Aug 042017
 August 4, 2017  Posted by at 1:26 pm Finance Tagged with: , , , , , ,  7 Responses »

William Blake Europe Supported by Africa and America 1796


Earlier this week I was struck by the similarities and differences between two graphs I saw float by. And the thought occurred that they are as scary as they are interesting. The graphs show eerily similar trends. And complement each other. The first graph, which Tyler Durden posted, shows productivity, defined as more or less the same as GDP per capita. It goes all the way back to 1790 and contends that 2017 productivity is about back to the level it was at in 1790. In the article, Tyler suggests a link with the amount of time people spend on Instagram et al, but perhaps there is something more going on.

That is, America and Western Europe exported almost their entire manufacturing capacity to China etc. And how can you be productive if you don’t manufacture anything? Yeah, I know, ‘knowledge economy’ and ‘service economy’ and all that, but does anyone still really believe those terms? Sure, that may have worked for a while as others were still actually making stuff (and nobody really understood the idea anyway), but it’s a sliding scale. As productivity plunged, so did GDP per capita. We can all wrap our heads around that.

America’s Productivity Plunge Explained

For the first time since the financial crisis, US multifactor productivity growth turned negative last year, mystifying economists who have struggled to find something to blame for the fact that worker productivity is declining despite a technology boom that should make them more efficient – at least in theory. To be sure, economists have struggled to find explanations for the exasperating trend, with some arguing that the US hasn’t figured out how to properly measure productivity growth correctly now that service-sector jobs proliferate while manufacturing shrinks. But what if there’s a more straightforward explanation? What if the decline in US productivity measured since the 1970s isn’t happening in spite of technology, but because of it?

To wit, Facebook has just released user-engagement data for its popular Instagram photo-sharing app. Unsurprisingly, the data show that the average user below the age of 25 now spends more than 32 minutes a day on the app, while the average user aged 25 and older. The last time Facebook released this data, in October 2014, its users averaged 21 minutes a day on the app. According to Bloomberg, “time spent is an important metric for advertisers, which like to hear that users are browsing an app beyond quick checks for updates, making them more likely to run into some marketing.” Maybe they should matter more to economists, too.


When asking the question “What if the decline in US productivity measured since the 1970s isn’t happening in spite of technology, but because of it?”, a next question should be: what is the technology used for? And if the answer to that is not “for making things”, then what do you think could its effect on productivity could possibly be?

Tyler took that graph from an article posted August 22, 2015, also on Zero Hedge, by Eugen Bohm-Bawerk, who at the time had some interesting things to say about it:

Productivity In America Now On Par With Agrarian Slave Economy

[..] it is time to take a closer look at productivity measured in terms of GDP per capita. While this is not an entirely correct way to measure productivity, it does adhere to new classical growth model theories which posit that in a developed economy, reached steady state, the only way to increase GDP per capita is through increased total factor productivity. In plain English, growth in GDP per capita equals productivity growth. The reason we use this concept instead of more advanced productivity measures is to get a long enough time series to properly understand the underlying fundamental forces driving society forward.

In our main chart we have tried to see through all the underlying noise in the annual data by looking at a 10-year rolling average and a polynomial trend line. In the period prior to the War of 1812 US productivity growth was lacklustre as the economy was mainly driven by agriculture and slaves (slaves have no incentive to work hard or innovate, only to work just hard enough to avoid being beaten). From 1790 to 1840 annual growth averaged only 0.7%. As the first industrial revolution started to take hold in the north-east, productivity growth rose rapidly, and even more during the second industrial revolution which propelled the US economy to become the world largest and eventually the global hegemon [..]

Adjusting for the WWII anomaly (which tells us that GDP is not a good measure of a country’s prosperity) US productivity growth peaked in 1972 – incidentally the year after Nixon took the US off gold. The productivity decline witnessed ever since is unprecedented. Despite the short lived boom of the 1990s US productivity growth only average 1.2% from 1975 up to today. If we isolate the last 15 years US productivity growth is on par with what an agrarian slave economy was able to achieve 200 years ago.

[..] With hindsight we know that finance did more harm than good so we can conservatively deduct finance from the GDP calculations and by doing so we essentially end up with no growth per capita at all over a timespan of more than 15 years! US real GDP per capita less contribution from finance increased by an annual average of 0.3% from 2000 to 2015. From 2008 the annual average has been negative 0.5%!

In other words, we have seen a progressive (pun intended) weakening of the US economy from the 1970s and the reason is simple enough when we know that monetary policy broken down to its most basic is a transaction of nothing (fiat money) for something (real production of goods and services). Modern monetary policy thereby violates the most sacred principle in a market based economy; namely that production creates its own demand. Only through previous production, either your own or borrowed, can one express true purchasing power on the market place.

The central bank does not need to worry about such trivial things. They can manufacture the medium of exchange at zero cost and express purchasing power on the same level as the producer. However, consumption of real goods and services paid for with zero cost money must by definition be pure capital consumption. Do this on a grand scale, over a long period of time, even a capital rich economy as the US will eventually be depleted. Capital per worker falls relative to competitors abroad, cost goes up and competitiveness falls (think rust-belt). Productive structures cannot be properly funded and the economy must regress to align funding with its level of specialization.

Eugen gets close to what I said earlier about productivity. That is, you have to make stuff, to manufacture things, in order to have, let alone grow, productivity (aka GDP per capita). An economy based -too heavily- on services and finance is not going to do it for you. Because “the most sacred principle in a market based economy” is that “production creates its own demand.”

Now, combine that graph with the next one, from Lance Roberts, which unmistakably depicts the same trendline, though on a different -shorter- time scale. Lance’s graph shows more or less the same as Tyler’s, if you allow me that freedom, namely: GDP per capita growth equals productivity equals GDP growth, but it adds a crucial component (unless you ask someone like Paul Krugman): debt.

Together, the graphs show how we have ‘solved’ the issue of falling growth and productivity: with debt. It doesn’t get simpler than that. We exported our productive capacity to China, and now we can only afford to buy their products -which are mostly inferior in quality to what our ancestors once made- by getting into -more- debt. Big simplification, granted, but we’re doing broad strokes here.



All this is simple enough for a 6-year old to grasp. It’s actually likely easier for them than for most trained economists. Problem is, the 6-year olds are probably busy on Instagram. Tyler’s right on that one. But then, at least they’re not stuck in outdated modelling.

Ergo: we have a precipitous decline in productivity, which also translates into a decline in GDP. Even if we come up with all sorts of accounting tricks to hide this fact. And what do we do, or rather, what have we done? Enter central banks, stage right. That second graph inevitably raises the question: Without all the debt, where would the growth rate stand today? And I know what you want to say, because just like you, I am afraid to ask.

We’ve used all those trillions in new debt to, as far as productivity is concerned, run to not even stand still: productivity (GDP per capita) continues to decline despite all the debt. Why is that? Well, Bohm-Bawerk answers that question earlier: “.. consumption of real goods and services paid for with zero cost money must by definition be pure capital consumption.” In other words, as I said before, if you don’t use it to actually make things, you’re basically just burning it. Plus, in the process, as we see ever clearer in the effects of QE, you can grossly distort an economy, by blowing bubbles, propping up zombies etc.

Things would look different if we used the “zero cost money” for production instead of consumption. But that’s not what the central bank money is used for at all. The net effect of all that debt, be it QE or new mortgage debt, is less than zero. Quite a bit less, actually. How do we solve that problem? The answer is deadly simple, though not easy to put into practice: start making stuff again! Or put it this way: debt must be used to raise production, not consumption.



Apr 122017
 April 12, 2017  Posted by at 9:09 am Finance Tagged with: , , , , , , , , , , ,  2 Responses »

Elliott Erwitt Trocadero, Paris 1950


The Tesla Ponzi Is Not ‘Inexplicable’ At All (WS)
Millennials Are Abandoning Postwar Engines of Growth: Suburbs and Autos (CHS)
Slowdown in US Borrowing Defies Easy Explanation (WSJ)
US Companies Now Have $1.6 Trillion Stashed In Tax Havens (Ind.)
Trump Declines To Endorse Bannon, Says US ‘Not Going Into Syria’ (MW)
Beware The Dogs Of War: Is The American Empire On The Verge Of Collapse? (JW)
A Breakthrough Alternative To Growth Economics – The Doughnut (G.)
The Commodification of Education (Steve Keen)
The Fed Could Use Less Book Learning and More Street Smarts (Ricketts)
Spectre Of Russian Influence Looms Large Over French Election (G.)
Moment Of Reckoning In Turkey As Alleged Coup Plotters Go On Trial (G.)
Greece: Cash and Apartments for Refugees with UNHCR Aid (GR)
Why The Human Race Is Heading For The Fire (G.)



People tend to forget that there are no functioning asset markets left. But there really aren’t.

The Tesla Ponzi Is Not ‘Inexplicable’ At All (WS)

Electric cars have been around for longer than internal combustion engines. When they first appeared in the 1800s, they competed with steam-powered cars and horses. What Tesla has done is put them on the map. That was a huge feat. Now every global automaker has electric cars. They all, including Teslas, still have the same problem they had in the 1800s: the battery. But those problems – costs, weight or range, and time it takes to charge – are getting smaller as the technology advances. And the competition from the giants, once batteries are ready for prime-time, will be huge, and global. So in March, Tesla sold 4,050 new vehicles in the US, according to Autodata. All automakers combined sold 1.56 million new vehicles in the US.

This gave Tesla a record high market share of an invisibly small 0.26%. Volume-wise, it’s in the same ballpark as Porsche. GM sold 256,007 new vehicles in March, for a market share of 16.5%. In other words, GM sold 63 times as many new vehicles as Tesla did. For percent-lovers, that’s 6,221% more. Even if Tesla quadruples its sales in the US, it still will not amount to a significant market share. Then there is Tesla’s financial performance. It lost money in every one of its 10 years of existence. Here are the “profits” – um, net losses – Tesla racked up, in total $2.9 billion:

We constantly hear the old saw that stock prices reflect future earnings and/or cash flows, and that looking back ten years has no meaning for the future. Alas, after 10 years of producing losses, Tesla shows no signs of making money in the future. It might instead continue burning through investor cash by the billions. Based on the logic that stock prices reflect future earnings, its shares should be at about zero. This chart compares Tesla’s net losses (red bars) and GM’s net income (green bars), in millions of dollars. Over those eight years going back to 2010, Tesla lost $2.7 billion; GM earned $47.1 billion:

[..] In comparison with GM, Tesla is ludicrously overvalued. But it’s not “inexplicable.” It’s perfectly explicable by the wondrously Fed-engineered stock market that has long ago abandoned any pretext of valuing companies on a rational basis. And it’s explicable by the hype – the “research” – issued by Wall Street investment banks that hope to get fat fees from Tesla’s next offerings of shares or convertible debt. The amounts are huge, going back ten years: Last month, Tesla raised another $1.2 billion, after having raised $1.5 billion in May 2016. There will be more. Tesla is burning a lot of cash. Investment banks get rich on these deals. The bonuses are huge. So it’s OK to hype Tesla’s stock and sell it to their clients. Everybody wins in this scenario – except for a few despised short sellers who’re hung up on their silly notion of reality.

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They simply can’t afford it.

Millennials Are Abandoning Postwar Engines of Growth: Suburbs and Autos (CHS)

If anything defined the postwar economy between 1946 and 1999, it was the exodus of the middle class from cities to suburbs and the glorification of what Jim Kunstler calls Happy Motoring: freeways, cars and trucks, ten lanes of private vehicles, the vast majority of which are transporting one person. The build-out of suburbia drove growth for decades: millions of new suburban homes, miles of new freeways, sprawling shopping malls, and tens of millions of new autos, trucks, and SUVs, transforming one-car households into three vehicle households. Then there was all the furnishings for those expansive new homes, and the credit necessary to fund the homes, vehicles, furnishings, etc. Now the Millennial generation is turning its back on both of these bedrock engines of growth.

As various metrics reveal, the Millennials are fine with taking Uber to work, buying their shoes from Zappos (return them if they don’t fit, no problem), and making whatever tradeoffs are necessary to live in urban cores. Simply put, the natural progression of this generation is away from suburban malls, suburban home ownership and the car-centric commuter lifestyle that goes with suburban homeownership. Saddled with insanely high student debt loads imposed by the rapaciously predatory higher education cartel, Millennials avoid additional debt like the plague. Millennials have relatively high savings rates. As for a lifetime of penury to service debt–hey, they already have that, thanks to their “I borrowed $100,000 and all I got was this worthless college degree” student loans.

Consider the secondary effects of these trend changes. If Millennials are earning less and already carrying heavy debt loads, who is going to buy the Baby Boom’s millions of pricey suburban McMansions? The answer might be “no one.” If vehicle sales decline, all the secondary auto-related sales decline, too. Auto insurance, for example. Furnishing a small expensive urban flat requires a lot less furnishings than a 3,000 square foot suburban house. What happens to sales of big dining sets and backyard furniture? As retail malls die, property taxes, sales taxes and payroll taxes decline, too. Many cheerlead the notion of repurposed commercial space, but uses such as community college classes pay a lot less per square foot than retail did, and generate little in the way of sales and payroll taxes. Financial losses will also mount. Valuations and property taxes will decline, and commercial real estate loans based on nose-bleed valuations and high retail lease rates will go south, triggering significant financial-sector losses.

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I’d think it couldn’t be easier.

Slowdown in US Borrowing Defies Easy Explanation (WSJ)

One of the great mysteries and biggest concerns in the economy right now is the slowing growth in bank lending. Economists are searching for answers but none are entirely satisfying. Total loans and leases extended by commercial banks in the U.S. this year were up just 3.8% from a year earlier as of March 29, according to the latest Federal Reserve data. That compares with 6.4% growth in all of last year, and a 7.6% pace as of late October. The slowdown is more surprising given the rise in business and consumer confidence since the election. And it is worrisome because the lack of business investment is considered an important reason why economic growth has remained weak. Loans to businesses have slowed most sharply, with the latest data showing commercial and industrial loans up just 2.8% from a year earlier, compared with 8.9% growth in late October.

Economists at Goldman Sachs estimate the slowdown in commercial and industrial lending alone equates to a $100 billion shortfall in loans. Investors may start to get more clarity on what is causing the slowdown when banks start reporting first-quarter earnings on Thursday. One explanation is that many companies have been tapping corporate bond markets to lock in low rates, and in some cases to pay down more expensive bank debt. In the first quarter of this year, corporate bond issuance rose by 18% from a year earlier, according to the Securities Industry and Financial Markets Association. But one reason for the increase is that the first quarter of 2016 was dismal because of market turmoil. The rise isn’t enough to explain the entire shortfall in lending.

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The Trump tax plan is way off schedule.

US Companies Now Have $1.6 Trillion Stashed In Tax Havens (Ind.)

The 50 biggest US companies stashed another $200bn of profits in offshore tax havens in 2015 alone, taking the total to approximately $1.6 trillion, according to new analysis. Donald Trump’s plans to slash taxes for corporations and wealthy individuals and impose a border tax will harm average consumers further, Oxfam said in a report published on Tuesday. The 50 largest companies disclosed use of 1,751 subsidiaries in countries classed as tax havens by the OECD and the US National Bureau of Economic Research, an increase of 143 on a year earlier, the charity found. The true number may be far higher as only “significant” subsidiaries have to be disclosed. Big multinationals such as Google, Amazon and Apple have come under fire for routing sales through countries such as Bermuda, Ireland and Luxembourg, which offer them low tax rates.

While this is legal, critics say it does not reflect where the firms actually do business. The top rate of US corporate tax is 35% – one of the highest rates in the world, incentivising many companies to hold billions offshore. Mr Trump has pledged to reduce this to 15% and a one-off rate of 10% for money currently held abroad. That will hand a $328bn tax break to the 50 biggest companies, with Apple, Pfizer and Microsoft the biggest gainers, accounting for 40% of the total, Oxfam estimated. While some have welcomed the move as a sensible way to bring profits of US companies back to the country, Oxfam warns that it risks accelerating a race to the bottom that will harm consumers in America as well as the world’s poor as global tax rates plummet.

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Scott Adams forecast three phases for opinion of Trump. First people would call him Hitler, then incompetent, then ‘competent but I don’t like it’. Is he on track?

Trump Declines To Endorse Bannon, Says US ‘Not Going Into Syria’ (MW)

President Donald Trump declined to give top adviser Steve Bannon a vote of confidence during a New York Post interview published Tuesday, in which he also said the U.S. was not headed toward a ground war in Syria. There have been reports of discord among Trump’s top White House advisers, and rumors that controversial chief strategist Bannon may be on the way out. Last week, Bannon and Trump’s son-in-law, Jared Kushner, were reportedly told to iron out their differences. When asked Monday by Post columnist Michael Goodwin if he still had confidence in Bannon, Trump didn’t exactly give a ringing endorsement: “I like Steve, but you have to remember he was not involved in my campaign until very late. I had already beaten all the senators and all the governors, and I didn’t know Steve.”

“I’m my own strategist and it wasn’t like I was going to change strategies because I was facing crooked Hillary.” “Steve is a good guy, but I told them to straighten it out or I will,” Trump said. In the same interview, Trump told Goodwin that, despite last week’s airstrike, U.S. policy toward Syria has not changed. “We’re not going into Syria,” Trump said. “Our policy is the same — it hasn’t changed. We’re not going into Syria.” Trump also acknowledged a growing rift with Russia — “We’re not exactly on the same wavelength with Russia, to put it mildly” — again called the nuclear deal with Iran “the single worst deal ever,” and said of the worsening nuclear situation with North Korea: “I knew I was left a mess, but it’s worse than I thought.”

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Cue Rome.

Beware The Dogs Of War: Is The American Empire On The Verge Of Collapse? (JW)

Waging endless wars abroad (in Iraq, Afghanistan, Pakistan and now Syria) isn’t making America—or the rest of the world—any safer, it’s certainly not making America great again, and it’s undeniably digging the U.S. deeper into debt. In fact, it’s a wonder the economy hasn’t collapsed yet. Indeed, even if we were to put an end to all of the government’s military meddling and bring all of the troops home today, it would take decades to pay down the price of these wars and get the government’s creditors off our backs. Even then, government spending would have to be slashed dramatically and taxes raised.

You do the math.
• The government is $19 trillion in debt.
• The Pentagon’s annual budget consumes almost 100% of individual income tax revenue.
• The government has spent $4.8 trillion on wars abroad since 9/11, with $7.9 trillion in interest. As the Atlantic points out, we’re fighting terrorism with a credit card.
• The government lost more than $160 billion to waste and fraud by the military and defense contractors.
• Taxpayers are being forced to pay $1.4 million per hour to provide U.S. weapons to countries that can’t afford them.
• The U.S. government spends more on wars (and military occupations) abroad every year than all 50 states combined spend on health, education, welfare, and safety.
• Now President Trump wants to increase military spending by $54 billion.
• Add in the cost of waging war in Syria, and the burden on taxpayers soars to more than $11.5 million a day. Ironically, while presidential candidate Trump was vehemently opposed to the U.S. use of force in Syria, and warned that fighting Syria would signal the start of World War III against a united Syria, Russia and Iran, he wasted no time launching air strikes against Syria.

