “The economy has been performing well, and we expect it to continue to do so.”

Yellen’s approach has parallels to the strategy that former Fed Chairman Ben Bernanke pursued in 2013 as officials debated whether to start scaling back bond purchases. Citing uncertainties to the outlook, Bernanke put off a move to begin tapering in September before deciding to go ahead in December. Just like today, much of the Fed’s initial reservations about acting in 2013 centered on developments in emerging markets, which had been rocked by Bernanke’s suggestion a few months earlier that a taper was on its way. Looming in the background then, as it is now, was the threat of a U.S. government shutdown. Today’s situation “lines up in so many ways” with that of 2013, said Aneta Markowska at SocGen, pointing to the upcoming fiscal showdown and emerging market concerns. “If all of that is resolved by December, my expectation is that the data will definitely support a hike.”

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No matter what the Fed does, emerging markets can’t win.

Fed Rate Decision Roils Emerging-Market Currencies (WSJ)

Many emerging-market currencies slumped against the dollar on Thursday despite the Federal Reserve’s decision to hold interest rates near zero for now. Currencies in Brazil, Turkey and South Africa, which have been among the hardest-hit by fears of a U.S. rate increase, enjoyed a short-lived reprieve after the central bank’s announcement. But they gave back all the gains within hours, as investors realized the Fed is still on track to raise interest rates later in the year. Many investors said the Fed’s reluctance to raise rates on Thursday signaled policy makers’ concerns about slowing global growth, which reflects a deepening economic malaise across emerging markets.

Many emerging countries rely on external capital flows to finance growth. The prospect of higher rates in the U.S. has led to outflows from these countries, contributing to weakening currencies and higher bond yields that drive up borrowing costs. The continuation of easy-money policies in the U.S. “buys some time for further adjustments by emerging-market economies, but this decision also confirms the fact that the U.S. economy continues to expand at a modest pace, which is not particularly emerging-market friendly,” said George Hoguet at State Street Global Advisors.

The Brazilian real took a roller-coaster ride. The currency, which was under pressure early in the day, rallied immediately upon the release of the Fed statement at 2 p.m. Eastern time, rising as much as 1.3% against the dollar. But the gains quickly dissipated. By late afternoon, the real lost 1.5% against the dollar to 3.8974, the weakest level in 13 years. Indonesia’s rupiah, after a brief rally, closed at its lowest level against the greenback since July 1998. Both the South African rand and the Turkish lira appreciated against the dollar shortly after the Fed announcement, but ended the day with losses.

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A neat excuse to hide their ignorance behind.

It’s a New World: How China Growth Concerns Kept the Fed on Hold (Bloomberg)

Here’s the latest sign of China’s arrival as a global economic power: It’s roiled financial markets enough to nudge the Federal Reserve away from raising interest rates. Fed policy makers left their benchmark rate near zero Thursday, saying the U.S. economy and inflation may be restrained by “recent global economic and financial developments.” Fed Chair Janet Yellen elaborated in a press briefing, saying the financial turmoil reflected investor concerns about risks to Chinese growth. “If it weren’t for China and all the turmoil surrounding China, I think the Fed would have hiked rates,” said Mickey Levy at Berenberg in New York, who has analyzed Fed policy for more than 30 years.

The focus on China comes after a market rout that wiped $5 trillion in value off the nation’s stocks and after a sudden move on Aug. 11 to change its exchange rate regime, a decision which triggered the yuan’s biggest depreciation in two decades and roiled global markets. The world’s second-largest economy is set to grow at its slowest pace in a quarter century this year even after five central bank interest rate cuts and fiscal stimulus. “China was an influence in this meeting, whereas in the past that would have been much less important,” said Tai Hui at JPMorgan Asset Management in Hong Kong. China affects the world more than ever before, and its influence over global markets will only increase as it approaches the U.S. economy in size. It accounted for 13.3% of global gross domestic product last year, from less than 5% a decade earlier, according to World Bank data.

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Croatia gave it their best, but they too need help.

Europe Lacks Strategy to Tackle Crisis, but Refugees March On (NY Times)

Europe’s failure to fashion even the beginnings of a unified solution to the migrant crisis is intensifying confusion and desperation all along the multicontinent trail and breeding animosity among nations extending back to the Middle East. With the volume of people leaving Syria, Afghanistan and other countries showing no signs of ebbing, the lack of governmental leadership has left thousands of individuals and families on their own and reacting day by day to changing circumstances and conflicting messages, most recently on Thursday when crowds that had been trying to enter Hungary through Serbia diverted to Croatia in search of a new route to Germany.

Despite the chaos, there were few signs that EU leaders, or the governments of other countries along the human river of people flowing from war and poverty, were close to imposing any order or even talking seriously about harmonizing their approaches and messages to the migrants. Instead, countries continue to improvise their responses, as Croatia did Thursday, and Slovenia — the next stop along the rerouted trail — is likely to do in coming days. The migrants did not shift course to Croatia on a whim. When Hungary effectively blocked their access on Tuesday with a border crackdown — which resulted in an ugly skirmish Wednesday between the police and migrants — they had few options.

And Macedonian and Serbian officials, along with many aid organizations, were urging them to circumvent a hostile Hungary and even providing maps and nonstop bus service to the Croatian frontier. Initially, Croatia’s foreign minister, Vesna Pusic, seemed to encourage them, too. “They can move freely in this period,” she said. “We will try to restore a decent face to this part of Europe.” So, since Wednesday morning, more than 11,000 migrants have entered Croatia, and officials said 20,000 more were already in Serbia, making their way to the Croatian border and likely to arrive soon — while untold tens of thousands more waited in Turkey and Greece for a clear signal about whether to follow.

But what the first arriving migrants found on the Croatian border was only more fog. The Croatian interior minister said that the country would abide by European Union rules and register all arriving asylum seekers and that they could not simply pass through the country unfettered. Then late Thursday, swamped by the crush of migrants, Croatia announced that the border would be closed altogether, indefinitely. Slovenian officials said that, no matter how many migrants Croatia lets through, they would register all arrivals and turn back any who do not qualify as refugees — a task that Hungary can attest is easier said than done.

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Dear MSM: Stop calling refugees ‘migrants’. And stop calling a meeting next week an ‘emergency’ meeting.

Losing Control Of Refugees, Croatia Closes Serbia Border Crossings (Reuters)

Croatia has closed seven of eight road border crossings with Serbia after complaining of being overwhelmed by an influx of more than 11,000 migrants who evaded police, trekked through fields and tried to sneak into Slovenia by train in a march westwards that is dividing Europe. Only the main Bajakovo crossing, on the highway between Belgrade and Zagreb, appeared to be open to traffic on Friday, while neighboring Slovenia stopped all rail traffic on the main line from Croatia after halting a train carrying migrants on the Slovenian side of the border. Migrants have been streaming into European Union member Croatia for two days, their path into the bloc via Hungary blocked by a metal fence, the threat of imprisonment and riot police who fired teargas and water cannon on Wednesday to drive back stone-throwing men.

There were desperate scenes at a railway station on Croatia’s eastern frontier with Serbia, where thousands were left stranded overnight under open skies. The EU has called an emergency summit next week to overcome disarray in the 28-nation bloc. Croatian Interior Minister Ranko Ostojic warned on Thursday that Croatia would close its border with Serbia if the flow of migrants continued at the same rate, saying his country was full to capacity. The president of Croatia told the military to be ready to join the effort to stop thousands of people criss-crossing the Western Balkans in their quest for sanctuary in the wealthy bloc. Late on Thursday, police announced they had banned all traffic at seven border crossings. “The measure is valid until further notice,” police said in a statement.

Serbia’s main highway north into Hungary is already closed by Hungarian riot police on the border. It remained unclear whether or how police would stop migrants, many of them refugees from Syria, from streaming through fields across the border away from official crossings, though their path across much of the frontier is made more difficult by the Danube river. Serbia warned its neighbors against shutting down the main arteries between them. “We want to warn Croatia and every other country that it is unacceptable to close international roads and that we will seek to protect our economic and every other interest before international courts,” Aleksandar Vulin, Serbia’s minister in charge of migration, told the Tanjug state news agency.

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And so we move from country to country and border to border, while Europe refuses to set up a meeting. To them, it’s an emergency only for refugees.

Croatia’s Resources Stretched as Thousands of Refugees Arrive (Bloomberg)

Croatia wavered in its commitment to accept a growing influx of migrants after 5,600 refugees poured into the country in one day, underscoring the massive task facing Europe as people flee war and poverty. “If migrants continued to arrive in larger numbers, Croatia would have to consider an entirely different approach,” Interior Minister Ranko Ostojic said in a statement on Thursday. Prime Minister Zoran Milanovic said Croatia will help refugees “as long as we can,” after throwing open its doors Wednesday. The people have been stranded in Serbia trying to enter the European Union through Hungary, which closed its southern frontier and fired tear gas and water cannons at migrants trying to break through a barrier on the border. Police said they used force to repel the crowd after refugees threw rocks and other projectiles.

European leaders have been at odds for weeks over how to deal with the region’s biggest refugee crisis since World War II, with Hungarian Prime Minister Viktor Orban fortifying his border to keep refugees out and German Chancellor Angela Merkel saying Europe has a moral responsibility to help. Orban has built a razor-wire fence along the border with Serbia and announced plans to extend the barrier to part of the frontier with Romania. The crisis claimed its first political casualty in Germany, with the government’s point person on the refugee crisis stepping down. The Interior Ministry announced Thursday that Manfred Schmidt, who headed the office for migration and refugees, was leaving for personal reasons.

Schmidt’s office was responsible for the initial decision to allow all Syrians entering the country to stay – a departure from an EU agreement requires refugees to be registered in the country where the arrive in the bloc and remain there to have their asylum applications processed. “The dramatically increased number of asylum seekers in Germany present the federal agency, as well as the states and municipalities, with an enormous challenge,” Interior Minister Thomas de Maiziere said in a statement thanking Schmidt for his “excellent work.” The departure comes after Merkel was criticized in recent days by some in her own coalition for her handling of the crisis as the country struggles to keep up with the influx. The chancellor has defended her decision to allow in refugees.

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What else are they going to say?

OPEC Assumes Oil Price Will Recover Gradually to $80 in 2020 (Bloomberg)

OPEC is assuming the oil price will rise gradually to $80 a barrel in 2020 as supply growth outside the group weakens, a slower recovery than several member nations have said they need. The average selling price of the Organization of Petroleum Exporting Countries’ crude will increase by about $5 annually to 2020 from $55 this year, according to an internal research report from the group seen by Bloomberg News. Iran and Venezuela said they would like to see a price of at least $70 this month and most member countries cannot balance their budgets at current prices. “It’s much harder for OPEC to lift prices” after the revolution of U.S. shale oil, said Bjarne Schieldrop, Oslo-based chief commodities analyst at SEB AB, which forecasts Brent crude at $73 by the end of the decade.

“Eighty dollars by 2020 is pretty close to consensus view.” The price of crude has tumbled more than 50% in the past year as OPEC followed Saudi Arabia’s strategy of defending its share of the global market against competitors like U.S. shale oil. While both OPEC and the International Energy Agency expect growth in global supply to slow as low prices bite, Goldman Sachs predicts that a persistent glut will keep crude low for the next 15 years. Production from nations outside OPEC will be 58.2 million barrels a day in 2017, 1 million lower than previously forecast, according to the internal report.

The impact low prices is “most apparent on tight oil, which is more price reactive than other liquids sources,” according to the report. “Supply reductions in U.S. and Canada from 2014 to 2016 are clearly revealed.” OPEC expects little stimulus to global demand in the medium term as a result of cheaper oil, with daily consumption growing by about 1 million barrels a year to 97.4 million in 2020, according to the report. While demand from China, Russia and OPEC members will grow more slowly than forecast a year ago, developing nations with still account for the bulk the expansion, it said.

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Debt dominoes.

Defaults Mount in Beleaguered US Energy Industry (WSJ)

The well is running dry for deeply indebted energy companies. Samson Resources became the latest, and largest, victim of an industry downturn, as it filed for chapter 11 protection late Wednesday. Industry experts say more oil-and-gas companies are poised to follow the Tulsa, Okla., company into bankruptcy as oil prices remain low following a steep drop that began last year. The default rate among U.S. energy companies has accelerated in recent months to 4.8%, the highest level since 1999 and up from 3.3% in August, according to Fitch Ratings. Within that group, exploration and production companies like Samson are defaulting at an even higher rate, 8.5%, Fitch said. Default volume for such companies is the highest it has been in five years, at $10.4 billion in debt.

The broader U.S. corporate default rate is 2.9%, according to Fitch. Meanwhile, the yield on a basket of U.S. junk-rated energy bonds has risen to 11%, just off its highest level since July 2009 and up from 5.9% a year ago, according to Barclays PLC. The increase indicates a lack of investor confidence that the bonds will be repaid in full. Yields on debt rise as prices fall. “Everything has been turned upside down,” said Marc Lasry, head of hedge- fund firm Avenue Capital Group, which recently raised $1.3 billion for an energy-focused fund. “If you’re equity it’s been total devastation. If you’re the high-yield guys you’re in total shock and you have no idea what to do,” he said, referring to investors in stocks and risky debt.

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It took 8 years to figure that one out?!

Central Banks’ Lesson: Easy Money Alone Isn’t a Growth Salve (WSJ)

Central bankers have injected roughly $8 trillion into the global economy since the financial crisis. In return, the world has remained in a low-growth rut. The Federal Reserve cited market turmoil and a weak economic picture overseas in deciding Thursday not to back off from one of the most aggressive global monetary policies in decades. Whenever the Fed moves to raise interest rates, one lesson remains: Cheap money alone can’t solve the world’s economic ills. The Fed noted positive developments at home, including increased household spending and business investment, but worried conditions overseas could restrain U.S. growth and put further downward pressure on near-term inflation.

“A lot of our focus has been on risks around China, but not just China—emerging markets more generally and how they may spill over to the U.S.,” said Fed Chairwoman Janet Yellen, noting “the significant economic and financial interconnections between the U.S. and the rest of the world.” Her unease underscores in part the limits of loose monetary policy as a singular response to economic weakness. Instead of using the breathing room of low interest rates to revamp their economies, governments around the globe have failed to enact longer-lasting policy overhauls as they try to combat an array of demographic and other challenges.

“Finance, especially as motivated by central banks, is really only a lubricant to growth,” said Raghuram Rajan, head of the Reserve Bank of India, at a recent meeting of top global finance officials. “It can’t be the underlying driver of growth.” Since the financial crisis began in 2007, the average key interest rate set by central banks has fallen by around 4 percentage points in advanced countries and 2 points in emerging markets. Central banks have also bought bonds and other assets equal to 10% of global output to stir growth in the postcrisis era.

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TEXT

China Outflows Said To Surpass A Staggering $300 Billion In Just 75 Days (ZH)

We’ve detailed the story exhaustively, so we won’t endeavor to recap it all here, but the short version is that what was billed as a move to give the market a greater role in setting the yuan’s exchange rate actually had the opposite effect – at least in the short run. That is, the PBoC used to manipulate the fix to control the spot and now they simply manipulate the spot to control the fix, but unabated devaluation pressure has forced China to intervene on a massive scale and that intervention recently moved into the offshore market as well, as Beijing scrambled to close the onshore/offshore spread. This is costing China dearly in terms of FX reserves, the liquidation of which was so massive in August as to prompt Deutsche Bank to brand it “Quantitative Tightening”, as the reserve drawdowns are effectively QE in reverse.

This is of course the same dynamic that’s been taking place in Saudi Arabia in the wake of the petrodollar’s demise and mirrors the response across EMs which are struggling to support commodity currencies as prices collapse. Attempts to quantify the scope of China’s reserve burn have become ubiquitous, as the cost of offsetting the outflows from China effectively serves as a proxy for the extent to which the Fed would, were they to hike, be “tightening into a tightening”, as we’ve put it. On Wednesday we showed that Beijing liquidated $83 billion in Treasurys in July. That, as we also noted, “is before China announced its devaluation on August 11 and before, as we also first reported, it sold another $100 billion in Treasurys in August.”

Today, we get a fresh look at the numbers courtesy of SAFE which shows that on net, banks sold $128 billion in FX to Chinese non-banks in August. Nothing too surprising there, given that we already knew positioning for FX purchases for the banking sector as a whole dropped by $115 billion for the month. As Goldman notes however, when you include banks’ forward books the picture worsens materially. An alternative gauge that we believe is a closer reflection of the underlying trend of currency demand shows a significantly larger outflow of $178bn. Today’s data at US$178bn on our preferred gauge of underlying currency demand (i.e., outright spot plus freshly-entered forward contracts) is significantly higher than any of [the previous] releases.

This means, as Goldman goes on to point out, that outflows are actually far worse than what’s indicated by simply looking at China’s reserve drawdown, as banks look to be shouldering some of the burden themselves. So between July and August (inclusive of freshly entered forwards), outflows total around $261 billion. But that’s not all. Nomura is out with an estimate of what’s taken place since the start of September. Between onshore spot intervention and offshore spot and forward intervention, the bank estimates China has spent some $47 billion month-to-date stabilizing the yuan, $25 billion of which in the offshore market, reinforcing what we said a week ago after CNH soared the most on record [..]

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What grandmas can move their savings in.

China’s Top Financial Firms Get Green Light for $3 Billion IPOs (WSJ)

China International Capital and China Reinsurance each received approval from the Hong Kong stock exchange late Thursday to hold initial public offerings worth a combined $3 billion, people familiar with the deals said, signaling a possible revival of what has been a quiet quarter for the city’s capital market. CICC, which is China’s top investment bank, and China Reinsurance, its biggest reinsurer, have yet to decide when to go public due to volatile stock markets, though they are aiming to do so this year, the people said. The turmoil in Chinese stocks is hurting investor appetite for initial public offerings in Hong Kong, the world’s top venue for listings this year. In the third quarter, IPOs in Hong Kong have raised $1.8 billion, down significantly from $5.4 billion in the same period last year..

The two IPOs would be the first major offering since China Railway Signal & Communication’s $1.4 billion Hong Kong IPO in August. Hong Kong’s Hang Seng Index, which is weighted heavily with mainland Chinese stocks, has fallen 17% in the third quarter so far, as mainland stocks have tumbled. Those declines have weighed on investor sentiment. On Monday, the short-haul carrier Hong Kong Airlines called off indefinitely a planned listing in which it had hoped to raise $500 million. The potential listing of CICC would give its shareholders, including KKR & Co. and TPG Capital, the chance to exit their investments despite turmoil in Chinese stocks. Central Huijin Investment, the domestic investment arm of China’s sovereign-wealth fund, is the largest shareholder in CICC with a 43.35% stake.

