Jun 302020
 June 30, 2020  Posted by at 10:37 am Finance Tagged with: , , , , , , , , , ,  36 Responses »

Pablo Picasso The dream 1951


China’s Military Becomes First To Use Experimental Coronavirus Vaccine (SCMP)
California, Texas See Record COVID-19 surges, Arizona Clamps Down (R.)
Norwegian Air Cancels 97 Boeing MAX And Dreamliners, Claims Compensation (R.)
Europe’s Recovery Fund: An Instrument of Class War (Varoufakis)
We Digitized the Mob, and There’s No Place to Hide (Miele)



As we approach the end of the first half of 2020, I’m seriously rethinking how to cover COVID19 going forward. The past five months have been intense in that regard, and at a certain point you need to wonder how useful such time-consuming work still is. For a long time I had the hope and belief that “we” would be able to halt the spread of the coronavirus, if only because that was -and is- the only sensible way to deal with a new pathogen about which very little is known, other than that it is potentially deadly.

But despite a huge number of actions, including lockdowns in many countries and societies, the infection numbers only keep rising. And at this point is is entirely unclear how countries like the US and Brazil will ever be able to get rid of the virus.

The consequences will be grave, albeit different in different places. We will see overwhelmed healthcare systems in some countries and states, while others will remain relatively unscathed, at least for a while. Ironically, in a world used to so much travelling it’s even useful to wonder what good it does to do a lockdown well. How long can New Zealand keep its borders closed?

As for healthcare, there was a report that it will take four years for the UK’s NHS to recover from COVID19, and that based on what they have experienced so far, while there is still plenty room for second or third waves, and/or any unforeseeable extra pressure.

Tourism as we’ve known it will never recover, at least not on a timescale that is meaningful to us. That whole industry needs a great reset. That is of course also true for airlines, plane manufacturers et al. As it is for the entire hospitality industry. People will be cautious when going out, the fear of infection rules supreme, as demonstrated again by this report from NBER, Fear, Lockdown, and Diversion, which shows it wasn’t the lockdowns that did the most damage.

This paper examines the drivers of the collapse using cellular phone records data on customer visits to more than 2.25 million individual businesses across 110 different industries. Comparing consumer behavior within the same commuting zones but across boundaries with different policy regimes suggests that legal shutdown orders account for only a modest share of the decline of economic activity (and that having county-level policy data is significantly more accurate than state-level data).

While overall consumer traffic fell by 60 percentage points, legal restrictions explain only 7 of that. Individual choices were far more important and seem tied to fears of infection. Traffic started dropping before the legal orders were in place; was highly tied to the number of COVID deaths in the county; and showed a clear shift by consumers away from larger/busier stores toward smaller/less busy ones in the same industry.

But I have to admit, over the past few days, when I was silent, I’ve become ever more worried by the American political and societal situation than by coronavirus. The images of people with guns standing outside of their homes, the stories of police and mob violence, shootings in “police-free” zones, it all starts to smell like a civil war.

While I wasn’t writing, I was reading all the more from both sides of aisle, and whatever they may still have had in common appears to disappear rapidly. The hunt for Trump continues unabated with yet another anonymous and unsourced tale about RussiaRussia, while the right is organizing to counter what they see as lawlessness across the nation.

Frank Miele, in a article below, quotes Bobby Kennedy, speaking after MLK was shot:

“The victims of the violence are black and white, rich and poor, young and old, famous and unknown. They are, most important of all, human beings whom other human beings loved and needed. No one — no matter where he lives or what he does — can be certain who will suffer from some senseless act of bloodshed. And yet it goes on and on. Why? What has violence ever accomplished? What has it ever created? … No wrongs have ever been righted by riots and civil disorders. … [A]n uncontrolled, uncontrollable mob is only the voice of madness, not the voice of the people.”

That sounds like a voice of reason that is sorely needed by the country right now. But does anyone see any of those? Ideally, Trump and Biden would get together on live TV to ask their supporters to please calm down. But I don’t see that happening in the present climate either. It’s become too polarized, fed by media and their business models.

I’m just trying to make sense of it all. Trying to find a way out of the mess, a way forward. But right now I’m mostly just thinking that Independence Day could turn into an incredibly messy affair. Or any other day between now and the election.





US has fifth day in a row with over 40,000 new cases











Key line: “The candidate is yet to start phase three trials, which would confirm whether it could protect recipients from infection.”

China’s Military Becomes First To Use Experimental Coronavirus Vaccine (SCMP)

China has approved military use of an experimental coronavirus vaccine developed by the People’s Liberation Army and a Chinese pharmaceutical company, in a first for the armed forces of any country. The vaccine, identified as Ad5-nCoV, was jointly developed by a team at the Academy of Military Medical Sciences, led by Major General Chen Wei, and Tianjin-based company CanSino Biologics. It is the first time that a vaccine candidate for Covid-19, the disease caused by the coronavirus, has been authorised for use for the military of any nation. CanSino said on Monday that the candidate had been through two phases of clinical trials, which indicated it was safe and there was “relatively high” immune response to the antigen.

The candidate is yet to start phase three trials, which would confirm whether it could protect recipients from infection. The military has approved its use for a year but it has not been authorised for civilian purposes. Adding Ad5-nCoV to the People’s Liberation Army’s catalogue of special drugs means that it can be deployed in major outbreaks. It is based on an Ebola vaccine that was developed by Chen but did not go into mass production. Scientists are racing to find an answer to the coronavirus that has already infected more than 10 million people and killed over 500,000. New cases continue to surge in the United States and India, with the US confirming more than 40,000 new cases for the third straight day on Monday.

According to the World Health Organisation, clinical trials are under way for 17 vaccine candidates, seven of which have been developed in China. One candidate developed by Oxford University and AstraZeneca is in phase three studies. Phase one and two studies typically test if a candidate is safe and whether it can generate an immune response from the recipients, but vaccines must complete all three sets of trials to be licensed. CanSino said it completed phase two trials on June 11, but the company has not yet released data from the study. [..] Many Chinese candidates are planning phase three trials in other countries as the spread of the coronavirus in China is too limited to test the efficacy of the vaccine. CanSino reached an agreement with Canadian government to conduct phase three trials there but details of the studies have not been revealed.

Read more …

We’ll see anti-police protests and anti-lockdown protests all at the same time.

California, Texas See Record COVID-19 surges, Arizona Clamps Down (R.)

California and Texas both marked record spikes in new COVID-19 infections on Monday, a Reuters tally showed, as Los Angeles reported an “alarming” one-day surge in America’s second-largest city that put it over 100,000 cases. Los Angeles has become a new epicenter in the pandemic as coronavirus cases and hospitalizations surge there despite California Governor Gavin Newsom’s strict orders requiring bars to close and residents to wear masks in nearly all public spaces. “The alarming increases in cases, positivity rates and hospitalizations signals that we, as a community, need to take immediate action to slow the spread of COVID-19,” Barbara Ferrer, director of public health for Los Angeles County, said in a statement announcing the sharp rise.

“Otherwise, we are quickly moving toward overwhelming our healthcare system and seeing even more devastating illness and death,” Ferrer said. Los Angeles Mayor Eric Garcetti announced a “hard pause” on when movie theaters, theme parks and other entertainment venues can reopen. Los Angeles County is the biggest movie theater market in the United States. Los Angeles County said its beaches will be closed for the Independence Day weekend and fireworks displays will be banned.


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is there a better example of the future of tourism?

Norwegian Air Cancels 97 Boeing MAX And Dreamliners, Claims Compensation (R.)

Norwegian Air has cancelled orders for 97 Boeing aircraft and will claim compensation from the U.S. plane maker for the grounding of the 737 MAX and for 787 engine troubles that hit its bottom line, the Oslo-based carrier said on Monday. The airline cancelled 92 of the 737 MAX jets, five 787 Dreamliners and so-called GoldCare service agreements related to both aircraft, just as Boeing on Monday began a crucial set of flight tests of the 737 MAX in an effort to gain regulatory approval for it to return to the skies.