Clearly, war has become a huge money-making venture, and the U.S. government, with its vast military empire, is one of its best buyers and sellers. Yet what most Americans—brainwashed into believing that patriotism means supporting the war machine—fail to recognize is that these ongoing wars have little to do with keeping the country safe and everything to do with enriching the military industrial complex at taxpayer expense. The rationale may keep changing for why American military forces are in Afghanistan, Iraq, Pakistan and now Syria. However, the one that remains constant is that those who run the government—including the current president—are feeding the appetite of the military industrial complex and fattening the bank accounts of its investors.

Case in point: President Trump plans to “beef up” military spending while slashing funding for the environment, civil rights protections, the arts, minority-owned businesses, public broadcasting, Amtrak, rural airports and interstates. In other words, in order to fund this burgeoning military empire that polices the globe, the U.S. government is prepared to bankrupt the nation, jeopardize our servicemen and women, increase the chances of terrorism and blowback domestically, and push the nation that much closer to eventual collapse. Obviously, our national priorities are in desperate need of an overhauling.

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Interesting but hardly a breakthrough. It’s not all that hard.

A Breakthrough Alternative To Growth Economics – The Doughnut (G.)

Raworth begins by redrawing the economy. She embeds it in the Earth’s systems and in society, showing how it depends on the flow of materials and energy, and reminding us that we are more than just workers, consumers and owners of capital. This recognition of inconvenient realities then leads to her breakthrough: a graphic representation of the world we want to create. Like all the best ideas, her doughnut model seems so simple and obvious that you wonder why you didn’t think of it yourself. But achieving this clarity and concision requires years of thought: a great decluttering of the myths and misrepresentations in which we have been schooled. The diagram consists of two rings. The inner ring of the doughnut represents a sufficiency of the resources we need to lead a good life: food, clean water, housing, sanitation, energy, education, healthcare, democracy.

Anyone living within that ring, in the hole in the middle of the doughnut, is in a state of deprivation. The outer ring of the doughnut consists of the Earth’s environmental limits, beyond which we inflict dangerous levels of climate change, ozone depletion, water pollution, loss of species and other assaults on the living world. The area between the two rings – the doughnut itself – is the “ecologically safe and socially just space” in which humanity should strive to live. The purpose of economics should be to help us enter that space and stay there. As well as describing a better world, this model allows us to see, in immediate and comprehensible terms, the state in which we now find ourselves. At the moment we transgress both lines. Billions of people still live in the hole in the middle. We have breached the outer boundary in several places.

An economics that helps us to live within the doughnut would seek to reduce inequalities in wealth and income. Wealth arising from the gifts of nature would be widely shared. Money, markets, taxation and public investment would be designed to conserve and regenerate resources rather than squander them. State-owned banks would invest in projects that transform our relationship with the living world, such as zero-carbon public transport and community energy schemes. New metrics would measure genuine prosperity, rather than the speed with which we degrade our long-term prospects.

Such proposals are familiar; but without a new framework of thought, piecemeal solutions are unlikely to succeed. By rethinking economics from first principles, Raworth allows us to integrate our specific propositions into a coherent programme, and then to measure the extent to which it is realised. I see her as the John Maynard Keynes of the 21st century: by reframing the economy, she allows us to change our view of who we are, where we stand, and what we want to be. Now we need to turn her ideas into policy. Read her book, then demand that those who wield power start working towards its objectives: human prosperity within a thriving living world.

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Hungry for knowledge, or hungry for a paycheck? Our education systems are a giant failure.

The Commodification of Education (Steve Keen)

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A real life consequence of Commodification of Education. Intellectual Yet Idiot.

The Fed Could Use Less Book Learning and More Street Smarts (Ricketts)

I’ll bet pundits and pollsters will forever ponder how Donald Trump got elected. For me, it’s straightforward: The American people—or at least enough of them to propel Mr. Trump into office—wanted to infuse practical business experience into the government. To borrow a phrase from my friend, the economist Larry Lindsey, voters rejected the political ruling class in favor of real-world experience. Which brings me to the Federal Reserve. In 2012 Jim Grant, the longtime financial journalist, delivered a speech at the Federal Reserve Bank of New York. “In the not quite 100 years since the founding of your institution,” he said, “America has exchanged central banking for a kind of central planning and the gold standard for what I will call the Ph.D. standard.” Central banking, in other words, is now dominated by academics. And while I don’t blame them for it, academics by their nature come to decision-making with a distinctly—you guessed it—academic perspective.

The shift described by Mr. Grant has had consequences. For one thing, simplicity based on age-old practice has been replaced by complexity based on econometric theory. Big Data has played an increasingly prominent role in how the Fed operates, even as the Fed’s role in the economy has deepened and widened. Rather than enlisting business leaders and bankers to fulfill the Fed’s increasingly complex mission, the nation’s political and monetary authorities turned primarily to the world’s most brilliant economists, who can be thought of more and more as monetary scientists. “Central bankers have invited politicians to abdicate leadership authority to an inbred society of PhD academics who are infected to their core with groupthink, or as I prefer to think of it: ‘groupstink,’” argues former Dallas Fed analyst Danielle DiMartino Booth in a new book.

Ten of the 17 current Fed governors and regional bank presidents have doctorates in economics. Few have much experience in the private economy. Most have spent the bulk of their careers at the classroom lectern or in Washington. This is a sea change. In past decades, Fed members and governors frequently had experience in banking, industry and agriculture. Do the results indicate that our pursuit of intellectual horsepower has produced a stronger economy? Today’s labor-force participation rate is lower than at any time since the late 1970s; an oven from Sears that cost $160 in 1975 would cost more than $400 today; and despite unprecedented intervention in the economy, America has experienced its worst recovery since the Great Depression.Given the cumulative genius of the leaders of the Federal Reserve System, and the highly sophisticated quantitative tools and policies the Fed has developed under their direction, why aren’t we doing better?

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Just one example of how deluded the UK, like the US, has fast become when it comes to Russia. ‘Putin Did It’ is very much alive. It’s getting mighty tiresome.

Spectre Of Russian Influence Looms Large Over French Election (G.)

The golden domes of one of Vladimir Putin’s foreign projects, the recently built Russian Holy Trinity cathedral in the heart of Paris, rise up not far from the Elysée palace, the seat of the French presidency. Dubbed “Putin’s cathedral” or “Saint-Vladimir”, it stands out as a symbol of the many connections the French elite has long nurtured with Russia, and which the Kremlin is actively seeking to capitalise on in the run-up to the French presidential election. France is an important target for Russia’s soft power and networks of influence. The country is a key pillar of the European Union, an important Nato member and home to Europe’s largest far-right party, the Front National, whose leader, Marine Le Pen, is expected to reach the 7 May run-off in the presidential vote and has benefited from Russian financing.

Le Pen took the extraordinary step of travelling to Moscow to meet Putin in March, just a month before the French vote, to boost her international profile and showcase her closeness to the Russian president’s worldview – including his virulent hostility towards the EU and his vision of a “civilisational” clash with radical Islam. Yet she is far from being the only presidential candidate to favour warmer relations with Russia, nor to reflect a certain French fascination with the Kremlin strongman. [..] Russian meddling in elections has become a hot political topic in the US, and there has been much speculation about Russia’s attempts to favour Brexit as well as anti-EU parties in the Netherlands and Germany. But France is now widely seen as the key country where Russia has a strategic interest in encouraging illiberal forces and seeking to drive wedges between western democracies.

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One shudders to imagine what happens if Erdogan loses the Sunday April 16 referendum. And also what happens if he wins.

Moment Of Reckoning In Turkey As Alleged Coup Plotters Go On Trial (G.)

Turkish prosecutors are laying the groundwork for large-scale trials of hundreds of people accused of participating in a coup attempt last July, an undertaking that is already transforming society and will be a reckoning of sorts for a nation that has endured much upheaval in recent years. Authorities say the trials will shed light on alleged links between the accused and Fethullah Gülen, an exiled US-based preacher with a vast grassroots network. The onset of the trials has refocused attention on the large-scale purges of Turkey’s government, media and academia after the coup attempt, in which tens of thousands of people – many with no known links to the Gülenists – were dismissed or jailed. Meanwhile, Turkey is preparing for a referendum on Sunday on greater presidential powers, which could prove the most significant political development in the history of the republic.

“What happened on 15 July [the day of the attempted coup] and what is now happening for months is completely transformative for Turkey,” said a journalist who worked for a Gülen-affiliated media outlet and requested anonymity for fear of reprisals. “One big part of society has been subjected to extreme demonisation in a process that cost them their jobs, reputation, freedom or ultimately their lives. Another part of the society has been filled with anger and radically politicised. “Nothing can be the same as before 15 July any longer – ever,” he added. Turkish courts have already begun several parallel trials over the coup attempt. Last month prosecutors demanded life sentences for 47 people accused of attempting to assassinate the president, Recep Tayyip Erdogan, on the night of the putsch, and the largest trial yet opened on 28 February in a specially built courtroom outside Ankara filled with more than 300 suspects accused of murder and attempting to overthrow the government.

About 270 suspects, including Gülen, went on trial in absentia in Izmir in January, and an indictment issued in late February alleges that Gülenists infiltrated the state and charges 31 members of the military with attempting to overthrow the constitutional order. The state intelligence agency, the National Intelligence Service (MIT), has sent prosecutors in Ankara a list of 122,000 individuals who allegedly used a secure messaging app, ByLock, which security officials say was widely used by the Gülen network for communications.

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Handing out money and housing to refugees while Greeks themselves are hungry and homeless. Great plan.

Greece: Cash and Apartments for Refugees with UNHCR Aid (GR)

Migration Deputy Minister Yiannis Mouzalas announced on Monday that refugees will be getting cash instead of free meals and will be staying in rented apartments in order to decongest migrant camps. In a joint press conference with the participation of Representative of the United Nations High Commissioner for Refugees (UNHCR) in Greece Philippe Leclerc, President of Union of Municipalities of Thesssaly Giorgos Kotsos and Larissa Mayor Apostolos Kaloyiannis, Mouzalas explained the project of decongestion of migrant camps and relocation of refugees in urban centers and smaller municipalities. Mouzalas said that refugees will be getting cash in hand for their meals instead of rations and will be staying in apartments under the UNHCR program, so that they will be getting primary care. The program applies for 10,000 asylum seekers in 2017 and another 10,000 in 2018.

The deputy minister clarified that the apartments will be rented by owners under free market conditions and the municipalities will assist the implementation of the program. This way, he said, local communities will benefit financially. The program will apply provided that the EU-Turkey agreement for refugee returns will continue to apply. This way, Mouzalas continued, the 40 camps across Greece that host 40,000 asylum seekers will be reduced to 17-20 with a maximum of 500 people each for 2017. In 2018, another 10,000 asylum seekers will be relocated under the program. The project will start with 500 refugees leaving the Koutsohera camp and moving to Larissa, a municipality that expressed interest in the program. As the program progresses, the camps in Thessaly (Koutsohera, Volos and Trikala) will eventually close and refugees will relocate in municipalities.

“The UN will help in the expansion of the hospitality program for refugees in apartments to improve their living conditions,” Leclerc said. The program has already been implemented in Athens, Thessaloniki and Livadia. The president of the Union of Municipalities of Thesssaly underlined that the program gives municipalities the opportunity to inject money to local communities through the leasing of the apartments and the cash the refugees would spend on food. The Larissa Mayor said that “The municipality of Larissa will work in this direction. Previously there was pressure to accommodate migrants in apartments, but it was too early. Today we are not afraid to do it.”

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The green movement condemns itself by offering only half solutions. Saving the planet would require drastic changes to everyone’s lifestyle and comfort. Instead we get CON21.

Why The Human Race Is Heading For The Fire (G.)

The future for humanity and many other life forms is grim. The crisis gathers force. Melting ice caps, rising seas, vanishing topsoil, felled rainforests, dwindling animal and plant species, a human population forever growing and gobbling and using everything up. What’s to be done? Paul Kingsnorth thinks nothing very much. We have to suck it up. He writes in a typical sentence: “This is bigger than anything there has ever been for as long as humans have existed, and we have done it, and now we are going to have to live through it, if we can.” Hope finds very little room in this enjoyable, sometimes annoying and mystical collection of essays. Kingsnorth despises the word’s false promise; it comforts us with a lie, when the truth is that we have created an “all-consuming global industrial system” which is “effectively unstoppable; it will run on until it runs out”.

To imagine otherwise – to believe that our actions can make the future less dire, even ever so slightly – means that we probably belong to the group of “highly politicised people, whose values and self-image are predicated on being activists”. According to Kingsnorth, such people find it hard to be honest with themselves. He was once one of them. “We might tell ourselves that The People are ignorant of The Facts and that if we enlighten them they will Act. We might believe that the right treaty has yet to be signed, or the right technology yet to be found, or that the problem is not too much growth and science and progress but too little of it. Or we might choose to believe that a Movement is needed to expose the lies being told to The People by the Bad Men in Power who are preventing The People from doing the rising up they will all want to do when they learn The Truth.”

He says this is where “the greens are today”. Environmentalism has become “a consolation prize for a gaggle of washed-up Trots”. As a characterisation of the green movement, this outbreak of adolescent satire seems unfair. To suggest that its followers become activists only because their “values and self-image” depend on it implies that there is no terror in their hearts, no love of the natural world, nothing real other than their need for a hobby.

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Mar 302017
 March 30, 2017  Posted by at 2:40 pm Finance Tagged with: , , , , , , , ,  9 Responses »

Rene Magritte Memory 1948


We are witnessing the demise of the world’s two largest economic power blocks, the US and EU. Given deteriorating economic conditions on both sides of the Atlantic, which have been playing out for many years but were so far largely kept hidden from view by unprecedented issuance of debt, the demise should come as no surprise.

The debt levels are not just unprecedented, they would until recently have been unimaginable. When the conditions for today’s debt orgasm were first created in the second half of the 20th century, people had yet to wrap their minds around the opportunities and possibilities that were coming on offer. Once they did, they ran with it like so many lemmings.

The reason why economies are now faltering invites an interesting discussion. Energy availability certainly plays a role, or rather the energy cost of energy, but we might want to reserve a relatively larger role for the idea, and the subsequent practice, of trying to run entire societies on debt (instead of labor and resources).



It almost looks as if the cost of energy, or of anything at all really, doesn’t play a role anymore, if and when you can borrow basically any sum of money at ultra low rates. Sometimes you wonder why people didn’t think of that before; how rich could former generations have been, or at least felt?

The reason why is that there was no need for it; things were already getting better all the time, albeit for a briefer period of time than most assume, and there was less ‘want’. Not that people wouldn’t have wanted as much as we do today, they just didn’t know yet what it was they should want. The things to want were as unimaginable as the debt that could have bought them.

It’s when things ceased getting better that ideas started being floated to create the illusion that they still were, and until recently very few people were not fooled by this. While this will seem incredible in hindsight, it still is not that hard to explain. Because when things happen over a period of decades, step by step, you walk headfirst into the boiling frog analogy: slowly but surely.


At first, women needed to start working to pay the bills, health care and education costs started rising, taxes began to rise. But everyone was too busy enjoying the nice slowly warming water to notice. A shiny car -or two, three-, a home in the burbs with a white picket fence, the American -and German and British etc.- Dream seemed to continue.

Nobody bothered to think about the price to pay, because it was far enough away: the frog could pay in installments. In the beginning only for housing, later also for cars, credit card debt and then just about anything.

Nobody bothered to look at external costs either. Damage to one’s own living environment through a huge increase in the number of roads and cars and the demise of town- and city cores, of mom and pop stores, of forest land and meadows, basically anything green, it was all perceived as inevitable and somehow ‘natural’ (yes, that is ironic).



Damage to the world beyond one’s own town, for instance through the exploitation of domestic natural resources and the wars fought abroad for access to other nations’ resources, only a very precious few ever cared to ponder these things, certainly after the Vietnam war was no longer broadcast and government control of -or cooperation with- the media grew exponentially.

Looking at today’s world in a sufficiently superficial fashion -the way most people look at it-, one might be forgiven for thinking that debt, made cheap enough, tapers over all other factors, economic and otherwise, including thermodynamics and physics in general. Except it doesn’t, it only looks that way, and for a limited time at that. In the end, thermodynamics always beats ‘financial innovation’. In the end, thermodynamics sets the limits, even those of economics.


That leads us into another discussion. If not for the constraints, whether they emanate from energy and/or finance, would growth have been able to continue at prior levels? Both the energy and the finance/political camps mostly seem to think so.

The energy crowd -peak oilers- appear to assume that if energy would have been more readily available, economic growth could have continued pretty much unabated. Or they at least seem to assume that it’s the limits of energy that are responsible for the limits to economic growth.

The finance crowd mostly seems to think that if we would have followed different economic models, growth would have been for the taking. They tend to blame the Fed, or politics, loose regulation, the banking system.

Are either of them right? If they are, that would mean growth can continue de facto indefinitely if only we were smart enough to either make the right economic and political decisions, or to find or invent new sources of energy.

But what kind of growth do both ‘fields’ envision? Growth to what end, and growth into what? 4 years ago, I wrote What Do We Want To Grow Into? I have still never seen anyone else ask that question, before or since, let alone answer it.

We want growth by default, we want growth for growth’s sake, without caring much where it will lead us. Maybe we think unconsciously that as long as we can secure growth, we can figure out what to do with it later.

But it doesn’t work that way: growth changes the entire playing field on a constant basis, and we can’t keep up with the changes it brings, we’re always behind because we don’t care to answer that question: what do we want to grow into. Growth leads us, we don’t lead it. Next question then: if growth stops, what will lead us?

Because we don’t know where we want growth to lead us, we can’t define it. The growth we chase is therefore per definition blind. Which of necessity means that growth is about quantity, not quality. And that in turn means that the -presupposed- link between growth and progress falls apart: we can’t know if -the next batch of- growth will make us better off, or make our lives easier, more fulfilling. It could do the exact opposite.


And that’s not the only consequence of our blind growth chase. We have become so obsessed with growth that we have turned to creative accounting, in myriad ways, to produce the illusion of growth where there is none. We have trained ourselves and each other to such an extent to desire growth that we’re all, individually and collectively, scared to death of the moment when there might not be any. Blind fear brought on by a blind desire.

As we’ve also seen, we’ve been plunging ourselves into ever higher debt levels to create the illusion of growth. Now, money (debt) is created not by governments, as many people still think, but by -private- banks. Banks therefore need people to borrow. What people borrow most money for is housing. When they sign up for a mortgage, the bank creates a large amount of money out of nothing.