Singapore’s sovereign-wealth fund GIC Pte. Ltd. holds 16.35%, while TPG Capital owns 10.3% and KKR holds 10%, according to its annual report. CICC was formed in 1995 by Morgan Stanley and China Construction Bank. as China’s first Sino-foreign joint-venture investment bank. Morgan Stanley sold its stake in December 2010 to a consortium that included GIC; Great Eastern Holdings, the insurer controlled by Oversea-Chinese Banking; and the private-equity firms KKR and TPG Capital. CICC has played a key role in advising the Chinese government on state-owned enterprise reform and guiding the listing of the country’s major overseas IPOs.

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Investment. In productive areas, that is.

Here’s Why China Could Drag The US Into Recession (Fortune)

No one can say for sure just how bad China’s economic situation has become, but analysts in the United States have been taking comfort in the fact that U.S. trade to China, and the Pacific Rim in general, constitutes a small sliver of U.S. GDP. And while the emerging world makes up a much bigger share of the global economy than it did a generation ago, the U.S. economy is still the largest in the world. When capital flees riskier economies like Brazil or Turkey, the U.S. is where it will run to. There’s one problem. These arguments ignore the fact that economists don’t agree on what, exactly, causes recessions. True, the Asian financial crisis of 1998 didn’t lead to slower growth in the U.S. But that doesn’t mean that a recession in the emerging world will fail to drag us down this time.

David Levy, economist and chairman of The Jerome Levy Forecasting Center, has been predicting that China would suffer an economic crisis and he believes that turmoil in emerging markets can take down the U.S. economy. Levy subscribes to what he calls “the profits perspective,” which examines global profits rather than country-specific GDP for indications of economic turmoil. How can global profits help predict recessions? Profits are the main factor that guides economic activity: when profits are high, businesses will invest and hire workers, and lenders will extend credit. When profits are low, the opposite occurs.

As it turns out, the largest contributor to global profits is net investment. When firms invest in capital equipment or when an individual invests in residential real estate, this is an act of wealth creation that does not require an immediate expense, in accounting terms. On a global scale, then, when investment is rising, we should also see profits rise and the global economy expand. But when we start to see investment stagnate or decline, we should expect profits to fall, putting recessionary conditions right around the corner.

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Slap that wrist!

Primary Dealers Rigged Treasury Auctions, Investor Lawsuit Says (Bloomberg)

The same analytical technique that uncovered cheating in currency markets and the Libor rates benchmark – resulting in about $20 billion of fines – suggests the dealers who control the U.S. Treasury market rigged bond auctions for years, according to a lawsuit. The analysis was part of a 115-page lawsuit filed in Manhattan federal court on Aug. 26 by Quinn Emmanuel Urquhart & Sullivan LLP and other law firms. The plaintiffs built their case against the 22 primary dealers who serve as the backbone of Treasury trading – including Goldman Sachs JPMorgan and Morgan Stanley – using data from Rosa Abrantes-Metz, an adjunct associate professor at New York University who has provided expert testimony in rigging cases.

Her conclusion: More than two-thirds of a certain type of Treasury auction appear to have been rigged. She found issues with other auctions, too. “The only plausible explanation is that Defendants coordinated artificially to influence the results of the auctions in the primary market,” according to the complaint filed by the Cleveland Bakers and Teamsters Pension Fund and other investors. The lawsuit, which seeks unspecified damages, comes as the U.S. Justice Department probes whether information in the Treasury auction market is being shared improperly by financial institutions, three people with knowledge of the investigation said in June.

Treasury traders at some banks learn of customer demand hours before auctions, and were communicating with their counterparts at other firms via chat rooms as recently as last year, Bloomberg News reported earlier this year. Abrantes-Metz’s analysis is similar to one used in lawsuits claiming bank and broker manipulation of the London interbank offer rate, or Libor. Those cases resulted in about $9 billion in settlements from the financial firms. Banks and brokers have paid about $9.9 billion in fines to global regulators related to manipulation of currency markets as of May.

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Bitcoin, rhubarb, it’s all the same.

Bitcoin Is Officially a Commodity, According to US Regulator (Bloomberg)

Virtual money is officially a commodity, just like crude oil or wheat. So says the Commodity Futures Trading Commission (CFTC), which on Thursday announced it had filed and settled charges against a Bitcoin exchange for facilitating the trading of option contracts on its platform. “In this order, the CFTC for the first time finds that Bitcoin and other virtual currencies are properly defined as commodities,” according to the press release. While market participants have long discussed whether Bitcoin could be defined as a commodity, and the CFTC has long pondered whether the cryptocurrency falls under its jurisdiction, the implications of this move are potentially numerous.

By this action, the CFTC asserts its authority to provide oversight of the trading of cryptocurrency futures and options, which will now be subject to the agency’s regulations. In the event of wrongdoing, such as futures manipulation, the CFTC will be able to bring charges against bad actors. If a company wants to operate a trading platform for Bitcoin derivatives or futures, it will need to register as a swap execution facility or designated contract market, just like the CME Group. And Coinflip—the target of the CFTC action—is hardly the only company that provides a platform to trade Bitcoin derivatives or futures.

“While there is a lot of excitement surrounding Bitcoin and other virtual currencies, innovation does not excuse those acting in this space from following the same rules applicable to all participants in the commodity derivatives markets,” said Aitan Goelman, the CFTC’s director of enforcement, in a statement. A request for comment sent to Coinflip’s chief executive via LinkedIn was not immediately returned. Coinflip consented to the order without admitting or denying any of its findings or conclusions. Since Coinflip is not alone in providing a platform to trade Bitcoin derivatives or futures, Goelman’s words imply that other unregulated exchanges could soon attract the attention of the CFTC.

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For calling a tool a tool.

Beppe Grillo Gets One Year Jail Sentence for “Defamation” (Tenebrarum)

Former Italian prime minister Silvio Berlusconi – the cavaliere – has been successful in fighting off legal challenges ranging from sex with minors to alleged tax fraud involving humungous amounts for well over adecade. On a number of occasions, the Italian State even created new laws specifically designed to keep the cavaliere out of jail. We admittedly just loved his constant successful evasions of justice. First of all, we were deeply worried by the thought of potentially losing this unsurpassed master of political entertainment. Secondly, when the Eurocracy decided it didn’t like him anymore, he was basically putsched out of office, and we greatly dislike the meddlers administering the Moloch in Brussels. Incidentally, ever since he has lost political power, Berlusconi’s successes in evading justice have been waning rather rapidly.

What was of course also great about Berlusconi’s brushes with the law was that they demonstrated unequivocally that the concept of “equality before the law” is a basically a bad joke. They showed the hoi-polloi that the modern-day rulers of the “democratic” societies of the West are in many respects really not much different from the feudal robber barons of the past. This seemed eminently useful from an educational perspective to us. This week we have been provided with yet another interesting demonstration by Italy’s justice system. An oppositional critic of the establishment who is seen as a genuine danger to the “European project” and the structures of the State because he enjoys massive voter support can evidently not hope to evade the long arm of the law as easily as the cavaliere was able to do in his heyday.

Beppe Grillo, leader of the wildly successful “5 Star Movement” has been handed a one year jail sentence (suspended, but still – one more misstep, and he’s locked up) and has been ordered to pay altogether 51,250 euro in fines and restitution. What was his crime? Did he defraud the tax man? Did he engage in bunga-bunga with minors? Did he have truck with the mafia? Nope – his alleged crime is defamation – and it appears that the law’s definition of “defamation” is “saying something about a public personality that said person doesn’t like”. Here is what happened, according to the press:

“Ascoli Piceno, September 14 – A judge here handed a suspended sentence of one year to 5-Star Movement (M5S) leader Beppe Grillo on Monday, for defamation of university professor Franco Battaglia. Grillo publicly insulted Battaglia during a speech on nuclear energy in May 2011 in the town of San Benedetto del Tronto, over an appearance Battaglia had made on the TV program Anno Zero. Referring to Battaglia’s comments, Grillo said, “You can’t let an engineer (…) go on television and say, with nonchalance, that no one died in Chernobyl. I’ll kick your ass, I’ll throw you out of television, I’ll report you to the police and send you to jail”. Battaglia testified that his car was also vandalized and he received a “strange phone call” prior to the act of vandalism. Grillo was ordered to pay a fine of €1,250 , and Battaglia was awarded compensation of €50,000.

It is well known that Beppe Grillo doesn’t mince words, but we can be reasonably sure that he was neither the man behind the “strange phone call” (we only have Battaglia’s say-so regarding this call), and that he probably didn’t vandalize the good professor’s car either. Most press reports didn’t go into too many details though – after all, Grillo had it coming, right?

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“Are the record temperatures due to climate change or due to El Niño? The answer is yes..”

Scorching Year Continues With the Hottest Summer on Record (Bloomberg)

Last month was the hottest August on record, topping out the hottest summer on record, according to data released on Thursday by the National Oceanic and Atmospheric Administration. It was the sixth month this year to set a new record: February, March, May, June, July, and August. This has been the hottest start to a year on record and the hottest 12 months on record. It follows the hottest calendar year (2014), and the hottest decade. In 136 years of global temperature data, we are in uncharted territory. And this year’s extremes are likely to continue as a strong El Niño weather pattern in the Pacific Ocean continues to rip more heat into the atmosphere. There’s now a 97% chance that 2015 will set yet another record, according to NOAA.

Results from the world’s top monitoring agencies vary slightly. NOAA and the Japan Meteorological Agency both listed August as the hottest month. NASA rated it one degree cooler than the previous record, set last year. All three agencies agree that 2015 is on track to be the hottest yet, by a long shot. The heat was experienced differently across the world, but few places escaped it altogether. In the U.S., chances are growing that above-normal temperatures will persist in Alaska and along the West Coast, as well as in the upper Midwest and Northeast, through February. That’s in line with what can happen during a strong El Niño. “Are the record temperatures due to climate change or due to El Niño? The answer is yes,” said Deke Arndt, chief of NOAA’s climate monitoring branch in Asheville, N.C.. “Long-term climate change is like climbing a flight of stairs. El Niño is like standing on tippy toes while you are on one of those stairs.”

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Jul 262015
 
 July 26, 2015  Posted by at 8:57 am Finance Tagged with: , , , , ,  16 Responses »
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Harris&Ewing Balancing act, John “Jammie” Reynolds, Washington DC 1917

There’s arguably nothing that’s been more hurtful -in more ways than one- to Greece and its Syriza government over the past six months, than the lack of support from the rest of Europe. And it’s not just the complete lack of support from other governments -that might have been expected-, but more than that the all but complete and deafening silence on the part of individuals and organizations, including political parties.

It’s no hyperbole to state that without their loud and clear support, Syriza never stood a chance in its negotiations with the Troika. And it’s downright bewildering that this continues to get so little attention from the press, from other commentators, and from politicians both inside Greece and outside of it.

This gives the impression that Greece’s problems are some sort of stand-alone issue. And that Athens must fight the entire Troika all on its own, a notion the same Troika has eagerly exploited.

It’s strange enough to see the supposedly well-educated part of the rich northern European population stay completely silent in the face of the full demolition of the Greek state, of its financial system, its healthcare and its economy.

Perhaps we should put that down to the fact that public opinion in for instance Germany is shaped by that country’s version of the National Enquirer, Bild Zeitung. Then again, the well-educated in Berlin allegedly don’t read Bild.

That no massive support movements have risen up in “rich Europe” to provide at least financial and humanitarian aid, let alone political support, can only be seen as a very significant manifestation of what Europe has become.

Which is something that “poorer Europe” should take note of, much more than it has. There is no solidarity, neither at the top nor at the ground level, between rich and poor(er) in the EU.

That in turn greatly enhances the need for Europe’s periphery to support one another, whether at government level or in the streets of Madrid, Milan etc. But that’s not happening either.

There have been sporadic declarations of undoubtedly well-intended support for Syriza from the likes of Podemos in Spain and M5S in Italy, but it’s been words only, and only on occasion; that’s where solidarity stops.

Brussels likes it just fine that way. They can pick off the weaker nations one by one, instead of having to deal with a united front. And that should count as a tactical failure for all of these nations.

As Greece has shown, fighting Brussels on your own is simply not a good idea. But Greece had no choice, it was left abandoned and exposed by the other countries in similar conditions as itself.

We can speculate as to why that happened – and keeps on happening. Kindred spirits to Syriza in Portugal, Italy, Spain, Ireland may be too focused on their own economies and circumstances. Or on their own political careers. Alternatively, they may simply be too scared of the Troika to take a stand against it.

In that light, Beppe Grillo’s words this week denouncing Alexis Tsipras are utterly unfair and not at all helpful, even if perhaps to an extent understandable.

Italy’s Plan B For An Exit From The Euro

Tsipras couldn’t have done a worse job of defending the Greek people. Only profound economic short-sightedness together with an opaque political strategy could transform the enormous electoral consensus that brought him into government in January into the victory for his adversaries, the creditor countries, only six months later, in spite of winning the referendum in the mean time.

An a priori rejection of a Euroexit has been his death sentence. Like the PD, he was convinced that it’s possible to break the link between the Euro and Austerity. Tsipras has handed over his country into the hands of the Germans, to be used like a vassal. Thinking that it’s possible to oppose the Euro only from within and presenting oneself without an explicit Plan B for an exit, he has in fact ended up by depriving Greece of any negotiating power in relation to the Euro.

Now, it’s no secret that I appreciate Grillo, and I think people like him are sorely needed in order to get rid of what Beppe in his ‘flowery’ language calls the “Explicit Nazi-ism [..] by Adolf Schauble”. And I do understand that he must get the message across to -potential- M5S voters that he does not intend to fold in face of the Troika’s demands as Tsipras has supposedly done.

But at the same time he completely ignores his own lack of support for Tsipras, the fact that he left him to fight the entire Troika on his own. Sure, Grillo visited Athens on the day of the latest referendum, but that is woefully inadequate. If anything, it seems to depict a lack of vision.

Beppe Grillo seems unaware that his criticism of Tsipras risks isolating himself when it comes time for Rome to be in the position Athens has been in since at least January 2015.

Moreover, Grillo has never had the fully loaded Troika gun pointed at his head and that of his people, the way Tsipras did. As a matter of fact, one might well argue that Tsipras gave in to a large extent precisely because he could not be sure enough that the likes of Grillo would follow him, and support him, if he would have chosen Plan B.

That is to say, if he would have refused to give in to the Troika demands and elected to leave open the option of a Grexit, in whatever form that might have taken.

On top of that, Grillo seems to forget that Tsipras never came into the talks with a democratic mandate to leave the eurozone. And the other side of the table was well aware of that, and used it against him.

After the next round of Italian elections, Grillo may well find himself in a similar position, and if he does he will call undoubtedly on Tsipras for support.

Podemos, Syriza, M5S and others should present themselves, very publicly, as a front. That should hold regular well-publicized meetings, issue clear and strong declarations of solidarity and support for one another, and make sure all of it gets a prominent place in international media.

The ruling class has organized itself, and the ruled won’t be able to fight them unless they do the same. You either do it together, or it’s not going to happen.

Grillo calls on Italy to use its massive €2 trillion debt as a threat against Germany, suggesting that, once Italy leaves the eurozone, it can be converted into lira. That threat would be a lot more credible if the entire periphery would present itself as a front.

And that front should perhaps even include France’s Front National and Marine Le Pen, or Britain’s Nigel Farage. One could argue that they would be strange bedfellows, but battling Brussels alone, as Tsipras has been forced to do, hardly looks to be the best way forward.

And unless and until there is a viable way forward, the European periphery will continue to move backward. That’s the number one lesson from Athens. Where the Troika is about to re-enter its trenches.

Jul 242015
 
 July 24, 2015  Posted by at 8:48 am Finance Tagged with: , , , , , , , , , , ,  3 Responses »
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Harris&Ewing WSS poster, Washington DC 1917


Why The Casino Is In For A Rude Awakening, Part I (David Stockman)
Gold Is In Its Worst Slump Since 1996 (CNN)
Cheap Money Is Here to Stay (Pesek)
A 50% Stock Market Plunge Would Not Be A Surprise (Blodget)
Forced Austerity Will Take Greece Back 65 Years (Jim Fouras)
Greece Braces For Troika’s Return To Athens (Guardian)
Italy’s Plan B For An Exit From The Euro (Beppe Grillo)
Beppe Grillo Wants Nationalisation Of Italian Banks, Exit From Euro (Guardian)
Grillo Calls For Italy To Throw Off Euro ‘Straitjacket’ (FT)
Italy Leans While Greece Tumbles (Bloomberg)
Interview: Yanis Varoufakis (ABCLateline)
“Why I Voted ‘YES’ Tonight” (Yanis Varoufakis)
Why I’ve Changed My Mind About Grexit (Daniel Munevar)
The Eurozone’s German Problem (Philippe Legrain)
The Return of the Ugly German (Joschka Fischer)
Schäuble – The Man Behind the Throne (Martin Armstrong)
German FinMin Schäuble’s Tough Tone Heightens Uncertainty Over Bailout (WSJ)
Greece: Out of the Mouth of “Foreign Affairs” Comes the Truth (Bruno Adrie)
Greek Store Closures Spike As Recession, Austerity Return (AP)
A Few Thoughts On Greek Shipping And Taxes (Papaeconomou)
Greek Financial Crisis Makes Its Migration Crisis Worse. EU Must Help. (WaPo)
Abenomics Needs To Be ‘Reloaded’, Warns IMF (CNBC)
Australia Weighs Steps to Rein In Sydney Property (WSJ)

“..to understand the potentially devastating extent of the coming asset deflation cycle, it is important to reprise the extent of the just completed and historically unprecedented global capital investment boom.”

Why The Casino Is In For A Rude Awakening, Part I (David Stockman)

The reason that the Bloomberg index will now knife through the 100 index level tagged on both the right- and left-hand side of the chart is the law of supply and demand – along with its first cousin called variable cost pricing and a destructive interloper best described as zombie finance. The latter is what becomes of central bank driven bubble finance when the cycle turns, as it is now doing, from asset accumulation and inflation to asset liquidation and deflation. But to understand the potentially devastating extent of the coming asset deflation cycle, it is important to reprise the extent of the just completed and historically unprecedented global capital investment boom.

Thus, in the case of the global mining industries, CapEx by the top 40 miners amounted to $18 billion in 2001. During the original boom cycle it soared to $42 billion by 2008, and then after a temporary pause during the financial crisis, reaccelerated once again, reaching a peak of $130 billion in 2013. Owing to the collapse of commodity prices as shown above, new projects and greenfield investments have pretty much ground to a halt in iron ore, met coal, copper and the other principal industrial materials, but there is a catch. Namely, that big projects which were in the pipeline when commodity prices and profit margins began to roll-over in 2012, are being carried to completion owing to the sunk cost syndrome. This means that available, on-line capacity continues to soar.

The poster child for that is the world’s largest iron ore port at Hedlund, Australia. The latter set another shipment record in June owing to still rising output in mines it services – a record notwithstanding the plunge of iron ore prices from a peak of $190 per ton in 2011 to $47 per ton a present. The ramp-up in E&P investment for oil and gas was similar. Global spending was $100 billion in the year 2000, but had risen to $400 billion by 2008 and peaked at $700 billion in 2014. In the case of hydrocarbon E&P investment, however,the law of variable cost pricing works with a vengeance because “lifting costs” even for shale and tar sands are modest compared to the front-end capital investment. Accordingly, the response of production to plunging prices has been initially limited and will be substantially prolonged.