“Norwegian has in addition filed a legal claim seeking the return of pre-delivery payments related to the aircraft and compensation for the company’s losses related to the grounding of the 737 MAX and engine issues on the 787,” the airline said. Norwegian did not specify the amount it would seek to claim from Boeing, which it had been in talks with about compensation, and was not immediately available for comment. Boeing said it was working with Norwegian on a path forward in a challenging time as it was with other operators but it would not comment on commercial discussions.

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Nothing has changed in Europe.

Europe’s Recovery Fund: An Instrument of Class War (Varoufakis)

Europe was never the battlefield on which the frugal North clashed with the profligate South. Instead, every European country has been the battlefield where a vicious class war is fought by a transnational oligarchy-without-frontiers training its armour against the weaker residents of every country, every region, every community. COVID-19, and the European Union’s response to it, only magnifies the human costs of this unremitting class war. All talk of a North-South clash is founded on a gigantic lie, that is based on many small truths, conveniently hiding from Europeans’ gaze the class war that diminishes their life prospects.

The crisis of financialisation in 2008 intensified Europe’s class war massively, holding a majority of Northern and Southern Europeans behind and leaving Europe, including its capitalist class, much weakened in relation to the rest of the world — the United States and China in particular. Twelve years on, COVID-19 gives this crisis a new, violent spin. The weak are weakened much, much more while Europe as a whole falls further and further behind the United States and China. While the EU’s leadership and bureaucracy have been quite active in the past three months, producing one impressive-sounding policy announcement after the next, the sum of their actions boost the class war that enfeebled Europe over the past decade and weakened a majority of Europeans everywhere.

[..] Rumours that Covid-19 caused the EU to lift its game are grossly exaggerated. Good people who took heart from the news that, however reluctantly, the EU has embraced common debt in a bid to further the cause of pan-european solidarity, will soon be deeply disappointed. Behind the heroic pronouncements and the triumphant propaganda lurks a sordid truth: The class war against Europe’s weaker people is escalating. And so is Europe’s descent into global irrelevance.

It all began with the quiet death of the Eurobond. Eurobonds, as advocated by DiEM25, would perform a simple task: They would automatically convert any new Italian, Spanish or Greek public debt (due to the impact of the pandemic on public revenues and expenses) into European debt (in the same way that US Treasury Bills absorb the costs of a recession in Missouri and Wisconsin). But, once the Eurobond was killed off by the Eurogroup in early April, it is now a given that the gigantic increase in national budget deficits will be followed by equally sizeable austerity in every country — a euphemism for the intensification of the class war that depletes the already atrophied incomes of the majority in each of our countries.

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Excellent piece, what ever side you’re on.

We Digitized the Mob, and There’s No Place to Hide (Miele)

The most shocking aspect of the wave of rioting and destruction that has been unleashed on many of our American cities in the wake of George Floyd’s death is not that there is an underlying discontent with the rate of progress in racial equality. That is understandable. What is not is the way that mayors, governors and members of Congress have not just tolerated, but endorsed, mob violence as an acceptable weapon of social change. Growing up in the turbulent 1960s, I was given a very specific warning by my mother: If you ever get caught up in a mob, get out of it as soon as possible because a mob has no brain. It just has emotion — and whether that emotion is anger, hatred or even joyful exuberance, it cannot be controlled.

We saw that in Minneapolis following the death of George Floyd while in police custody. People with a brain were outraged by what they saw. They wanted to protest, to speak out, and to demand justice. But when they came together in the streets, they discovered how quickly protest can transform into riot, and how demands for justice can be used to justify injustice. The basic premise of justice, after all, is recompense, making sure that wrongdoers pay a price for their crime. Yet there was no recompense in burning the businesses of innocent bystanders. There was no justice in stealing TVs and PlayStations. This was just brainless mob violence. It was shameful and it should have been easily condemned by the politicians, news media and celebrities who were not part of the mob.

That’s what would have happened in the 1960s. When Martin Luther King Jr. was murdered, leading to riots across America in 1968, Bobby Kennedy appealed for peace amidst “this mindless menace of violence in America which again stains our land and every one of our lives.” The parallel is exact. A black man is unjustly murdered. The nation is outraged. Riots ensue. The only part that is missing today is a respected grown-up like Kennedy who would condemn the violence and recognize that “[i]t is not the concern of any one race.” As Kennedy said,

“The victims of the violence are black and white, rich and poor, young and old, famous and unknown. They are, most important of all, human beings whom other human beings loved and needed. No one — no matter where he lives or what he does — can be certain who will suffer from some senseless act of bloodshed. And yet it goes on and on. Why? What has violence ever accomplished? What has it ever created? … No wrongs have ever been righted by riots and civil disorders. … [A]n uncontrolled, uncontrollable mob is only the voice of madness, not the voice of the people.”

What a refreshing expression of common sense, and what a contrast it offers to the bleating appeasers from the Democratic Party today who have bent a knee in obeisance to the mob, to the rioters, to the monument defacers, to the statue topplers. But it’s not just the Democrats who have bowed to the “voice of madness.” Most Republicans are right there with them. So too are corporate entities such as Intel and Amazon, and sporting organizations such as the NFL and NASCAR. For their part, news outlets such as CNN and MSNBC are promoting the riots and the cleansing of American history that is being pushed by Black Lives Matter. The question is why?

It is easy to understand why someone surrounded by the mob surrenders to its power, but those corporate boardrooms are far from the fray and well-protected from the torches and Molotov cocktails. So why have they turned their backs on law and order and embraced the mob? What has changed since the 1960s that makes it so much harder for leaders in government, business and culture to condemn violence and lawlessness? The answer will not surprise you, but it should scare you. Somewhere along the way, we digitized the mob. The few dozen people surrounding a statue are not the problem. The few hundred people confronting police are not the problem. The few thousand people looting stores and throwing rocks are not the problem. The mob on the street is not the problem. The mob on the street is the symptom.

The millions of people acting without moral restraint, without reason and without fear of consequences on the Internet are the problem. Indeed, the digital mob is the unintended consequence of the Internet itself. Connecting the world via technology was supposed to encourage communication, understanding and a breaking down of barriers. Instead it has resulted in a world divided into silos, special interests, identity groups. We tend to seek out those we have the most in common with and to block, ban or troll those who are unlike us. We feel safety in numbers, and from that safety is often bred outright contempt for those who think differently.

Read more …



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I’ll close today with a series of clips of an interview yesterday with Michael Fynn’s attorney Sidney Powell, who’s going to be an important voice in the run-up to November 3, whether you agree with her or not. Stay safe.







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Sep 272019

Salvador Dali Self-portrait in the studio 1919


These Once-Secret Memos Cast Doubt On Joe Biden’s Ukraine Story (Solomon)
Democrats Reveal the Real Purpose of the Impeachment Investigation (PCR)
Chelsea, Reality Hope New Approval Of Whistleblowers Will Set Them Free (Onion)
Wall Street To Dems: We’ll Sit Out, Or Back Trump, If Warren Nominated (CNBC)
Fed Will Need To Grow Its Balance Sheet ‘Permanently’ – Morgan Stanley (CNBC)
US Annual Health Insurance Costs Hit Record High Above $20,000 (BBG)
Quarter Of UK Rural Businesses ‘Could Be Bankrupted By No-Deal Brexit’ (G.)
China’s Giant $400 Billion Iran Investment Complicates US Options (F.)
Yemen’s Houthis Are Bringing Down A Goliath (Escobar)
Spanish Security Company Spied On Julian Assange In London For US (El Pais)
Trump Administration Proposes Historically Low Refugee Limit (AP)



John Solomon’s account is really important in the impeachment hearings.. And everything he says is documented.