So if the bank gets itself into trouble, for instance because they lose money speculating, or because people can’t pay their mortgages anymore that they never could afford in the first place, the only way out for that bank, other than bailouts, is to sign more people up for mortgages -or car loans-, preferably bigger ones all the time.



What we have invented to keep big banks afloat for a while longer is ultra low interest rates, NIRP, ZIRP etc. They create the illusion of not only growth, but also of wealth. They make people think a home they couldn’t have dreamt of buying not long ago now fits in their ‘budget’. That is how we get them to sign up for ever bigger mortgages. And those in turn keep our banks from falling over.

Record low interest rates have become the only way that private banks can create new money, and stay alive (because at higher rates hardly anybody can afford a mortgage). It’s of course not just the banks that are kept alive, it’s the entire economy. Without the ZIRP rates, the mortgages they lure people into, and the housing bubbles this creates, the amount of money circulating in our economies would shrink so much and so fast the whole shebang would fall to bits.

That’s right: the survival of our economies today depends one on one on the existence of housing bubbles. No bubble means no money creation means no functioning economy.


What we should do in the short term is lower private debt levels (drastically, jubilee style), and temporarily raise public debt to encourage economic activity, aim for more and better jobs. But we’re doing the exact opposite: austerity measures are geared towards lowering public debt, while they cut the consumer spending power that makes up 60-70% of our economies. Meanwhile, housing bubbles raise private debt through the -grossly overpriced- roof.

This is today’s general economic dynamic. It’s exclusively controlled by the price of debt. However, as low interest rates make the price of debt look very low, the real price (there always is one, it’s just like thermodynamics) is paid beyond interest rates, beyond the financial markets even, it’s paid on Main Street, in the real economy. Where the quality of jobs, if not the quantity, has fallen dramatically, and people can only survive by descending ever deeper into ever more debt.



Do we need growth? Is that even a question we can answer if we don’t know what we would need or use it for? Is there perhaps a point, both from an energy and from a financial point of view, where growth simply levels off no matter what we do, in the same way that our physical bodies stop growing at 6 feet or so? And that after that the demand for economic growth must necessarily lead to The Only Thing That Grows Is Debt?

It’s perhaps ironic that the US doesn’t appear to be either first or most at risk this time around. There are plenty other housing markets today with what at least look to be much bigger bubbles, from London to China and from Sydney to Stockholm. Auckland’s bubble already looks to be popping. The potential consequences of such -inevitable- developments are difficult to overestimate. Because, as I said, the various banking systems and indeed entire economies depend on these bubbles.

The aftermath will be chaotic and it’s little use to try and predict it too finely, but it’ll be ‘interesting’ to see what happens to the banks in all these countries where bubbles have been engineered, once prices start dropping. It’s not a healthy thing for an economy to depend on blowing bubbles. It’s also not healthy to depend on private banks for the creation of a society’s money. It’s unhealthy, unnecessary and unethical. We’re about to see why.


Mar 062017
 March 6, 2017  Posted by at 10:03 am Finance Tagged with: , , , , , , , , , ,  8 Responses »

Dorothea Lange Negro woman who has never been out of Mississippi July 1936


The Government Doesn’t Actually Want Housing To Be More Affordable (SMH)
In Praise Of Cash (Aeon)
Basic Income Isn’t Just A Nice Idea. It’s A Birthright (G.)
Oil Falls On Lower China Growth Targets, Doubts On Russian Output Curbs (R.)
China’s Credit Target Implies Adding Entire German GDP This Year (BBG)
Record-Breaking Stocks A Bad Reason For The Fed To Raise Interest Rates (BI)
Leaving The EU Is The Start Of A Liberal Insurgency (Carswell)
Deutsche Bank CEO Cryan Has A New Strategy: Reverse His Old Strategy (BBG)
Renzi’s Return Clouded By Probe Into Father, Government Minister (BBG)
The Iraq War Stench Lingers Behind Today’s Preoccupation With Fake News (G.)
Saudi Arabia Stealing 65% of Yemen’s Oil in Collaboration with US, Total (AHT)
Turkey’s Erdogan Compares German Behavior With Nazi Period (R.)
US Asks Ankara For Steps To Ease Aegean Tension (K.)
Greece Desperate For Growth Strategy As Public Mood Darkens (G.)
Polluted Environments Kill 1.7 Million Children A Year (R.)



From Australia, but applicable worldwide. Mortgages in housing bubbles are the main engine of money (credit) creation in our economies. Boith governments and banks depend on them for profit, taxes and ultimately survival. Imagine if housing prices halved, the entire construct would collapse. They’ll do anything to keep the game going. And then they will fail.

The Government Doesn’t Actually Want Housing To Be More Affordable (SMH)

The federal government’s problem with making housing more affordable is that it becomes, by definition, cheaper. And that’s not something that the federal government wants to see happen for some very understandable reasons. Back in the Howard era Australians were encouraged to invest in housing as a form of wealth creation, partially as a way of addressing rental strain and mainly as a way to ensure people had assets and therefore didn’t go selfishly claiming pensions later on. That’s when the negative gearing and capital gains exemptions were introduced that made buying property such a sweet deal. So now there are a lot of Australians who have put their retirement eggs in the basket marked “leveraging the hell out of my mortgage to buy more investment properties” for the last couple of decades and who will be therefore disadvantaged if the value of housing drops.

And then there’s pure self interest at work too, since between a third and half of all our representatives have investment properties – the PM himself owns seven properties, for example. How keen would you say that our parliamentary representatives are to make their portfolios drop in value, especially for something as stupid as the greater good? Also, as well we know thanks to the efforts of the NSW Independent Commission Against Corruption, the NSW Liberals are so beloved by property developers that the party went to some effort to find a way of accepting donations from them despite those donations being completely illegal. If they suddenly become the party that makes property less lucrative, there’d be no donations to justify the creation of opaque entities like the Free Enterprise Foundation.

[..] Will housing become more affordable in Australia? Absolutely! And it could happen one of two ways. This complex web of legislation can be gently and strategically unpicked via careful bipartisan cooperation across our different spheres of government in concert with the private sector in an effort to create a sane, universally beneficial housing system at all levels. Alternatively, we can choose to leave things be until the housing bubble bursts and plunges Australia into a crippling recession. And since this is politics in 2017, we can assume that Plan A is already off the table.

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Using cash is fast becoming a revilutionary act.

In Praise Of Cash (Aeon)

The cashless society – which more accurately should be called the bank-payments society – is often presented as an inevitability, an outcome of ‘natural progress’. This claim is either naïve or disingenuous. Any future cashless bank-payments society will be the outcome of a deliberate war on cash waged by an alliance of three elite groups with deep interests in seeing it emerge. The first is the banking industry, which controls the core digital fiat money system that our public system of cash currently competes with. It irritates banks that people do indeed act upon their right to convert their bank deposits into state money. It forces them to keep the ATM network running. The cashless society, in their eyes, is a utopia where money cannot leave – or even exist – outside the banking system, but can only be transferred from bank to bank.

The second is the private payments industry – the likes of Mastercard – that profits from running the infrastructure that services that bank system, streamlining the process via which we transfer digital money between bank accounts. They have self-serving reasons to push for the removal of the cash option. Cash transactions are peer-to-peer, requiring no intermediary, and are thus transactions that Visa cannot skim a cut off. The third – perhaps ironically – is the state, and quasi-state entities such as central banks. They are united with the financial industry in forcing everyone to buy into this privatised bank-payments society for reasons of monitoring and control. The bank-money system forms a panopticon that enables – in theory – all transactions to be recorded, watched and analysed, good or bad. Furthermore, cash’s ‘offline’ nature means it cannot be remotely altered or frozen.

This hampers central banks in implementing ‘innovative’ monetary policies, such as setting negative interest rates that slowly edit away bank deposits in order to coerce people into spending. Governments don’t really mention that monetary policy agenda. It isn’t catchy enough. Rather, the key weapons used by the alliance are more classic shock-and-awe scare tactics. Cash is used by criminals! People buy drugs with cash! It’s the black economy! It supports tax evasion! The ability to present control as protection relies on constant calls to imagine an external enemy, the terrorist or Mafiosi. These cries of moral panic are set in contrast to the glossy smiling adverts about digital payment. The emerging cashless society looms like a futuristic sunrise, cleansing us of these dangerous filthy notes with rays of hygienic, convenient, digital salvation.

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From Thomas Paine to Henry George, the reason for UBI has long been known. Call it ‘ground rent’ or ‘land value tax’. Tax the ownership class, not the workers. ‘Birthright’ may sound strange today, but is it really?

Basic Income Isn’t Just A Nice Idea. It’s A Birthright (G.)

Every student learns about Magna Carta, the ancient scroll that enshrined the rights of barons against the arbitrary authority of England’s monarchs. But most have never heard of its arguably more important twin, the Charter of the Forest, issued two years later in 1217. This short but powerful document guaranteed the rights of commoners to common lands, which they could use for farming, grazing, water and wood. It gave official recognition to a right that humans nearly everywhere had long just presupposed: that no one should be debarred from the resources necessary for livelihood. But this right – the right of habitation – came under brutal attack beginning in the 15th century, when wealthy nobles began fencing off common lands for their own profit.

[..] the success of basic income – in both the north and south – all depends on how we frame it. Will it be cast as a form of charity by the rich? Or will it be cast as a right for all? Thomas Paine was among the first to argue that a basic income should be introduced as a kind of compensation for dispossession. In his brilliant 1797 pamphlet Agrarian Justice, he pointed out that “the earth, in its natural, uncultivated state was, and ever would have continued to be, the common property of the human race”. It was unfair that a few should enclose it for their own benefit, leaving the vast majority without their rightful inheritance. As far as Paine was concerned, this violated the most basic principles of justice.

Knowing that land reform would be politically impossible (for it would “derange any present possessors”), Paine proposed that those with property should pay a “ground rent” – a small tax on the yields of their land – into a fund that would then be distributed to everyone as an unconditional basic income. For Paine, this would be a right: “justice, not charity”. It was a powerful idea, and it gained traction in the 19th century when American philosopher Henry George proposed a “land value tax” that would fund an annual dividend for every citizen. The beauty of this approach is that it functions as a kind of de-enclosure. It’s like bringing back the ancient Charter of the Forest and the right of access to the commons. It restores the right to livelihood – the right of habitation.

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Yeah, output cuts. Sure.

Oil Falls On Lower China Growth Targets, Doubts On Russian Output Curbs (R.)

Oil prices fell in Asian trade on Monday, wiping out some of the gains of the previous session amid worries lower growth targets in China could cut oil demand and ongoing concern over Russia’s compliance with a global deal to cut oil output. But worries over escalating violence in the Middle East put a floor under prices. Brent crude futures dropped 29 cents, or 0.5%, to $55.61 a barrel as of 0638 GMT after settling 1.5% higher in the previous session. U.S. West Texas Intermediate (WTI) crude futures fell 30 cents, or 0.6%, to $53.03 a barrel after closing the previous session up 1.4%. “The main drag affecting markets today is the lowering of growth targets by China and tighter regulatory controls which implies less demand for oil and commodities in general,” said Jeffrey Halley at Oanda brokerage in Singapore.

China aims to expand its economy by around 6.5% this year, Premier Li Keqiang said in his work report at the opening of the annual meeting of parliament on Sunday. That is lower than the 6.7% growth achieved last year. China also plans to cut steel and coal output this year in an effort to tackle pollution, its top economic planner said on Sunday, while China’s newly appointed banking regulator vowed on to strengthen supervision of the lending sector. Meanwhile, figures by Russia’s energy ministry released last week showed February oil output was unchanged from January at 11.11 million barrels per day (bpd), casting doubt on Russia’s moves to rein in output as part of a pact with oil producers last year. That came as oil prices rose on Friday as the dollar weakened modestly after a speech by Fed Chair Janet Yellen, which suggested a rate increase would come at the end of its two-day meeting on March 15.

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“China’s great ball of money.”

China’s Credit Target Implies Adding Entire German GDP This Year (BBG)

China’s credit engine will keep humming this year, adding the rough equivalent of Germany’s annual economic output to its already massive stock of total social financing (TSF), according to estimates derived from the nation’s 2017 targets. Adding higher equity market financing and about 5 trillion yuan ($725 billion) worth of local government bond swaps to the official credit growth target of 12%, analysts at UBS see TSF expansion of 14.8% this year. They calculate that’s equal to a whopping 23 trillion yuan, or $3.3 trillion, addition to the amount of total credit already swishing around the world’s second-largest economy. “China’s pace of leverage increase will be slowing, albeit not by that much,” economists led by Hong Kong-based Wang Tao wrote in a report.

“The government’s intention for a still strong pace of credit growth and recent notable tightening in China’s money market and bond market attest to the difficulties facing the PBC in balancing monetary policy.” China’s great ball of money creates a constant headache for policy makers as money flows from asset class to asset class, creating bubbles along the way. It’s a particular dilemma for the People’s Bank of China because it needs new credit to generate the kind of growth its leaders desire – around 6.5% or higher if possible this year. The M2 money supply target was cut to 12% this year from 13% in 2016, while still higher than the 11.3% actual expansion last year.

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So wrong so many times, and still taken serious. You’d almost admire them for it.

Record-Breaking Stocks A Bad Reason For The Fed To Raise Interest Rates (BI)

Federal Reserve officials say their decisions on interest rate policy hinge on the ebb and flow of economic data, not the whims of financial markets. They have repeatedly downplayed the effect of short-term market fluctuations in their policy moves, aimed at maintaining a strong labor market and 2% inflation over the medium term. But the thing about markets is, they don’t really matter until they suddenly do. That may be the case at the moment, with Fed officials suddenly signaling in unison, without major changes in the economic data, that an increase in interest rates is coming this month. Investors accordingly shifted from considering a March hike as rather a long shot to seeing it as a near sure possibility in just two weeks. What changed? The stock market continued to set new records without much underlying economic impetus.

When the Fed released minutes from its end of January meeting, they showed members “expressed concern that the low level of implied volatility in equity markets appeared inconsistent with the considerable uncertainty attending the outlook.” The Fed comments on the broad health of the financial markets all the time, but that kind of focus on stock volatility is less common. Fed Chair Janet Yellen and her Vice Chair Stanley Fischer, both speaking on March 3, appeared to seal the deal for a rate increase at the Fed’s upcoming March 14-15 meeting — with Yellen indicating that a hike is coming barring a drastic disappointment in next week’s February jobs report. Fischer was also was fairly unequivocal. “If there has been a conscious effort to move up our hike expectations I am going to join it,” he told a monetary policy conference in New York, sponsored by the University of Chicago’s Booth School of Business.

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Carswell is the only MP for Ukip. Farage hates him now. But he has some points: “Trump – or Geert Wilders in the Netherlands – is where you end up when you ignore legitimate public concerns and there isn’t a safety valve. “

Leaving The EU Is The Start Of A Liberal Insurgency (Carswell)

What is Nigel Farage so cross about? We won the EU referendum, for goodness sake. Since 23 June, I’ve been walking on sunshine. My mood has been a state of Zen-like bliss. Alongside Boris Johnson, David Owen, Gisela Stuart and all of those involved in the official Vote Leave campaign, I spent the referendum arguing that leaving the EU would be an opportunity to make Britain more open, outward-looking and globally competitive. It is becoming increasingly clear to me that this is where Brexit is going to take us. [..] Brexit is often bracketed alongside the election of Donald Trump and the rise of the new radical populist movements in many western countries. But to me the EU referendum result was a safety valve. Trump – or Geert Wilders in the Netherlands – is where you end up when you ignore legitimate public concerns and there isn’t a safety valve.

Throughout history oligarchy has emerged in societies in which power was previously dispersed: in the late Roman republic, and in early modern times in the Venetian and then the Dutch republics. Each time, the emergence of oligarchy was always accompanied by an anti-oligarch insurgent reaction.Many of today’s new radical movements aren’t oligarchs, but an anti-oligarchy insurgency. Trump is no American Caesar about to cross some constitutional Rubicon. Yet such insurgents often ended up unwittingly assisting the oligarchs. In Rome the Gracchi brothers, with their Trump-like concern about cheap migrant labour, caused so much civil strife that an all-powerful emperor seemed a better bet. In Venice, the anti-oligarch rebel Bajamonte launched an unsuccessful coup – and in doing so gave the elite a pretext to create a new, superpowerful executive arm of government, the Council of Ten.

Created to respond to the crisis for six weeks, it ran the republic for the next 600 years. The Dutch anti-oligarch De Witt was so inept, he paved the way for the return of a strong stadtholder, or king. So, too, today. If chaotic, angry insurgents such as France’s Marine Le Pen and the rightwing populist Alternative for Germany party are the alternative, then being governed by remote, unaccountable elites sitting in central banks and Brussels doesn’t seem so unattractive after all. But Brexit isn’t anything like that. It is the beginning of a liberal insurgency. Brexit means that we take back control from the supranational elite. Power can be dispersed outward and downwards. Those who make public policy might once more answer to the public. Cheer up – it might even mean that there is less space for anger in our politics too.

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“Even after a recent rally, the stock is 29% lower than when Cryan took the helm in 2015…”

Deutsche Bank CEO Cryan Has A New Strategy: Reverse His Old Strategy (BBG)

Deutsche Bank CEO John Cryan tore up his own turnaround plan in an admission that the 17-month-old effort flopped. Germany’s largest bank late Sunday approved measures – most crucially, plans to raise about $8.5 billion in a share sale – that effectively restart what has already been the most turbulent transformation in its recent history. Among the moves: naming two deputy CEOs who may now be positioned to succeed Cryan; selling a piece of the asset-management business and abandoning the sale of the consumer-banking unit, which was the linchpin of the blueprint he scrapped. Speaking on Monday, Cryan said the deputies were installed at his request as the company will focus more on the German market with the reintegration of Postbank, which he said reflects a strong performance by the unit and a changed environment for banks.

Yet the developments underscore how, almost two years after he took over, Deutsche Bank has been unable to plot a course to a more profitable future while seeking to eliminate 9,000 jobs. “We want to move back into modest growth mode, controlled growth,” Cryan said in the interview. “The operating environment in the U.S. but also increasingly in the euro zone and especially in Germany looks strong. And so I’m reasonably confident about the future.” Deutsche Bank fell 5.4% at 9:16 a.m. in Frankfurt trading, the biggest drop more than four weeks. Before today, the shares had rallied 44% in the past six months. Even though they’re being tapped for a capital infusion for the fourth time since 2010, some investors welcomed the developments as a way to end questions about the firm’s financial strength. S

elling a minority stake in the asset-management unit within the next two years and unloading some assets at the investment bank will help raise another 2 billion euros ($2.1 billion) of capital. Deutsche Bank’s last three capital increases raised about €21.7 billion – compared to the current market value of €26.4 billion. Even after a recent rally, the stock is 29% lower than when Cryan took the helm in 2015. “The shareholder dilution is enormous,” said Michael Huenseler, an investor at Assenagon Asset Management, which holds a stake in Deutsche Bank. “But at the same time, this package should end what has been hurting Deutsche Bank for so long: the discussion about the capital situation. Now the bank has to prove that it can be profitable.”