Read more …

“All of that is creating an anti-inflationary environment that sucks the air out of the gold market.”

Gold Is In Its Worst Slump Since 1996 (CNN)

So much for predictions that gold would spike to $2,000 an ounce. The yellow metal is in a deep slump. It’s down more than 40% from its 2011 peak and crashing back toward $1,000. The slide just keeps getting worse. Gold has declined for 10 straight days. That’s the longest losing streak for gold since September 1996. To put that into perspective, back then oil prices were fetching just $19 a barrel, New York Yankees rookie shortstop Derek Jeter was nearing his first World Series title and rap fans were mourning the death of Tupac Shakur. So why is gold getting creamed? It comes down to three key factors: a strong U.S. dollar, China slowing down its gold purchases and little worry about inflation anymore.

1. Strong dollar: A strong greenback hurts commodities that are measured in dollars because it makes them more expensive for overseas buyers. It’s a double negative for gold because the precious metal is supposed to be a hedge against inflation and the devaluing of currency. “Gold has taken it on the chin with the strength in the dollar. Over the past week or so, it was almost like a perfect storm,” said Bob Alderman, head of wealth management at Gold Bullion International, a provider of precious metals. The U.S. dollar lost ground against most currencies on Thursday, giving gold a short reprieve. Gold prices ticked up 0.2% to $1,093 an ounce. But over the coming months, the dollar is expected to keep climbing.

2. China, Iran & Greece: Gold plummeted by as much as $40 an ounce in mere minutes after China’s central bank gave a rare update on how much gold it’s hoarding. The numbers showed the world’s largest gold producer has been stockpiling gold reserves at a slower pace than previously thought, spooking gold investors. Gold has also been hurt by easing tensions in Europe and the Middle East. Iran’s landmark nuclear agreement with the West has lessened some fears about a conflict in that volatile region. Those fears had allowed gold, and more so oil, to trade at a premium. Likewise, Greece landed a last-minute deal with its creditors that allows the crisis-ravaged country to stay in the euro. Investors are no longer speculating about a Greek exit or the long-term implications for the currency union. “The new bailout softened the fear of contagion. That was not a good thing for gold,” said Alderman.

3. What inflation? Inflation worries also remain muted. When gold topped $1,900 in September 2011, some investors bought gold because they feared the Federal Reserve’s money printing would cause runaway inflation. But inflation continues to undershoot the Fed’s goals despite extremely low interest rates and years of massive bond purchases. “Over the last 5,000 years gold has been a store of value that will be there for a time when there is inflation. There is no inflation now,” said George Gero at RBC Capital Markets. In fact, the recent collapse in the commodities complex is only lowering inflation and inflation expectations. Everything from coffee, sugar, beans to crude oil is heading south. Industrial metals like copper and aluminum have renewed their tumble in recent days as soft global economic growth hurts demand and supply gluts deepen. All of that is creating an anti-inflationary environment that sucks the air out of the gold market.

Read more …

Does China have a choice?

Cheap Money Is Here to Stay (Pesek)

For decades, central banks lorded over markets. Traders quivered at the omnipotence of monetary authorities – their every move, utterance and wink a reason to scurry for safe havens or an opportunity to score huge profits. Now, though, markets are the ones doing the bullying. Take New Zealand and Australia. Yesterday, the Reserve Bank of New Zealand slashed borrowing costs for the second time in six weeks even as housing prices continue to skyrocket. A day earlier, its counterpart across the Tasman Sea (already wrestling with an even bigger property bubble of its own) said a third cut this year is “on the table.” Just one year ago, it seemed unthinkable that officials in Wellington and Sydney, more typically known for their hawkishness and stubborn independence, would join the global race toward zero.

But with commodity prices sliding, China slowing and governments reluctant to adopt bold reforms, jittery markets are demanding ever-bigger gestures from central banks. Even those presiding over stable growth feel the need to placate hedge funds, lest asset markets falter. When this dynamic overtakes countries such as New Zealand (growing 2.6%) and Australia (2.3%), it’s hard not to conclude that ultralow rates will be the global norm for a long, long time. Indeed, the major monetary powers that are easing – Europe, Japan, Australia and New Zealand – have all suggested rates may stay low almost indefinitely. Those angling to return to normalcy, meanwhile – the Fed and Bank of England – are pledging to move very slowly. Even nations with rising inflation problems, like India, are hinting at more stimulus.

“As interest rates continue to fall across most of the globe, central banks are also united in their main message: Once rates have come down, they’re likely to stay down,” says Simon Grose-Hodge of LGT Bank. “And when they finally do tighten, the ‘normal’ rate is going to be a lot lower than it used to be.” Could the People’s Bank of China be next? “With underlying GDP growth still looking weak, more monetary policy moves are likely,” says Adam Slater of Oxford Economics. “And China may even face the prospect of short-term rates dropping towards the zero lower bound.”

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But Henry expects a resurge. On what basis, though?

A 50% Stock Market Plunge Would Not Be A Surprise (Blodget)

As regular readers know, for the past ~21 months I have been worrying out loud about US stock prices. Specifically, I have suggested that a decline of 30% to 50% would not be a surprise. I haven’t predicted a crash. But I have said clearly that I think stocks will deliver returns that are way below average for the next seven to 10 years. And I certainly won’t be surprised to see stocks crash. So don’t say no one warned you! So far, these concerns have just made me sound like Chicken Little. The S&P 500 is up strongly from where I first sounded the alarm. That’s actually good for me, because I own stocks. But my concerns haven’t changed. Earlier this year, for the first time, I even put (some) money where my mouth is!

In February, I changed the “dividend reinvestment” policy on my S&P 500 fund. (I’m an indexer — I think stock-picking is generally a lousy strategy for individuals.) Specifically, I stopped reinvesting dividends. I’m a long-term investor, so I don’t really care what stocks do next. This dividend change was a bet that, at some point in the future, I will be able to reinvest the cash from these dividends in stocks at lower prices than today. If stock prices never fall below today’s level, this will cost me money. It will also make me feel dumb for (sort of) trying to time the market. But at some point you’ve got to put some money behind what your analysis is telling you. What my analysis is telling me is:

1) stocks are extremely expensive and will eventually revert toward historical means, probably via a sharp correction of 30% to 50%

2) long-term stock returns from today’s level will be about 2% per year — nothing to write home about

So if I think there’s risk of a crash, why don’t I just sell everything? For the reasons outlined below. Again, I don’t care if the stocks I own tank, as long as they don’t tank permanently. A crash will just give me a chance to buy more at lower prices.

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Jim Fouras is a former speaker of the Queensland Parliament.

Forced Austerity Will Take Greece Back 65 Years (Jim Fouras)

It’s hard to believe that in the last five years, Greece’s financial situation is comparable to those dark days when Germany invaded Greece. For example: a 25% decline in GDP; 25% unemployment (50% among youth); 40% of children living below the poverty line; soaring suicides rates; people cannot afford basic medicines and health care. Austerity measures are suffocating Greece and causing a brain drain that will damage it for generations. German leader Angela Merkel, in unison with the Troika, has forced austerity programs on the Greeks. For five years, Merkel has dominated the crisis management of the Greek economy through her insistence on fiscal rigour and cuts despite a huge economic slump and impoverishment of Greek society.

The IMF has argued internally for at least three years that the organisation was breaching its own rules by taking part in any bailout that held little prospect of achieving the debt sustainability that the IMF rescues prescribed. IMF boss Christine Lagarde ignored this advice. Nobel prize-winning economist Joseph Stigliz argues that “when the IMF arrives in a country, they are only interested in one thing. How do we make sure that banks and the financial institutions are paid … they are not interested in development or what helps a country get out of poverty”. The Troika has assumed their bailout programs would reduce Greece’s debt to well below 110% (of GDP) by 2022. The Guardian has published IMF documents showing that under the best-case scenario, which includes a growth projection of 4% per year for the next five years (a ridiculous assumption), the country’s debt level will drop to 124% Greece’s debt level is now 175% and the nation slid back into recession.

The Greek economy will continue to slide unless there is a significant reduction of its debt and policies that allow Greece to grow at a rate to service those debts. Two days before the recent referendum, the IMF conceded that the crisis-ridden country needs up to 60 billion euros of extra funds over the next three years and large-scale debt relief. Germany will not accept debt relief, consequently it is not the Troika’s agenda. Greece is being forced to sell assets worth €50 billion with the proceeds earmarked for a trust fund supervised by its creditors — foreign leaders demanding almost total surrender of its national fiscal sovereignty. It would be difficult to imagine any sensible seller taking part in such a fire sale. The Greek Parliament will now vote for their country to be poorer.

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“How Greeks will react remains unclear, with much depending on media coverage.”

Greece Braces For Troika’s Return To Athens (Guardian)

Greece is bracing for the return to Athens of officials representing the reviled “troika” of creditors as the debt-stricken country prepares to start negotiations for a third bailout. Mission chiefs with the EU, ECB and IMF fly into the Greek capital on Friday for talks on a proposed €86bn (£60bn) bailout, the third emergency funding programme for Athens since 2010. The return of the triumvirate, a day after internationally mandated reforms were pushed through the parliament by MPs, marks a personal defeat for the prime minister, Alexis Tsipras, who had pledged never to allow the auditors to step foot in Greece again. How Greeks will react remains unclear, with much depending on media coverage.

“The press will almost certainly make a big deal out of this and the government will try to play it down,” said Aristides Hatzis, a leading political commentator. “But given what people have gone through recently it might seem rather trivial and that is to Tsipras’ advantage. Their presence will definitely reinforce the realisation that another bailout is here.” Much has changed for Tsipras, the young firebrand catapulted into office on promises to eradicate the biting austerity policies that over five years have created record levels of unemployment and poverty. In the six months since his election, the radical leftist has been brought face-to-face with the brute force of fiscal rectitude and a German-dominated Europe.

Addressing parliament ahead of the crucial vote, Tsipras, who succumbed to the demands of foreign lenders earlier this month – accepting an ultimatum to find €12bn of savings, by far the heaviest austerity package to date – conceded that his government had been defeated. But he insisted the alternative – bankruptcy and exit from the euro – would have been catastrophic. He told MPs: “We chose a difficult compromise to avert the most extreme plans by the most extreme circles in Europe.” [..] “We are turning our back on our common battles when in essence we say … austerity and giving into blackmail is a one-way street,” said Panagiotis Lafazanis, who heads the Left Platform, the far-left faction around which mutinous MPs rally around. “Greece does not have a future as a blackmailed eurozone colony under memorandum [bailout],” added the former minister who now advocates a return to the drachma.

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” The drama of the Euro will keep going as long as the Americans want it to, that is until the definitive approval of the TTIP by which the USA will place Europe in subjugation..”

Italy’s Plan B For An Exit From The Euro (Beppe Grillo)

Tspiras couldn’t have done a worse job of defending the Greek people. Only profound economic short-sightedness together with an opaque political strategy could transform the enormous electoral consensus that brought him into government in January into the victory for his adversories, the creditor countries, only six months later, in spite of winning the referendum in the mean time. An a priori rejection of a Euroexit has been his death sentence. Like the PD, he was convinced that it’s possible to break the link between the Euro and Austerity. Tsipras has handed over his country into the hands of the Germans, to be used like a vassal. Thinking that it’s possible to oppose the Euro only from within and presenting oneself without an explicit Plan B for an exit, he has in fact ended up by depriving Greece of any negotiating power in relation to the Euro.

So it was clear from the beginning that Tsipras would have crashed even though Varoufakis did try to react a few times. Only Vendola, the PD and the media inspired by the Scalfari-style lies (among many) of the United States of Europe and of those who are nostalgic about the Ventotene Manifesto could have believed in a Euro without Austerity. And they are obliged to go on believing in this so as not to have to admit that there is an exit opportunity after seven years of economic disasters. The consequence of this political disaster is before everyone’s eyes:
– Explicit Nazi-ism on the part of those that have reduced the periphery of Europe to a protectorate by using the debt, with alarming echoes of historical parallels.
– Mutism or explicit support for Germany by the oher European countries perhaps because of opportunism (north) or because of subordination (periphery).
– Financial markets that are celebrating the end of democracy with new highs.
– Expropriation of the national wealth by mortgaging €50 billlion of Greek property that ended up in the fund created by Adolf Schauble so as to get to rake in the cash from the war debts.

It was all thought out, foreseen, and planned down to the last detail. The drama of the Euro will keep going as long as the Americans want it to, that is until the definitive approval of the TTIP by which the USA will place Europe in subjugation in a way that is not dissimilar to how Germany is subjugating the periphery. By now the Euro is an explicit battle between the creditors and the debtors. It’s not useful for our government to try to appear to be on the virtuous side of the winners – those supporting the Euro – and supporting reform. It’s not possible to reform the Euro from within but the fight must be fought on the outside and we must abandon this anti-democratic straitjacket. Our debt and lack of growth together with deflation, place us neatly in the category of those who are beaten by debt. Thus we’d do well to prepare ourselves with a government that is explicitly anti-Euro to defend ourselves from the final assault on the wealth of the Italian people who are ever more at risk, unless we reclaim our monetary sovereignty.

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“[This] is how not to lose the first battle we will face when the time comes to break away from the union and the ECB..”

Beppe Grillo Wants Nationalisation Of Italian Banks, Exit From Euro (Guardian)

The populist leader of Italy’s second largest political party has called for the nationalisation of Italian banks and exit from the euro, and said the country should prepare to use its “enormous debt” as a weapon against Germany. Former comedian-turned-politician Beppe Grillo, who transformed Italian politics when he launched his anti-establishment Five Star Movement in 2009, has long been a bombastic critic of the euro. But his stance hardened significantly in a blogpost on Thursday in which he compared the Greek bailout negotiations to “explicit nazism”. Grillo constructed what he called a “Plan B” for Italy, which he said needed to heed the lessons of Greece so that it was ready “when the debtors come round”.

His plan called for Italy to adopt a clear anti-euro stance and to shake off its belief that – if forced to accept tough austerity – other “peripheral” countries would come to its aid. Grillo said Italy had to use its enormous €2tn (£1.4bn) debt as leverage against Germany, implying that the potential global damage of an Italian default would stop Germany from “interfering” with Italy’s “legitimate right” to convert its debt into another currency. He said Greece’s hand had been forced by the threat of bankruptcy to its banks, and that Italy therefore needed to nationalise its banks and shift to another currency. “[This] is how not to lose the first battle we will face when the time comes to break away from the union and the ECB,” Grillo wrote.

Setting aside Grillo’s colourful language and analogies, analyst Vincenzo Scarpetta of Open Europe said there was some merit to his arguments. “That blogpost does have some elements of truth,” Scarpetta said. “The lesson from Greece was that if you want to be in the eurozone you have to agree to rules of austerity.” The strength of anti-euro sentiment in Italy is easy to overlook since Matteo Renzi, the centre-left prime minister and head of the Democratic party, is a strong defender of Italy’s role in the eurozone. But Scarpetta pointed out that supporters of the Five Star Movement, coupled with supporters of the rightwing Northern League, which is also anti-euro, means that about 40% of Italians are at least sympathetic to anti-euro sentiments.

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No, really, M5S was the biggest single party in the latest elections. Renzi got in because of a ‘vote link’ between his party and another one.

Grillo Calls For Italy To Throw Off Euro ‘Straitjacket’ (FT)

Beppe Grillo, the leader of Italy’s populist Five Star Movement, has launched a full-throated attack on the euro, saying Rome should abandon what he called an “anti-democratic straitjacket”. Mr Grillo, whose party is the second most popular in Italy, demanded the government formulate a “plan B” to exit the single currency and “take back our monetary sovereignty”. The comedian has become an increasingly trenchant critic of the euro at a time of rising euroscepticism across the Italian political landscape, spurred in part by the agonies of Greece and its prolonged bailout talks. But his attack on the single currency in an extensive blog post was nonetheless remarkable for its ferocity.

It suggests Mr Grillo sees a political opportunity in doubling down on his anti-euro message in the wake of Greece’s last-minute acceptance of exacting terms for a third bailout. It is also a sign of political contagion, or concerns that populist forces might gain traction from the Greek crisis. The Five Star Movement has been rising steadily in the polls since March. It is now garnering the support of nearly 25% of Italian voters and has narrowed the gap with the ruling centre-left Democratic party led by Matteo Renzi, the prime minister. Mr Grillo was particularly scathing about Alexis Tsipras, the Greek prime minister, whom he had professed to admire before the deal was reached. “It would be difficult to defend the interests of the Greek people worse than Tsipras did,” Mr Grillo wrote.

“His refusal to exit the euro was his death sentence. He was convinced that he could break the marriage between the euro and austerity, but ended up delivering his country into Germany’s hands, like a vassal.” To avoid that fate, Mr Grillo said Italy should use its heavy debt load — worth more than €2tn, or 130% of GDP — as a threat. “[The debt] is an advantage that allows us to be on the offensive in any future negotiation, it is not a bogeyman that should make us bite at any request from our creditors,” he said.

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“Its €2.3 trillion debt, more than 132% of GDP, is second only to Greece in the euro area. Italy has lost a quarter of its industrial output, and GDP has contracted by 9% since 2007.“

Italy Leans While Greece Tumbles (Bloomberg)

Viewed from Berlin or London, the financial woes of Italy and Greece can look dangerously similar. Both sit on mountains of public debt and suffer from double-digit unemployment. So why hasn’t Italy had to shutter banks, submit to austerity measures in return for emergency loans, and contemplate an exit from the euro? For now Italy is chugging along, paying its debts and selling bonds. Its benchmark stock index is up 25% this year. It’s emerging from a record recession even as Greece enters a new slump after a brief rebound in 2014. Rome-based Eni, Europe’s No. 4 oil company, is pumping 1.7 million barrels per day globally and says output will keep rising. Finmeccanica sells helicopters to corporations and armed forces from the U.K. to China. Carnival cruise liners are made in Fincantieri’s Trieste shipyard.

Italian luxury goods, from Fendi to Ferrari, are at the top of consumer shopping lists. Among European manufacturers, Italy trails only Germany in production. The Greeks? They’ve got tourism and shipping and little else, says Marc Ostwald, a fixed income strategist at ADM Investor Service in London. Greek exports fell 7.5% in the first quarter, while Italy’s rose more than 3%. Tourism in Italy generated about €34 billion last year, almost triple what it did in Greece. With 60 million residents, Italy is more than five times as populous as Greece. History makes a difference, too. Rebuilding from World War II, Italy set off on the Dolce Vita boom years, popularizing the Vespa scooter and making a mark in international design.