Watched quite a lot of the House hearing yesterday, and thought: this is a circus. Everyone knows Trump is guilty or not before they’ve seen anything, just depending on what party they belong to. And no, no fan of Adam Schiff.

These Once-Secret Memos Cast Doubt On Joe Biden’s Ukraine Story (Solomon)

Former Vice President Joe Biden, now a 2020 Democratic presidential contender, has locked into a specific story about the controversy in Ukraine. He insists that, in spring 2016, he strong-armed Ukraine to fire its chief prosecutor solely because Biden believed that official was corrupt and inept, not because the Ukrainian was investigating a natural gas company, Burisma Holdings, that hired Biden’s son, Hunter, into a lucrative job. There’s just one problem. Hundreds of pages of never-released memos and documents — many from inside the American team helping Burisma to stave off its legal troubles — conflict with Biden’s narrative.

And they raise the troubling prospect that U.S. officials may have painted a false picture in Ukraine that helped ease Burisma’s legal troubles and stop prosecutors’ plans to interview Hunter Biden during the 2016 U.S. presidential election. [..] Some media outlets have reported that, at the time Joe Biden forced the firing in March 2016, there were no open investigations. Those reports are wrong. [..] the Ukraine Prosecutor General’s office still had two open inquiries in March 2016, according to the official case file provided me. [..] In a newly sworn affidavit prepared for a European court, Shokin testified that when he was fired in March 2016, he was told the reason was that Biden was unhappy about the Burisma investigation.

“The truth is that I was forced out because I was leading a wide-ranging corruption probe into Burisma Holdings, a natural gas firm active in Ukraine and Joe Biden’s son, Hunter Biden, was a member of the Board of Directors,” Shokin testified. “On several occasions President Poroshenko asked me to have a look at the case against Burisma and consider the possibility of winding down the investigative actions in respect of this company but I refused to close this investigation,” Shokin added.

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“..keeping him under investigation, at least through the November election, will increasingly erode the support of both Trump and the Republican party brand..”

Democrats Reveal the Real Purpose of the Impeachment Investigation (PCR)

The Democrats know that there is no impeachable offense. What they intend to do is to use the investigation to look into every aspect of Trump’s life and try to make dirt out of things unrelated to his talk with the Ukrainian president. This “impeachment investigation” is a political act to help their candidate win the next presidential election. Democrats themselves describe it in this way. For example, here is how Rob Kall, the director of one of the progressive Democrat websites, described the purpose of the investigation: “The idea should be to keep the impeachment going as long as possible, with new testimonies and new releases of disclosures of alleged corruption and treason on a regular basis.

“Looking at impeachment as a process for removing the president is the wrong way of thinking about it. Looking at it as a key that gives access to investigative tools is the smarter, more strategic, way of looking at it. “Ideally, it will get so bad for Trump that the Republicans will end up putting up someone else to run in the general election. “But keeping him under investigation, at least through the November election, will increasingly erode the support of both Trump and the Republican party brand, making a Democratic takeover of the Senate and the White House, and an increased control of the House even more likely.” In other words, it is a political power play.

The outcome depends on whether Americans see the impeachment investigation as another orchestrated hoax like Russiagate or whether they fall for the hoax as they iniatially did with the Russiagate investigation. The United States does not have a media. It has a propaganda ministry that helps the ruling elites control the explanations that Americans are given. Polls show that Americans have lost confidence in the media. If so, the impeachment investigation will backfire on the Democrats.

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Personally, I’m very much torn between tragedy and comedy.

Chelsea, Reality Hope New Approval Of Whistleblowers Will Set Them Free (Onion)

Following a CIA officer’s much-applauded decision to disclose evidence that President Trump urged his Ukrainian counterpart to interfere in the 2020 election, former intelligence analysts Chelsea Manning and Reality Winner expressed confidence Thursday that the nation’s newfound appreciation for whistleblowers would get them out of jail. “Now that everyone really seems to like it when wrongdoing is exposed, I’m sure it’s just a matter of time before they clear my name and let me go,” Winner said by phone from a federal prison in Texas, echoing the sentiments of Manning, who told reporters she expected not only to be released from jail but also to be allowed to return immediately to active duty in the Army.

“Americans recognize that what this anonymous whistleblower did was both courageous and patriotic, so I’m sure to be commended for releasing a report on interference in the 2016 election, right? I was ahead of my time, really. I’m not saying there will be a parade in my honor, but I sure wouldn’t be surprised. I’ll be out of here in a day or two, and then, who knows? Maybe I’ll even run for public office.” At press time, sources confirmed a chipper Edward Snowden had informed officials in the Justice Department that he was finally ready to leave Moscow and fly back home.

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The differences in fund-raising amounts are scary. The DNC is going to need Tulsi just for that.

Wall Street To Dems: We’ll Sit Out, Or Back Trump, If Warren Nominated (CNBC)

Democratic donors on Wall Street and in big business are preparing to sit out the presidential campaign fundraising cycle — or even back President Donald Trump — if Sen. Elizabeth Warren wins the party’s nomination. In recent weeks, CNBC spoke to several high-dollar Democratic donors and fundraisers in the business community and found that this opinion was becoming widely shared as Warren, an outspoken critic of big banks and corporations, gains momentum against Joe Biden in the 2020 race. “You’re in a box because you’re a Democrat and you’re thinking, ‘I want to help the party, but she’s going to hurt me, so I’m going to help President Trump,’” said a senior private equity executive, who spoke on condition of anonymity in fear of retribution by party leaders.

The executive said this Wednesday, a day after Speaker Nancy Pelosi announced that the House would begin a formal impeachment inquiry into Trump. During the campaign, Warren has put out multiple plans intended to curb the influence of Wall Street, including a wealth tax. In July, she released a proposal that would make private equity firms responsible for debts and pension obligations of companies they buy. Trump, meanwhile, has given wealthy business leaders a helping hand with a major corporate tax cut and by eliminating regulations. Warren has sworn off taking part in big money fundraisers for the 2020 presidential primary. She has also promised to not take donations from special interest groups.

She finished raising at least $19 million in the second quarter mainly through small-dollar donors. The third quarter ends Monday. Trump, has been raising hundreds of millions of dollars, putting any eventual 2020 rival in a bind as about 20 Democrats vie for their party’s nomination. Trump’s campaign and the Republican National Committee have raised over $100 million in the second quarter. A large portion of that haul came from wealthy donors who gave to their joint fundraising committee, Trump Victory. In August, the RNC raised just over $23 million and has $53 million on hand. The Democratic National Committee have struggled to keep up. The DNC finished August bringing in $7.9 million and has $7.2 million in debt.

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No Greyerz yesterday, MS today. People do understand. But nobody acts.

Fed Will Need To Grow Its Balance Sheet ‘Permanently’ – Morgan Stanley (CNBC)

The Federal Reserve’s asset purchases likely will total $315 billion over the next six months as it seeks to stabilize overnight funding markets and contain the movements of its target interest rate, according to projections from Morgan Stanley. Those permanent moves will be necessary because the current temporary purchases likely won’t be enough to stabilize the market for overnight purchase agreements, or repos, the bank said. The Fed just a month ago halted a process that saw a more than $600 billion reduction of the balance sheet, which consists mostly of Treasurys and mortgage-backed securities that it had acquired in its efforts to pull the U.S. economy out of the financial crisis.

“We maintain that these temporary repo operations will not prove to be a sufficient long-term solution to the recent funding pressure,” Morgan Stanley strategist Kelcie Gerson said in a note. “Ultimately, the Fed will need to increase the size of its balance sheet permanently.” The Morgan Stanley forecast is a bit smaller than one recently from Bank of America Merrill Lynch, which estimated balance sheet expansion at $400 billion this year. The balance sheet currently stands about $3.9 trillion, pushed by three rounds of asset purchases in a process known as quantitative easing. Starting in October 2017, the Fed started allowing some proceeds from its maturing bonds to roll off each month, with a corresponding decrease of bank reserves that has taken the total down to about $1.5 trillion, the lowest in more than eight years.