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A boiling cauldron that will keep festering a for a while longer. Italy has a long-standing ownership class that won’t give up easily. Corruption, the mob, the church, secret lodges.

Renzi’s Return Clouded By Probe Into Father, Government Minister (BBG)

Matteo Renzi’s comeback risks being undermined by a judicial investigation into the father of the Italian former prime minister and a government minister. Rome prosecutors on Friday were due to question Tiziano Renzi, 65, over an accusation of influence-peddling, his lawyer said. The elder Renzi is alleged to have obtained promises of monthly sums of money from Alfredo Romeo, a Naples entrepreneur, in return for mediating on his behalf for public works contracts, Italian news agency Ansa reported. The ex-premier’s father has denied any wrongdoing. [..] “If the investigation goes ahead, it will surely hurt Matteo Renzi’s prospects even if he has nothing to do with it,” said Sergio Fabbrini, director of the school of government at Luiss University in Rome. “This is the most critical moment of his political career, he has to find a new strategy.”

Tiziano Renzi’s lawyer Federico Bagattini said in a telephone interview that his client had done nothing illicit. “We deny that he ever asked for anything, that he ever promised he would intervene, and that he ever received any money or any other benefit,” Bagattini said. Tiziano Renzi said Thursday he had nothing to hide. “I have never asked for money. I never took any. Never,” he said in a statement reported by Ansa. [..] The anti-establishment Five Star Movement, which has made denunciations of political corruption one of its main platforms, has seized on the case. It submitted on Thursday a parliamentary vote of no confidence against Sports Minister Luca Lotti, a close ally of Matteo Renzi, which will test the government’s majority.

Lotti is also under investigation in the case for allegedly revealing confidential information, according to Italian news media, a charge he denied in a post on Facebook on Thursday. Five Star “talks of kick-backs, arrests, contracts – all things which I have nothing to do with,” Lotti wrote. The office of Franco Coppi, Lotti’s lawyer, did not respond to an emailed request for comment on Friday. The case is “an atomic bomb on Italian politics,” Five Star co-founder Beppe Grillo, who wants a referendum on Italy’s membership of the euro, wrote on his blog. “When it explodes, no one will be able to find shelter. Today more than ever we need honesty in institutions.”

Read more …

It didn’t start yesterday. Western media have been killing off their own credibility for propaganda reasons, for many years.

The Iraq War Stench Lingers Behind Today’s Preoccupation With Fake News (G.)

[..] with trust in the establishment at an all time low, the institutional heft of traditional media companies becomes a liability rather than an asset, enabling Trump to successfully turn the “fake news” label onto his opponents. Much of that goes back to Iraq. “The period of time between 9/11 and the invasion of Iraq represents one of the greatest collapses in the history of the American media,” says Gary Kamiya. “Every branch of the media failed, from daily newspapers, magazines and websites to television networks, cable channels and radio. “Bush administration lies and distortions went unchallenged, or were actively promoted. Fundamental and problematic assumptions about terrorism and the ‘war on terror’ were rarely debated or even discussed. Vital historical context was almost never provided. And it wasn’t just a failure of analysis. With some honourable exceptions, good old-fashioned reporting was also absent.”

Let’s look at the most famous example of how the media was used to make the Iraq war happen. On September 8 2002, the New York Times published a major story by Michael R Gordon and Judith Miller asserting that Iraq had “stepped up its quest for nuclear weapons and … embarked on a worldwide hunt for materials to make an atomic bomb”. The piece cited no named sources whatsoever. Rather, it attributed all its significant claims simply to anonymous US officials – and, by so doing, it helped launder the Bush administration’s talking points, lending a liberal imprimatur to unverified (and totally untrue) claims. When the key members of the Bush administration launched a publicity blitz to make the war happen, they were able to quote the New York Times as evidence: in effect, reacting to newspaper revelations for which they themselves were responsible.

For instance, during a CNN appearance, Condoleeza Rice urged the public to support an invasion on the basis that “we don’t want the smoking gun to be a mushroom cloud”. She’d lifted the phrase directly from Gordon and Miller – who’d taken it from the administration. Elsewhere, Gordon and Miller referred to Iraq’s supposed interest in acquiring high-strength aluminium tubes as an illustration of its nuclear ambitions. Again, the claims came from Bush officials. But when, at the UN General Assembly, Bush told the story, he sounded as if he were repeating a New York Times scoop. A similar circularity defined the propaganda campaign conducted in other countries.

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In case you were still wondering why an entire country and its people are being obliterated.

Saudi Arabia Stealing 65% of Yemen’s Oil in Collaboration with US, Total (AHT)

“63% of Yemen’s crude production is being stolen by Saudi Arabia in cooperation with Mansour Hadi, the fugitive Yemeni president, and his mercenaries,” Mohammad Abdolrahman Sharafeddin told FNA on Tuesday. “Saudi Arabia has set up an oil base in collaboration with the French Total company in the Southern parts of Kharkhir region near the Saudi border province of Najran and is exploiting oil from the wells in the region,” he added. Sharafeddin said that Riyadh is purchasing arms and weapons with the petro dollars stolen from the Yemeni people and supplies them to its mercenaries to kill the Yemenis. Late in last year, another economic expert said Washington and Riyadh had bribed the former Yemeni government to refrain from oil drilling and exploration activities, adding that Yemen has more oil reserves than the entire Persian Gulf region.

“Saudi Arabia has signed a secret agreement with the US to prevent Yemen from utilizing its oil reserves over the past 30 years,” Hassan Ali al-Sanaeri told FNA. “The scientific research and assessments conducted by international drilling companies show that Yemen’s oil reserves are more than the combined reserves of all the Persian Gulf states,” he added. Al-Sanaeri added that Yemen has abundant oil reserves in Ma’rib, al-Jawf, Shabwah and Hadhramaut regions. He noted that a series of secret documents by Wikileaks disclosed that the Riyadh government had set up a committee presided by former Saudi Defense Minister Crown Prince Sultan bin Abdel Aziz. “Former Saudi Foreign Minister Saud al-Faisal and the kingdom’s intelligence chief were also the committee’s members.”

Read more …

“If I want to come to Germany, I will, and if you don’t let me in through your doors, if you don’t let me speak, then I will make the world rise to its feet..”

Turkey’s Erdogan Compares German Behavior With Nazi Period (R.)

Turkish President Tayyip Erdogan accused Germany on Sunday of “fascist actions” reminiscent of Nazi times in a growing row over the cancellation of political rallies aimed at drumming up support for him among 1.5 million Turkish citizens in Germany. German politicians reacted with shock and anger. German Justice Minister Heiko Maas told broadcaster ARD that Erdogan’s comments were “absurd, disgraceful and outlandish” and designed to provoke a reaction from Berlin. But he cautioned against banning Erdogan from visiting Germany or breaking off diplomatic ties, saying that such moves would push Ankara “straight into the arms of (Russian President Vladmir) Putin, which no one wants”.

The deputy leader of Chancellor Angela Merkel’s Christian Democratic Union (CDU) party said the Turkish president was “reacting like a wilful child that cannot have his way”, while a top leader of the CDU’s Bavarian sister party described Erdogan as the “despot of the Bosphorus” and demanded an apology. German authorities withdrew permission last week for two rallies by Turkish citizens in German cities at which Turkish ministers were to urge a “Yes” vote in a referendum next month on granting Erdogan sweeping new presidential powers. Berlin says the rallies were canceled on security grounds. However, Turkish Economy Minister Nihat Zeybekci spoke at large events in Leverkusen and Cologne on Sunday while protesters stood outside.

The row has further soured relations between the two NATO members amid mounting public outrage in Germany over the arrest in Turkey of a Turkish-German journalist. It has also spurred growing demands for Merkel to produce a more forceful response to Erdogan’s words and actions. A poll conducted for the Bild am Sonntag newspaper showed that 81% of Germans believe that Merkel’s government has been too accommodating with Ankara. Germany, under an agreement signed last year, relies on Turkey to prevent a further flood of migrants from pouring into Europe. The lead article in German news magazine Der Spiegel on Sunday urged Merkel to free herself from the “handcuffs of the migrant deal”.

[..] A defiant Erdogan said he could travel to Germany himself to rally support for the constitutional changes to grant him greater power. “Germany, you have no relation whatsoever to democracy and you should know that your current actions are no different to those of the Nazi period,” Erdogan said at a rally in Istanbul. “If I want to come to Germany, I will, and if you don’t let me in through your doors, if you don’t let me speak, then I will make the world rise to its feet,” he told a separate event.

Read more …

And Erdogan will want something in return.

US Asks Ankara For Steps To Ease Aegean Tension (K.)

American officials have urged Ankara to refrain from action that would further escalate tension with fellow NATO member Greece in the Aegean Sea, Kathimerini understands, adding that the issue was raised during the Munich Security Conference last month, as well as during private contacts in Ankara. Sources told Kathimerini that US Secretary of State Rex Tillerson raised the topic with Turkish Foreign Minister Mevlut Cavusoglu on the sidelines of the Munich gathering last month. Assistant Secretary of State John Heffern reportedly asked Turkish officials for steps that will help reduce the recent spike in tensions with Greece.

A few days later, the same sources said, US Ambassador to Ankara John Bass met with Turkey’s Foreign Ministry Undersecretary Umit Yalcin to put pressure in the same direction. Yalcin is said to have attributed the standoffish behavior of the Turkish military to the army’s damaged morale by developments following July’s failed coup attempt. Analysts however say that any autonomy of the Turkish armed forces has been heavily compromised in the wake of the coup. Greek Foreign Minister Nikos Kotzias is expected to travel to Washington for a meeting with Tillerson in the coming days. Talks are to be followed by a telephone conversation between Prime Minister Alexis Tsipras and US President Donald Trump.

Read more …

Growth is not possible in Greece today. The entire austerity edifice would have to be reversed.

Greece Desperate For Growth Strategy As Public Mood Darkens (G.)

In navigating the country’s economic collapse, every one of Athens’ post-crisis governments has at some point attempted to change the narrative by diverting attention to development and growth. But the latest shift comes amid evidence that prime minister Alexis Tsipras’s two-party administration has gone a step further, approaching the World Bank for a €3bn loan to finance employment policies and programmes.

The move would highlight the desperation of a government tackling ever-growing poverty rates. Last week, the Cologne Institute for Economic Research said poverty in thrice-bailed out Greece had jumped 40% between 2008 and 2015, by far the biggest leap of any European country. Tsipras has been told he will have to enforce labour market reforms and further pension and income tax cuts if Greece is to realistically achieve a primary surplus of 3.5% – before interest payments are taken into account – once its current rescue programme expires in August 2018. The country faces debt repayments of over €7bn in July and with its coffers near empty would be unable to avert default – and inevitable euro exit – if additional loans weren’t forthcoming.

The prospect of more cuts, when pensions have already been slashed 12 times and some retirees are surviving on little more than €300 a month, has exacerbated the sense of gloom in the eurozone’s weakest member state. “We will have to compromise,” Dragasakis admitted. “Even if such demands are totally irrational,” he said, adding that Greece’s real problem was that it was primarily caught up in an ugly dispute between its lenders over what to do with a debt load close to 180% of GDP. The IMF has projected the pile will reach an “explosive” 275% of output if not relieved – a move that Germany, the biggest provider of bailout funds, refuses steadfastly to agree to. “It is why we have not completed the review,” said Dragasakis of the progress report Athens must conclude to secure further assistance.

The Greek government has been accused of deliberately delaying implementation of reforms. “This government won’t deliver reforms because it doesn’t believe in them,” said the centre-right main opposition leader Kyriakos Mitsotakis at the Delphi forum. As in antiquity, when kings, warriors and philosophers descended on Delphi at times of uncertainty to consult the Pythia, or prophetess, about their future, politicians, policy gurus, economists and academics gather annually at the place once regarded as the centre of the world to debate Greece’s plight. “What we need is a masterplan and a vision to get out of this crisis,” said Nikos Xydakis, the former European affairs minister who is now parliamentary spokesman for the ruling Syriza party. “A masterplan in financial terms but also a vision for a new identity of Greeks once this crisis ends.”

Read more …

How mankind gets rid of itself, and can’t help doing it.

Polluted Environments Kill 1.7 Million Children A Year (R.)

A quarter of all global deaths of children under five are due to unhealthy or polluted environments including dirty water and air, second-hand smoke and a lack or adequate hygiene, the World Health Organization (WHO) said on Monday. Such unsanitary and polluted environments can lead to fatal cases of diarrhea, malaria and pneumonia, the WHO said in a report, and kill 1.7 million children a year. “A polluted environment is a deadly one – particularly for young children,” WHO Director-General Margaret Chan said in a statement. “Their developing organs and immune systems, and smaller bodies and airways, make them especially vulnerable to dirty air and water.” In the report – “Inheriting a sustainable world: Atlas on children’s health and the environment” – the WHO said harmful exposure can start in the womb, and then continue if infants and toddlers are exposed to indoor and outdoor air pollution and second-hand smoke.

This increases their childhood risk of pneumonia as well as their lifelong risk of chronic respiratory diseases such as asthma. Air pollution also increases the lifelong risk of heart disease, stroke and cancer, the report said. The report also noted that in households without access to safe water and sanitation, or that are polluted with smoke from unclean fuels such as coal or dung for cooking and heating, children are at higher risk of diarrhea and pneumonia. Children are also exposed to harmful chemicals through food, water, air and products around them, it said. Maria Neira, a WHO expert on public health, said this was a heavy toll, both in terms of deaths and long-term illness and disease rates. She urged governments to do more to make all places safe for children. “Investing in the removal of environmental risks to health, such as improving water quality or using cleaner fuels, will result in massive health benefits,” she said.

Read more …

Feb 182017
 February 18, 2017  Posted by at 4:01 pm Finance Tagged with: , , , , , , , ,  8 Responses »

Jackson Pollock Shooting Star 1947


It’s amusing to see how views start to converge, at the same time that it’s tiresome to see how long that takes. It’s a good thing that more and more people ‘discover’ how and why austerity, especially in Europe, is such a losing and damaging strategy. It’s just a shame that this happens only after the horses have left the barn and the cows have come home, been fed, bathed, put on lipstick and gone back out to pasture again. Along the same lines, it’s beneficial that the recognition that for a long time economic growth has not been what ‘we’ think it should be, is spreading.

But we lost so much time that we could have used to adapt to the consequences. The stronger parties in all this, the governments, companies, richer individuals, may be wrong, but they have no reason to correct their wrongs: the system appears to work fine for them. They actually make good money because all corrections, all policies and all efforts to hide the negative effects of the gross ‘mistakes’, honest or not, made in economic and political circles are geared towards making them ‘whole’.

The faith in the absurd notion of trickle down ‘economics’ allows them to siphon off future resources from the lower rungs of society, towards themselves in the present. It will take a while for the lower rungs to figure this out. The St. Louis Fed laid it out so clearly this week that I wrote to Nicole saying ‘We’ve been vindicated by the Fed itself.’ That is, the Automatic Earth has said for many years that the peak of our wealth was sometime in the 1970’s or even late 1960’s.

Intriguing questions: was America at its richest right before or right after Nixon took the country off the gold standard in 1971? And whichever of the two one would argue for, why did he do it smack in the middle of peak wealth? Did he cause the downfall or was it already happening?

As per the St. Louis Fed report: “Real GDP growth fell and leveled off in the mid-1970s, then started falling again in the mid-2000s”. What happened during that 30-year period was that we started printing and borrowing with abandon, making both those activities much easier while we did, until the debt load overwhelmed even our widest fantasies ten years ago. And we’ve never recovered from that, if that was not obvious yet. Nor will we.

As the first graph below shows, there was still growth post-Gold Standard but the rate of growth fell and then “leveled off”, only to fall more after, to a point where Real GDP per Capita is presently 0.5% or so -little more than a margin error-. How one would want to combine that with talk of an economic recovery is hard to see. In fact, such talk should be under serious scrutiny by now.

Still, the numbers remain positive, you say. Yes, that’s true. But there’s a caveat, roughly similar to the one regarding energy and the return on it. Where we used to pump oil and get 100 times the energy in return that we needed to pump it, that ratio (EROEI) is now down to 10:1 or less. Alternative energy sources do little better, if at all. Whereas to run a complex society, let alone one like ours that must become more complex as we go along – or die-, we would need somewhere along the lines of a 20:1 to even 30:1 EROEI rate.

Another place where a similar caveat can be found is the amount of dollars it takes to produce a dollar of real growth. That amount has been increasing, and fast, to the point where it takes over $10 to create $1 or growth in the US and Europe, and China too moves towards such numbers.

Both our energy systems and our financial systems are examples of what happens when what we should perhaps call the rate of ‘productivity’ (rather than growth) falls below a critical mass: it becomes impossible to maintain, even keep alive, a society as complex as ours, which requires an increase in complexity to survive. In other words: a Real GDP per Capita growth rate of 0.5% is not enough to stand still, just like oil EROEI of 5:1 is not; there is growth, but not -nearly- enough to keep growing.

One does not get the impression that the St. Louis Fed economists who wrote the report are aware of this -though the title is suggestive enough-, they seem to lean towards the eternal desire for a recovery, but they did write it nonetheless. Do note the sharp drop that coincides with the 1973 oil crisis. We never ‘recovered’.

Why Does Economic Growth Keep Slowing Down?

The U.S. economy expanded by 1.6% in 2016, as measured by real GDP. Real GDP has averaged 2.1% growth per year since the end of the last recession, which is significantly smaller than the average over the postwar period (about 3% per year). These lower growth rates could in part be explained by a slowdown in productivity growth and a decline in factor utilization. However, demographic factors and attitudes toward the labor market may also have played significant roles.

The figure below shows a measure of long-run trends in economic activity. It displays the average annual growth rate over the preceding 40 quarters (10 years) for the period 1955 through 2016. (Hence, the first observation in the graph is the first quarter of 1965, and the last is the fourth quarter of 2016.)


Long-run growth rates were high until the mid-1970s. Then, they quickly declined and leveled off at around 3% per year for the following three decades. In the second half of the 2000s, around the last recession, growth contracted again sharply and has been declining ever since. The 10-year average growth rate as of the fourth quarter of 2016 was only 1.3% per year. Total output grows because the economy is more productive and capital is accumulated, but also because the population increases over time.

The same dynamics (or lack thereof) are reflected in a recent piece by Chris Hamilton, in which he argues that global growth -as expressed by growth in energy consumption- has largely been non-existent for years, other than in China. Moreover, China has added a stunning amount of debt to achieve that growth, and since its population growth is about to stagnate -and then turn negative-, this was pretty much all she wrote.