Nutella, a nut-based chocolate spread introduced after the war, had annual sales of €8.4 billion last year, making the Ferrero family one of Italy’s richest. Greece, by contrast, went from government by junta in the 1960s and 1970s to a republic run by a political elite and a bloated government in the 1980s. Cutting its civil service and pension costs down to an appropriate size lies at the heart of the struggle between Greece and Europe on economic reform. Italy’s strength as an industrial exporter has provided stability, helping the country build up gold reserves of $90 billion—the world’s third-biggest stash after the U.S. and Germany and more than 20 times what Greece holds. Just a single Italian bank needed a public bailout after the 2008 crisis, even as dozens of lenders in northern Europe had to dip into state coffers to stay open.

[..] Italy may yet become another Greece. Aside from the recent uptick in growth, its numbers are grim. The global financial crisis of 2008-09, followed by the euro debt crisis, triggered the deepest and longest recessions in Italy’s postwar history. Its €2.3 trillion debt, more than 132% of GDP, is second only to Greece in the euro area. Italy has lost a quarter of its industrial output, and GDP has contracted by 9% since 2007. As a member of the euro zone, Italy can’t counter falling foreign demand by devaluing its currency, as it often did when the lira was in use. Unemployment is 12.5%, and 45% among youth—many of whom flee abroad. “Some of my best pupils, who speak English and other languages, have had to move to the U.K. or Germany to find jobs and a better future,” says Ivo Pezzuto at Università Cattolica in Milan

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“..we don’t believe in it and we should not be trying to implement a program whose logic we contest.”

Interview: Yanis Varoufakis (ABCLateline)

EMMA ALBERICI: What was the point of the referendum then? The Greek people told you they didn’t want you to cave in to the demands from your eurozone partners and the IMF, but then that’s exactly what you’ve ended up doing.

YANIS VAROUFAKIS: That’s an excellent question, isn’t it? Let me remind you that on that night, the night of the referendum when I discovered that my prime minister and my government were going to move in the direction that you’ve mentioned, I resigned my post. That was the reason why I resigned, not because anybody else demanded it.

EMMA ALBERICI: So would it surprise you if you were forced back to the polls and indeed if you lost the next election?

YANIS VAROUFAKIS: Nothing would surprise me these days in Europe. We seem to be doing the wrong thing consistently. It’s a comedy of errors, from 2010 onwards. It’s my considered opinion that the responsible thing to do for our party will be to hand over the keys of government to those who believe in this program, in this fiscal consolidation reform program and the new loan, ’cause we don’t believe in it and we should not be trying to implement a program whose logic we contest.

EMMA ALBERICI: And it’s curious because at a time when Australia is debating a rise in the GST from 10 to 15%, the Greek people have seen their GST go up from 13 to 23% on public transport and processed foods. I mean, you didn’t get voted in to government – you actually got voted into government promising the opposite: no more austerity.

YANIS VAROUFAKIS: Precisely. It’s the reason why I resigned. To increase VAT in a broken economy like Greece to 23%, in an economy where the problem is not that the tax rates were too low, but the tax take was too low because of tax evasion. I spent five months in the Ministry of Finance trying to devise ways of having a new social contract between the state and the Greek people, the basis of which would be: we will reduce the rates for you, but you will pay it and you will not evade. And then you have the troika of lenders, the creditors, ruthlessly, effectively implementing the policies of a coup d’etat and putting our Prime Minister in a position where he had to choose between measures like the ones you mentioned, pushing VAT up to exorbitant heights, and therefore condemning our tax take to be reduced significantly or having our banks remain shut forever. This is a major assault both on rationality and on European democracy.

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“with the hope that my comrades will gain some time, and that we, all of us, united, will plan a new resistance to autocracy, misanthropy, and the (facilitated) acceleration and deepening of the crisis.”

“Why I Voted ‘YES’ Tonight” (Yanis Varoufakis)

[..] .. in the document that I had sent to the institutions, I was merely accepting the responsibility of a “new Civil Code” and certainly not the one they would dictate. Nor would I have ever imagined that our government (under the supervision of the Troika) would accept to submit all those changes to the Parliament under the label “urgent”, thus negating all the adjustments and annulling the Parliament. Last Wednesday I had no other choice but to vote with a thunderous NO. Mine came to stand beside the NO that 61.5% of our compatriots answered to a capitulation under the infamous TINA (there is no alternative). I

have denied this for the past 35 years in all 4 continents where I have lived. Today, tonight, those two measures, which I had myself proposed on February, are introduced to the Greek Parliament in a manner that I had never imagined; a manner which adds no credit to the government of SYRIZA. My disagreement with the way we handled the negotiations after the referendum is essential. And yet, my main goal is to protect the unity of SYRIZA, to support A.Tsipras, and to stand behind E.Takalotos. I have already explained all that in my article with the title Why I voted NO published in EfSyn .

Accordingly, today I will vote YES, for two measures that I, myself, had proposed, albeit under radically different conditions and requirements. Unfortunately I am certain that my vote will not be of any help to the government towards our common goals. And that is because the Euro Summit “prior actions’ deal was designed to fail. I will, however offer my vote with the hope that my comrades will gain some time, and that we, all of us, united, will plan a new resistance to autocracy, misanthropy, and the (facilitated) acceleration and deepening of the crisis. (i) This morning, while participating at the Financial Committee of the parliament, I ascertained that no colleague of mine, not even the Minister of Justice, agreed with the new civil code. It was a sad spectacle.

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Daniel Munevar is a 30-year-old post-Keynesian economist from Bogotá, Colombia. From March to July 2015 he worked as a close aide to former Greek finance minister Yanis Varoufakis”

Why I’ve Changed My Mind About Grexit (Daniel Munevar)

What do you make of the latest bailout agreed between Greece and its creditors? Well, first of all it’s still not clear that there will be an actual agreement – there are several parliaments that need to approve their country’s participation in an ESM bailout. And even if they somehow reach an agreement, there is simply no way it can work. The economics of the program are just insane. They haven’t announced the precise fiscal targets yet, but if we look at the Debt Sustainability Analyses (DSAs) published by the IMF and the Commission, they both state that the target should be a 3.5% primary surplus in the medium term.

But if you look at what has happened over the course of the past five years, Greece has managed to ‘improve’ its structural balance by 19 points of GDP. During that same time, GDP has collapsed by about 20% – that’s an almost one-to-one relation. So if you start from -1% – which is the general assumption for this year – to make it to 3.5 means you need an adjustment of over 4% of GDP, which means GDP will collapse by another 4 points between now and 2018. This brings us to another point, which is that the current agreement is just a taste of things to come. The final Memorandum of Understanding (MoU) is definitely going to contain much harsher austerity measure than the ones currently on the table, to offset the drop in GDP that we have witnessed in the past months as a result of the standoff with the creditors.

The problem is that these Memorandums are turning Greece into a debt colony: you’re basically creating a set of rules which, as the government misses its fiscal targets – knowing for a fact that it will –, will force the government to keep retrenching even more, which will cause GDP to collapse even further, which will mean even more austerity, etc. It’s a never-ending vicious circle. This underscores one of the core problems of this whole situation: i.e., that the institutions have always disentangled the fiscal targets from the debt sustainability analyses. The logic of having debt relief is that it allows you to basically have lower fiscal targets and distribute over time the impact of fiscal consolidation. But in Greece’s case, even if there is debt relief on the scale that they are suggesting – which is unlikely – Greece will still have to implement massive consolidation, on top of everything that has been already done.

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“.. in exchange for these loans, Merkel obtained much greater control over all eurozone governments’ budgets through a demand-sapping, democracy-constraining fiscal straitjacket..”

The Eurozone’s German Problem (Philippe Legrain)

The eurozone has a German problem. Germany’s beggar-thy-neighbor policies and the broader crisis response that the country has led have proved disastrous. Seven years after the start of the crisis, the eurozone economy is faring worse than Europe did during the Great Depression of the 1930s. The German government’s efforts to crush Greece and force it to abandon the single currency have destabilized the monetary union. As long as German Chancellor Angela Merkel’s administration continues to abuse its dominant position as creditor-in-chief to advance its narrow interests, the eurozone cannot thrive – and may not survive. Germany’s immense current-account surplus – the excess savings generated by suppressing wages to subsidize exports – has been both a cause of the eurozone crisis and an obstacle to resolving it.

Before the crisis, it fueled German banks’ bad lending to southern Europe and Ireland. Now that Germany’s annual surplus – which has grown to €233 billion, approaching 8% of GDP – is no longer being recycled in southern Europe, the country’s depressed domestic demand is exporting deflation, deepening the eurozone’s debt woes. Germany’s external surplus clearly falls afoul of eurozone rules on dangerous imbalances. But, by leaning on the European Commission, Merkel’s government has obtained a free pass. This makes a mockery of its claim to champion the eurozone as a rules-based club. In fact, Germany breaks rules with impunity, changes them to suit its needs, or even invents them at will. Indeed, even as it pushes others to reform, Germany has ignored the Commission’s recommendations.

As a condition of the new eurozone loan program, Germany is forcing Greece to raise its pension age – while it lowers its own. It is insisting that Greek shops open on Sundays, even though German ones do not. Corporatism, it seems, is to be stamped out elsewhere, but protected at home. Beyond refusing to adjust its economy, Germany has pushed the costs of the crisis onto others. In order to rescue the country’s banks from their bad lending decisions, Merkel breached the Maastricht Treaty’s “no-bailout” rule, which bans member governments from financing their peers, and forced European taxpayers to lend to an insolvent Greece. Likewise, loans by eurozone governments to Ireland, Portugal, and Spain primarily bailed out insolvent local banks – and thus their German creditors.

To make matters worse, in exchange for these loans, Merkel obtained much greater control over all eurozone governments’ budgets through a demand-sapping, democracy-constraining fiscal straitjacket: tougher eurozone rules and a fiscal compact.
Germany’s clout has resulted in a eurozone banking union that is full of holes and applied asymmetrically. The country’s Sparkassen – savings banks with a collective balance sheet of some €1 trillion ($1.1 trillion) – are outside the European Central Bank’s supervisory control, while thinly capitalized mega-banks, such as Deutsche Bank, and the country’s rotten state-owned regional lenders have obtained an implausibly clean bill of health.

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Fischer (German Foreign Minister and Vice Chancellor from 1998-2005) is still a major voice in Germany. But he’s been awkwardly silent.

The Return of the Ugly German (Joschka Fischer)

In terms of foreign policy, Germany rebuilt trust by embracing Western integration and Europeanization. The power at the center of Europe should never again become a threat to the continent or itself. Thus, the Western Allies’ aim after 1945 – unlike after World War I – was not to isolate Germany and weaken it economically, but to protect it militarily and firmly embed it politically in the West. Indeed, Germany’s reconciliation with its arch-enemy, France, remains the foundation of today’s European Union, helping to incorporate Germany into the common European market, with a view to the eventual political unification of Europe. But in today’s Germany, such ideas are considered hopelessly “Euro-romantic”; their time has passed.

Where Europe is concerned, from now on Germany will primarily pursue its national interests, just like everybody else. But such thinking is based on a false premise. The path that Germany will pursue in the twenty-first century – toward a “European Germany” or a “German Europe” – has been the fundamental, historical question at the heart of German foreign policy for two centuries. And it was answered during that long night in Brussels, with German Europe prevailing over European Germany. This was a fateful decision for both Germany and Europe. One wonders whether Chancellor Angela Merkel and Finance Minister Wolfgang Schäuble knew what they were doing. To dismiss the fierce criticism of Germany and its leading players that erupted after the diktat on Greece, as many Germans do, is to don rose-tinted glasses.

Certainly, there was nonsensical propaganda about a Fourth Reich and asinine references to the Führer. But, at its core, the criticism articulates an astute awareness of Germany’s break with its entire post-WWII European policy. For the first time, Germany didn’t want more Europe; it wanted less. Germany’s stance on the night of July 12-13 announced its desire to transform the eurozone from a European project into a kind of sphere of influence. Merkel was forced to choose between Schäuble and France (and Italy). The issue was fundamental: Her finance minister wanted to compel a eurozone member to leave “voluntarily” by exerting massive pressure.

Greece could either exit (in full knowledge of the disastrous consequences for the country and Europe) or accept a program that effectively makes it a European protectorate, without any hope of economic improvement. Greece is now subject to a cure – further austerity – that has not worked in the past and that was prescribed solely to address Germany’s domestic political needs. But the massive conflict with France and Italy, the eurozone’s second and third largest economies, is not over, because, for Schäuble, Grexit remains an option. By claiming that debt relief is “legally” possible only outside the eurozone, he wants to turn the issue into the lever for bringing about a “voluntary” Grexit.

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“Behind the curtain, the federalization of Europe is the ultimate goal, although politicians always denied that in front of the curtain.”

Schäuble – The Man Behind the Throne (Martin Armstrong)

Many Europeans are starting to see a very hard-line German position championed by Schäuble, which they are characterizing behind the curtain as a more selfish edge by demanding painful measures from Athens and resisting any firm commitment to granting the Greek relief from crippling debt, despite the fact that it was such debt relief that enabled Germany to recover. Yet the position of Schäuble from the outset was his vision that the other nations must coordinate with the core, of which the other nations were not actually regarded. That perception of a selfish Germany has been fueled by Schäuble’s statement suggesting that Greece would get its best shot at a substantial cut in its debt ONLY if it was willing to give up membership in the European common currency. Schäuble is expected to take his tough stance once again with the next crash candidate. For many, that appears to be Italy, which is now considered the greatest risk within Euroland. Yet, his views are spelled out in his 1994 paper.

Schäuble seems to have foresaw the crisis back in 1994, distinguishing between core members and non-core members. Therefore, his thinking is quite different from that of France. Paris has jumped the gun after the Greece disaster and now want a core Europe push, but clearly with Italy as a full-fledged member into a new federalized Europe. Behind the curtain, the federalization of Europe is the ultimate goal, although politicians always denied that in front of the curtain. The curtain is starting to be drawn, but the equal federalization of Europe was never part of the German mindset. There seems to be a conflict emerging between Germany and France because France wiped out its economy with insane taxation. It too will fall in this next downward cycle.

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Schäuble has of course been at least as detrimental as Varoufakis to the conversation, but he’s still in place. Go figure.

German FinMin Schäuble’s Tough Tone Heightens Uncertainty Over Bailout (WSJ)

Germany’s finance chief departed for his annual vacation on a posh North Sea island on Thursday, leaving the capital to mull a summer mystery that could decide Greece’s fate: What’s going on with Wolfgang Schäuble? Over the past two weeks, the 72-year-old Mr. Schäuble has puzzled even German officials who know the finance chief well with remarks questioning the wisdom of a new bailout for Greece. He has also hinted he might resign over differences with Chancellor Angela Merkel. The comments mark a shift to a more hawkish tone for Germany’s longest-serving national politician, whose career has been defined by loyalty to his political allies and to the idea of European integration.

They also underscore the fragility of last week’s agreement among eurozone leaders to work toward a new bailout deal for Greece, which governments will need to sign off on as early as next month. A person who works closely with Mr. Schäuble said the minister remained guided by a commitment to European interests—and that giving in to Greek demands, for instance, by forgiving debt would damage the EU’s credibility. The Finance Ministry is working to lay the groundwork for a new bailout, the person said, even though Mr. Schäuble’s preferred solution would have been for Greece to agree to a temporary “timeout” from the euro.

But Mr. Schäuble’s open skepticism over whether a new bailout would work has heightened uncertainty over what would happen once officials representing international creditors reached a preliminary deal with Athens, which is expected in the middle of next month. Over the weekend, Mr. Schäuble mused in response to a German magazine interviewer’s question about his differences on Greece with Ms. Merkel that he would resign if someone forced him to violate the responsibilities of his office. “I could go to the president and ask for my dismissal,” Mr. Schäuble told Der Spiegel, before adding that he wasn’t, in fact, considering resigning.

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“Greece was only a pipe through which French and German banks, for the most part, saved themselves.”

Greece: Out of the Mouth of “Foreign Affairs” Comes the Truth (Bruno Adrie)

In an article by Mark Blyth titled “A Pain in the Athens: Why Greece Isn’t to Blame for the Crisis” and published on July 7th 2015 in Foreign Affairs, one discovers surprising statements, which are all the more surprising when one knows that this magazine is published by the Council on Foreign Relations that gathers the American élite, the New-Yorker banking élite being there for the most part. According to the author, “Greece has very little to do with the crisis that bears its name”. And, to make us understand this, he invites us to “follow the money—and those who bank it”. According to him, the origins of the crisis are not to be looked for in Greece but “in the architecture of European banking”.

Indeed, during the first decade of the euro, European banks, attracted by easy money, granted massive loans in what the author calls “the European periphery”, and, in 2010, in the middle of the financial crisis, banks had accumulated impaired periphery assets corresponding to €465 billion for French banks and €493 billion for German banks. “Only a small part of those impaired assets were Greek”, but the problem is that, in 2010, Greece published a revised budget equivalent to 15% of the GDP. Nothing to be afraid of actually since it only represented 0.3% of the Eurozone’s GDPs put together. But, because of their periphery assets and above all a leverage rate* twice as high—that is to say twice as risky—as the American banks’, European banks feared that a Greek default would make them collapse.

This is what really happened. The banks’ insatiable voracity led them, as always, to act carelessly, and, as they did not accept their failure, as always, they made sure that others would foot the bill. Nothing new under the golden sky of the Banking Industry, unless, this time, it went a bit further than usual. These banks set up the Troïka program in order to “stop the bond market bank run”. And no matter if it increased unemployment by 25% and destroyed the third of the country’s GDP. It doesn’t make much difference to the bankers. This is what the rescue plans have been used for. Apparently aimed at Greece, they were created by and for the major European banks. Today, given that the Greek can no longer pay French and German banks, even the European taxpayers are solicited.

Greece was only a pipe through which French and German banks, for the most part, saved themselves. On the total amount of €203 billion that represents the two rescue plans (2010-2013 and 2012-2014), 65% went right to the banks’ vaults. Some people even go so far as to say that 90% of the loans did not pass through Greece. This approach, expressed in the columns of Foreign Affairs, cannot be seen as heterodox. It is even confirmed by the ex-director of theBundesbank, Karl Otto Pöhl, who acknowledged that the rescue plan was meant to save the banks, and especially the French banks, from their rotten debts.

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The idea is to get the whole population on its kness.

Greek Store Closures Spike As Recession, Austerity Return (AP)

Running a business in Koukaki is becoming a struggle. Shop-owners in the central Athens neighborhood, one of the capital city’s most financially diverse, are finding it a lot more difficult to get by. They could be cutting hair or selling extra-large shirts – it makes no difference. Their tales of hardship can be repeated up and down the country of nearly 11 million people. Empty storefronts are again a feature of Greeces towns and cities amid a crisis that put Greece’s future in the euro in doubt. The downturn worsened after the late-June decision by the Greek government to impose a series of strict controls on the free flow of money, with a paltry 60-euro a day limit on daily withdrawals from ATMs. Though banks reopened this week for the first time in more than three weeks, the ATM withdrawal limit is unchanged and cash is becoming scarce.