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Another issue that nobody acts upon.

US Annual Health Insurance Costs Hit Record High Above $20,000 (BBG)

The cost of family health coverage in the U.S. now tops $20,000, an annual survey of employers found, a record high that has pushed an increasing number of American workers into plans that cover less or cost more, or force them out of the insurance market entirely. “It’s as much as buying a basic economy car,” said Drew Altman, chief executive officer of the Kaiser Family Foundation, “but buying it every year.” The nonprofit health research group conducts the yearly survey of coverage that people get through work, the main source of insurance in the U.S. for people under age 65. While employers pay most of the costs of coverage, according to the survey, workers’ average contribution is now $6,000 for a family plan.

That’s just their share of upfront premiums, and doesn’t include co-payments, deductibles and other forms of cost-sharing once they need care. The seemingly inexorable rise of costs has led to deep frustration with U.S. health care, prompting questions about whether a system where coverage is tied to a job can survive. As premiums and deductibles have increased in the last two decades, the percentage of workers covered has slipped as employers dropped coverage and some workers chose not to enroll. Fewer Americans under 65 had employer coverage in 2017 than in 1999, according to a separate Kaiser Family Foundation analysis of federal data. That’s despite the fact that the U.S. economy employed 17 million more people in 2017 than in 1999.

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Yeah, it’s the Guardian, and yeah, it may be a little less bad than they say, but the Tories’ lack of preparedness for what they themselves promote is nuts regardless.

Quarter Of UK Rural Businesses ‘Could Be Bankrupted By No-Deal Brexit’ (G.)

As many as one in four rural businesses could be left facing bankruptcy in a no-deal Brexit, and the staunchly Conservative rural vote may be in doubt as a result, the head of the UK’s landowners’ group has warned on the eve of the Tory party conference. Farmers are particularly vulnerable to a no-deal Brexit because tariffs would be levied on exports, imports of cheap food could flood the market, and because decisions must be made now which will have an impact for the next year. Arable farmers are putting crops in the ground now for spring, and livestock farmers are preparing to breed sheep and other livestock for next year.

Tim Breitmeyer, president of the Country Land and Business Association, said farms and the rural businesses that rely on them were not in a position to absorb the shock of Brexit, and estimates suggested a large number would be in danger. “Agriculture is not making very much money. In many cases, they’re losing [money] without the single farm payment [subsidy]. If you have a tariff to add to your problems, if you have increased costs to add to your problems, it’s only going to make matters worse and tip some businesses over the top,” he told the Guardian. “Now I don’t know whether that’s 15% or 25% but I’m absolutely sure there will be quite a few farming businesses for which it actually just tips them into receivership.”

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China was never going to let Iran fall. But now Trump’s sanctions policies drive it straight into Beijing hands: “Chinese firms will maintain the right of the first refusal to participate in any and all petrochemical projects in Iran, including the provision of technology, systems, process ingredients and personnel required to complete such projects.”

China’s Giant $400 Billion Iran Investment Complicates US Options (F.)

Amidst historic U.S. – Iran tensions, Beijing is doubling-down on its strategic partnership with Tehran, ignoring U.S. efforts to isolate the Islamic Republic from global markets. Following an August visit by Iran Foreign Minister Mohammad Javad Zarif to Beijing, the two countries agreed to update a 25-year program signed in 2016, to include an unprecedented $400 billion of investment in the Iranian economy – sanctions be damned. The capital injection, which would focus on Iran’s oil and gas sector, would also be distributed across the country’s transportation and manufacturing infrastructure. In return, Chinese firms will maintain the right of the first refusal to participate in any and all petrochemical projects in Iran, including the provision of technology, systems, process ingredients and personnel required to complete such projects.

According to an exclusive interview with Petroleum Economist, a senior source in Iran’s petrochemical sector had this to say about the new agreement: “The central pillar of the new deal is that China will invest $280 billion developing Iran’s oil, gas and petrochemicals sectors… there will be another $120 billion investment in upgrading Iran’s transport and manufacturing infrastructure, which again can be front-loaded into the first five-year period and added to in each subsequent period should both parties agree.” This comes at a time when Washington is exerting its so-called ‘maximum pressure’ strategy against Iran, which aims to change its international behavior by bringing oil exports down to zero.

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Makes me think of how Britain fought back vs Germany, and Viernam vs the US. Once your entire economy moves into self-defense mode, -almost- anything is possible.

Yemen’s Houthis Are Bringing Down A Goliath (Escobar)

“It is clear to us that Iran bears responsibility for this attack. There is no other plausible explanation. We support ongoing investigations to establish further details.” The statement above was not written by Franz Kafka. In fact, it was written by a Kafka derivative: Brussels-based European bureaucracy. The Merkel-Macron-Johnson trio, representing Germany, France and the UK, seems to know what no “ongoing investigation” has unearthed: that Tehran was definitively responsible for the twin aerial strikes on Saudi oil installations. “There is no other plausible explanation” translates as the occultation of Yemen. Yemen only features as the pounding ground of a vicious Saudi war, de facto supported by Washington and London and conducted with US and UK weapons, which has generated a horrendous humanitarian crisis.

So Iran is the culprit, no evidence provided, end of story, even if the “investigation continues.” Hassan Ali Al-Emad, Yemeni scholar and the son of a prominent tribal leader with ascendance over ten clans, begs to differ. “From a military perspective, nobody ever took our forces in Yemen seriously. Perhaps they started understanding it when our missiles hit Aramco.” [..] “Past Yemeni governments had missiles, but after 9/11 Yemen was banned from buying weapons from Russia. But we still had 400 missiles in warehouses in South Yemen. We used 200 Scuds – the rest is still there [laughs].”

Al-Emad breaks down Houthi weaponry into three categories: the old missile stock; cannibalized missiles using different spare parts (“transformation made in Yemen”); and those with new technology that use reverse engineering. He stressed: “We accept help from everybody,” which suggests that not only Tehran and Hezbollah are pitching in. Al-Emad’s key demand is actually humanitarian: “We request that Sana’a airport be reopened for help to the Yemeni people.” And he has a message for global public opinion that the EU-3 are obviously not aware of: “Saudi is collapsing and America is embracing it in its fall.”

On the energy front, Persian Gulf energy traders that I have relied upon as trustworthy sources for two decades confirm that, contrary to Saudi Oil Minister Abdulazziz bin Salman’s spin, the damage from the Houthi attack on Abqaiq could last not only “months” but even years. As a Dubai-based trader put it: “When an Iraqi pipeline was damaged in the mid-2000s the pumps were destroyed. It takes two years to replace a pump as the backlogs are long. The Saudis, to secure their pipelines, acquired spare pumps for this reason. But they did not dream that Abqaiq could be damaged. If you build a refinery it can take three to five years if not more.

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“The secret probe is the consequence of a criminal complaint filed by Assange himself, in which he accuses Morales and the company of the alleged offenses involving violations of his privacy and the secrecy of his client-attorney privileges, as well as misappropriation, bribery and money laundering.”

Spanish Security Company Spied On Julian Assange In London For US (El Pais)

Undercover Global S. L., the Spanish defense and private security company that was charged with protecting the Ecuadorian embassy in London during the long stay there of WikiLeaks founder Julian Assange, spied on the cyberactivist for the US intelligence service. That’s according to statements and documents to which EL PAÍS have had access. David Morales, the owner of the company, supposedly handed over audio and video to the CIA of the meetings Assange held with his lawyers and collaborators. Morales is being investigated for this activity by Spain’s High Court, the Audiencia Nacional.