Global Growth is All About China…Nothing but China

Since 2000, China has been the nearly singular force for growth in global energy consumption and economic activity. However, this article will make it plain and simple why China is exiting the spotlight and unfortunately, for global economic growth, there is no one else to take center stage. To put things into perspective I’ll show this using four very inter-related variables…(1) total energy consumption, (2) core population (25-54yr/olds) size and growth, (3) GDP (flawed as it is), and (4) debt. First off, the chart below shows total global energy consumption (all fossil fuels, nuclear, hydro, renewable, etc…data from US EIA) from 1980 through 2014, and the change per period. The growth in global energy consumption from ’00-’08 was astounding and an absolute aberration, nearly 50% greater than any previous period.


[..] here is the money chart, pointing out that the growth in energy consumption (by period) has shifted away from “the world” squarely to China. From 2008 through 2014 (most recent data available), 2/3rds or 66% of global energy consumption growth was China. Also very noteworthy is that India nor Africa have taken any more relevance, from a growth perspective, over time. The fate of global economic growth rests solely upon China’s shoulders.


China’s core population is essentially peaking this year and beginning a decades long decline (not unlike the world. The chart below shows total Chinese core population peaking, energy consumption stalling, and debt skyrocketing.


The chart below shows China’s core population (annual change) again against total debt, GDP, and energy consumption. The reliance on debt creation as the core population growth decelerated is really hard not to see. This shrinking base of consumption will destroy the meme that a surging Chinese middle class will drive domestic and global consumption…but I expect this misconception will continue to be peddled for some time.


• China of ’85-’00 grew on population and demographic trends.

• China of ’00-’15 grew despite decelerating population growth but on accelerating debt growth…this growth in China kept global growth alive.

• China of ’15-’30 will not grow, will not drive the global economy and absent Chinese growth…the world economy is set to begin an indefinite period of secular contraction. China ceased accumulating US Treasury debt as of July of 2011 and continues to sell while busy accumulating gold since 2011.

Unfortunately, neither quasi-democracies nor quasi-communist states have any politically acceptable solutions to this problem of structural decelerating growth and eventual outright contraction…but that won’t keep them from meddling to stall the inevitable global restructuring.

I can only hope that these data will convince more people that all the times I’ve said that growth is over, it was true. And perhaps even make them think about what follows from there: that when growth is gone, so is all centralization, including globalization, other than by force. This will change the world a lot, and unfortunately not always in peaceful ways.

What seems to have started (but was in the air long before) with Brexit and Trump, is merely a first indication of what’s to come. People will not accept that important decisions that affect them directly are taken by anonymous ‘actors’ somewhere far away, unless this promises and delivers them very concrete and tangible benefits. In fact, many have lost all faith in the whole idea, and that’s why we have Trump and Brexit in the first place.

This turn inward -protectionism if you will-, in the UK, US and many other places, is an inevitable development that follows from declining growth and soaring debt. Entire societies will have to be re-built from the ground up, and people will want to do that themselves, not have it dictated by strangers. At the same time, of course, those who profit most from centralization want that to continue. They can’t, but they will try, and hard.

Equally important, people who wish to try and save existing ‘central institutions’ for less selfish and more peaceful reasons should think twice, because they will fail too. It’s centralization itself that is failing, and the demise of the structures that represent it is but a consequence of that. We will see local structures being built, and only after that possibly -and hopefully- connect to each other. This is a big change, and therefore a big challenge.

Feb 172017
 February 17, 2017  Posted by at 11:00 am Finance Tagged with: , , , , , , , , ,  2 Responses »

John Collier Workmen at emergency office construction job, Washington, DC Dec 1941


Global Growth is All About China…Nothing but China (Econimica)
US Household Debt Is Dangerously Close To 2008 Levels (CNN)
“Seriously Delinquent” US Auto Loans Surge (WS)
3 Reasons The US Could Be Headed For A Fresh Debt Crisis (MW)
Fed President Says US Banks Have “Half The Equity They Need” (Black)
Harward Turns Down National Security Adviser Job Over Staffing Dispute (CBS)
The Swamp Strikes Back (Escobar)
Who’s Sucking Up All the World’s Safest Bonds? (WSJ)
Mary Jo White Seriously Misled the US Senate to Become SEC Chair (Martens)
European Financial Centres After Brexit (E.)
Putin Orders Russian Media To “Cut Back” On Positive Trump Coverage (ZH)
‘Bank Run’ under Capital Controls: Greeks withdraw €2.5bn in 45 days (KTG)



Let this sink in. Then realize how reliable Chinese numbers are. And that’s where all the ‘growth’ is in the world.

Global Growth is All About China…Nothing but China (Econimica)

Since 2000, China has been the nearly singular force for growth in global energy consumption and economic activity. However, this article will make it plain and simple why China is exiting the spotlight and unfortunately, for global economic growth, there is no one else to take center stage. To put things into perspective I’ll show this using four very inter-related variables…(1) total energy consumption, (2) core population (25-54yr/olds) size and growth, (3) GDP (flawed as it is), and (4) debt. First off, the chart below shows total global energy consumption (all fossil fuels, nuclear, hydro, renewable, etc…data from US EIA) from 1980 through 2014, and the change per period. The growth in global energy consumption from ’00-’08 was astounding and an absolute aberration, nearly 50% greater than any previous period.

Of that growth in energy consumption, the chart below breaks down the sources of that growth among China (red), India/Africa (gold) and the rest of the world (blue). It’s plain to see the growth of Chinese energy consumption, the decelerating growth among the rest of the world, and the stagnant growth among India / Africa.

But here is the money chart, pointing out that the growth in energy consumption (by period) has shifted away from “the world” squarely to China. From 2008 through 2014 (most recent data available), 2/3rds or 66% of global energy consumption growth was China. Also very noteworthy is that India nor Africa have taken any more relevance, from a growth perspective, over time. The fate of global economic growth rests solely upon China’s shoulders.

The chart below shows China’s core population (annual change) again against total debt, GDP, and energy consumption. The reliance on debt creation as the core population growth decelerated is really hard not to see. This shrinking base of consumption will destroy the meme that a surging Chinese middle class will drive domestic and global consumption…but I expect this misconception will continue to be peddled for some time.

Read more …

Fewer delinquencies, says the Fed. But then look at the next article: “Seriously Delinquent” US Auto Loans Surge

US Household Debt Is Dangerously Close To 2008 Levels (CNN)

Total household debt climbed to $12.58 trillion at the end of 2016, an increase of $266 billion from the third quarter, according to a report from the Federal Reserve Bank of New York. For the year, household debt ballooned by $460 billion — the largest increase in almost a decade. That means the debt loads of Americans are flirting with 2008 levels, when total consumer debt reached a record high of $12.68 trillion. Rising debt hints that banks are extending more credit. Mortgage originations increased to the highest level since the Great Recession. Mortgage balances make up the bulk of household debt and ended the year at $8.48 trillion. However, growth in non-housing debt – which includes credit card debt and student and auto loans – are key factors fueling the rebound in debt.

Student loan debt balances rose by $31 billion in the fourth quarter to a total of $1.31 trillion, according to the report. Auto loans jumped by $22 billion as new auto loan originations for the year climbed to a record high. Credit card debts rose by $32 billion to hit $779 billion. At these rates, the New York Fed expects household debt to reach its previous 2008 peak sometime this year. But while that may sound alarming, there is one big difference between now and 2008, according to the Fed: Fewer delinquencies. At the end of 2016, 4.8% of debts were delinquent, compared to 8.5% of total household debt in the third quarter of 2008. There were also less bankruptcy filings – a little more than 200,000 consumers had a bankruptcy added to their credit report in the final quarter of last year, a 4% drop from the same quarter in 2015.

Read more …

“There’s nothing like loading up consumers with debt to make central bankers outright giddy.”

“Seriously Delinquent” US Auto Loans Surge (WS)

Bank regulators have been warning, now it’s happening. The New York Fed, in its Household Debt and Credit Report for the fourth quarter 2016, put it this way today: “Household debt increases substantially, approaching previous peak.” It jumped by $226 billion in the quarter, or 1.8%, to the glorious level of $12.58 trillion, “only $99 billion shy of its 2008 third quarter peak.” Yes! Almost there! Keep at it! There’s nothing like loading up consumers with debt to make central bankers outright giddy. Auto loan balances in 2016 surged at the fastest pace in the 18-year history of the data series, the report said, driven by the highest originations of loans ever. Alas, what the auto industry has been dreading is now happening: Delinquencies have begun to surge.

This chart – based on data from the Federal Reserve Board of Governors, which varies slightly from the New York Fed’s data – shows how rapidly auto loan balances have ballooned since the Great Recession. At $1.112 trillion (or $1.16 trillion according to the New York Fed), they’re now 35% higher than they’d been during the crazy peak of the prior bubble. Note that during the $93 billion increase in auto loan balances in 2016, new vehicle sales were essentially flat. No way that this is an auto loan bubble. Not this time. It’s sustainable. Or at least containable when it’s not sustainable, or whatever. These ballooning loans have made the auto sales boom possible.

Read more …

Not a new topic, but some useful numbers.

3 Reasons The US Could Be Headed For A Fresh Debt Crisis (MW)

Subprime car loansThe amount of total open car loans just topped $1 trillion, according to credit ratings firm Experian. But is that a sign of consumer confidence … or a cause for alarm? According to the latest data, from the third quarter of 2016, about 1 in 5 car loans are made to subprime borrowers, at an average interest rate of almost 11%. And broadly speaking, the average car loan in the U.S. is for a balance of almost $30,000 and a monthly payment of about $500. With stats like that, it’s no wonder the default rate on car loans is rising. A study by lending analysis firm Lending Times recently found that auto loan delinquencies are up over 21% compared with 2012 levels. A senior vice president at TransUnion, one of the three major credit rating bureaus, recently said he expects “a modest increase in delinquency” for auto loans going forward, too.

Just image what would happen if rates tick a bit higher. After all, if homeowners who were “underwater” on their homes in 2007 could shrug off the impact of a foreclosure on their credit report and simply walk away from a big mortgage, then why in the world would they stick with a double-digit interest rate on a car loan — especially as that car ages or breaks down? The real weight of these loans continues to hit the balance sheets of lenders, with net subprime losses continuing to march upward in December to 8.52%. Standard & Poor’s U.S. Auto Loan Tracker noted that while some of the acceleration was seasonal, “the year-over-year increases indicate that 2017’s losses could surpass last year’s levels.” No wonder the New York Fed called subprime auto debt a “significant concern” at the end of last year.

Student loans Hedge-fund guru Bill Ackman has said “I think that the government’s going to lose hundreds of millions of dollars” on student loans. And while that may sound like hysterics, when you consider that there is roughly $1.4 trillion in outstanding student debt, according to the Federal Reserve, that number doesn’t seem so far-fetched. Most of that is owned by the federal government via subsidized loans, too, with a recent Bloomberg report estimating the government owned some $850 billion in student loan debt as of 2014. Even a modest default rate would quite literally eat up hundreds of millions of dollars in a hurry. The losses for the government are disturbing, but at least can be made up with higher taxes or cuts elsewhere in the budget. There’s no relief for the millions of young Americans who are stuck paying for their college degree instead of spending on consumer goods.

Government-insured mortgagesAfter the collapse of subprime mortgages during the financial crisis, banks learned a hard lesson about these risky home loans. But if you think that means they avoided all loans to less-than-stellar borrowers, think again. The New York Fed recently juxtaposed the rise of government-insured mortgages vis-à-vis the decline in subprime lending to find that “government insurance programs rapidly expanded and more than filled the void.” That mirrors a report from ProPublica back in 2012 that estimated 9 in 10 mortgages issued at the time were being guaranteed by taxpayers via government-sponsored enterprises such as Fannie Mae and Freddie Mac. And while standards are moderately higher for loans with this government backstop than precrisis loans to subprime borrowers, “they are not low-risk loans,” write the New York Fed economists. “The combination of high leverage and low credit scores documented above translates into extremely high default rates.”

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It’s all about political power.

Fed President Says US Banks Have “Half The Equity They Need” (Black)

In a scathing editorial published in the Wall Street Journal today, the president of the Federal Reserve Bank of Minneapolis, Neel Kashkari, blasted US banks, saying that they still lacked sufficient capital to withstand a major crisis. Kashkari makes a great analogy. When you’re applying for a mortgage or business loan, sensible banks are supposed to demand a 20% down payment from their borrowers. If you want to buy a $500,000 home, a conservative bank will loan creditworthy borrowers $400,000. The borrower must be able to scratch together a $100,000 down payment. But when banks make investments and buy assets, they aren’t required to do the same thing. Remember that when you deposit money at a bank, you’re essentially loaning them your savings.

As a bank depositor, you’re the lender. The bank is the borrower. Banks pool together their deposits and make various loans and investments. They buy government bonds, financial commercial trade, and fund real estate purchases. Some of their investment decisions make sense. Others are completely idiotic, as we saw in the 2008 financial meltdown. But the larger point is that banks don’t use their own money to make these investments. They use other people’s money. Your money. A bank’s investment portfolio is almost entirely funded with its customers’ savings. Very little of the bank’s own money is at risk. You can see the stark contrast here. If you as an individual want to borrow money to invest in something, you’re obliged to put down 20%, perhaps even much more depending on the asset.

Your down payment provides a substantial cushion for the bank; if you stop paying the loan, the value of the property could decline 20% before the bank loses any money. But if a bank wants to make an investment, they typically don’t have to put down a single penny. The bank’s lenders, i.e. its depositors, put up all the money for the investment. If the investment does well, the bank keeps all the profits. But if the investment does poorly, the bank hasn’t risked any of its own money. The bank’s lenders (i.e. the depositors) are taking on all the risk. This seems pretty one-sided, especially considering that in exchange for assuming all the risk of a bank’s investment decisions, you are rewarded with a miniscule interest rate that fails to keep up with inflation. (After which the government taxes you on the interest that you receive.) It hardly seems worth it.

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Harward Turns Down National Security Adviser Job Over Staffing Dispute (CBS)

Vice Admiral Robert Harward has rejected President Trump’s offer to be the new national security adviser, CBS News’ Major Garrett reports. Sources close to the situation told Garrett Harward and the administration had a dispute over staffing the security council. Two sources close to the situation confirm Harward demanded his own team, and the White House resisted. Specifically, Mr. Trump told Deputy National Security Adviser K. T. McFarland that she could retain her post, even after the ouster of National Security Adviser Michael Flynn. Harward refused to keep McFarland as his deputy, and after a day of negotiations over this and other staffing matters, Harward declined to serve as Flynn’s replacement.

Harward, a 60-year-old former Navy SEAL, served as deputy commander of U.S. Central Command under now-Defense Secretary James Mattis. He previously served as deputy commanding general for operations of Joint Special Operations Command at Fort Bragg in North Carolina. Harward has also commanded troops in both Iraq and Afghanistan for six years after the 9/11 attacks. Under President George W. Bush, he served on the National Security Council as director of strategy and policy for the office of combating terrorism.

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As I said: the New Cold War is being fought INSIDE the US.

The Swamp Strikes Back (Escobar)

The tawdry Michael Flynn soap opera boils down to the CIA hemorrhaging leaks to the company town newspaper, leading to the desired endgame: a resounding victory for hardcore neocon/neoliberalcon US Deep State factions in one particular battle. But the war is not over; in fact it’s just beginning. Even before Flynn’s fall, Russian analysts had been avidly discussing whether President Trump is the new Victor Yanukovich – who failed to stop a color revolution at his doorstep. The Made in USA color revolution by the axis of Deep State neocons, Democratic neoliberalcons and corporate media will be pursued, relentlessly, 24/7. But more than Yanukovich, Trump might actually be remixing Little Helmsman Deng Xiaoping: “crossing the river while feeling the stones”. Rather, crossing the swamp while feeling the crocs.

Flynn out may be interpreted as a Trump tactical retreat. After all Flynn may be back – in the shade, much as Roger Stone. If current deputy national security advisor K T McFarland gets the top job – which is what powerful Trump backers are aiming at – the shadowplay Kissinger balance of power, in its 21st century remix, is even strengthened; after all McFarland is a Kissinger asset. Flynn worked with Special Forces; was head of the Defense Intelligence Agency (DIA); handled highly classified top secret information 24/7. He obviously knew all his conversations on an open, unsecure line were monitored. So he had to have morphed into a compound incarnation of the Three Stooges had he positioned himself to be blackmailed by Moscow.

What Flynn and Russian ambassador Sergey Kislyak certainly discussed was cooperation in the fight against ISIS/ISIL/Daesh, and what Moscow might expect in return: the lifting of sanctions. US corporate media didn’t even flinch when US intel admitted they have a transcript of the multiple phone calls between Flynn and Kislyak. So why not release them? Imagine the inter-galactic scandal if these calls were about Russian intel monitoring the US ambassador in Moscow. No one paid attention to the two key passages conveniently buried in the middle of this US corporate media story. 1) “The intelligence official said there had been no finding inside the government that Flynn did anything illegal.” 2) “…the situation became unsustainable – not because of any issue of being compromised by Russia – but because he [Flynn] has lied to the president and the vice president.” Recap: nothing illegal; and Flynn not compromised by Russia. The “crime” – according to Deep State factions: talking to a Russian diplomat.

Vice-President Mike Pence is a key piece in the puzzle; after all his major role is as insider guarantor – at the heart of the Trump administration – of neocon Deep State interests. The CIA did leak. The CIA most certainly has been spying on all Trump operatives. Flynn though fell on his own sword. Classic hubris; his fatal mistake was to strategize by himself – even before he became national security advisor. “Mad Dog” Mattis, T. Rex Tillerson – both, by the way, very close to Kissinger – and most of all Pence did not like it one bit once they were informed.

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A big way in which central banks distort markets.

Who’s Sucking Up All the World’s Safest Bonds? (WSJ)

The world is running out of safe financial assets. One reason may be regulators’ push to make trading safer. A scarcity of safe collateral can create bouts of volatility in the markets where investors fund their purchases. Economists also worry that a lack of quality public-sector assets leads the private sector to create less reliable and riskier substitutes. Global rules increasingly require that investors deposit cash as security, called margin, when they trade with each other. This money is often left at clearinghouses, which are intermediaries that stand between buyers and sellers and step in if one of the parties won’t make good on a transaction. Regulators are trying to give these clearinghouses more heft to make the financial system safer.

The clearinghouses, in turn, have to do something with the cash, and they frequently take it to repurchase, or “repo,” markets, where they lend it out in exchange for high-quality assets such as German bunds or U.S. Treasurys. That has the effect of vacuuming up safe assets. Paradoxically, cash—at least its electronic form—isn’t ultrasafe: It needs to be left in bank deposits, and even the strongest banks have some risk. Treasurys and bunds don’t. Europe’s dearth of safe assets is especially acute. According to a semiannual survey released Tuesday by the International Capital Market Association, demand for collateral in the eurozone increased significantly in the second half of 2016. The ECB and other central banks across the developed world have been blamed for this safe-asset scarcity because they have bought trillions of dollars worth of government bonds in a bid to boost economic growth.