For an economy where cash payments are the norm, that’s a problem. In Koukaki, about 2 kilometers south of downtown Athens, 65-year-old mechanic Giorgos Prasinoudis is angry. His wife and 11-year-old daughter have already moved to Germany – the country that’s ironically blamed for many of the economic and social problems afflicting Greece. On Wednesday, he sat drinking coffee on the sidewalk outside his motorcycle repair shop, with posters of bikes and children’s drawings pinned to the wall. Hes closed the store after 32 years. A “For Sale” sign is taped to the window. “It’s over for Greece. We won’t recover for another 50 years,” he said. “The country borrowed so much money, those who benefited left the country, and ordinary people have been handed the bill …

I hope my daughter learns German and doesn’t come back. Not even for a holiday.” Prasinoudis is one of the countless victims of Greeces economic crisis. Locked out of international bond markets in the spring of 2010, the country has relied on foreign rescue money to pay its debts – on condition that tough austerity measures, such as cuts to spending and increases in taxes were imposed. The cost has been huge. A million jobs, mostly in the private sector, have been lost since then ? around a fifth of the country’s workforce. But after appearing to stabilize last year, the Greek economy has gone into reverse but unemployment remains high. At last count, unemployment was still over 25% and more than 50% for the under-25s.

Alongside the capital controls, the government imposed a new round of austerity, raising sales taxes and levies on businesses, while maintaining emergency taxes on households that have eaten up disposable incomes. Early Thursday, parliament approved a second round of measures demanded by rescue creditors for a new bailout. Retail associations fear a return to the peak levels of unemployment around 2012 when they were hit by a surge of business failures.

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“The argument that shipping companies will migrate to substantially higher cost locations to avoid tonnage taxes seems ludicrous.”

A Few Thoughts On Greek Shipping And Taxes (Papaeconomou)

We have all witnessed a lot of Greek drama during the past few weeks as the impasse between the Greek government and its international creditors reached its climax. It now appears that after months of terse negotiations between the two parties, Greece has finally agreed to pass and implement austerity measures in exchange for financial aid. One of the innocent bystanders in all this has been the Greek shipping community. As part of the broad agreement between Athens and the Eurozone, the Greek government has undertaken to increase the tonnage tax, a flat tax that is assessed each year on all ships that are managed by shipping companies based in Greece.

As expected the shipping community has been up in arms crying foul over the proposed tax and threatening to leave to more tax-friendly locales like Monaco, Dubai, or Singapore. This has made me wonder: what would be the effect of increased tonnage tax on a shipping company’s running costs?

[..] Let’s assume for example that the Greek government unilaterally doubles the tonnage tax in accordance with the agreement provision. Star Bulk Carriers will have to pay an additional $129 per ownership day. Is this amount really the straw that will break the camel’s back and force a mass exodus of Greek shipping companies to greener pastures? I don’t think so. But let’s further assume that Greek shipping companies do decide to move to Monaco, Dubai, Singapore, or even London or New York. Have shipping executives done a cost of living comparison between say Monaco or New York City and Athens? The argument that shipping companies will migrate to substantially higher cost locations to avoid tonnage taxes seems ludicrous.

I believe the lobbying on behalf of Greek ship-owners is not about tonnage taxes, but about keeping their income tax-free status. Greek ship-owners are some of the hardest-nosed traders you can find. I don’t believe a tempest in a teapot will cloud their business acumen. I suspect that they will cut a deal with the taxman sooner or later, and if I may add, for the benefit of both sides.

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EU doesn’t want to help.

Greek Financial Crisis Makes Its Migration Crisis Worse. EU Must Help. (WaPo)

Greece’s problems are many. Thanks to the financial crisis, citizens have endured long ATM lines and shortages in stores. Greece may be the last place in Europe equipped to handle its newest problem: record numbers of migrants, particularly Syrians, arriving daily by boat. Since the beginning of 2015, an astounding 79,338 migrants have arrived by sea, 60% of whom are Syrian. Slightly more migrants have transited to Greece than to Italy, a reversal from 2014, when Italy received 170,100 migrants and Greece only 34,442 total, according to estimates from the International Organization for Migration. These migrants pay traffickers exorbitant fees and risk their lives on dangerous journeys. Once arrived, they find the small communities on Greece’s many islands totally overwhelmed and unable to help. Most try to move northwards, to states like Hungary, via the Balkans.

Other migrants remain in hungry squalor throughout Greece. UNHCR recently reported more than 3,000 refugees in makeshift accommodations at a site on the northern Aegean island of Lesbos. Refugees kept in detention centers have limited access to electricity and water. Dozens sleep on makeshift pallets in the Kos police station courtyard. Greece’s financial crisis exacerbates xenophobia and discrimination against migrants. While many Greeks have rallied to help the migrants, the far-right portrays these migrants as taking precious resources and sullying Greek culture. Golden Dawn, a far-right party, said “We will do everything we can to protect the Greek homeland against immigrants.” Even before the 2015 surge, 84% of adults in Greece wanted decreased immigration — the highest proportion in the world — according to 2012 and 2014 Gallup interviews.

And Greece’s No. 1 industry, tourism, could suffer. Migrants crowd the sidewalks of island resort towns beside vacationers, but the contrast could hardly be starker between the wet and hungry arrivals from Iraq, Afghanistan and Syria, and the European tourists who dine on fine meals and rest in posh surroundings. Many migrants fleeing conflict-ridden states have walked almost 40 miles across Greece, sick, exhausted and sometimes pregnant, because they were not allowed to take public or private transportation due to a law that equated anyone assisting migrants with human smugglers. The law — overturned this month — kept both private citizens and public buses from driving migrants that landed in Greece without being rescued by coast guards.

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It needs to be abandoned.

Abenomics Needs To Be ‘Reloaded’, Warns IMF (CNBC)

Japan needs to reduce its reliance on a weak yen to reflate its economy, the IMF warned, as it called on authorities to speed up “high impact” structural reforms and prepare for further monetary easing. “The Bank of Japan needs to stand ready to ease further, provide stronger guidance to markets through enhanced communication, and put greater emphasis on achieving the 2% inflation target in a stable manner,” the IMF said in its 2015 Article IV Consultation with Japan published late Wednesday. Under current policies, the central bank won’t meet its 2% inflation target in the medium-term, or over a five-year horizon, according to the international lender. After rising to 1.5% in mid-2014, core inflation – excluding fresh food and the effects of the consumption tax increase – has declined rapidly and has been close to zero since February 2015.

“Abenomics needs to be reloaded so that policy shortcomings do not become a drag on growth and inflation,” the IMF said. Abenomics refers to three-pronged economic revival plan launched by Prime Minister Shinzo Abe in late 2012, consisting of monetary easing, fiscal expansion and structural reforms. Deeper structural reforms must accompany further easing if the government is to achieve its inflation goal, the IMF stressed. “With the exception of corporate governance and some progress on female labor force participation, structural reforms have not yet been in areas that could provide the biggest bang for the buck,” it said.

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Much too late.

Australia Weighs Steps to Rein In Sydney Property (WSJ)

Fast-rising house prices are prompting regulators in New Zealand and Australia to try, or consider, measures to prick nascent bubbles in single cities, an unusual move for any country. In Auckland, New Zealand’s biggest city, property prices have jumped 17% over the past year, compared with a nationwide average of 9.3%, and now are more than 50% higher than eight years ago. Sydney prices have risen about four times as fast as those in almost all other Australian state capitals in the past 12 months. It is rare for countries to focus tough new clamps on a single city or district. But a surge in homegrown speculators, and of buyers from countries such as China, has left too many people chasing too few properties in Sydney and Auckland.

Policy makers are increasingly concerned that a sudden crash could derail their economies. In Australia, Sydney-specific regulation is merely under discussion. But in New Zealand, measures to limit the impact of a price surge in Auckland are in place already: From October, real-estate investors in the city will be required to put down deposits of at least 30% on properties they want to purchase. No such rules will apply to property investment in other cities. Until now, Australian policy makers have sought to temper house-price growth by restricting lending to speculators and making it costlier to provide mortgages to residential buyers generally, anywhere in the country. In the past several weeks, however, the central bank has made clear it sees the issue as essentially a local one, describing soaring prices in the nation’s most populous city as “crazy.”

The narrowing focus on Sydney has triggered speculation that similar moves to New Zealand’s may be in the offing, steered by the banking regulator. “The boom is now quite singularly in Sydney,” said George Tharenou at UBS. “It’s difficult and very micro to target Sydney house prices, but it’s getting to the point where it needs to be considered.” Earlier this month, Citigroup said the risk of a crash had become so real that it was time to stop banks lending so freely to Sydney property investors specifically. “The horse has already bolted,” said Paul Brennan at Citi Research, Australia. “Additional prudential measures directed at the Sydney market may be unavoidable, even if it is late in the cycle.”

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Apr 062015
 
 April 6, 2015  Posted by at 9:16 am Finance Tagged with: , , , , , , , , ,  4 Responses »
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G.G. Bain ‘Casino Theater playing musical ‘The Little Whopper’, NY 1920


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Once Over $12 Trillion, the World’s Reserves Are Now Shrinking (Bloomberg)
How Criminals Built Capitalism (Bloomberg)
Greek Political Unrest And Deepening Crisis Fuel Talk Of Snap Election (Guar.)
Greek Economy Staring At Recession Again (Kathimerini)
What Happens If Greece Defaults On Its IMF Loans? (Telegraph)
Greece and IMF Hold Talks on Crucial Debt Payment (NY Times)
Varoufakis Meets Lagarde: ‘Greece Will Pay All Creditors Including IMF’ (GR)
How Much Of Brazil’s Economy Got Lost In Petrobras Scandal? (Forbes)
Petrobras Woes Reach Europe, US (Bloomberg)
Japan’s Wary Manufacturers Resist Abe’s Urge To Splurge (Reuters)
The Inbred Bernanke-Summers Debate On Secular Stagnation (Steve Keen)
Leader Of Ukraine Neo Nazi Right Sector Appointed As Army Advisor (Zero Hedge)
Eastern Ukraine Leaders Appeal To Merkel, Hollane To End Embargo (DW)
Saudi Arabia Rejects Russian UN All-Inclusive Arms Embargo on Yemen (RT)
Record Gasoline Output to Curb Biggest US Oil Glut in 85 Years (Bloomberg)
UK Law Changed To Force Nuclear Waste Dumps On Local Communities (Guardian)

Beppe is not just an entertainer.

7 Unfounded Fears About An Exit From The Euro (Beppe Grillo)

1) Mortgages – Mortgages will be converted into the new currency the day we exit the Euro. For anyone with a variable interest rate, this will still remain linked to the Euribor and thus it will remain stable. In relation to mortgages, Italians will benefit.

2) Inflation – Just think that the goods (home, car, telephone) that we want to buy will come down in price. If we don’t spend, the economy stagnates. This is what is happening today with deflation. A low level of inflation is thus necessary to keep the economy going. On the other hand, it mustn’t be too high to avoid devaluing our ability to spend. This won’t happen because Italian products will become more competitive than foreign products and the products that we are obliged to import from abroad (for example: crude oil) have a limited impact on the final price (for example: in the last year the value of the Euro has fallen by about 25% in relation to the dollar, but the high level of customs duties on petrol, has meant that the effect has not been apparent).

3) Current account – Your current account in Euro will be converted into the new currency. But, just even today, you can have a different currency in your bank account. You will still be able to do that after the exit from the Euro. So you could have dollars, Euro, pounds sterling, francs or a new currency.

4) Government bonds – 95% of Italian State bonds will be converted into the new currency (given that 95% are issued in accordance with Italian legislation and so they would inherit the national currency). The State will pay out on them and will issue them in the new currency. Given the low yields and the high risk that we already see right now, Italian State bonds are not a good buy for an Italian citizen.

5) Transition from the Euro to the lira – There’ll probably be a 1 to 1 conversion with the new currency and it will then probably devalue a bit. The effect on prices will probably be that they stay the same as today but they will be given in the new currency.

6) Increase in the price of petrol – The price of petrol is a false problem as most of the price (64%) is paid in taxes. International prices of crude oil and the exchange rate only relate to 26% of the price. If we also consider that the price of crude oil is at a record low right now, an exit from the Euro will surely be no problem from this point of view.

7) Imports: increase in the prices of imported products – This problem, that is particularly important for technology products, can only be resolved by investing in innovation after the destruction of companies like Olivetti and the downsizing of Telecom Italia. Innovation is the only way to develop the country. Staying in the Euro is not going to help. Throughout history, we have exported and traded with the countries nearest to us, but not because they have the Euro, simply because they are the closest and the geographic location has made it easier to trade with them ever since the time of the Roman Empire.

However, the value of exports going into the countries using the Euro, has being going down ever since we joined the Euro. Just in 2007, those accounted for 60%, and today that’s now down to less than 50%. The only areas where the value of our exports is growing is outside the Euro zone as can be seen from research into Italian exports: “emerging markets currently represent the biggest proportion of our exports, while the importance of the Euro area has seen a significant fall“.

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While Cameron is boasting this huge recovery.

Teachers Warn Of ‘Victorian’ Poverty Among Pupils (BBC)

Teachers say they are seeing “Victorian conditions” with pupils arriving at school hungry and not wearing the right clothes needed for the weather. The NASUWT teachers’ union says schools and teachers are increasingly having to deal with the consequences of poor housing and poverty. Teachers reported bringing in their own food to school to give to children. The Conservatives said the number of children in poverty had fallen by 300,000 under the coalition government. The Liberal Democrats said they had helped families by introducing free school meals for all infant children. Tristram Hunt, Labour’s shadow education secretary, warned of the “quiet indignity of poverty that can wreak havoc with a child’s confidence”. He said poverty was one of the “biggest barriers” to pupils achieving in school.

Claims about poverty in the school-age population will be heard at the NASUWT teachers’ union annual conference in Cardiff. The union asked members for their experiences and received almost 2,500 responses. It was not a representative sample of teachers, but among those replying more than two in three reported seeing pupils come to school hungry. “Children in 2015 should not be hungry and coming to school with no socks on and no coats – some children are living in Victorian conditions – in the inner cities,” said one unnamed teacher. Almost one in four of the teachers who responded said they had brought in food for pupils who were hungry, and an even higher proportion had seen the school feeding pupils.

More than three in four had seen pupils arriving at school with “inappropriate clothing” such as no socks or coats in bad weather. Similar numbers claimed that a bad diet meant that pupils were unable to concentrate on their work. More children were being sent home with letters about unpaid school meals and pupils who were sick were still being sent to school because parents could not afford to take time off work, claimed teachers. The comments from the survey suggest teachers felt that they were having to cope with the wider problems linked to family hardship, such as children living in temporary accommodation or relying on food banks.

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All about emerging markets. They’re going to be steamrollered.

Once Over $12 Trillion, the World’s Reserves Are Now Shrinking (Bloomberg)

The decade-long surge in foreign-currency reserves held by the world’s central banks is coming to an end. Global reserves declined to $11.6 trillion in March from a record $12.03 trillion in August 2014, halting a five-fold increase that began in 2004, according to data compiled by Bloomberg. While the drop may be overstated because the strengthening dollar reduced the value of other reserve currencies such as the euro, it still underlines a shift after central banks – with most of them located in developing nations like China and Russia – added an average $824 billion to reserves each year over past the decade. Beyond being emblematic of the dollar’s return to its role as the world’s undisputed dominant currency, the drop in reserves has several potential implications for global markets.

It could make it harder for emerging-market countries to boost their money supply and shore up faltering economic growth; it could add to declines in the euro; and it could damp demand for U.S. Treasury bonds. “It’s a big challenge for emerging markets,” Stephen Jen, a former IMF economist, said. They “now need more stimulus. The seed has been sowed for future volatility,” he said. Stripping out the effect from foreign-exchange fluctuations, Credit Suisse estimates that developing countries, which hold about two-thirds of global reserves, spent a net $54 billion of this stash in the fourth quarter, the most since the global financial crisis in 2008. China, the world’s largest reserve holder, together with commodity producers contributed to most of the declines, as central banks sold dollars to offset capital outflows and shore up their currencies.

A Bloomberg gauge of emerging-market currencies has lost 15% against the dollar over the past year. China cut its stockpile to $3.8 trillion in December from a peak of $4 trillion in June, central bank data show. Russia’s supply tumbled 25% over the past year to $361 billion in March, while Saudi Arabia, the third-largest holder after China and Japan, has burned through $10 billion in reserves since August to $721 billion. The trend is likely to continue as oil prices stay low and growth in emerging markets remains weak, reducing the dollar inflows that central banks used to build reserves, according to Deutsche Bank.

Such a development is detrimental to the euro, which had benefited from purchases in recent years by central banks seeking to diversify their reserves, according to George Saravelos at Deutsche Bank. The euro’s share of global reserves dropped to 22% in 2014, the lowest since 2002, while the dollar’s rose to a five-year high of 63%, the International Monetary Fund reported March 31. “The Middle East and China stand out as two regions that are likely to face ongoing pressures to run down reserves over the next few years,” Saravelos wrote in a note. The central banks there “need to sell euros,” he said.

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By a gut named Clive Crook, no less.

How Criminals Built Capitalism (Bloomberg)

Whenever buyers and sellers get together, opportunities to fleece the other guy arise. The history of markets is, in part, the history of lying, cheating and stealing — and of the effort down the years to fight commercial crime. In fact, the evolution of the modern economy owes more than you might think to these outlaws. That’s the theme of “Forging Capitalism: Rogues, Swindlers, Frauds, and the Rise of Modern Finance” by Ian Klaus. It’s a history of financial crimes in the 19th and early 20th centuries that traces a recurring sequence: new markets, new ways to cheat, new ways to transact and secure trust. As Klaus says, criminals helped build modern capitalism. And what a cast of characters.

Thomas Cochrane is my own favorite. (He was the model for Jack Aubrey in Patrick O’Brian’s “Master and Commander” novels.) Cochrane was an aristocrat and naval hero. At the height of his fame in 1814 he was put on trial for fraud. An associate had spread false rumors of Napoleon’s death, driving up the price of British government debt, and allowing Cochrane to avoid heavy losses on his investments. Cochrane complained (with good reason, in fact) that the trial was rigged, but he was found guilty and sent to prison. The story is fascinating in its own right, and the book points to its larger meaning. Cochrane, in a way, was convicted of conduct unbecoming a man of his position. Playing the markets, let alone cheating, was something a man of his status wasn’t supposed to do.

Trust resided in social standing. As the turbulent century went on, capitalism moved its frontier outward in every sense: It found new opportunities overseas; financial innovation accelerated; and buyers and sellers were ever more likely to be strangers, operating at a distance through intermediaries. These new kinds of transaction required new ways of securing trust. Social status diminished as a guarantee of good faith. In its place came, first, reputation (based on an established record of honest dealing) then verification (based on public and private records that vouched for the parties’ honesty). Successive scams and scandals pushed this evolution of trust along.