The judicial investigation into the director of UC Global S. L. and the activities of his company were ordered by a judge named José de la Mata, and they began weeks after EL PAÍS published videos, audios and reports that show how the company spied on the meetings that the cyberactivist held in the embassy. The secret probe is the consequence of a criminal complaint filed by Assange himself, in which he accuses Morales and the company of the alleged offenses involving violations of his privacy and the secrecy of his client-attorney privileges, as well as misappropriation, bribery and money laundering.

Morales, a former member of the military who is on leave of absence, stated both verbally and in writing to a number of his employees that, despite having been hired by the government of then-Ecuadorian President Rafael Correa, he also worked “for the Americans,” to whom he allegedly sent documents, videos and audios of the meetings that the Australian activist held in the embassy. “We are playing in another league. This is the first division,” he told his closest colleagues after attending a security fair in the US city of Las Vegas in 2015 where he supposedly made his first American contacts. Despite the fact that the Spanish firm – which is headquartered in the southern city of Jerez de la Frontera – was hired by Senain, the Ecuadorian intelligence services, Morales called on his employees several times to keep his relationship with the US intelligence services a secret.

The owner of UC Global S. L. ordered a meeting between the head of the Ecuadorian secret service, Rommy Vallejo, and Assange to be spied on, at a time when they were planning the exit of Assange from the Ecuadorian embassy using a diplomatic passport in order to take him to another country. This initiative was eventually rejected by Assange on the basis that he considered it to be “a defeat,” that would fuel conspiracy theories, according to sources close to the company consulted by this newspaper. The meeting took place on December 21, 2017 in the meeting room of the diplomatic building and was recorded both on video and audio by cameras installed by Morales’ employees.

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This is absolutely nuts. You need 100,000 at the very least, or mayhem will ensue. And the US can easily absorb those numbers. There are a million people coming, minimum, each year.

Trump Administration Proposes Historically Low Refugee Limit (AP)

The Trump administration wants to cap the number of refugees admitted into the United States to the lowest number since the resettlement program was created in 1980. A State Department proposal released Thursday would put a cap on the number of refugees at 18,000 for the fiscal year that starts Oct. 1. Of those refugee admissions spots, 5,000 would be set aside for persecuted religious minorities — an attempt to bolster President Donald Trump’s heightened focus on global religious freedom — and 1,500 would be set aside for nationals of Guatemala, Honduras and El Salvador, who are seeking asylum in the United States in far greater numbers.

Last year, the administration placed the cap at a record low of 30,000. The historically low limits have drawn protests from human rights groups as well as government officials. “To cut the number of refugees the U.S. will accept to this low of a number reflects nothing more than this administration’s attempts to further hate, division and prejudice in a country that once valued dignity, equality and fairness,” said Ryan Mace, Grassroots Advocacy and Refugee Specialist at Amnesty International USA. The group dismissed arguments that the U.S. lacks the capacity to adequately vet and settle refugees, calling this “a purely political decision.”

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Whistleblowers: WikiLeaks has never revealed a source.






Sep 012018
 September 1, 2018  Posted by at 8:47 am Finance Tagged with: , , , , , , , ,  4 Responses »

Pablo Picasso Portrait of Daniel-Henry Kahnweiler 1910


Delaying NAFTA Deal Is Actually A Win-Win-Win (R.)
The Bank That Nearly Broke Europe (Tooze)
Rebel Leader Alexander Zakharchenko Killed In Explosion In Ukraine (G.)
US Ready To Boost Arms Supplies To Ukraine (G.)
Bad Faith Nation (Kunstler)
Saudi Arabia Hints At Plan To Turn Qatar Into An Island (AFP)
Brazil’s Top Electoral Court Votes Down Lula Candidacy (AFP)
Brexit: Entering The Final Phase (RTE)
The Terrible Human Cost Of Greece’s Bailouts (Coppola)
India Introduces Free Health Care – For Its 500 Million Poorest People (NW)



But the pending Mexico government change could change that.

Delaying NAFTA Deal Is Actually A Win-Win-Win (R.)

Delaying a revamped North American Free Trade Agreement is actually a win-win-win. Canada and the United States will keep talking despite missing a Friday deadline to conclude trade talks. Negotiators will need to move quickly to avoid the risk of fresh demands from the next Mexican government. But getting a deal that all sides can sell is more important. The mood was tense on Friday as U.S. President Donald Trump acknowledged having told Bloomberg he wasn’t going to make any concessions to his northern neighbor. The United States had already shut the Canadians out of talks for weeks while it negotiated with the Mexican government.

On Monday, Trump hailed a U.S.-Mexico deal on certain NAFTA provisions and threatened auto tariffs on Canada if it didn’t capitulate by the end of the week. Ottawa and Washington also appeared to remain far apart on certain issues. Trump has slammed Canadian tariffs of up to 270 percent on dairy imports. Canada objects to the U.S. demand to eliminate dispute panels for anti-dumping complaints. That’s why it’s encouraging that both sides will continue negotiations next week. The Friday deadline was set because of the 90-day notice period Congress needs before a deal can be concluded. Meeting it would enable Mexican President Enrique Peña Nieto to sign the pact before he leaves office at the end of November.

But the parties have some wiggle room because the deal text doesn’t have to be released until the end of September. Trump gave notice to Congress on Friday that a trade pact with Mexico would be concluded by the end of November, and Canada could join “if it is willing.” Yet Trump’s threat to do a deal with Mexico alone rings hollow because Congress has signaled it would reject a bilateral deal.

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In-deep on Trichet and all his arrogance.

The Bank That Nearly Broke Europe (Tooze)

The ECB often deals with critics by pointing to its limited mandate. But in responding to this crisis, Trichet far overstepped those bounds. His aim was nothing less than regime change. He was trying to use the crisis to force the completion of the still-incomplete constitution of the single currency zone—on conservative terms. He wanted Europe’s politicians to agree to binding fiscal rules, to establish a bond market stabilisation fund independent of the ECB, a fund that would keep the ECB forever clear of any obligation to stand behind public debt. Until the politicians fell into line, he would support the market only in extremis. Playing with fire, the ECB unleashed a conflagration.

When in the spring of 2011 Greece’s centre-left Pasok government suggested that it might be safer to write down or restructure some of its debt, Trichet did not just stonewall—he sought to silence the debate by threatening that if Athens publicly broached the issue, the ECB would cut off the funding lifeline to its banks. In the name of protecting the reputation of Europe’s sovereign borrowers, Trichet made himself into an intransigent defender of creditor interest.

And when market pressure was not enough, Trichet did not hesitate to step across the boundary that notionally separated the central bank from national governments; he issued instructions to the governments of Ireland, Spain and Italy, demanding spending cuts, tax increases and changes to labour law that reached deep into their internal affairs. Trichet used the ECB’s “independence,” and the threat of the bond market, to dictate terms to elected governments.

No such tough medicine was dished out to Europe’s banks, which should, like their American counterparts, have been forced to recapitalise in 2008-2009, even if that meant shareholders had to suffer. When the debts of Ireland’s banks threatened to tip its government over the edge, Trichet still refused point blank to countenance “bailing in” their private creditors to sharing the pain.

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Russia provocation. Which set of warmongers did it? US or Kiev?

Rebel Leader Alexander Zakharchenko Killed In Explosion In Ukraine (G.)

The leader of a Kremlin-backed separatist republic in war-torn eastern Ukraine has been killed in a blast that tore through a cafe close to his official residence in Donetsk. Alexander Zakharchenko, 42, was named prime minister of the so-called Donetsk People’s Republic (DNR) in November 2014. The DNR’s official news agency confirmed his death and said the republic’s finance minister, Alexander Timofeev, was injured when the explosive device went off in the Separ café in the centre of Donetsk. The bomb was planted in a nearby vehicle, Ukrainian media reported.