However, during a speech last month, ECB official Yves Mersch pointed to clearinghouses as a key culprit, and warned that “the requirements for trades to be centrally cleared are still being introduced, so the demand from market infrastructure to exchange cash for collateral will rise.” Data are scarce, but the latest figures from the Bank for International Settlements show that more than half of the notional amount outstanding of derivatives transactions was centrally cleared by the end of 2014, after new regulation was enacted—twice as much as in 2009.

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“Americans will continue to be relegated to the status of dumb tourist in their own country.”

Mary Jo White Seriously Misled the US Senate to Become SEC Chair (Martens)

Less than two weeks after Mary Jo White was nominated to become Chair of the Securities and Exchange Commission by President Barack Obama on January 24, 2013, White filed an ethics disclosure letter advising that she would “retire” from her position representing Wall Street banks at the law firm Debevoise & Plimpton. White wrote on this subject in great detail, stating:

“Upon confirmation, I will retire from the partnership of Debevoise & Plimpton, LLP. Following my retirement, the law firm will not owe me an outstanding partnership share for either 2012 or any part of 2013. As a retired partner, I will be entitled to the use of secretarial services, office space and a blackberry at the firm’s expense. For the duration of my appointment, I will forgo these three benefits, though I may pay for some secretarial services at my own expense. Pursuant to the Debevoise & Plimpton, LLP Partners Retirement Program, I will receive monthly lifetime retirement payments from the firm commencing the month after my retirement. However, within 60 days of my appointment, the firm will make a lump sum payment, in lieu of making monthly retirement payments for the next four years. Within 60 days of my appointment, I also will receive payouts of my interest in the Debevoise & Plimpton LLP Cash Balance Retirement plan and my capital account.”

Yesterday it was widely reported in the business press that Mary Jo White is returning to her former law firm as a partner representing clients who face government investigations. She will also fill the newly created position of Senior Chair of the law firm. This news is highly significant because it would appear that the U.S. Senate was seriously misled by White’s ethics letter in its deliberations to confirm her as the top cop of Wall Street. The news is also highly significant because it will mark the fourth time in four decades that Mary Jo White has spun through the revolving doors of Debevoise & Plimpton (where she represented serial law violators) to government service (prosecuting serial law violators).

[..] Until there is meaningful legislative reform of political campaign financing and revolving door appointments, Americans will continue to be relegated to the status of dumb tourist in their own country.

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Bankers have too much money and too much power.

European Financial Centres After Brexit (E.)

“WHEN the vote took place,” says Valérie Pécresse, “it was an opportunity for us to promote Île de France”, the region around Paris of which she is the elected head. Two advertising campaigns were prepared, depending on the result of Britain’s referendum last June on leaving the European Union. The unused copy ran: “You made one good decision. Make another. Choose Paris region.” Brexit has made Paris bolder. Once Britain leaves Europe’s single market, the many international banks and other firms that have made London their EU home will lose the “passports” that allow them to serve clients in the other 27 states. Possibly, mutual recognition by Britain and the EU of each other’s regulatory regimes will persist. But no one can rely on the transition to Brexit being smooth, rather than a feared “cliff edge”. Best to assume the worst.

Britain is expected to start the two-year process of withdrawal next month. Given the time needed to get approval from regulators, find offices and move (or hire) staff, financial firms have long been weighing their options. London will remain Europe’s leading centre, but other cities are keen to take what they can. The Parisians are pushing hardest, pitching their city as London’s partner and peer. “I don’t see the relationship with London as a rivalry,” says Ms Pécresse. “The rivalry is not with London but with Dublin, Amsterdam, Luxembourg and Frankfurt.” Especially, it seems, Frankfurt. Paris has more big local banks, more big companies and more international schools than its German rival. London apart, say the French team, it is Europe’s only “global city”. When, they smirk, did you last take your partner to Frankfurt for the weekend?

This month the Parisians were in London, briefing 80 executives from banks, asset managers, private-equity firms and fintech companies. They are keen to dispel France’s image as an interventionist, high-tax, work-shy place. The headline corporate-tax rate is 33.3% but due to fall to 28% by 2020. A scheme giving income-tax breaks to high earners who have lived outside France for at least five years will now apply for eight years after arrival or return, not five. The Socialists, who run the city itself, and Ms Pécresse’s Republicans are joined in a business-friendly “sacred union”, says Gérard Mestrallet, president of Paris Europlace, which promotes the financial centre. Ms Pécresse and others play down the risk that Marine Le Pen, of the far-right, Eurosceptic National Front will win the presidential election this spring.

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“Crimea was TAKEN by Russia during the Obama Administration. Was Obama too soft on Russia?” the U.S. president tweeted.

Putin Orders Russian Media To “Cut Back” On Positive Trump Coverage (ZH)

Trump’s honeymoon with capital markets is on the rocks, kept alive only by the occasional soundbite about “massive” or “phenomenal” tax cuts; it now appears that the US president’s – until recently – amicable relationship with Russia is also quickly souring. According to Bloomberg, the Kremlin has ordered Russian state media to cut “way back” on their fawning coverage of President Donald Trump, in what three sources told BBG is a “reflection of growing concern among senior Russian officials that the new U.S. administration will be less friendly than first thought.” The Russian president has defended his decision saying it is the result of declining interest among the Russian viewers in Trump’s rise to power, but Bloomberg adds that some of the most popular TV segments on Trump touched on ideas the Kremlin would rather not promote, such as his pledge to “drain the swamp.”

The suggestion is that since Trump is looking to end governmental corruption, the “authoritarian” Putin should be worried; and yet instead of “draining the swamp” Trump has filled it by surrounded himself with precisely those bankers he used as populist examples of all that is wrong with the government. As such, Putin should greet Trump’s failed “swamp draining” although that part did not make it into the Bloomberg report. Putin’s decree comes at a time of rising anti-Russian sentiment in Washington, where U.S. spy and law-enforcement agencies are conducting multiple investigations to determine the full extent of contacts Trump’s advisers had with Russia during and after the 2016 election campaign.

According to Bloomberg, the order marks a stark turnaround from just a few weeks ago when Russia hailed Trump’s presidential victory as the beginning of a new era of cooperation between the former Cold War foes. “Trump’s campaign was watched with rapture as news anchors gushed over the novelty of hearing an American presidential candidate praise Putin. But the wall-to-wall coverage went too far for the Kremlin’s liking.” In January, Trump reportedly received more mentions in the media than Putin, relegating the Russian leader to the No. 2 spot for the first time since he returned to the Kremlin in 2012 after four years as premier, according to Interfax data.”

That said, there has certainly been a chilling in relations between Trump and Putin. In recent weeks, numerous White House officials, including Trump, have criticized Russia for its annexation of Crimea and the subsequent violence in Ukraine. Trump on Wednesday accused Putin of seizing Crimea from Ukraine in a series of Twitter posts that were delivered amid a flurry of allegations that his team has ties to Russia. “Crimea was TAKEN by Russia during the Obama Administration. Was Obama too soft on Russia?” the U.S. president tweeted. As Bloomberg concludes, Russian officials, who had readily commented to local media on earlier news from Washington, suddenly became less talkative after the Crimea comment. And so, with Trump-Putin relations suddenly in purgatory, and Trump’s domestic “Russia-facing” exposure in chaos, it is now unclear how Trump will pivot away to restore what many had hoped would lead to a restoration in normal relations between the two countries.

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And there we go again.

‘Bank Run’ under Capital Controls: Greeks withdraw €2.5bn in 45 days (KTG)

Delays in the talks between Greece and its lenders have brought back the ghost of Grexit. The grave disagreement between the IMF and the European lenders, Grexit bombshell flying around and Greece’s reluctance to accept additional austerity measures have increase uncertainty among citizens – for one more time. And what do citizens do when they feel political and economical insecurity? The run to banks and withdraw deposits. 2.5 billion euros left Greek banks in the last 45 days. And this despite the capital controls that allow Greeks to withdraw a maximum of just €1,800 per month. However, in better situation are those who brought back cash to the banks. Cash that was largely withdrawn before the capital controls were imposed in July 2015 as a result of a major bank run from November 2014 until end of June 2015.

Those who pulled the cash from under the mattress and brought it to bank are allowed to withdraw money above the €1800 cap. According to newspaper Eidiseis, the cash withdrawal in the last 45 days has set bankers in alert. In addition to cash withdrawals, business loans and mortgage, amounting a total of €500 million, turned red. A sign that the delay in the conclusion of the second review has increased uncertainty among the Greeks, as the daily notes. Speaking to the daily, sources from the Union of Greek Banks said that “time is not working in our favor.” They stressed that the government and the lenders should reach a compromise. Beginning of February, Greek websites for economic news had reported that more than one billion euros was withdrawn in January 2017.

According to a report of November 2015, more than €120 billion left the Greek banks during the years of the crisis. €45 billion left the banks during November 2014 – 2015. 80% of this amount, that is some €36 billion are been kept in homes, company safes or in bank lockers.

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Feb 132017
 February 13, 2017  Posted by at 10:49 am Finance Tagged with: , , , , , , , , ,  10 Responses »

New York City Under 26 Inches Of Snow, 1947


Why Does Economic Growth Keep Slowing Down? (StLouisFed)
The Market Will Be Repricing Dramatically Downward – Stockman (CNBC)
Jim Rogers: “A Lot Of People Will Disappear” (ZH)
US Trade Deficit Last Year Was Widest Since 2012 (WSJ)
Trump Reviews Top White House Staff After Tumultuous Start (Pol.)
Mike Flynn’s Position as National Security Adviser Grows Tenuous (WSJ)
Refugee-Embracing Trudeau Set to Bite His Tongue on Trump Visit (BBG)
Romania Protests Enter Day 13, Call For Government Of ‘Thieves’ To Resign (G.)
Germany Repatriates Gold Faster Than Planned As Faith In Euro Plunges (RT)
Brussels’ Hypocrisy Over The Closing Of Borders (Nikos Devletoglou)
Greece: The Low-Noise Collapse Of An Entire Country (FE)



Even though the St. Louis Fed people can’t seem to read their own numbers properly, or at least interpret them, here it is. As the Automatic Earth has said for many years: the peak of our wealth was sometime in the 1970’s or even late 1960’s.

Everything after that was borrowed or printed. Here’s the proof. Sent this to Nicole earlier saying ‘We’ve been vindicated by the Fed itself.’ “Real GDP growth fell and leveled off in the mid-1970s, then started falling again in the mid-2000s”

Why Does Economic Growth Keep Slowing Down? (StLouisFed)

The U.S. economy expanded by 1.6% in 2016, as measured by real GDP. Real GDP has averaged 2.1% growth per year since the end of the last recession, which is significantly smaller than the average over the postwar period (about 3% per year). These lower growth rates could in part be explained by a slowdown in productivity growth and a decline in factor utilization. However, demographic factors and attitudes toward the labor market may also have played significant roles. The figure below shows a measure of long-run trends in economic activity. It displays the average annual growth rate over the preceding 40 quarters (10 years) for the period 1955 through 2016. (Hence, the first observation in the graph is the first quarter of 1965, and the last is the fourth quarter of 2016.)

Long-run growth rates were high until the mid-1970s. Then, they quickly declined and leveled off at around 3% per year for the following three decades. In the second half of the 2000s, around the last recession, growth contracted again sharply and has been declining ever since. The 10-year average growth rate as of the fourth quarter of 2016 was only 1.3% per year. Total output grows because the economy is more productive and capital is accumulated, but also because the population increases over time. The next figure compares long-run growth rates of real GDP and real GDP per capita. Both series display similar behavior. Although population growth has been slowing, the effect is not big enough to change the qualitative results described above. The third figure adds long-run growth rates of real GDP divided by the labor force. Dividing by the labor force instead of the total population accounts for the effects of changing demographics and labor market attachment.

From the 1970s until the 2000s, long-run growth rates of real GDP divided by the labor force remained well below those of real GDP per capita. There are two main factors that explain this: 1) Lower fertility and longer lifespans steadily increased the potential labor force relative to the total population. 2) Labor force participation increased significantly from the 1960s until 2000, largely driven by increased female labor force participation. When accounting for both of these factors, economic activity from 1975 to 1985 looks more depressed than in the two decades that followed. This seems consistent with the negative effects that the 1970s oil shocks and efforts to reduce inflation in the early 1980s had on the economy.

The trend in labor force participation reversed in 2000, as participation rates have been steadily decreasing since then. This explains why real GDP divided by labor force growth rates are now higher than real GDP per capita growth rates. Having accounted for the long-term effects of changes in demographics and labor market attitudes, we can now look at the effects of productivity growth and factor utilization. The final figure compares long-run growth rates in real GDP divided by the labor force with long-run growth rates in total factor productivity and long-run averages of capacity utilization (i.e., the actual use of installed capital relative to potential use). Note that data for capacity utilization are only available since 1967.

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“The market is apparently pricing in a huge Trump stimulus. But if you just look at the real world out there, the only thing that’s going to happen is a fiscal bloodbath and a White House train wreck like never before in U.S. history.”

The Market Will Be Repricing Dramatically Downward – Stockman (CNBC)

Stocks are booming under President Donald Trump, but long-time critic David Stockman warns traders are living in a “fantasy land” that can’t last —and Trump’s policies will derail the market for years to come. The former Reagan administration OMB director appeared on CNBC’s “Futures Now”last week to emphasize that Trump has become seemingly distracted by issues other than his proposed economic agenda. That should be a particular point of worry for investors, who Stockman argued have been far more optimistic about Trump’s presidency than might be warranted by the facts. In other words, while all three major market indexes continued to hit record highs last week, the former Reagan aide sees the current market rally as moot and not reflective of the current political climate.

“What’s going on today is complete insanity,” said Stockman. “The market is apparently pricing in a huge Trump stimulus. But if you just look at the real world out there, the only thing that’s going to happen is a fiscal bloodbath and a White House train wreck like never before in U.S. history.” Since the election, the S&P 500 Index has rallied more than 8%, the Nasdaq about 6% and the Dow Jones Industrial Average a whopping 10%. Last week, all three benchmarks rallied to new record highs. Yet if anything, according to Stockman’s predictions, those gains may be lost. Most of Trump’s actions “[have] nothing to do with the economic agenda” he’s proposed, Stockman told CNBC. That, along with a debt ceiling debate that will take place on March 15 in Congress, and a market rally that has gone on for a while, leads Stockman to think that a big downturn is on the way.

“There’s going to be no tax action this year,” said Stockman, echoing the concerns of Goldman Sachs and a few other Wall Street economists who say Trump’s plans for the economy are facing mounting political risks. Last week, the president vowed that tax reform could happen this year, and promised an announcement within the next few weeks. “If there’s any next year it will be deficit neutral, which means it’s not going to add the $15 to earnings like these people expect,” Stockman said, speaking of the rosy expectations of some analysts who think tax reform could boost corporate earnings in the medium-term. “My argument is there is not going to be any economic rebound, there is not going to be any profit surge,” Stockman added. “Therefore the market will be repricing dramatically downward once it’s clear that that’s the case.”

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Rogers adds a new dimension of doom: “..a lot of institutions, people, companies even countries, certainly governments and maybe even countries are going to disappear.”

Jim Rogers: “A Lot Of People Will Disappear” (ZH)

On the Greater Depression… …get prepared because we’re going to have the worst economic problems we’ve had in your lifetime or my lifetime and when that happens a lot of people are going to disappear. In 2008 Bear Stearns disappeared, Bear Stearns had been around over 90 years. Lehman Brothers disappeared. Lehman Brothers had been around over 150 years. A long, long time, a long glorious history they’ve been through wars, depression, civil war they’ve been through everything and yet they disappear. So the next time around it’s going to be worse than anything we’ve seen and a lot of institutions, people, companies even countries, certainly governments and maybe even countries are going to disappear.

I hope you get very worried. When you start having bear markets as you I’m sure well know one bad thing happens and another bad thing happens and these things snowball just like in bull markets good news comes out then more good news comes out the next thing you know you’re five or six or seven years into a bull market. Well bear markets do the same thing and so we have a lot of bad news on the horizon. I haven’t even gotten to war. I haven’t even gotten to trade war or anything like that but you know things do go wrong.

On Trump and the possibility of trade wars…and real wars Mr. Trump has also said he’s going to have trade war with China, Mexico, Japan, Korea a few other people that he has named. He swore that on his first day in office he would impose 45% tariffs against China. He’s been there three weeks, two or three weeks and he hasn’t done it yet but he still got it in his head I’m sure or maybe he’s just another politician like all the rest of them. He says one thing and he doesn’t mean it at all but he does have at least three people in high levels in his group who are very, very keen to have trade wars with China and other people.

If he does that Eric, it’s all over. I mean history is very clear that trade wars always lead to problems, often to disaster, sometimes even to real war, a shooting war. So I don’t know, I’m not sure Mr. Trump knows. He said so many things and many of the things are contradictory. Now if he’s not going to have trade wars with various people then chances are for a while happy days are here… [The dollar is] going to go too high, may turn into a bubble, at which point I hope I’m smart enough to sell it because at some point the market forces are going to cause the dollar to come back down because people are going to realize, oh my gosh, this is causing a lot of turmoil, economic problems in the world and it’s damaging the American economy. At that point the smart guys will get out. I hope I’m one of them.

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Sputtering engines all around.

US Trade Deficit Last Year Was Widest Since 2012 (WSJ)

The U.S. logged a $502.25 billion trade deficit in 2016, the largest in four years and a gap President Donald Trump is setting out to narrow to bolster the U.S. economy. The new president faces obstacles in the coming months and years, including the potential for a stronger dollar, larger federal budget deficits and low national saving rates compared with much of the rest of the world, all of which could force trade deficits to widen. As in past years, the 2016 gap reported Tuesday by the Commerce Department reflected a large deficit for U.S. trade in goods with other countries, offset in part by a trade surplus for services. The gap in terms of goods only was $347 billion with China last year, $69 billion with Japan, $65 billion with Germany and $63 billion with Mexico.

For December, the total trade gap decreased 3.2% from November to a seasonally adjusted $44.26 billion. Exports rose 2.7%, including increased sales of civilian airplanes and aircraft engines. Imports were up 1.5% in December, including a rise in car imports. [..] The interplay between trade, growth and employment is complex and difficult to manage. The U.S. has run trade deficits for decades, during periods of expansion and low unemployment as well as during recessions and high unemployment. The gap widened starting in the late 1990s with China’s emergence as a world trading power and recent research shows a surge of imports from China put downward pressure on U.S. wages and manufacturing employment.