Gregor MacGregor and the mythical South American colony of Poyais (“the quintessential fraud of Britain’s first modern investment bubble,” Klaus calls it); Beaumont Smith and an exchequer bill forging operation of remarkable scope and duration; Walter Watts, insurance clerk, theatrical entrepreneur and fraudster; Harry Marks, journalist, newspaper proprietor and puffer of worthless stocks. On and on, these notorious figures altered the way the public thought about commercial trust, and spurred the changes that enabled the public to keep on trusting nonetheless.

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They’ll only do snap if the polls allow for it. Doesn’t look anywhere near.

Greek Political Unrest And Deepening Crisis Fuel Talk Of Snap Election (Guar.)

The worsening Greek debt crisis has reanimated talk within the ruling Syriza party of a snap general election if discussions with creditors fail, as the country faces a Thursday deadline to repay a €450m loan to the IMF. The Greek finance minister, Yanis Varoufakis, was scheduled to hold informal talks with the IMF’s managing director, Christine Lagarde, in Washington DC on Sunday, while warnings of early elections underscored the political unrest in Athens. The slow pace of negotiations with creditors and worsening state of the Greek economy brought a warning from the far-left Syriza of snap polls being held before the summer – just months after winning power. “If we are not satisfied [with the outcome] we will go to the people,” Kostas Chrysogonos, a prominent Syriza MEP told local media at the weekend.

“We have a popular mandate to bring about a better result,” he said of the talks aimed at concluding a reform-for-cash programme to keep the crisis-hit country afloat. “If, ultimately, creditors insist on following an inflexible line … then the electoral body will have to assume its responsibilities.” Varoufakis’ unexpected meeting with the IMF chief has been arranged as senior government officials repeated assurances that Greece was not about to to default on its debt repayments. The deputy finance minister, Dimitris Mardas, said the IMF payment would be made and civil service wages would be paid. “There is money for the payment of salaries, pensions and whatever else is needed in the next week.”

The prospect of renewed political strife in Greece coincided with mounting dissent within Syriza over the extent to which it should roll back on pre-electoral reforms. The anti-austerity government led by Alexis Tsipras has found itself increasingly cornered with creditors – the so-called troika – refusing to endorse proposed reforms under an extension of its €240bn bailout. Militants led by energy minister Panagiotis Lafazanis have ratcheted up the pressure by rejecting any notion of making necessary concessions starting with privatisations.

On Sunday, Lafazanis denounced Greece’s international creditors for treating the country with “unbelievable prejudice and as a colony”. Raising the prospect of a deal with Russia, he said, “A Greek-Russian agreement would help our country greatly in negotiations with lenders.” Despite assertions over the weekend that Sunday’s talks were part of the negotiation process, Athens is believed to harbour hopes that the IMF – which has proved to be a more conciliatory partner than either the EU or ECB in negotiations – will agree to cut the government some slack when Varoufakis discusses the reform programme with Lagarde. On Friday, Syriza’s parliamentary spokesman, Nikos Filis, also piled on the pressure saying Tsipras’ leftist-led coalition would prefer to pay salaries and pensions than bondholders if forced to make a choice.

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“The combination of a better-than-expected tax collection in March, the postponement of some budget expenditures and internal borrowing from some state entities and other sources made it possible for the government to pay both creditors and pensioners and civil servants last month.”

Greek Economy Staring At Recession Again (Kathimerini)

The Greek state may be able to service its debt and pay pensions and salaries to civil servants in April. However, the limited progress in negotiations between the government and the official creditors on the conclusion of the economic policy program increases uncertainty, reduces credit availability and adversely affects domestic demand despite less austerity. The economic damage has increased the risk of recession. The combination of a better-than-expected tax collection in March, the postponement of some budget expenditures and internal borrowing from some state entities and other sources made it possible for the government to pay both creditors and pensioners and civil servants last month. Greece paid an estimated €2.5 billion to the IMF and other creditors in March without including T-bills.

Assuming tax revenues remain on track and more general government entities lend part of their cash reserves to the state, we would expect Greece to be able to meet its obligations to creditors in April but it will face a tougher hurdle in May. It is reminded the state owes about 458 million euros to the IMF on April 9 and has to find an additional €700 million or so for T-bills maturing on April 14 which are held by international investors and most likely will not be rolled over. It will also have to pay €194 million to private bondholders on April 17 and €80 million to the ECB on April 20, according to Bank of America Merrill Lynch (BofA). Deputy Finance Minister Dimitris Mardas, who is in charge of the General Accounting Office, assured recently that the state will make the payment to the IMF on time and pay wages to some civil servants in the middle of the month.

This contrasts with leaks in the press, citing other government officials’ warnings that Greece would run out of money on April 9. Although no one disputes that the central government is in a tough financial position, some abroad suspect these warnings are also part of a Greek strategy to get some funding from the EU via the EFSF or indirectly from the ECB. Even if Greece is able to overcome this hurdle in April, it will have to pass another test in early May, assuming it has not reached an agreement with its creditors by then. It will have to pay €200 million to the IMF on May 1 and an additional €763 million on May 12, according to a recent report by BofA.

Of course, the country has shown that it intends to honor its obligations so far and could be able to continue doing so in the rest of April and even May to the extent that it is able to mobilize the cash reserves of state entities, collect more revenues than targeted in the adjustment program and postpone expenditures to suppliers and others for the future, building arrears.

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This will take until at least June. “According to IMF protocol, Greece would be afforded a 30-day grace period..” They’ll pay on April 9. The next payments are May 1 and 12. Add 30 days to that. That’s when payments to other creditors are due.

What Happens If Greece Defaults On Its IMF Loans? (Telegraph)

The Greek government faces another crucial deadline in its interminable bail-out drama this week, as fears mount that the country could become the first developed nation to ever default on its international obligations. After a harrowing March, cash-strapped Athens now faces a €448m payment to the IMF on Thursday. But with public sector wages and pensions to pay out, a cacophony of voices on Syriza’s Left have vowed to prioritise domestic obligations unless creditors finally unlock the remainder of its €240bn bail-out programme. “We are a Left-wing government. If we have to choose between a default to the IMF or a default to our own people, it is a no-brainer,” a senior Greek official told The Telegraph last week.

The rhetoric is a far cry from February, when Greece’s finance minister pledged his government would “squeeze blood out of a stone” to meet its obligations to the Fund. Yanis Varoufakis will now spend Easter Sunday with IMF director Christine Lagarde in a bid to gain some leeway on the country’s reforms-for-cash programme. Greece owes €9.7bn to the IMF this year. Missing its latest installment in order to pay out its social security bill on April 14, would see the country fall into an arrears process, unprecedented for a developed world debtor. Although no nation has ever officially defaulted on its obligations in the post-Bretton Woods era, Greece would join an ignominious list of war-torn nations and international pariahs who have failed to pay back the Fund on time.

What happens after April 9? Missing Thursday’s payment would not immediately trigger a default however. According to IMF protocol, Greece would be afforded a 30-day grace period, during which it would be urged to pay back the money as soon as possible, and before Ms Lagarde notifies her executive board of the late payment. Following this hiatus, a technical default could be declared a month later, when “a complaint regarding the member’s overdue obligations is issued by the Managing Director to the Executive Board”. In the interim, Greece may well stump up the cash having spooked creditors and the markets of the possibility of a fatal breach of the sanctity of monetary union. Should no money be forthcoming however, the arrears process may well extend indefinitely. Greece’s IMF burden would also start piling up, with the government due to pay another €963m by May 12.

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Very predictable.

Greece and IMF Hold Talks on Crucial Debt Payment (NY Times)

Mr. Varoufakis, from the moment he became finance minister this year, has gone out of his way to cultivate ties with Ms. Lagarde and has said that paying the fund was a priority for Greece. Over the last month, however, the economic situation in Greece has worsened greatly. Deposits worth about €25 billion have been withdrawn from Greek banks, some of which are now on life support with the European Central Bank. The government’s tax collections are also suffering as companies and consumers fret over the prospect that Greece might be forced to abandon the euro. Now, with Europe refusing to permit Greece access to temporary lines of liquidity — such as letting its banks issue more short-term treasury notes — Greece is running out of cash.

Which means that if it were to pay the fund €458 million this Thursday, there might not be enough left in the coffers to pay pensions and public sector wages the next week, some Greek officials say. Mr. Varoufakis, who came to power on a platform of ending the policy of putting the needs of Greece’s creditors above its suffering citizens, was to make the case to Ms. Lagarde that his government could not meet all of its commitments. “This government has made strong statements that they will meet their commitments,” said a person who was involved in the negotiations but was not authorized to speak publicly. The problem is, this person said, Greek officials have made commitments to their own people as well. “They are being pushed to the wall.”

There is some wiggle room. Even if Greece does not pay up on Thursday, it will not be in technical default as there is a 30-day grace period that could allow the government to pay its pension and wage obligations and strike a broader deal so that its creditors could disburse the needed funds. Mr. Varoufakis is also planning to meet with officials in the United States Treasury on Monday in the hope that the United States, as the dominant voice at the I.M.F., might pressure fund officials, and Europe as well, to cut Greece some slack. The United States has been quietly critical of Europe’s harsh stance toward Greece, warning of the consequences that a Greek default and exit from the euro would have on financial markets.

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Hollow phrases exercise.

Varoufakis Meets Lagarde: ‘Greece Will Pay All Creditors Including IMF’ (GR)

Greek Finance Minister Yanis Varoufakis said Greece will pay all its creditors, including the upcoming International Monetary Fund installment, as he was exiting a meeting with IMF managing director Cristine Lagarde in Washington, DC on Sunday April 5. Greece faces a deadline to repay a €450m loan to the International Monetary Fund on April 9th, and many sources had speculated that the crisis-hit country won’t be able to pay the installment. “Greece was a founding member of Bretton Woods institutions,” the Greek Finance Chief noted to reporters outside the IMF. Christine Lagarde made the following statement after the meeting: “Minister Varoufakis and I exchanged views on current developments and we both agreed that effective cooperation is in everyone’s interest. We noted that continuing uncertainty is not in Greece’s interest and I welcomed confirmation by the Minister that payment owing to the Fund would be forthcoming on April 9th.”

“I expressed my appreciation for the Minister’s commitment to improve the technical teams’ ability to work with the authorities to conduct the necessary due diligence in Athens, and to enhance the policy discussions with the teams in Brussels, both of which will resume promptly on Monday. I reiterated that the Fund remains committed to work together with the authorities to help Greece return to a sustainable path of growth and employment.” The Greek finance minister traveled to Washington, DC to hold an informal discussion on the Greek government’s reform program with the IMF’s managing director, Christine Lagarde. The Varoufakis-Lagarde meeting started at 6.15 pm on Sunday and lasted for two hours. The Greek Finance minister is also scheduled to meet with President Obama’s top economic and national security adviser Caroline Atkinson on Monday.

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Lowballing.

How Much Of Brazil’s Economy Got Lost In Petrobras Scandal? (Forbes)

A study out this week in Brazil estimates just how much the country lost to this ugly Petrobras oil scandal. The price tag: R$87 billion ($27.1 billion) that is expected to have been lost in GDP this year because of Petrobras’ corrupt, little ways. All told, that comes out to a little more than 1% of Brazil’s GDP burned up in scandal. Brazil’s GDP is about $2.2 trillion. The study was done by the Getulio Vargas Foundation. It based its estimates on Petrobras planned reduction in investments this year, which will hit oil and gas service firms, construction, engineering and consumer spending. Layoffs in construction will likely take at least R$13.6 billion from federal coffers this year. Two construction companies that colluded with Petrobras in the scandal, OAS and Galvao, have both filed for bankruptcy.

Construction companies are expected to reduce GDP by another R$10 billion, with the Foundation estimating a massive blood-letting in the job market, well into the thousands. Petrobras has yet to release earnings due to its third party auditors fearing repercussions if it signs off on phony accounts. So far, the market has April 30 as the date to discover just what Petrobras earned last year. But that can be delayed because shareholder lawsuits in New York have forced the Securities and Exchange Commission to review the earnings data before it is released to the market. The SEC will have their final say. At least three law firms have filed class action suits against the Brazilian oil giant. New York law firm Pomerantz is lead counsel on the case. Earnings will not include losses accrued from the scandal, the local Estado de Sao Paulo newspaper reported this week.

The newspaper also said that changes to the way auditors and regulators are reviewing Petrobras’ books might work in the oil firm’s favor. Last year, Deloitte said that Petrobras inflated its assets to the tune of R$88.6 billion. That number is expected to decline by at least half. Petrobras’ ex-CEO Maria Gracas Foster and her auditing firm PricewaterhouseCoopers are part of the shareholder lawsuit along with Brazilian bank Itau Unibanco. Estimates are for Brazil’s economy to contract by around 0.5% this year. “Brazil’s problems are all domestic and you can trace it to Petrobras,” says economist Alex Wolf at Standard Life Investments. “Consumer sentiment is down, unemployment is up slightly and investment is still down. We think Brazil is one of the most vulnerable emerging markets around.”

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“It’s a stark reversal from five years ago when a wave of European and US oil-services companies eagerly flocked to Brazil to build plants and set up offices.”

Petrobras Woes Reach Europe, US (Bloomberg)

When Italian oil services company Saipem spent $300 million at the start of the decade in Brazil, it joined a long list of foreign companies jockeying for business with Petrobras. Now it’s struggling to get paid. Saipem is one of at least five European companies that spoke about late payments, delivery delays or other difficulties in Brazil during fourth-quarter earnings calls. While day-to-day operations are functioning, Petrobras partners are also facing decision-making obstacles that are inhibiting planning, said officials at partners Galp Energia, BG Group and Repsol who asked not to be named. It’s a stark reversal from five years ago when a wave of European and US oil-services companies eagerly flocked to Brazil to build plants and set up offices.

Back then, Petrobras was ramping up investments to more than $100 million a day after making the Western Hemisphere’s biggest crude finds in decades. Today, Petrobras is slashing spending as oil prices plunge and it’s all but locked out of credit markets because of a sweeping corruption scandal. “Brazil’s a big market,” Terje Soerensen, CEO of Norwegian Siem Offshore, said in a telephone interview. “When that stops, it affects the entire industry.” Siem doesn’t know if the four to six vessels it had marked for Brazilian contracts will be needed now, Soerensen said. Saipem executives said in a February 16 earnings call that some payments from Petrobras were late. Norway’s Aker CEO Luis Araujo said in a March 17 interview that the company was asked to delay equipment deliveries.

Vallourec, a French oil-pipeline maker, and Alfa Laval, a Swedish oil industry engineering firm, also cited a difficult business environment in February conference calls. US oilfield-service providers Halliburton and Schlumberger echoed similar concerns. Halliburton sees activity continuing to decline in Brazil, President Jeff Miller said in a conference call earlier this year. The spending cuts Petrobras has announced will create “challenges” this year, Schlumberger CEO Paal Kibsgaard said.

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“But Japan’s bankers are laughing all the way to the…”

Japan’s Wary Manufacturers Resist Abe’s Urge To Splurge (Reuters)

Hirotoshi Ogura, a self-described “factory geek”, is Daikin Industries’ master of doing more with less – and part of the reason Japan’s recovery remains stuck in the slow lane. As Japan heads into the season of peak demand for room air-conditioners, Ogura and other Daikin managers have been tasked with figuring out how to boost output by some 20% at a plant in western Japan that six years ago the company had almost given up on as unprofitable. The wrinkle: they have no budget for new capital investment at the 45-year-old Kusatsu plant.

The still-evolving workaround shown to a recent visitor involves home-made robots for ferrying parts, experimental systems using gravity rather than electricity to power parts of the line, more temporary workers on seasonal contracts and dozens of steps to chip away at the 1.63 hours it takes to make a typical new air conditioner. “We can do a lot without spending anything,” says Ogura, a 33-year Daikin veteran who joined the company just after high school. “Anything we need, we first try to build ourselves.” Like Daikin, a number of Japanese manufacturers are shifting production back to Japan from China and elsewhere to take advantage of a weaker yen.

Rival Panasonic has pulled back some production of room air-conditioners, Sharp has brought back production of some refrigerators, and Canon has repatriated some output of high-end copiers, according to a list compiled by Nomura. But even as output recovers, Japanese companies remain cautious about new capital investment in factories and equipment. The trend is especially pronounced for smaller firms down the supply chain. After increasing capital spending by 6% in the just-completed fiscal year, small manufacturers plan a 14% decrease in the current year, according to the Bank of Japan’s quarterly survey released this week. Big manufacturers like Daikin plan a 5% increase, but overall investment remains 10% below pre-crisis 2007 levels.

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Economics and inbreeding.

The Inbred Bernanke-Summers Debate On Secular Stagnation (Steve Keen)

Ben Bernanke has recently started blogging (and tweeting), and his opening topics were why interest rates are so low around the world, and a critique of Larry Summers’ “secular stagnation” explanation for this phenomenon, and for persistent low growth since the financial crisis. Summers then replied to Bernanke’s argument, and a debate was on. So who is right: Bernanke who argues that the cause is a “global savings glut”, or Summers who argues that the cause is a slowdown in population growth, combined with a dearth of profitable investment opportunities, not only now but for the foreseeable future? I’d argue both of them, and neither simultaneously—both, because they can both point to empirical data that support their case; neither, because they are only putting forward explanations that are consistent with their largely shared view of how the economy works.

And the extent to which they are the product of a single way of thinking about the world simply cannot be exaggerated. It goes well beyond merely belonging to the same school of thought within economics (the “Neoclassical School” as opposed to the “Austrian”, “Post Keynesian”, “Marxist” etc.), or even the same sect within this school (“New Keynesian” as opposed to “New Classical”). Far beyond. They did their graduate training in the same economics department at the Massachusetts Institute of Technology (MIT). They attended the same macroeconomics class: Stanley Fisher’s course in monetary economics at MIT for graduate students (was it the same year—does anybody know?) Some of their fellow Fisher alumni included Ken Rogoff and Olivier Blanchard.

And that’s not all—far from it. Paul Samuelson (MIT) was overwhelming the intellectual architect of what most people these days think is Keynesian economics. Paul Samuelson is Larry Summers’ uncle. Samuelson’s “Foundations of Economic Analysis” was the core of the MIT approach to economics, and it became the model for economics textbooks around the world. Gregory Mankiw’s (PhD, MIT) market-dominating text today is a pale echo of Samuelson’s original. This group has been notably dismissive of other approaches to doing economics. Krugman (PhD MIT) leads the pack here, deriding views that are outside this mindset.

If I were describing a group of thoroughbred horses, alarm bells would already be ringing about a dangerous level of in-breeding. Sensible advice would be proffered about the need to inject new blood into this dangerously limited breeding pool. But the issue would only be of importance to the horseracing community. Instead I am talking about a set of individuals whose ideas have had enormous influence upon both the development of economic thought and the formation of economic policy around the globe for the last four decades. The fact that so much of the dominant approach to thinking about the economy emanates, not merely from such a limited perspective, but from such a limited and interconnected pool of people, should be serious cause for alarm – especially given how the world has fared under the influence of this thoroughbred group.