Zakharchenko is the latest in a series of separatist leaders to have been assassinated during the ongoing conflict in eastern Ukraine, where more than 10,000 people have died since fighting broke between Kremlin-backed separatists and pro-Ukrainian government forces in 2014, according to UN figures. More than 1.5 million people have been displaced by the fighting. Vladimir Putin called the killing a “dastardly” act that aimed to destabilise the fragile peace in the region and the Russian president expressed his condolences to Zakharchenko’s family.

The Russian foreign ministry was quick to react, accusing the Ukrainian government of ordering the “terrorist attack”, although Putin’s later statement did not blame Kiev for the killing. The Ukrainian security service chief, Igor Guskov, said Zakharchenko’s death could have been the result of infighting between rival separatist factions or an operation by Russian special forces. Kiev has previously accused Russia of killing separatist figures who refuse to obey Kremlin orders.

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Big mistake. Russia has no room to back down.

US Ready To Boost Arms Supplies To Ukraine (G.)

Washington is ready to expand arms supplies to Ukraine in order to build up the country’s naval and air defence forces in the face of continuing Russian support for eastern separatists, according to the US special envoy for Ukraine. In an interview with the Guardian, Kurt Volker said there was still a substantial gap between the US and Russia over how a United Nations peacekeeping force could be deployed to end the four-year war, and predicted that Vladimir Putin would wait for presidential and parliamentary elections in Ukraine next year before reconsidering his negotiating position. However, Volker argued that time was not on Putin’s side. He insisted pro-western, anti-Russian sentiment was growing in Ukraine with every passing month.

And he made clear that the Trump administration was “absolutely” prepared to go further in supplying lethal weaponry to Ukrainian forces than the anti-tank missiles it delivered in April.= “They are losing soldiers every week defending their own country,” said Volker, a former US ambassador to Nato. “And so in that context it’s natural for Ukraine to build up its military, engage in self-defense, and it’s natural to seek assistance and is natural that other countries should help them. And of course they need lethal assistance because they’re being shot at.” He added: “We can have a conversation with Ukraine like we would with any other country about what do they need. I think that there’s going to be some discussion about naval capability because as you know their navy was basically taken by Russia. And so they need to rebuild a navy and they have very limited air capability as well. I think we’ll have to look at air defence.”

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“..Mr. Trump slip-sliding towards Hubrisville like some ass-clown pol in a Coen Brothers’ movie..”

Bad Faith Nation (Kunstler)

Radiating anger and, at times, actual malice, Mr. Trump presented exactly the lack of couth that drives his hypothetically more refined “blue” enemies up a tree. His rhetorical skills have not improved since 2016, but his demagogic self-confidence soars as he unwittingly launches himself into a one-man Space Force flying too close to the sun, claiming that he has magically made America great again, mission accomplished! Even the live audience of Hoosier clods appeared strangely restive and unconvinced after an hour of this bellowing, and one got a sense of Mr. Trump slip-sliding towards Hubrisville like some ass-clown pol in a Coen Brothers’ movie about to be run out of the grange hall on a rail.

His error: taking “ownership” of a financialized economy of hallucinated markets run by out-of-control algo robots into a twilight zone of default and insolvency. The “red” and “blue” constituencies at war with each other are essentially the losers and winners in this depraved system. When the hallucination dissolves, the winners will be the new losers and the old losers will be looking to string them up. That scenario remains to be played out as we say our official goodbyes to summer this holiday weekend and turn the corner into portentous autumn. On the “blue” side of things, mendacity rules as usual lately, especially in the Deep State septic abscess that the Russia probe has become.

Department of Justice official Bruce Ohr, twice demoted but still on the payroll, went into a closed congressional hearing and apparently threw everybody but his mother under the bus, laying out an evidence trail of stupendous, flagrant corruption in that perfidious scheme to un-do the election results of 2016. Most amazingly, it was revealed that Mr. Ohr had not been called to testify by special counsel Robert Mueller nor by the federal prosecutor John Huber, who is charged with investigating the FBI / DOJ irregularities surrounding the Russia probe. It is amazing because Mr. Ohr is precisely the pivotal figure in what now looks like an obvious conspiracy to politically weaponize the agencies against the Golden Golem. An awful lot of people have some ‘splainin’ to do on that one, starting with the Attorney General and his deputy. Who will put it to them?

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Planning another invasion?!

Saudi Arabia Hints At Plan To Turn Qatar Into An Island (AFP)

A Saudi official hinted Friday the kingdom was moving forward with a plan to dig a canal that would turn the neighbouring Qatari peninsula into an island, amid a diplomatic feud between the Gulf nations. “I am impatiently waiting for details on the implementation of the Salwa island project, a great, historic project that will change the geography of the region,” Saud al-Qahtani, a senior adviser to Crown Prince Mohammed bin Salman, said on Twitter. The plan, which would physically separate the Qatari peninsula from the Saudi mainland, is the latest stress point in a highly fractious 14-month long dispute between the two states.

Saudi Arabia, the United Arab Emirates, Bahrain and Egypt cut diplomatic and trade ties with Qatar in June 2017, accusing it of supporting terrorism and being too close to Riyadh’s archrival, Iran — charges Doha denies. In April, the pro-government Sabq news website reported government plans to build a channel -– 60 kilometres (38 miles) long and 200 metres wide –- stretching across the kingdom’s border with Qatar. Part of the canal, which would cost up to 2.8 billion riyals ($750 million), would be reserved for a planned nuclear waste facility, it said. Five unnamed companies that specialise in digging canals had been invited to bid for the project and the winner will be announced in September, Makkah newspaper reported in June.

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Corruption rules.

Brazil’s Top Electoral Court Votes Down Lula Candidacy (AFP)

A majority of Brazil’s top electoral court shot down late Friday the candidacy of popular leftist Luiz Inacio Lula da Silva in the country’s upcoming presidential vote, telling the jailed former leader he cannot participate in October’s critical election. The vote punctuated a gripping case that has roiled the country for months, with Lula, 72, remaining the top contender among Brazilians to lead Latin America’s largest economy — despite sitting behind bars since April for accepting a bribe. In an extraordinary session the Superior Electoral Court dashed Lula’s hopes after hours of debate, with the judges voting an overwhelming 6-1 against him.

Shortly thereafter, the former president’s Workers’ Party (PT) vowed to “fight with all means” to secure candidacy for the leftist icon. “We will present all appeals before the courts for the recognition of the rights of Lula provided by law and international treaties ratified by Brazil,” said the party in a statement. “We will defend Lula in the streets, with the people, because he is a candidate of hope.” Lula’s case was a last-minute addition to the court session. The result was expected, but the vote of Judge Edson Fachin, the second to speak, had momentarily rekindled suspense. He relied on Lula’s recent backing from the UN Human Rights Committee, which ruled that the former leader cannot be disqualified from the elections as his legal appeals are ongoing.

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With full deadlock.

Brexit: Entering The Final Phase (RTE)

As we head into September, the assessment of EU officials and diplomats is that August has come and gone with little to show for it. Yes, there has been the publication of over 50 technical notices on a no-deal Brexit, and a flurry of trips to European capitals by Theresa May, Foreign Secretary Jeremy Hunt, and Business Secretary Greg Clark. But there has been no movement from London on the key issues, because the paralysis in the House of Commons still holds. “Objectively in the British system nothing has changed,” says one EU diplomat. “They’re still deeply divided.” As Fleet Street was trumpeting a change of heart on Brexit, the Japanese electronic giant Panasonic quietly announced it was shifting its European headquarters from the UK to the Netherlands.

In a statement the company blamed “potential fiscal obstacles by the application of different rules and regulations between the UK and EU.” So where do things stand? There are just under seven weeks before the European Council in October. In that time Theresa May will have to conclude the Withdrawal Agreement, and reach agreement on a political declaration on the future relationship that will sit alongside the divorce treaty. On the Withdrawal Treaty there are three outstanding issues. The first is on governance – how the EU and UK will resolve their differences in the future. The second is on Geographical Indicators – will the UK respect some 3,000 sensitive EU products such as Champagne and Feta cheese and not start producing their own under those names.