Economists generally say trade has overall if uneven benefits, including lower prices for consumers.In 2016, the total deficit rose modestly from the prior year to its highest dollar level since 2012. But it shrank slightly to 2.7% as a share of U.S. economic output after hovering at 2.8% of GDP in 2013 through 2015. The gap fundamentally reflects the fact that Americans consume more than they produce relative to the rest of the world. To shrink the gap, they would either have to produce more or consume less. If Americans consumed less, the deficit could contract along with the broader economy, as happened during the 2001 and 2007-2009 recessions, leaving workers no better off. To produce more, U.S. firms could export more or take market share from imports. Tariffs could help that happen, but other countries might retaliate.

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This was always going to happen. It’s been clear from the start that not all these people would last very long. It’s Trump-style: throw out some stuff and see what sticks. And this is where the anti-Trump stance of the media bites: WaPo or CNN or NYT or in this case Politico have lost any and all signs of objectiveness. Which colors their reporting on this too, or so one must assume. We could have done with some credible sources.

Trump Reviews Top White House Staff After Tumultuous Start (Pol.)

President Donald Trump, frustrated over his administration’s rocky start, is complaining to friends and allies about some of his most senior aides — leading to questions about whether he is mulling an early staff shakeup. Trump has told several people that he is particularly displeased with national security adviser Michael Flynn over reports that he had top-secret discussions with Russian officials about and lied about it. The president, who spent part of the weekend dealing with the Flynn controversy, has been alarmed by reports from top aides that they don’t trust Flynn. “He thinks he’s a problem,” said one person familiar with the president’s thinking. “I would be worried if I was General Flynn.”

Yet Trump’s concern goes beyond his embattled national security adviser, according to conversations with more than a dozen people who have spoken to Trump or his top aides. He has mused aloud about press secretary Sean Spicer, asking specific questions to confidants about how they think he’s doing behind the podium. During conversations with Spicer, the president has occasionally expressed unhappiness with how his press secretary is talking about some matters — sometimes pointing out even small things he’s doing that he doesn’t like. Others who’ve talked with the president have begun to wonder about the future of Chief of Staff Reince Priebus. Several Trump campaign aides have begun to draft lists of possible Priebus replacements, with senior White House aides Kellyanne Conway and Rick Dearborn and lobbyist David Urban among those mentioned.

Gary Cohn, a Trump economic adviser who is close with senior adviser Jared Kushner, has has also been the subject of chatter. For now, Priebus remains in control as chief of staff. He was heavily involved in adviser Stephen Miller’s preparation for appearances on Sunday morning talk shows, which drew praise from the president. If there is a single issue where the president feels his aides have let him down, it was the controversial executive order on immigration. The president has complained to at least one person about “how his people didn’t give him good advice” on rolling out the travel ban and that he should have waited to sign it instead of “rushing it like they wanted me to.” Trump has also wondered why he didn’t have a legal team in place to defend it from challenges.

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A very strange position to be in for a career intelligence man.

Mike Flynn’s Position as National Security Adviser Grows Tenuous (WSJ)

The White House is reviewing whether to retain National Security Adviser Mike Flynn amid a furor over his contacts with Russian officials before President Donald Trump took office, an administration official said Sunday. Mr. Flynn has apologized to White House colleagues over the episode, which has created a rift with Vice President Mike Pence and diverted attention from the administration’s message to his own dealings, the official said. “He’s apologized to everyone,” the official said of Mr. Flynn. Mr. Trump’s views toward the matter aren’t clear. In recent days, he has privately told people the controversy surrounding Mr. Flynn is unwelcome, after he told reporters on Friday he would “look into” the disclosures.

But Mr. Trump also has said he has confidence in Mr. Flynn and wants to “keep moving forward,” a person familiar with his thinking said. Close Trump adviser Steve Bannon had dinner with Mr. Flynn over the weekend, according to another senior administration official, and Mr. Bannon’s view is to keep him in the position but “be ready” to let him go, the first administration official said. Mr. Trump’s son-in-law and senior adviser, Jared Kushner, as of Sunday evening hadn’t yet weighed in, the official said. Mr. Flynn initially said that in a conversation Dec. 29 with the Russian ambassador, Sergey Kislyak, he didn’t discuss sanctions imposed that day by the outgoing Obama administration, which were levied in retaliation for alleged Russian interference in the 2016 presidential election.

Mr. Flynn now concedes that he did, administration officials said, after transcripts of his phone calls show as much. He also admits he spoke with the ambassador more than once on Dec. 29, despite weeks of the Trump team’s insisting it was just one phone call, officials said. Mr. Pence, in television interviews, vouched for Mr. Flynn, based on a private conversation, and he was angered he repeated information publicly that turned out to be untrue, administration officials said. Messrs. Pence and Flynn spoke twice on Friday, one official said. If Mr. Flynn had promised any easing of sanctions once Mr. Trump took office, he may have violated a law that prohibits private citizens from engaging in foreign policy, legal experts have said.

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Who does the headlines at Bloomberg?

Refugee-Embracing Trudeau Set to Bite His Tongue on Trump Visit (BBG)

More than two decades ago, with Donald Trump already atop a real-estate empire, a young Justin Trudeau set out to explore the world. He toured Europe and Africa with friends, hiding their beer from customs agents before boarding the Trans-Siberian railway to China. On the train, he sketched, read “War and Peace” and gazed at the remnants of the Soviet Union. It was a defining trip, he’d later write, that left him praising both diversity and compromise. Both values will be tested Monday. The now-45-year-old Canadian prime minister – hailed by Joe Biden as one of the last champions of liberalism – heads to Washington for his first meeting with the new U.S. president, 70, whose bellicose statements and immigration restrictions reveal a deep gulf between the two leaders. But U.S. liberals hoping for Trudeau to emerge as Trump’s foil shouldn’t hold their breath.

He’s already bit his tongue and focused almost exclusively on an economic relationship that accounts for three-quarters of Canada’s exports. The White House visit will test just how far Trudeau can go to woo the president and preserve trade without selling out his core values. “We both got elected on commitments to strengthen the middle class, and support those working hard to join it,” Trudeau said last week. “And that’s exactly what we’re going to be focused on.” He has little choice. Nearly two-thirds of all Canadian trade is with the U.S., the highest ratio of Group of 20 nations and quadruple all but Mexico. Almost all of Canada’s oil goes to the U.S. and most of the country’s manufacturing is geared toward meeting U.S. demand. Americans hold C$2.3 trillion ($1.8 trillion) in Canadian assets, almost exactly the same amount held by Canadians in the U.S. A Deutsche Bank report this month that looked at the potential impact of Trump policies on all the U.S.’s major partners found Canada would be among the hardest hit, forcing the country to cede about $70 billion in trade to the U.S. [..]

The threats to Canada from Trump’s agenda go beyond trade. Trump has shown an interest in overhauling the U.S. tax system in a way that would impose financial disincentives against imports. The border-adjusted tax plan would focus levies on domestic income and imports while exempting exports and offshore income. It has met opposition from retailers and oil refiners but is supported by major exporters. It’s unclear whether the president fully favors that approach. All this, however, is unlikely to be detailed Monday. Instead, Trudeau will seek to lay out a joint economic narrative with Trump. The prime minister’s conciliatory spirit traces back to that Trans-Siberian railway trip. On New Year’s Eve 1994, Trudeau drank vodka with the conductor, captivated by stories but abhorred by “his casual racism to our fellow passengers,” he wrote in his autobiography.

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Corruption interrupted.

Romania Protests Enter Day 13, Call For Government Of ‘Thieves’ To Resign (G.)

Tens of thousands of Romanians have braved the cold and returned to the streets in protest, calling on the government to resign as they accused it of attempting to water down anti-corruption laws. “Thieves! Resign!” chanted protesters gathered in front of the seat of government in Bucharest on Sunday night, as they used the lights from their mobile phones to project the blue, yellow and red colours of the Romanian flag. Up to 50,000 protesters took part in the Bucharest march, according to Romanian media reports. The authorities did not give any estimate of their own. Some 20,000 more took to the streets in other major cities, calling on the government to stand down. “We want to give the government a red card,” one of the protesters, 33-year-old businessman Adrian Tofan, said.

Sunday’s demonstrations, the 13th consecutive day of protests against the government, took place despite the administration backing down over a planned controversial decree which would have made abuse of power a crime punishable by jail only if the sums involved exceeded 200,000 lei ($47,500). The demonstrations, the largest since the ousting and summary execution of communist dictator Nicolae Ceausescu in 1989, have continued despite the resignation on Thursday of justice minister Florin Iordache. “The justice minister’s resignation isn’t enough after what they tried to do,” said Tofan. Another demonstrator also said he had completely lost faith in the government. “We want this government to stand down. We don’t trust it, they want us to go backwards,” said Bogdan Moldovan, a doctor.

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Highly speculative, but….“..some economists in Germany say the repatriated gold may be needed to back a new deutschmark should the eurozone collapse..”

Germany Repatriates Gold Faster Than Planned As Faith In Euro Plunges (RT)

Berlin is bringing home its gold reserves stored in New York, London and Paris faster than scheduled, Germany’s central bank said Thursday. The move is linked to surging euroskepticism, as new governments in France and Italy may ditch the single currency. The German Bundesbank has already moved 583 tons of gold out of New York and Paris, planning to have a half of its gold back in Germany by the end of 2017, which is ahead of the 2020 plan. The rest will be split between the Federal Reserve Bank of New York and the Bank of England. “We have a lot of discussions about Trump, regarding implications on monetary policy, macroeconomics, etc., but we trust the central bank of the US,” Bundesbank board member Carl-Ludwig Thiele told a news conference. “Trump has not triggered a discussion about the storage facility in New York,” he said.

As French presidential candidate Marine Le Pen and Italy’s 5-Star Movement are openly calling to pull out of the euro, some economists in Germany say the repatriated gold may be needed to back a new deutschmark should the eurozone collapse. During the Cold War, 98% of Germany’s bullion was stored abroad, and so far the biggest repatriation was in 2000 when the Bundesbank repatriated 931 tons from the Bank of England. When the relocation is complete, Germany will still have 1,236 tons in New York, 432 tons in London and the rest in Frankfurt. The current repatriation involves moving 300 tons from New York and 374 tons from Paris. The Bundesbank said it is not worried about keeping gold in England despite Brexit, as London remains a key gold trading market and a safe place. Germany has the second-largest gold reserves in the world after the US with 3,381 tons.

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Brussels’ Hypocrisy Over The Closing Of Borders (Nikos Devletoglou)

Sir, It seems remarkable that today’s leaders of the EU, encouraged by the overreaction of the global mass media, reserve for themselves the appearance of virtue and goodness and generally resent the refreshing American principle summed up by president Donald Trump as America First. Americans have shed blood, along with vast material expense, defending human rights in Europe — regardless of ethnicity, geography, culture or religion, demonstrably having guaranteed the continent’s survival in freedom and subsequent prosperity, including that of Germany, after the second world war.

The EU’s hypocrisy offends. Indeed, it remains a mystery how Brussels feels justified in its heavy criticism of America’s increasing vigilance over its own borders when the EU itself continues to turn a blind eye to the formidable barbed-wire militarised fortifications erected all along the northern frontiers of Greece by its neighbours, pitilessly blocking the passage of hundreds of thousands refugees desperately fleeing the war in Syria. These refugees still dearly hope to reach Germany first and eventually other parts of Europe, but are instead inhumanely trapped in Greece practically under the authority of the EU — which, further, even condones the closing of borders in Austria and Hungary. These are provocative double standards. The scant remaining resources in Greece are already stretched to their limits.

Previously prosperous islands in the Aegean Sea – Chios, Samos and Lesbos were until recently celebrated high-profile tourist destinations worldwide – are currently overrun by multitudes of refugees, understandably aggressively inclined by now, at the expense of social cohesion elsewhere in Greece as well. Still worse, the country remains undeservedly caught in a deepening economic and financial crisis, a result of blind austerity policies inspired by Germany that the EU rigorously enforces to this day, manifestly ruling out growth and prosperity in Greece any time soon. Both the IMF and the European authorities still fail to appreciate that reducing Greek debt by one-third in the present circumstances would consistently reflect the social, economic and financial damage they themselves have caused by arbitrarily depressing the Greek economy since 2010.

Nicos E Devletoglou, Emeritus Professor of Economics, University of Athens, Greece

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Bitter, bitter tragedy. “The human and social cost of this austerity policy is not included in the Excel tables of the Eurogroup. But it is paid cash by the population.”

Greece: The Low-Noise Collapse Of An Entire Country (FE)

European officials may argue that their bailout is working, they welcome the recovery of Greece and the budget surpluses, but the situation is quite different: passively we are witnessing the low-noise collapse of a whole country. While forecasts foresee a rebound of the Greek economy in 2016, with growth of at least 2.6%, these risks once again prove to be false. If a slight start was recorded at the beginning of the year, it continued to slacken. In the last few months, the engine seems to have stalled. According to Markit figures published on February 1st, manufacturing activity recorded its largest decline in 15 months. “The decline is related to both the decline in production and new orders. While rising import prices have accelerated to their highest level in 70 months, companies nevertheless lower their selling prices,” explains the economic and financial institute, pointing to the fall in consumption and the lack of outlets.

In seven years Greece’s GDP decreased by a third. Unemployment affects 25% of the population and 40% of young people between 15 and 25 years. One third of companies have disappeared in five years. Successive cuts imposed everywhere in the name of austerity now bite in all regions. There are no more trains, no more buses in whole parts of the country. No more schools, sometimes. Many secondary schools had to close in the most remote corners because of lack of funding. Per capita spending on health has declined by a third since 2009, according to the OECD. More than 25,000 doctors were dismissed. Hospitals lack personnel, medicines, everything. The human and social cost of this austerity policy is not included in the Excel tables of the Eurogroup.

But it is paid cash by the population. One fifth of the population lives without heating or telephone. 15% of the population has now fallen into extreme poverty compared to 2% in 2009. The Bank of Greece, which cannot be suspected of complacency, has drawn up a report on the health of the Greek population, published in June 2016. The figures it gives are overwhelming: 13% of the population are excluded medical care; 11.5% cannot buy prescription drugs; People with chronic health problems are up to 24.2%. Suicides, depression, mental illness show exponential increases. Worse: while the birth rate has fallen by 22% since the beginning of the crisis, the infant mortality rate almost doubled in a few years to reach 3.75% in 2014.

After seven years of crisis, austerity and European plans, the country is exhausted, financially, economically and physically. “The situation is getting worse. What we need most now is food. This shows that the problems relate to the essential and not the quality of life. It’s about subsistence,” says Ekavi Valleras, head of the NGO Desmos. And it is to this country that Europe asks moreover to assume alone or almost the reception of the refugees coming to Europe.

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Feb 012017
 February 1, 2017  Posted by at 9:21 pm Finance Tagged with: , , , , , , , , ,  5 Responses »

Théodore Géricault The Raft of the Medusa 1819


Benoît Hamon won the run-off for the presidential nomination of the Socialist party in France last weekend. The party that still, lest we forget, runs the country; current president François Hollande is a Socialist, even if only in name, but he did win the previous election. Hamon ran on a platform of shortening the workweek from 35 to 32 hours, legalizing cannabis and ‘easing’ the country into a universal basic income of €750/month per capita. He’s way left of Hollande, who has a hilariously low approval rating of 4%.

Hamon doesn’t appear to have much chance of winning the presidency in the two voting rounds taking place on April 23 and May 7, but we all know how reliable election predictions are these days, and in that regard France is as volatile as the next country. With conservative runaway favorite François Fillon accused of having paid his wife $1 million for doing nothing and Marine Le Pen, already desperately short on funds, targeted by the EU over money, who knows what and who will decide the election? Hamon may simply be the only one left standing on the day after the vote.

I bring up Hamon, about whom I know very little, not least because he was more or less a late minute addition to the field that was supposed to have been an easy win for his former boss Manuel Valls, I bring up Hamon because he confirms something I’ve been talking about for a while. That is, the fact that ‘leftist France’ chooses to go even more left than expected, goes a way towards proving my ‘theory’ that voters in many if not most western countries will move away from their respective political centers, and towards extremes.

This is an inevitable consequence of traditional, less extreme, politicians and parties having all become clustered together in shapeless and colorless blobs in the center, both in the US and in most European countries, combined with the fact that all of their policies -especially economic ones- have spectacularly failed vast amounts of people (or voters, if you will).

The failure of their policies has been hidden from sight by interest rates squashed like bugs, ballooning central bank balance sheets, real estate bubbles, fabricated economic data, and fantasy stories in their media that seem(ed) to affirm the ‘recovery’ tales, but they all ‘forgot’ to -eventually- line up reality with the fantasies. They never made 99% of people actually more comfortable. The entire politics-economics-media deus ex machina has failed because it was/is based on lies and fake news, meant to hide economic reality (i.e. negative growth), and this will have grave consequences.

People have started noticing this despite the official and media-promoted data. And they’re not going to “un-notice”. Not only don’t people -once they find out- like having been lied to for years, they dislike worsening living conditions even more. And that’s all they get; the only people who get it better are the rich, because without that the machinery can’t continue pumping up the ‘official’ numbers.


And what do you get? People complain about Trump. And they focus on one of his -seemingly- crazy ideas: temporarily closing US borders to refugees from nations with large Muslim populations. Which is a fine thing to resist, because yes, it’s a pretty silly idea, but why haven’t they paid similar attention to how they’ve been lied to for years on both the economy and on Syria, on how Obama became the Drone King and how many innocent people lost their lives because of that?!

To how favorite all-American gal Hillary screwed up Northern Africa when she declared We Came We Saw He Died and the death of Libya’s Gaddafi, who gave his country the highest living standards in the region, free education and free health care, but was murdered by Hillary’s US troops, co-created the chaos that led to so many people wanting to flee their homelands in the first place?

Why is that? Why are there protests when people are halted at an American border crossing but not when American and British and French and Australian forces blow the very same people’s homes to smithereens? Could that have something to do with where the protesters get their information? With how much they know about what’s happening in the world before it reaches their doorsteps?

Yes, people are suffering, and it’s very unfair what’s happening to many caught in the Trump Ban, but does anyone really believe that that’s where it started, that this is the first time (or even a unique time) that protest is warranted, or more so? And if not, why is it happening? Because people only notice stuff when it hits them in the face, I would presume, but who among the protesters would volunteer to agree they live their lives with blinders on? Not many, I would venture. So why do we see what we do? Where were you when Obama ordered yet another child, a family, which hadn’t yet made it to a US airport but might as well have, to be collateral damage?

I get why you’re protesting the Trump ban, but I don’t get why that’s your prime focus. I am guessing that most of the protesters would not have voted Trump in the first place, and would have been much happier -to put it mildly- for Hillary to be president right now. But if you would have paid attention in history class, you would know that it was Hillary who brought the refugees to your welcome mats to begin with.

Take it a step further, like to the January 21 women’s march, and you would realize that the vast majority of the refugees would have much preferred to stay where they grew up, where the women in their families, their sisters and aunts and daughters used to live. Most of whom are gone now, they’re either dead or diaspora-ed to Jordan, Turkey, Alberta, Sweden, Greece. All on account of Obama and his crew. Who of course blamed it on Assad and Putin. “I killed 1000 children, but I had to because those guys are so dangerous….”