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Time to stop our support right here and now.

Leader Of Ukraine Neo Nazi Right Sector Appointed As Army Advisor (Zero Hedge)

With Greece on the verge of either getting kicked out of Europe or suffer through yet another government overhaul, one which many suggest may usher the “last” option for Greece, the ultra nationalist, neo-Nazi Golden Dawn party into governance, some wonder if it is not Europe’s ulterior intention to force a populist shift toward right wing, nationalist parties (perhaps best observed in France where Marine le Pen’s dramatic rise to power has left many dazed and confused) one which will lead to social instability and shortly thereafter, war (because in a world in which every Keynesian voodoo trick to revive the economy has failed, war is the last remaining outcome).

So while we await to see if Europe’s turn to ultra right wing movements accelerates in the coming months, we just learned of a very disturbing development in just as insolvent Ukraine, where moments ago the website of the local Ministry of Defense reported that Dmytro Yarosh, leader of Ukraine’s “Right Sector” political party, whose political ideology has been described as nationalist, ultranationalist, neofascist, right-wing, or far right, was just appointed as Advisor to Chief of General Staff. From the Ukraine ministry of defense:

Dmytro Yarosh appointed as Advisor to Chief of General Staff – Dmytro Yarosh, leader of ‘Pravyi Sector’ (Right Sector) political party, appointed as Advisor to Chief of General Staff. Yesterday, Colonel General Viktor Muzhenko, Chief of General Staff, and Dmytro Yarosh agreed the format of cooperation between ‘Pravyi Sector’ and the Ukrainian Armed Forces. Colonel General Viktor Muzhenko stressed the Ukrainian army had become one of the strongest armies of Europe; the Ukrainian soldiers proved they knew how to fight and appreciated the contribution of volunteer battalions to defense of Ukraine and said: “We understand the needs of changes and increase of efficiency at all the army levels. We also consider various models of formation of the army reserve.

We are developing the reforms and will implement them. We gathered all the patriots and defenders of Ukraine under single leadership. The enemy understands our unity and that its attempts end in failure. We have one goal and the united Ukraine. The Army becomes stronger each week”. Dmytro Yarosh underlined the unity was the key precondition for further successful fighting and demonstrated the readiness to establish the cooperation and integration of volunteer battalions to the Ukrainian Armed Forces. ‘Pravyi Sector’ is ready to be subordinated to military leaders in issues related to defense of state from the external enemy.

In other words, the leader of Ukraine’s Neo-Nazis will, as a local “patriot and defender of Ukraine” be advising, i.e., fighting for, what little remains of Ukraine’s army. Sadly the parallels with Europe of the 1920s and 1930s, not to mention the decade just following, grow more visible with every passing day.

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“..the UN warned in December that Kyiv’s embargo might be a violation of its obligations to citizens in the rebel-held territory.”

Eastern Ukraine Leaders Appeal To Merkel, Hollande To End Embargo (DW)

Alexander Zakharchenko and Igor Plotnitsky, the elected leaders of Donetsk and Luhansk, called for an end to Kyiv’s embargo on government services in eastern Ukraine on Saturday. In an open letter to Chancellor Angela Merkel and President Francois Hollande, they asked the leaders who helped negotiate the ceasefire in Ukraine to use their “influence to encourage Ukrainian offices to begin paying out welfare services to Donbass residents once again.” The government in Kyiv placed an embargo on social services to the country’s eastern residents in November following what it deemed illegal elections that gave power to Zakharchenko and Plotnitsky.

Although the EU, the US and the UN also condemned the polls, the UN warned in December that Kyiv’s embargo might be a violation of its obligations to citizens in the rebel-held territory. “The fate for many [in those areas] may well be life-threatening,” the Office of the UN High Commissioner for Human Rights said.” Kyiv had not only ceased paying out pensions, but had also relocated hospitals, schools and prisons, leaving a what the UNHCHR described as a “severe protection gap.”

The open letter to Merkel and Hollande also pointed to numerous violations of a ceasefire, which was implemented in February. Both Kyiv and Donbass have blamed each other for not upholding the truce. Over the weekend, three soldiers were killed by a landmine near Donetsk. Those were the first deaths reported since Monday, when one soldier was killed. Fighting in the region has claimed roughly 6,000 lives since last spring.

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The whole world should speak up against this warfare. Where’s the US?

Saudi Arabia Rejects Russian UN All-Inclusive Arms Embargo on Yemen (RT)

Saudi Arabia has rejected Russia’s amendments to a Security Council draft resolution which would see an all-inclusive arms embargo on all parties in the Yemeni conflict, as it continues to spiral out of control with civilian death toll climbing up. “There is little point in putting an embargo on the whole country. It doesn’t make sense to punish everybody else for the behavior of one party that has been the aggressor in this situation,”Saudi Arabia’s representative to the UN Abdallah Al-Mouallimi said after a closed emergency UN Security Council meeting on Saturday. Al-Mouallimi added that he “hopes” Russia won’t resort to its veto power in case the all-inclusive embargo clause is not added into the draft submitted by the Gulf Cooperation Council that urges an arms embargo only on the Houthis.

At the same time, Riyadh agreed with Moscow’s calls for need of “humanitarian pauses” in the Saudi-led coalition’s air campaign in Yemen – though saying that Saudi Arabia already cooperates fully in this regard. “We always provided the necessary facilities for humanitarian assistance to be delivered,” Al-Mouallimi told reporter heading out of the meeting. “We have cooperated fully with all requests for evacuation.” Moscow convened an emergency meeting on a draft resolution demanding “regular and obligatory” breaks in air assaults against Houthi rebels, in which many civilians keep dying in increasing numbers. The Russian-proposed draft circulated on Saturday demanded “rapid, safe and unhindered humanitarian access to ensure that humanitarian assistance reaches people in need.”

The current council president and Jordan’s Ambassador Dina Kawar said that the council members “need time” to consider the Russian draft resolution, adding that the talks would continue. “We hope that by Monday we can come up with something,” Kawar said. The 15-member council is considering the possibly of merging the Russian and Gulf Cooperation Council proposed drafts into one. The Security Council meeting coincided with the call from the International Committee of the Red Cross for a “humanitarian pause.” The NGO urged to break hostilities for at least 24 hours. “We urgently need an immediate halt to the fighting, to allow families in the worst affected areas, such as Aden, to venture out to get food and water, or to seek medical care,” said Robert Mardini, head of the ICRC’s operations in the Near and Middle East.

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As per these geniuses, Americans are going to drive like crazy. Storage problem? Just make gasoline! It’s the Forrest Gump approach.

Record Gasoline Output to Curb Biggest US Oil Glut in 85 Years (Bloomberg)

Refiners are poised to make gasoline at a record pace this year, keeping the biggest U.S. crude glut in more than 80 years from overflowing storage. They’re enjoying the best margins in two years as they finish seasonal maintenance of their plants before the summer driving season. They’ll increase output to meet consumer demand and they’ve added more than 100,000 barrels a day of capacity since last summer, when they processed the most oil on record. Booming crude production expanded inventories this year by 86 million barrels to 471 million, the highest level since 1930. Analysts from BofA to Goldman Sachs have said storage space may run out. What looks like an oversupply to banks is turning into an all-you-can-eat buffet for those making gasoline and diesel fuel.

“A lot of the excess crude we’ve been sitting on is going to get chewed up quickly,” Sam Davis at Wood Mackenzie, said in Houston April 2. “We’re going to move from a stock build to a stock draw.” Goldman Sachs and Bank of America have said storage builds are increasing the risk of breaching storage capacity, sending prices tumbling. West Texas Intermediate, the U.S. benchmark, already has lost more than half its value since June as growing U.S. shale production led to a global oversupply. Inventories surged as U.S. output rose 71% over the past five years as drillers used techniques like horizontal drilling and hydraulic fracturing to tap previously inaccessible oil in shale rock layers.

In Cushing, Oklahoma, the delivery point for WTI futures, supplies have more than tripled since early October to a record 58.9 million barrels. Last July, refiners processed 16.5 million barrels of crude a day, the highest level in monthly Energy Department data going back to 1961. Refining margins in March have averaged $28.09 a barrel, the most since March 2013. Refiners typically schedule maintenance shutdowns in the spring and fall, reducing oil demand during that time. U.S. refiners increased crude runs by an average 1.1 million barrels a day in April through July over the past five years. During that period, U.S. crude inventories have fallen an average of 24.7 million barrels from the end of May through September.

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Just lovely.

UK Law Changed To Force Nuclear Waste Dumps On Local Communities (Guardian)

Nuclear waste dumps can be imposed on local communities without their support under a new law rushed through in the final hours of parliament. Under the latest rules, the long search for a place to store Britain’s stockpile of 50 years’ worth of the most radioactive waste from power stations, weapons and medical use can be ended by bypassing local planning. Since last week, the sites are now officially considered “nationally significant infrastructure projects” and so will be chosen by the secretary of state for energy. He or she would get advice from the planning inspectorate, but would not be bound by the recommendation. Local councils and communities can object to details of the development but cannot stop it altogether.

The move went barely noticed as it was passed late on the day before parliament was prorogued for the general election, but has alarmed local objectors and anti-nuclear campaigners. Friends of the Earth’s planning advisor, Naomi Luhde-Thompson, said: “Communities will be rightly concerned about any attempts to foist a radioactive waste dump on them. We urgently need a long-term management plan for the radioactive waste we’ve already created, but decisions mustn’t be taken away from local people who have to live with the impacts.” Objectors worry that ministers are desperate to find a solution to the current radioactive waste problem to win public support to build a new generation of nuclear power stations.

Zac Goldsmith, one of the few government MPs who broke ranks to vote against the move, criticised the lack of public debate about such a “big” change. “Effectively it strips local authorities of the ability to stop waste being dumped in their communities,” he said. “If there had been a debate, there could have been a different outcome: most of the MPs who voted probably didn’t know what they were voting for.”

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Apr 032015
 
 April 3, 2015  Posted by at 9:19 am Finance Tagged with: , , , , , , , ,  10 Responses »
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G.G. Bain Pelham Park Railroad, City Island monorail, NY 1910


‘EU Has Already Collapsed’– Beppe Grillo (RT)
The Principal And Interest On Debt Myth (Steve Keen)
Greece Scraps Hospital Visit Fee, To Hire 4,500 Health Workers (Reuters)
Greek Reforms: Right Direction Or Road To Ruin? (CNBC)
Greece Draws Up Drachma Plans, Prepares To Miss IMF Payment (AEP)
Tsipras To Seek ‘Road Map’ During Russia Visit (Kathimerini)
Eurozone Officials: No Loan Tranches For Partial Greece Agreement (Kathimerini)
Euro Debate Ignites in East EU in Face of Public Skepticism (Bloomberg)
Oil Falls Nearly 4% After Tentative Nuclear Deal For Iran (Reuters)
Crude Oil Futures Retreat After Iran Nuclear Deal Reached (Bloomberg)
US to Press for Guilty Plea From Citibank in Currency Probe (Bloomberg)
Why Brazil Has A Big Appetite For Risky Pesticides (Reuters)
Turkey’s 10-Hour Blackout Shows World Power Grids Under Threat (Bloomberg)
Nestlé Called Out For Bottling, Selling California Water During Drought (Reuters)

“I am an ordinary man, a comic, who has found his niche in this world and who woke up one day with a determination to dedicate a bit of his experience, wits and money to the cause of common good.”

‘EU Has Already Collapsed’– Beppe Grillo (RT)

RT: Is the Italian population ready to abandon euro and come back to the lira?

BG: Yes, the lira. Rather, a lira. Not the lira we used to have twenty years ago. But let’s call this new currency lira, with the lira-euro rate 1 to 1. For me, leaving the Eurozone means primarily launching a currency I call lira, which is not the lira we had 20 years ago, but let’s retain the name lira all the same. When we switch to the new lira its value will automatically decline by 20-30%. It will be an immediate shock. And what will happen next? We’ll have to pay more for commodities. But we do not market commodities, what we do is process them. We buy oil and refine it, we buy soybeans and grain and process them. We refine oil to produce petrol getting back the 30% in added value, and it won’t significantly affect the final petrol price – 5-10 cents per liter at most. And we’ll get a 30% export benefit. I think we’ll become number one in Europe, since we are absolute leaders in terms of industrial production.

Our foreign debt will be reduced by 30%, our credits too. What is there to be afraid of? They do their best to scare you as soon as you start considering the option of walking out. They start shouting, “Oooooh, what a catastrophe”. It is their problem, their catastrophe, not ours, it is unrelated to intelligent, hardworking people who are intent on doing this. It’s the catastrophe for those who earn money staying at home, abusing the financial system, receiving capital gains, who don’t work for real and are not part of the real economy. Yes, considering that the financial transaction volume, as it seems, exceeds global GDP by 10-15%. Take the German Bundesbank. If you inspect its balance you’ll find there 70 thousand billion dollars in derivatives, hedge funds, financial products etc.

And you want them to invest in real economy – in small factories and that sort of thing! But mind you, Germany is also having a hard time. We should treat this issue with utmost care and attention. The problem, as I see it, largely depends on you, my friends, on how you translate this interview, which parts you’ll choose to broadcast and what your audience will eventually be able to make out of what I said here. Here’s the real problem. We don’t have facts any more, reliable truthful facts. We know nothing about the situation in Afghanistan, or about Iran. We don’t have a slightest idea of what Putin says, because everything is delivered to us in translation made by some American or Israeli language services agency. We can’t have the truth.

So first we need to imagine what this truth may be like and go search for it, even if we have to sacrifice something. I appeal to you- go and look for information. Look at me. Dig for truth and don’t believe the journalists who stick labels calling me a rightist, a leftist, a homophobe, a racist and what not. They call me all kinds of names. And, in fact, I am an ordinary man, a comic, with 40 years of professional career under belt, who has found his niche in this world and who woke up one day with a determination to dedicate a bit of his experience, wits and money to the cause of common good. This is what scares people.

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Buddy Steve takes you through it one more time.

The Principal And Interest On Debt Myth (Steve Keen)

There are many ways that you can divide the world into two groups. Men and women, for example—with the former being about 50.2% of the population and the latter 49.8%. Or those that like math and those that don’t—where there are no accurate figures, but I’d hazard a guess at a 10% to 90% split. The (almost) binary grouping that motivated this post is between those who reckon that banks, debt and money are of no real consequence in capitalism, and those who believe that the mere mechanics of banking guarantee that capitalism is doomed. The former includes the vast majority of economists, who delusionally model the macroeconomy as if banks, debt and money don’t exist. The latter includes most of the general public, who know that banks create money when they create a loan, and think that because banks insist on interest on loans, the money supply has to grow indefinitely.

I reckon the split in this binary division is about 0.1% in the “banks don’t matter” camp, and 99.9% in the “debt can’t be paid” group. But there is also a statistically insignificant handful who reckon that both groups are wrong. I’m one of that handful, and both other groups exasperate the hell out of me, and my sprinkling of like-minded colleagues—hi Stephanie, Scott, Richard [both of you] and a few others. A tweet from one the 99.9% finally pushed me over the edge on Twitter this weekend—see Figure 1—and I promised that I’d devote my next column on Forbes to debunking this myth.

The myth itself is clearly stated in Bernie King’s tweet: because banks lend principal, but insist that principal and interest be paid by the debtor, the money supply has to grow continuously to make this possible. The corollary is that since debt creates money, debt has to grow continuously too—faster than income—and that’s why capitalism has financial crises. So why is it wrong? In words, it’s because it confuses a stock (debt in dollars) with a flow (interest in dollars per year). But I’m not going to stick with mere words to try to explain this, because it’s fundamentally a mathematical proposition about accounting—that money must grow to allow interest to be paid on debt—and it’s best debunked using the maths of accounting, known as double-entry bookkeeping. So if you want to know why it’s a myth, brace yourself to do some intellectual work to follow the logic.

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As brave as it is necessary.

Greece Scraps Hospital Visit Fee, To Hire 4,500 Health Workers (Reuters)

Greek Prime Minister Alexis Tsipras said a €5 fee to access state hospitals had been scrapped and 4,500 healthcare workers would be hired, the latest move by his leftist government to ease what it calls a humanitarian crisis in the country. The move is likely to further endear Tsipras to austerity-weary Greeks but represents yet another potential outlay by the cash-strapped government at a time when its European and IMF lenders are demanding a commitment to fiscal rigour. Still, the abolition of the 5 euro fee for hospital visits would hurt the budget by less than €20 million annually and the health workers are expected to be hired without running afoul of Greece’s pledge to trim the public sector.

“We want to turn the health sector from a victim of the bailouts, a victim of austerity, into a fundamental right for every resident of this country and we commit to do so at any cost,” Tsipras said, adding he would fight “barbaric conditions” in public hospitals and corruption in the sector. His government would unify data systems as part of measures to boost transparency and save money, he said, in a nod to a longtime demand from international lenders. In a package of reforms sent to lenders on Wednesday, Greece said it planned comprehensive healthcare reform with the universal right to quality healthcare. It cited a fiscal impact of €2.1-2.7 billion without specifying if that represented outlays or potential revenues from tackling corruption.

Greece spends €11 billion a year on its public healthcare system – accounting for about 5% of its total economic output, which Tsipras said represented the lowest level of health spending among EU countries. Years of deep cuts in health spending have hurt standards of care in Greece’s state hospitals where there is often a shortage of basic supplies while fewer doctors and nurses look after more patients, an increasing number of whom are uninsured. About 2.5 million Greeks have no health insurance, Tsipras said. Health officials caution that despite the worsening conditions in the sector, most Greeks are able to access the health system without insurance. “All citizens, after this terrifying crisis, should have access to healthcare irrespective of whether they have insurance or not,” Tsipras said. “We will not tolerate the exploitation of human pain.”

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“While it has cut government spending, Greece has also suffered from falling tax revenues, which means that its deficit figures are worse than its targets..”

Greek Reforms: Right Direction Or Road To Ruin? (CNBC)

Greece may have put together an updated list of reform proposals, but as its new government finds it more difficult to secure concessions, there are still fears the country could crash out of the euro zone. The contents of the new reforms list, which has been published by the Greek press and involves raising an extra €4.7-6.1 billion in government revenues, represents “a clear step in the right direction” according to economists at Barclays Capital. This means that, in effect, the Greek government has offered some concession to European authorities on the continuing wrangles over the austerity measures imposed as part of its bailout. Since Greece elected a new government in January, led by the left-wing Syriza party, which promised to bring an end to austerity, the tone of its negotiations with international creditors has changed, raising fears that it may end up defaulting on its debt repayments and exiting the euro zone.