The third, and biggest, obstacle is the Irish backstop. The most recent proposal from London to replace to the European Commission’s draft legal text on the backstop dates back to 7 June. It suggested a Temporary Customs Arrangement (TCA) and a UK-wide backstop that would expire around the end of 2020, when a new trade arrangement would – presumably – take effect. London’s subsequent qualification of the TCA was that the Chequers White Paper would definitively rule out the need for the backstop. That solution is not definitive enough for Dublin or the other member states. A backstop is still needed in the Withdrawal Agreement. So, the deadlock remains.

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One of the world’s best healthcare systems has been gutted.

The Terrible Human Cost Of Greece’s Bailouts (Coppola)

Some people justify Greece’s terrible depression and severe fiscal austerity on the grounds that they are necessary to “reform” the Greek economy. Others even argue that Greeks “deserve” poverty and deprivation. They had a massive party at other people’s expense, after all. Now, it’s payback time. I have heard a lot of this recently. So I am grateful to the medical journal The Lancet for providing me with some ammunition to fire at those who want to play “blame the Greeks”, or who believe that the austerity inflicted on Greek was both mild and necessary, or who simply can’t see the humans behind the numbers. The Lancet has published an analysis of changes in life expectancy in Greece during the recent crisis. It is heavy on numbers and light on anecdote, but even so, it makes grim reading.

Greek mortality has worsened significantly since the beginning of the century. In 2000, the death rate per 100,000 people was 944.5. By 2016, it had risen to 1174.9, with most of the increase taking place from 2010 onwards. Greece’s mortality increase stands in stark contrast to global death rates, which fell during this time. Even in Western Europe, where death rates rose slightly overall, no other country experienced a deterioration on this scale. Cyprus, Greece’s close neighbour, also experienced some worsening of mortality rates around the time of its financial crisis and recession, but not on the scale of Greece. Among the countries included in the study, Greece’s case appears to be exceptional.

But what is causing these additional deaths? The report says it varies with age: “…adverse effects of medical treatment, self-harm, and several types of cancer stood out as consistently increasing in Greece across all ages… Within specific age groups, other causes are apparent, with rapid increases in deaths due to neonatal haemolytic disease and neonatal sepsis in children younger than 5 years, and prominent increases in self-harm among adolescents and young adults. Greek adults aged 15–49 years had increased mortality due to HIV, several treatable neoplasms, all types of cirrhosis, neurological disorders (eg, multiple sclerosis, motor neuron disease), chronic kidney disease, and most types of cardiovascular disease except for ischaemic heart disease and stroke.”

Let me translate this piece of medical jargon into plain English: • Newborn babies are dying of completely treatable conditions. • Adolescents and young adults are killing themselves. • Adolescents and adults are dying of diseases associated with poor diet, alcohol abuse and smoking, and of treatable illnesses.

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That’s the entire EU.

India Introduces Free Health Care – For Its 500 Million Poorest People (NW)

The Indian government will pay for health care for around 500 million of its poorest citizens, with Prime Minister Narendra Modi declaring that the country can reach its potential only with a healthy population. During a speech to mark the country’s independence day on Wednesday, Modi said, “It is essential to ensure that we free the poor of India from the clutches of poverty due to which they cannot afford health care,” The Times of India reported. The National Health Protection Mission—also known as “Modicare”—will give impoverished families health insurance coverage of up to $7,100 every year. This may not seem a lot by American standards, but in a country where the annual per capita income is just over $1,900, it will make a massive difference to those who cannot afford private treatment.

Public hospitals in India offer free, but less sophisticated, care. The system is strained to the point of collapse, with hospitals struggling to secure enough beds and staff to care for the sick. The lack of access for rural communities—where 66 percent of Indians live—forces people to travel many hours to reach urban facilities if they want treatment. This means the private medical sector cares for the majority of India’s patients and charges them accordingly. When the project was announced in February, then-Finance Minister Arun Jaitley declared it the “world’s biggest government-funded health care program.” According to the mission’s chief executive officer, Indu Bhushan, “This is going to be a game changer.” Medical costs are one of the primary causes of poverty in India. Around 63 million Indians fall into poverty each year because of health care bills, and 70% of all charges are paid directly by patients.

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Jun 242017

Fred Lyon San Francisco Cable Car rounding the curve at Jones Street 1946


US New Home Sales Jump, Median Price Surges To Record High (R.)
Sydney Prices To Jump ‘Overnight’ As First-Home Incentives Kick In (D.)
The World Has Been Fitted With Two Debt Straightjackets (Steve Keen)
The Future Prospects For Japanese Banks Look Like Hell (Makoto Utsumi)
Europe’s Banking Union Is Dying in Italy (BBG)
Two Italian Zombie Banks Toppled Friday Night (WS)
‘Emmangela’ Show Reasserts EU’s Franco-German Alliance (AFP)
Schaeuble Says British Were ‘Lied To’, ‘Deceived’ In Brexit Campaign (R.)
UK MPs Plan Cross-Party Alliance To Defeat May, Hard Brexit (Ind.)
Corbyn Vows To Force Early British Election (Ind.)
May Blocked Plan To Guarantee Rights Of EU Citizens In UK After Brexit (Ind.)
The Fed Needs to Acknowledge the Slowing Economy (DDMB)
Unfunded Liabilities Have Turned Illinois Into A Banana Republic (Lang)
America’s Health-Care Rain Dance (Jim Kunstler)
US-Led Coalition Kills Almost 500 Syrian Civilians In One Month (NW)
The Unfinished Negotiations For A Greek “Super-Memorandum” (Press Project)



They are determined to get all the suckers they can get before the implosion. There’s a huge empty bag to be passed on.

US New Home Sales Jump, Median Price Surges To Record High (R.)

New U.S. single-family home sales rose in May and the median sales price surged to an all-time high, suggesting the housing market had regained momentum. The Commerce Department said on Friday new home sales increased 2.9% to a seasonally adjusted rate of 610,000 units last month. April’s sales pace was also revised sharply higher to 593,000 units from 569,000 units. Economists polled by Reuters had forecast new home sales, which make up about 10% of all home sales, rising 5.4% to a pace of 597,000 units last month. Sales were up 8.9% on a year-on-year basis in May.

“While the data quality of the new home sales report is notoriously poor, the general picture from this report and the existing home sales report is one of solid housing demand in the important spring selling season,” said Michael Feroli, an economist with J.P. Morgan. The housing market has been bolstered by continued strong job growth. The unemployment rate fell to a 16-year low of 4.3% in May and mortgage rates are still favorable by historical standards. However, an increase in the cost of building materials and shortages of lots and labor have crimped homebuilding. With demand outstripping supply, house prices remain elevated. The median house price rose to a record high of $345,800 in May, from $310,200 in the prior month. The average sales price last month was $406,400, also a record high.

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Ditto in Australia. This is from real estate broker Domain, responsible for ad campaigns like the one in the photo -which I took in Melbourne in 2011.

Sydney Prices To Jump ‘Overnight’ As First-Home Incentives Kick In (D.)

Property prices in affordable areas are expected to jump “overnight” on the back of changes to first-home buyer stamp duty concessions starting in July, experts say. Strategic vendors in these locations are holding off accepting offers until next month to take advantage of the expected surge in demand. First-home buyers in NSW are set to save up to $24,740 with stamp duty concessions for homes up to $800,000 and a full exemption for homes under $650,000. Among those anticipating they will benefit from the changes is Quakers Hill home owner Bhugol Kansakar who bought his house for $611,000 in March 2015 – then a first-home buyer himself. Since May his three-bedroom home at 9 Nyngan Street has been on the market for $730,000 to $760,000. “We’ve had offers around $720,000 to $730,000 … we’re holding out until next month as stamp duty will be off for the first-home buyers,” Mr Kansakar said.