This generation of refugees, of the huddled masses that the Statue of Liberty is supposed to teach you about, didn’t come to America because it’s the promised land; they came because America turned their homeland into a giant pile of rubble surrounded by garbage heaps and minefields. I don’t know if you’ve ever seen pictures of Aleppo before it was destroyed, but I dare you to tell me there is even one existing American city today that’s more beautiful than Aleppo was before Americans and their allies reduced it to dust. Here you go. This is Aleppo before America got involved in Syria:



There’s very little left of that beautiful city, with its highly educated people and their lovely happy children. And none of that has anything at all to do with Donald Trump! I don’t want to give you pics of what Aleppo looks like now. I want you to remember how lovely it was before ‘we’ moved in, years go. Sure, what you hear and see in the west is that Assad and Putin are the bad guys in this story. But now that the US/EU supported ‘rebels’ are gone, dozens of schools are reopening, and medical centers, hospitals. Who are the bad guys now?

And yeah, Trump is an elephant, and elephants are always awkward and they’re messy and they tend to kick things over and when they make mistakes those tend to be huge, but how much valuable china does the US really have left anyway? Isn’t it all perhaps just a sliver off target, the demos, the outrage and indignation? Is the idea that your army can destroy people’s living environments with impunity without you protesting in anything approaching a serious way, and that then you get to demand, through protest, that those same people are allowed entry into your country? That’s way too late to do the right thing.


I started out making the point that as our politico-economic systems are failing, voters will move away from the center that devised and promoted those systems, and that this will happen in many countries. The US could have had Bernie Sanders as president, but the remaining powers in the center made that impossible. Likewise, many European countries will see a move towards either further left or further right.

Since the former is mostly dormant at best, while the latter has long been preparing for just such a moment, many nations will follow the American example and elect a right wing figurehead. This will cause a lot of chaos, but that’s not necessarily a bad thing. People need to wake up and become active. The recent US demonstrations may be a first sign of that, even though they look largely out of focus. More than anything else, people need a mirror, they need to acknowledge that because they’ve been in a state of mindless self-centered slumber for so long, they have work to do now.

And that work needs to consist of more than yelling at the top of your lungs that Trump and Le Pen and Wilders are such terribly bad people. For one thing because that will only help them, for another because they were not the people who put you to sleep or were supporting mindless slaughter in faraway nations or were making up ‘official’ numbers as your economies were dumped into handbaskets on their way to hell. So ask yourselves, why did you believe what Obama was saying, or Merkel, or Cameron, Sarkozy, Rutte, you name them, while you could have known they were just making it all up, if only you had paid attention?

Why? What happened? Why did the term ‘fake news’ only recently become a hot potato, even though you’ve been bombarded with fake and false news for years? Is it because you were/are so eager to believe that your economy is recovering that any evidence to the contrary didn’t stand a chance? If so, do realize that for many people that was not true; it’s why they voted for the people you now so despise. Is it perhaps also because you’re so eager to believe your ‘leaders’ do the right thing that you completely miss out on the fact that they’re not? And whose fault is that?


In yet another angle, people claim that the planet’s in great peril because Trump doesn’t ‘believe’ in climate change. But it’s not Trump’s who’s the danger when it comes to climate change, you are, because you’re foolish enough to believe that things like last year’s infinitely bally-hood Paris Agreement (CON21) will actually ‘save’ something. That belief is more dangerous than a flat-out denial, because it lulls people into sleep, while denial keeps them awake.

It’s the idea that there’s still time to rescue the planet that’s dangerous, because it’s the perfect excuse to keep on doing what you were doing without having to feel too much guilt or remorse. You’re not going to save a single species with your electric car or whatever next green fad there is, the only way to do that is through drastic changes to your society and your own behavior.

That’s not only true with respect to the climate, it’s just as valid with respect to the refugees on your doorstep. If you want to rescue them, and those who will come after them, the only thing that makes any difference is making sure the bombing stops, that the US and European war machines are silenced. If you don’t do that, none of these protests are of any use. So sure, yeah, by all means, protest, but make sure you protest the real issues, not just a symptom.

That doesn’t mean you should shut the door in the face of these frail forms fainting at the door, that’s just insane, but it does mean that after welcoming your guests, you will also have to make sure what brought them there must stop. If you stop killing and maiming these people, and help rebuild Aleppo and a thousand other places, they won’t need to come to your door anymore.


As for the political field, unrest will continue and grow because the end of economic growth means the end of centralization, and our entire world, politically, economically, what have you, is based on these two things. Today, unrest is the only growth industry left. And it’s not going away anytime soon. It’s a new day, a new dawn, it’s just that unfortunately this is not going to be a pretty one.

Still, none of it is unexpected. The Automatic Earth has been saying for years, and with us quite a few others, that this was and is inevitable. Of course there are those who say that we cried wolf, but we’ll take that risk any day. Saw a nice very short video of Mike Maloney saying in 2011 that Obama would have to double US debt between 2008 and 2016 just to keep the entire system from starting to collapse, running to stand still, Alice, Red Queen and all. And guess what?

There’s the recovery as it’s been sold to you. It’s all been borrowed, to the last penny. Will Donald Trump double US debt once again? Will the EU countries do the same? How about Japan and China? And to think that federal debt isn’t even the worst threat, personal debt is, and so many of us carry so much of that, and try to pass off our mortgaged homes as assets, not debt. An increasingly desperate game on all fronts.

Jan 132017
 January 13, 2017  Posted by at 4:45 pm Finance Tagged with: , , , , , , ,  12 Responses »

Rene Burri Alexandria Egypt 1962

2016 brought a lot of changes, or rather, brought them to light. In reality, the world has been changing for many years, but many prominent actors benefitted from the changes remaining hidden. Simply because their wealth and power and worldviews are better served that way.

It’s entirely unclear whether we will ever get a chance to see to what extent the efforts to hide developments have been successful, or even been perpetrated at all, because we don’t know to what extent truth and reality will be accessible in the future.

What we can say at this point in time is that the changes 2016 delivered were urgently needed. There are many people out there who just want to turn back the clock, and change everything back to how it was, but they can’t, and that’s a good thing, because the way things were was hurting too many people.

2016 will go down in history as the year when a big divide between groups of people in the western world became visible, a divide that had until then been papered over by real or imaginary wealth, as well as by ignorance and denial.

When politics and media conspire to paint for the public a picture of their choosing, they can be very successful, especially if that picture is what people very much wish to see, true or not. But as we’ve seen recently, our traditional media have become completely useless when it comes to reporting news; the vast majority have switched to reporting their own opinions and pretending that is news.

On the one hand, there is a segment of society that either has noticed no changes, or is so desperate to hold on to what they have left, that they resist seeing them. On the other hand, there are those who feel left behind by that first group, and by the idea that the world that is still functioning and even doing well.

The first group has been captivated by, and believed in, the incessantly promoted message of recovery from an economic, financial and gradually also political crisis. The second see in their lives and that of their friends and neighbors that this recovery is an illusion.

It’s like the old saying goes: you can’t fool all of the people all of the time. And that’s why you have Brexit and Trump and why you’re going to have much more of that, certainly across Europe. Things are not going well, and there is no recovery, for a large enough percentage of people that their votes and voices now swing the debates and elections.

It’s not even complicated. This week there was a report from Elevate’s Center for the New Middle Class that concluded that half of Americans, 160 million people, can’t afford to have a broken arm treated (at $1,400). And sure, you can say that perhaps that number is a bit too high, but there have been many such reports, that for instance say the majority of Americans have less than $1000 in savings, and can’t even afford a car repair.

In Britain numbers are not much different. Over the past decade, the country has been very busy creating an entire new underclass. If your economy is not doing well, and your answer to that is budget cuts and austerity, it’s inevitable that this happens, that you create some kind of two-tier or three-tier society. And then come election time, you run the risk of losing.

Both Britain and the US boast low unemployment numbers, but as soon as you lift the veil, what you see is low participation rates, low wages and huge numbers of part-time jobs stripped of all the benefits a job used to guarantee. It allows those who still sit pretty to continue doing that, but it’ll come right back to haunt you if you don’t turn it around, and fast enough.

For many people, Obama, Merkel, Cameron and the EU cabal have been disasters. For too many, as we now know. That doesn’t mean that Trump will fix the economic problems, but that’s not the issue. People have voted for anything but more of the same. Which in Britain they’re not even getting either, so expect more mayhem there.

In most places, some variety of right wing alternative is the only option available that is far enough removed from ‘more of the same’. Moreover, many if not most incumbent parties are in a deep identity crisis. Trump did away with the Republicans AND the Democrats, and they had better understand why that is, or they’ll be wholly irrelevant soon.

In Britain, the most important votes in many decades was lost by the Tories, who subsequently performed a musical chairs act and stayed in power. You lost! Losers are not supposed to stay in power! But the other guys are all too busy infighting to notice.

That identity crisis, by the way, is not a new thing. If you look across the western political spectrum, there are all these left wing and right wing parties happily working together, either in coalition governments or through other ‘productive’ forms of cooperation. So who are people going to vote for when they’re unhappy with what they’ve got? Where is that ‘change’ that they want? Not on the traditional left or right.

So you get Podemos and M5S and Trump and UKIP and Le Pen. It’s not their fault, or the voters’ fault, it’s the political establishment that has tricked itself into believing in the same illusion it’s been promoting to voters.

And yes, they have now proven that it’s possible to stave off, for a number of years, a deeper crisis, depression, by borrowing and printing ‘money’. Especially if you can at the same time hit the poorest in your society with impunity.

But in the end no amount of fake or false news on the economic front will allow you to continue the facade for too long, because people know when they can’t afford things anymore. The evidence here is somewhat more direct than with regards to political fake news, though they may well both follow the same pattern of ‘discovery’.

Our societies are still run as if there is no real crisis, as if it’s all just a temporary glitch, as if the incumbent models function just fine, and as if recovery is just around the corner. And we can make it look as if that is true, but only for an ever smaller amount of time, and for an ever smaller amount of people.

The basic issue here is not a political one. It’s economic. Our economic systems have failed, and they can’t be repaired. We should always have realized that no growth is forever, but at least we now know. Or could know, it’ll take a while to sink in.

Next up is a redo and revamp of those economic systems, but that is not going to be easy, and may not get done at all. The resistance may be too strong, warfare -economic or physical- may seem like a way out, there are many unknowns. We could, ironically, get quite far in that redo if we simply cut all the waste for our economic processes, but then again, that would have us find out that much of the system runs entirely on wasting stuff, and wasting less kills the system.

However that may be, and however it may turn out, this is where we find ourselves. Protesting Trump and Brexit is inevitable, but it doesn’t address any core issues. From a purely economic point of view, Obama failed spectacularly, as did David Cameron, as does Angela Merkel. And as do, we will find out in 2017, many other incumbent ‘leaders’.

Their successors, whatever political colors they may come from, will all come to power promising, and subsequently attempting, to restart growth. Which is no longer feasible across an entire country, or even if it were, it would mean squeezing other countries. With corresponding risks.

Trump and Brexit are necessary, perhaps even long overdue, in order to break the illusion that things could go on as they were. But they are not solutions. America needs a big wake-up. Trump looks likely to deliver one. That is needed for the rest of the country to wake from its slumber. Ask yourself: are you going to get weaker from dealing with a Trump presidency? Maybe not the best question, or at least not before having asked: do you know how weak you are right now?

For Britain to leave the EU is a great first step. As I’ve said many times, centralization is not an option without growth. And Brussels has shown us quite a few of the worst consequences of centralization. Nobody should want to be a part of that.

Summarized: for most people, 2017 will be the year of the inability to understand where their favorite worldview flew off the rails. Change can be a bitch. But change is needed to keep life alive.

Dec 272016
 December 27, 2016  Posted by at 10:01 pm Finance Tagged with: , , , , , , , , , , ,  13 Responses »

Joan Miró Caballo, Pipa y Flor Roja (Horse Pipe and Red Flower) 1920


I was surprised to see how surprised I was, like I’m sure millions of people were, to see the term ‘fake news’ pop up in what are still called ‘respectable’ (which is by now really just another word for ‘old’) news outlets.

Because a huge part of what they have been feeding their readers and viewers for years is that very thing: fake news. Who needs a bunch of bored highschool kids in small town Montenegro when you have the offices of America’s ‘official’ news sources at your disposal?

That there are still people trying to make a serious point by quoting anything at all published in the Washington Post -and to an only slightly lesser extent the New York Times- is beyond me. And not a little bit beyond. Well, that people still read these sheets is just as incredible, I grant you that.

I haven’t kept count of the number of ‘articles’ the WaPo has published over the past year or so -the election campaign- that referred to unsubstantiated reports emanating from anonymous US intelligence sources about Russian involvement in everything bad under the sun, but I’m dead certain that put together they would add up to a Christmas bestseller of respectable size. A chance missed there, gents. You could have had your own garbage lead your own bestseller lists. Snake, tail.

And it’s not as if it was a new thing for them either, what’s new is the sheer volume and the concerted campaign we’re talking about. We of course had a similar thing in 2003 with the Weapons of Mass Destruction ‘fantasy’. Now that I mention it, how is it possible that Colin Powell is still walking around free, and Cheney and W.?

When did it become de rigueur to lie to the people, let alone Congress and the UN? What have we become? When did that happen? Remember Ukraine, and the stories you were told about that, less than 3 years ago? Crimea? G-d I hope Trump will get rid of Victoria Nuland.

Trump called the UN a sad club for people to “get together, talk and have a good time”. Is he wrong? Really? If so, do tell, how wrong is he? Perhaps wrong in the same way that the IMF is wrong for letting Christine Lagarde keep her plush tax-free seat after being convicted for handing €400 million in French taxpayer money to a crony? That kind of wrong?

I’m thinking there are still awfully few people who understand what’s happening in the world. What’s changing. And I don’t hold out much hope that they will until it hits them smack upside the backs of their heads.

Why there’s Trump and Brexit, and why many more changes are in the offing. Well, it’s precisely because the UN and EU and IMF and Capitol Hill are self-serving ‘clubs’ filled with unaccountable and overpaid people who have turned the world into a godawful mess.

Not for themselves, they’re fine, thank you very much, they all have pensions from here to Rome and back again for the rest of their lives, but for everyone else. G-d I hope Trump will come through on his pre-election promise to limit the terms of American Congressmen and Senators. And that this is subsequently applied to all these ‘clubs’. Because if anything, it’s them who are the bane of this world. Public service…

There may be fine individuals among them, that’s not even -the worst of- the point, it’s the dilapidated, decayed, rotten to the core institutions that they ‘serve’ which are the problem. They serve themselves and they serve the institutions, the one thing they sure don’t serve is the people. You know who’s given (‘voted’) them those lavish pensions and benefits? They themselves did, and their predecessors.

The UN is supposed to keep the peace in the world. Well, works like a charm, doesn’t it? The IMF is tasked with keeping 200 or so nations in reasonably balanced economic conditions. Got it down. The US Congress was set up as a pillar of democracy, but it’s occupied by guys and gals who spend so much more time raising funds for their next campaign than representing those who voted them in, that they need lobbyists to tell them which way to vote.

As for the EU, is it even possible they’re the worst of the bunch? Europe is falling apart before all of our eyes, and they’re all in full tard denial about it. They are turning Greece into a third world country, they’re alienating Britain to the point where the English will, once they wake up to what’s going on, want to set Brussels on fire. And why? There’s no point left to any of it at all.

Italy’s a goner, once enough Italians realize what the ECB wants to do to their banks. France is such a key member nobody wants to even imagine it falling, so its broke banks are ignored. Holland will come very close to voting in Wilders, which means Nexit. Germany is destabilizing rapidly. Spain has been a hornets’ nest for years. Etc.

And again: why? Well, because the Obama/Merkel model has so dramatically failed. All these places where left and right work together to produce a shapeless blob somewhere in the center that has no identity and doesn’t speak out for anyone.

You just wouldn’t know it from reading the Washington Post. Or any comparable old and respected medium in any of these European countries. It’s not just the politics that have failed, it’s its propaganda machine too.

This is something that manifests itself differently in different places, but it shouldn’t be that hard to see the ties that bind it all together. For one thing, because, not even touched on so far, the amount of fake financial news that has been forced down our throats for decades, and increasingly so: the worse things get, the bigger the lie…

There is no economic recovery. Never was. Not in the US, not in Europe anywhere. It’s a fairy tale. There are plates shifting, sure. You can cherry pick a region stateside that does well if only you select the ‘right’ stats. Like you can say employment is on a roll, if you’re willing to discard the number of ‘newly created’ jobs that are part time.

And yes, if you just completely ignore that 94 million Americans are not counted at all in unemployment numbers, Obama has been a big success. It’s just that those 94 million have a vote, too. We will see that exact same dynamic, and we have already started, play out all across Europe.

It’ll be much messier, for instance because in Holland last time I looked 81 different political parties were vying to take part in the upcoming elections, but the end result will be the same. That is, the existing order will be voted out. Not everywhere, and it won’t be replaced by radically different parties and people in all places, but do please understand that it doesn’t have to.

In Europe, it’s not and/and, it’s if/or. As in, if either Italy or France or Holland vote in a party that wants to leave the EU or the Euro, it’s game over. The endgame will be almighty messed up because of all the laws and regulations the EU has invented, but eventually the walls of Brussels will crumble. Good riddance too.

I’ve said it a hundred times before, all the institutions mentioned before, EU, IMF, UN and yes, even Congress, exist by the grace of growth. People accept them only as long as they can show reasonable proof that they bring economic benefits. As soon as that’s gone (or I should say as soon as people figure it out), so are they.

People are going to vote for someone close to their own lives, their own world, to lead them in times of contraction. That is inevitable. It’s why Trump won, and it’s also why he’s set to fail. Isn’t that a lovely paradox? We’re going to split up into smaller entities, economic contraction guarantees it.

And while everyone tries to talk you into thinking that’s terrible, there’s no reason why it should be. We can work together in many different ways. All these supranational institutions have merely become straight jackets that serve only the people who work inside them and those outside who benefit from keeping up appearances and clinging to power.

That of course gets us back to the Washington Post and its comatose brethren. The US press has been a full accomplice with Washington in reporting fake news about the recovery, and it’s not there. Never has been. The Dow Jones says one thing, the votes for Trump say another. In the end, democracy is that simple. Same goes for Britain, same goes for continental Europe.

And there’s no doubt that Trump is an iceberg-sized gamble, but a change had to come. A change from the monsoon of fake news we have all been fed, but also initially a change that won’t be able to help itself from being replete with more fake news, from all sides.

Put it this way: in 2016, the engine of change got cranked up. In the new year, it will accelerate. That is 2017. That is what the new year will bring.