What is certain is that Greece still needs external financial support, particularly the €7.2 billion in bailout funds which it hopes to unlock from its international lenders. To date, Greece has received two bailouts worth a total of €240 billion. Its lenders are keeping up the pressure on Greek politicians to reach a compromise. On Wednesday, the ECB raised Greece’s emergency liquidity by a modest €700 million to €71.8 billion, which Rabobank strategists argued continues “a strategy whereby Greece’s leeway in terms of liquidity is strictly rationed.” While it has cut government spending, Greece has also suffered from falling tax revenues, which means that its deficit figures are worse than its targets, and its deficit was still rising at the end of February. The other peripheral euro zone economies which were bailed out during the credit crisis are in various stages of recovery, but Greece has lagged behind. “Greece’s budget consolidation is unravelling,” Jessica Hinds at Capital Economics wrote in a research note.

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That’s exactly what I wrote a few days ago: of course they’re preparing to leave. But that’s all you can read into this. Ambrose may count for more than me, but it’s the same message.

Greece Draws Up Drachma Plans, Prepares To Miss IMF Payment (AEP)

Greece is drawing up drastic plans to nationalise the country’s banking system and introduce a parallel currency to pay bills unless the eurozone takes steps to defuse the simmering crisis and soften its demands. Sources close to the ruling Syriza party said the government is determined to keep public services running and pay pensions as funds run critically low. It may be forced to take the unprecedented step of missing a payment to the IMF next week. Greece no longer has enough money to pay the IMF €450 million on April 9 and also to cover payments for salaries and social security on April 14, unless the eurozone agrees to disburse the next tranche of its interim bail-out deal in time “We are a Left-wing government. If we have to choose between a default to the IMF or a default to our own people, it is a no-brainer,” said a senior official.

“We may have to go into a silent arrears process with the IMF. This will cause a furore in the markets and means that the clock will start to tick much faster,” the source told The Telegraph. Syriza’s radical-Left government would prefer to confine its dispute to EU creditors but the first payments to come due are owed to the IMF. While the party does not wish to trigger a formal IMF default, it increasingly views a slide into pre-default arrears as a necessary escalation in its showdown with Brussels and Frankfurt. The view in Athens is that the EU creditor powers have yet to grasp that the political landscape has changed dramatically since the election of Syriza in January and that they will have to make real concessions if they wish to prevent a disastrous rupture of monetary union, an outcome they have ruled out repeatedly as unthinkable.

“They want to put us through the ritual of humiliation and force us into sequestration. They are trying to put us in a position where we either have to default to our own people or sign up to a deal that is politically toxic for us. If that is their objective, they will have to do it without us,” the source said. Going into arrears at the IMF – even for a few days – is an extremely risky strategy. No developed country has ever defaulted to the Bretton Woods institutions. While there would be a grace period of six weeks before the IMF board declared Greece to be in technical default, the process could spin out of control at various stages. Syriza sources say are they fully aware that a tough line with creditors risks setting off an unstoppable chain-reaction. They insist that they are willing to contemplate the worst rather than abandon their electoral pledges to the Greek people.

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“Greece ‘will reassure the Russians, not the Westerners.'”

Tsipras To Seek ‘Road Map’ During Russia Visit (Kathimerini)

The aides of Greek Prime Minister Alexis Tsipras and Russian President Vladimir Putin, and the Greek and Russian embassies in Moscow and Athens, are feverishly preparing for a scheduled visit by Tsipras to the Russian capital on April 8 and 9 which the Greek government hopes will serve to significantly upgrade bilateral ties. According to a well-informed source, Tsipras is expected to seek agreement for a “road map” of initiatives on the political and economic levels. Talks are expected to touch on several topics of bilateral interest, including “commercial and financial cooperation, investments, energy, tourism and cooperation in matters of education and culture,” according to Tsipras’s office.

Other topics on the agenda include “the relationship between Russia and the European Union, as well as regional and international issues.” Tsipras is expected to emphasize Greece’s respect for its commitments as a member of the EU and NATO on the one hand while underlining his conviction that the European Union’s “security architecture” should include Russia. Amid European concerns about Greece’s position vis-a-vis EU sanctions against Russia, Greek officials have sought to offer reassurances, suggesting that Athens will not actively oppose the EU line. But sources close to Tsipras said the government will continue to express its disagreement with sanctions as a policy.

As for a likely bilateral cooperation in the energy sector, a high-ranking government source told Kathimerini that Greece “will reassure the Russians, not the Westerners.” According to sources, Energy Minister Panayiotis Lafazanis has already agreed in principle to a proposal made by the head of Russian giant Gazprom, Alexey Miller, for a new gas pipeline through Turkey to be extended through Greek territory. The plan foresees the creation of a consortium in which Greece’s Public Gas Corporation (DEPA) would play a key role along with Russian funds and possibly also European clients of Gazprom, Kathimerini understands.

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As the game continues, it inevitably becomes less transparent.

Eurozone Officials: No Loan Tranches For Partial Greece Agreement (Kathimerini)

Greece is revisiting the possibility that it might be able to get some of the €7.2 billion remaining in bailout funding in return for part of the reforms being demanded by creditors but Kathimerini understands that the eurozone does not believe this option is available. Three European officials who spoke to Kathimerini on Thursday on condition of anonymity said there is no question of Athens receiving funding unless there is first an agreement on the entirety of the reform package. “There cannot be a partial agreement,” one of the three said. The next time Greece will be discussed is at a Euro Working Group (EWG) on April 8, a day ahead of Athens having to pay €450 million to the IMF.

Unnamed eurozone officials told Reuters that Greece expressed fears during the last EWG that it would run out of money on April 9. However, this claim was immediately denied by the government. “The Finance Ministry categorically denies an anonymous report by Reuters on issues which were supposedly discussed during the Euro Working Group on April 1,” the Finance Ministry said in a statement. Eurogroup chief Jeroen Dijsselbloem said negotiations with Athens are “improving” but that there is still much ground for Greece and its lenders to cover before an agreement on reforms could be reached. “They deliver more and more proposals that are more and more detailed.

On some parts, we will definitely reach an agreement,” he said, adding that he does not expect the Eurogroup to meet next week to discuss Greek reforms. “There must be a good package which can also be realized in the four months we’re talking about,” Dijsselbloem said. “The clock continues to tick.” The Finance Ministry insisted on Thursday that Greece’s primary surplus target for this year will be 1.2 to 1.5% despite the fact that the proposals it sent to lenders, which were leaked on Wednesday, indicated a goal of 3.1 to 3.9%.

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Only fools and horses would volunteer to join the euro at this point.

Euro Debate Ignites in East EU in Face of Public Skepticism (Bloomberg)

While Greece may have one foot out the door, policy makers in the European Union’s east are reopening the debate about whether to join the euro area after years of shunning the currency during the global financial crisis. In the Czech Republic, the prime minister said on Wednesday that joining the euro soon would help the economy after the president challenged the central bank’s long-standing resistance with a vow to appoint policy makers who favor the common currency. In Poland, the main divide between the top two candidates in the May 10 presidential election is whether the region’s biggest economy should ditch the zloty. “It’s quite interesting how the sentiment has shifted — I’m slightly surprised by this,” William Jackson at Capital Economics said.

“As the story coming from the euro zone in recent years has been negative, it’s very hard to imagine how the euro case for the public would be made now.” The obstacles are many. Romania, which has set 2019 as a potential target date, and Hungary don’t meet all the economic criteria. Poland faces legal hurdles and the Czech government has said it won’t set a date during its four-year term. As a standoff between Greece and euro-area leaders threatens to push the country into insolvency and potential exit, opinion polls show most Czechs and Poles oppose a switch.

The appeal of the euro, which all European Union members save Britain and Denmark are technically obliged to join, suffered when the area had to provide emergency loans to ailing members during the economic crisis. While five ex-communist countries that joined the trading bloc in 2004 – Slovakia, Slovenia, Estonia, Latvia, and Lithuania – have acceded, the Czech Republic, Poland and Hungary don’t have road maps. The region’s three biggest economies argued that floating currencies and control over monetary policy helps shield themselves against shocks like the euro crisis even if smaller countries may benefit from lower exchange-rate volatility and reduced trade costs. Facing weakening in their korunas, zlotys, and forints, some politicians in eastern Europe are questioning that logic.

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The new US balance act make everybody wobble on their feet.

Oil Falls Nearly 4% After Tentative Nuclear Deal For Iran (Reuters)

Brent oil fell nearly 4% on Thursday after a preliminary pact between Iran and global powers on Tehran’s nuclear program, even as officials set further talks in June and analysts questioned when the OPEC member will be allowed to export more crude. Traders had been fixated on the talks held in Lausanne, Switzerland for over a week as Iran tried to agree with six world powers on concessions to its nuclear program to remove U.S.-led sanctions that have halved its oil exports. The sanctions against Iran will come off under a “future comprehensive deal” to be agreed by June 30, after it complies with nuclear-related provisions, Iranian Foreign Minister Javad Zarif told a news conference. “If nothing is going to be signed until June, something could go wrong between now and then,” said Phil Flynn, analyst at Price Futures Group in Chicago.

Bob McNally, an adviser to former U.S. president George Bush who heads energy research firm Rapidan Group, noted Iran will need much patience as the “sanctions are not likely to be lifted until late 2015 or early 2016, though we could see slippage beforehand.” North Sea Brent crude futures, the more widely-used global benchmark for oil, settled down $2.15, or 3.8%, at $54.95 a barrel, almost $1 above the session low. U.S. crude futures settled down 95 cents, or 2%, at $49.14 a barrel, after falling nearly $2 earlier. “I think the market over reacted and is now sitting back a little to think there is a lot more work to be done,” said Dominick Chirichella at the Energy Management Institute. Under the preliminary deal, Iran would shut down more than two-thirds of its centrifuges producing uranium that could be used to build a bomb, dismantle a reactor that could produce plutonium and accept intrusive verification. Iran also needs to limit enrichment of uranium for 10 years.

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“Prices pared losses on speculation no additional Iranian oil will flow into the global market in the short term.”

Crude Oil Futures Retreat After Iran Nuclear Deal Reached (Bloomberg)

Crude oil futures declined after Iran and world powers said they reached an outline accord that keeps them on track to end a decade-long nuclear dispute. Brent slid 3.8% in London, while West Texas Intermediate crude dropped 1.9% in New York. The sides now have until the end of June to bridge gaps and draft a detailed technical agreement that would ease the international sanctions imposed on Iran, including oil exports. Prices pared losses on speculation no additional Iranian oil will flow into the global market in the short term. “This is mildly bearish,” Michael Lynch at Strategic Energy & Economic Research, said by phone. “We were expecting more Iranian oil to hit the market regardless of the outcome of the talks. They are not about to dump oil on the market.”

Iran, a member of OPEC, could boost shipments by 1 million barrels a day if penalties are lifted, Oil Minister Bijan Namdar Zanganeh said March 16. Extra supplies would add to a worldwide glut that’s sent oil prices 50% lower since last year. WTI for May delivery settled down 95 cents to end at $49.14 a barrel on the New York Mercantile Exchange. The contract climbed $2.49 to $50.09 on Wednesday, the biggest gain since February. Brent for May settlement declined $2.15 to $54.95 a barrel on the ICE Futures Europe exchange. The European benchmark crude traded at a premium of $5.81 to WTI on the ICE. Both exchanges are closed April 3 for the Good Friday holiday. Sanctions against oil exports will be lifted upon the deal’s completion, Iran’s Tasnim news service reported.

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Some criminals just negotiate, knowing they don’t risk any penaties thermselves, only their firm will get wrist-slapped. “Citigroup has countered with an offer that the plea come from a subsidiary that’s smaller than the Citibank NA unit..”

US to Press for Guilty Plea From Citibank in Currency Probe (Bloomberg)

The U.S. Department of Justice is pressing for Citigroup’s main banking subsidiary to plead guilty to a felony tied to the rigging of foreign-exchange markets, according to two people briefed on the matter. Citigroup has countered with an offer that the plea come from a subsidiary that’s smaller than the Citibank NA unit, the people said, asking not to be identified discussing private negotiations. An agreement could come as soon as May and the related fine probably won’t exceed $1 billion, one of the people said. Two other people said the Justice Department is weighing all options and hasn’t decided on a particular entity. A guilty plea by its main banking unit might threaten Citigroup’s ability to operate certain types of businesses through that subsidiary, which accounted for more than 70% of the firm’s revenue last year.

The Justice Department has been investigating banks’ alleged manipulation of currency benchmarks for almost two years, and is pressing to resolve the probe with settlements that include guilty pleas, people familiar with the negotiations have told Bloomberg.
Authorities want the pleas to come from entities of greater importance within the banks, while the companies would prefer smaller units, according to two people briefed on the talks. JPMorgan, for example, would rather have its U.K.- based subsidiary plead guilty, arguing the behavior occurred there, the people said. Citibank reported $10.3 billion of net income in 2014 and at year-end it held assets of $1.36 trillion, or 74% of Citigroup’s total, according to Federal Deposit Insurance Corp. data.

The parent company books the vast majority of its derivatives trades through the unit, which typically benefits from a higher credit rating and lower funding costs. A guilty plea by the nation’s third-biggest bank would set a new bar for criminal enforcement in the U.S. financial industry. While JPMorgan and Citigroup have paid billions of dollars in fines to resolve probes into their business practices since the 2008 financial crisis, neither has been convicted of a crime in the U.S. Settlements with the two New York-based firms would come around the same time as at least three other banks, one person said, declining to identify them. Another person familiar with the matter said last month that Citigroup and JPMorgan were in settlement talks along with UBS, Barclays and RBS.

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“What’s toxic in one place is toxic everywhere, including Brazil.”

Why Brazil Has A Big Appetite For Risky Pesticides (Reuters)

The farmers of Brazil have become the world’s top exporters of sugar, orange juice, coffee, beef, poultry and soybeans. They’ve also earned a more dubious distinction: In 2012, Brazil passed the United States as the largest buyer of pesticides. This rapid growth has made Brazil an enticing market for pesticides banned or phased out in richer nations because of health or environmental risks. At least four major pesticide makers – U.S.-based FMC, Denmark’s Cheminova, Helm of Germany and Swiss agribusiness giant Syngenta – sell products here that are no longer allowed in their domestic markets, a Reuters review of registered pesticides found. Among the compounds widely sold in Brazil: paraquat, which was branded as “highly poisonous” by U.S. regulators. Both Syngenta and Helm are licensed to sell it here.

Brazilian regulators warn that the government hasn’t been able to ensure the safe use of agrotóxicos, as herbicides, insecticides and fungicides are known in Portuguese. In 2013, a crop duster sprayed insecticide on a school in central Brazil. The incident, which put more than 30 schoolchildren and teachers in the hospital, is still being investigated. “We can’t keep up,” says Ana Maria Vekic, chief of toxicology at Anvisa, the federal agency in charge of evaluating pesticide health risks. FMC, Cheminova and Syngenta said the products they sell are safe if used properly. A ban in one country doesn’t necessarily mean a pesticide should be prohibited everywhere, they argue, because each market has different needs based on its crops, pests, illnesses and climate.

“You can’t compare Brazil to a temperate climate,” says Eduardo Daher, executive director of Andef, a Brazilian pesticide trade association. “We have more blights, more insects, more harvests.” Public-health specialists here reject that argument. “So what if the needs of crops or soils in Brazil are different?” says Victor Pelaez, a food engineer and economist at the Federal University of Paraná, in southern Brazil. “What’s toxic in one place is toxic everywhere, including Brazil.”

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Who in the west will not think: oh, well, Turkey, isn’t that the third world?

Turkey’s 10-Hour Blackout Shows World Power Grids Under Threat (Bloomberg)

A massive power failure that crippled life in Turkey for almost 10 hours on Tuesday highlights the threats facing grids worldwide. Turkey’s most extensive power failure in 15 years, which left people stranded in elevators and traffic snarled, wasn’t the result of a lack of electricity. The prime minister said all possible causes – including a cyber-attack – were being investigated. While the source of the problem is still unknown, recent revelations that a 2008 oil pipeline explosion in Turkey was orchestrated via computer and the high-profile attack last year on Sony Pictures Entertainment demonstrate the increasing ability of hackers to penetrate systems. For power grids, technology being added to make them more reliable and productive is also giving attackers an entry point into vital infrastructure.

“Every country, including the U.S., will be looking at it to see what the vulnerabilities were and learn some lessons about protection,” said Kit Konolige, a New York-based utility analyst for Bloomberg. “An electric grid is a complex system and it’s hard to ensure that it’s defended everywhere.” Several foreign governments have hacked into U.S. energy, water and fuel distribution systems and might damage essential services, the National Security Agency said in November. A report by California-based cybersecurity company SentinelOne predicts that such attacks will disrupt American electricity in 2015.

“More and more attacks are targeting the industrial control systems that run the production networks of critical infrastructure, stealing data and causing damage,” said David Emm, a principal researcher at Moscow-based security company Kaspersky Lab Inc., which advises governments and businesses. All power use was previously measured by mechanical meters, which were inspected and read by a utility worker. Now, utilities are turning to smart meters, which communicate live data to customers and the utility company. This opens up the systems to hackers.

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“Nestlé may be bottling more than locals drink from the tap.”

Nestlé Called Out For Bottling, Selling California Water During Drought (Reuters)

Nestlé is wading into what may be the purest form of water risk. A unit of the $243 billion Swiss food and drinks giant is facing populist protests for bottling and selling perfectly good water in Canada and drought-stricken California. Nestlé Waters says it does nothing harmful in the watersheds where it operates. Its parent company also signed and strongly supports the United Nations-sponsored CEO Water Mandate, which develops corporate sustainability policies. The company is under fire in British Columbia, though, for paying only $2.25 for every million liters of water it withdraws from local sources. Yet the provincial government sets the price and until this year charged nothing. The rates are also far higher in Quebec, which charges $70, and Nova Scotia, where the price is $140.

Nonetheless, 132,000 people have signed an online petition demanding the government stop allowing Nestlé to take water on the cheap. The company’s reputation may be at even greater risk in California, whose severe drought is in its fourth year. The Courage Campaign has organized an online petition, with more than 40,000 signatures so far, that demands Nestlé Waters stop bottling H2O during the drought. There are several local protests, too. The Swiss firm drew 50 million gallons from Sacramento sources last year, less than 0.5% of the Sacramento Suburban Water District’s total production. It amounts to about 12% of residential water use, though, and is just shy of how much water flows from home faucets in the United States, according to the U.S. Environmental Protection Agency.

In other words, Nestlé may be bottling more than locals drink from the tap. Consumers can only blame themselves, of course, for buying so much bottled water. The average price for a gallon is $1.21, according to the International Bottled Water Association. For just $1.60, Californians could purchase 1,000 gallons of tap water, according to the National Resources Defense Council. Moreover, Nestlé’s water business is its smallest and least profitable, generating a trading operating profit last year of 10.3% – less than half that of its powdered and liquid beverages unit. With California imposing a 25% cut on residential water use, Nestlé Waters may want to consider turning off its own taps.

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