In this price bracket, first-home buyers would get a partial exemption from July. “It is a big block of land, three-bedrooms, perfect for a first home.” He anticipates he will be likely to get $760,000 or more for the home when the new rules come in. And he’s far from the only one anticipating he’ll get a premium, his sales agent Raine & Horne Blacktown business development manager Edwin Almeida said. About 40% of inquiries on homes he had listed across the Blacktown Council area priced under $750,000 were first-home buyers asking if they could formally exchange next month. He expects local prices would jump by $20,000 to $40,000. “Easy money does not make the market more accessible for first-home buyers. It just means vendors and developers will increase the price of property to meet demand,” Mr Almeida said.

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Two pieces from a PDF by “The International Economy” site, entitled: “Has the World Been Fitted With a Debt Straightjacket? Nearly forty distinguished experts offer their wisdom”. Click the link to see all.

First, Steve Keen…

The World Has Been Fitted With Two Debt Straightjackets (Steve Keen)

T he world has been fitted with not just one but two debt straightjackets: one made of public debt and the other of private debt. The situation in the United States is typical. The total U.S. debt level at the end of World War II was equivalent to 130% of GDP, with public debt being three-quarters of the total and private debt one-quarter. Today, it is 250% of GDP, with public debt being two-fifths of the total and private debt three-fifths. But there is a simple trick that could let the United States, like Harry Houdini, magically escape from one of these two straightjackets in a flash. Like any magic act, it’s ruined by the telling: despite all the political hand-wringing over the burden the public debt imposes on future generations, public debt could be eliminated by the stroke of a proverbial pen, for two simple reasons.

First, this debt is exclusively in U.S. dollars; second, the government is the only institution in the nation that “owns its own bank,” the Federal Reserve, which can create U.S. dollars at will. The Fed could buy up—and effectively cancel—this debt overnight. You might not like this trick, but it’s both possible and perfectly legal. That leaves the second straightjacket: private debt. Here Houdini’s escape is not possible, because if any individual tried to do what the U.S. government can do, that person would be gaoled for counterfeiting. All U.S. private debt is, like public debt, owed in U.S. dollars; but only the U.S. government has the privilege of owning its own bank. For the private sector, it’s effectively the banks that own the debtors. But paradoxically, most economists obsess about the public debt trap and ignore the private debt one.

Why? Because they believe that banks do not originate loans, but instead act as “intermediaries” between savers and borrowers. Therefore, they say, private debt doesn’t matter, because if the debtor can’t spend, the lender can, and vice versa. They therefore believe that the level of private debt, and its rate of growth or decline, are economically irrelevant. They can’t see a private straightjacket. Several central banks have recently loudly declared that this model is nonsense—including Germany’s ultraconservative Bundesbank. Banks are not “intermediaries of debt” but originators. They don’t lend pre-existing money, but create money when they make an entry in the borrower’s deposit account, which is matched precisely by an entry in the borrower’s debt account.

Since debtors borrow to spend, rising private debt boosts demand while falling debt reduces it. Demand in the United States was therefore boosted substantially as private debt rose almost fivefold from 1945 until 2008. Now demand from credit is stagnant and as likely to subtract from demand as add to it. So private debt is the real straightjacket constraining the economy. But with mainstream economists ignoring it and fretting about government debt, the U.S. economy is likely to remain in its debt straightjacket indefinitely. As the public has started to realize since the 2008 crisis took them by surprise, mainstream economists are inept magicians.

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…second, Makoto Utsumi, Chairman of the International Advisory Board, Tokai Tokyo F.H., and former Vice Minister of Finance for International Affairs, Japan.

The Future Prospects For Japanese Banks Look Like Hell (Makoto Utsumi)

Can Japan withstand the return to conventional monetary policy? The Bank of Japan has been conducting an unconventional monetary policy for almost two decades, drastically strengthening this policy since Governor Kuroda took office in 2013. As public debt accumulated to 250% of GDP and due to the massive holdings of Japanese Government bonds by the Japanese banking sector, some argue that Japan cannot withstand the return to conventional monetary policy. Here are my points of view: First, let us consider the impact of interest rates hikes on public finances. Many analysts argue that this move would be destructive to public finances due to increased interest payments. There is a point, however, almost all analysts neglect. When interest rates on the JGB rise, the rates on savings and deposits also rise.

As 20% of the interest income is withheld at source, the incremental tax revenue would offset to a great deal the increasing cost of the debt service to be paid by the government. Although the damage caused by the shift in monetary policy on the budget balance would be limited, the fiscal situation of Japan would become increasingly serious with a sustained lack of fiscal discipline. Japanese public finances seem to be on a path to breakdown and the Bank of Japan’s policy to purchase Japanese government bonds up to an amount equal to 80% of new issuances looks more and more like the monetization of the budget deficit. Next, let us see the impact on the banking sector. Two decades of unconventional monetary policy have been squeezing the banks’ profit margins through the extreme flattening of the yield curve.

From this view point, the return to conventional monetary policy is good news for the Japanese banking sector in the long run. On the other hand, in the short and medium terms, this would represent the harshest challenge for banks due to massive valuation losses on their bond holdings. According to the Bank of Japan’s survey, a 1 percentage point rise of interest rates on bonds would cause a loss of US$20 billion for mega-banks, US$25 billion for regional banks, and US$19 billion for credit unions. While the U.S. Federal Reserve is firmly committed toward exit and as the European Central Bank seems to be quietly probing a future exit strategy, where is the Bank of Japan going? If it continues to maintain zero or negative interest rates, current profits of the banking sector would be further squeezed.

If it starts to take steps toward conventional monetary policy, the banking sector would face serious valuation losses. Either way, the future prospects for Japanese banks look like hell. We will probably witness a clear distinction between two groups of banks: those who manage their business based on foresight and those who don’t. And we would see a deep reshuffle in the banking sector along with the exit process from the unconventional monetary policy of the Bank of Japan.

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

Europe’s Banking Union Is Dying in Italy (BBG)

The Italian government looks set to put Veneto Banca and Banca Popolare di Vicenza, two troubled regional lenders, into liquidation, selling off the good assets to a rival bank for a symbolic price. The toxic assets would be transferred to a bad bank, mostly funded by the government. Shareholders and junior bond-holders would contribute to the rescue, while senior creditors would be spared. The rival bank, Intesa Sanpaolo, would be getting a great deal for little risk. But for the Italian taxpayer, and the credibility of euro zone financial regulation, the plan is a loser and should be stopped. The Italian scheme is radically different from the one put in place two weeks ago, when the Spanish lender Banco Santander bought Banco Popular for one euro. In that case Santander also acquired Popular’s non-performing loans as well as all the future legal risks.

It also immediately went to the markets to raise capital to pay for it. Here, Intesa will only pick the assets it wants and insists that the operation not impact its capital ratio. This plan is a slap in the face of Italian taxpayers, who according to some estimates could end up paying around €10 billion ($11.1) for it. The government could have taken a less expensive route, involving the “bail in” of senior bondholders. It chose not to: Many of these instruments are in the hands of retail investors, who bought them without being fully aware of the risks involved. The government wants to avoid a political backlash and the risk of contagion spreading across the system. However, €10 billion is a whale of a premium to pay as an insurance against a contagion. And Rome may still face a backlash – from taxpayers who will feel defrauded.

Most importantly, this plan is a dagger in the heart of the euro zone banking union. This was one of Europe’s main responses to the sovereign debt crisis, designed to limit the contribution of taxpayers to bank rescues and to ensure all euro zone lenders faced a coherent set of rules. Italy is relying for its plan on its domestic liquidation regime. Rome will effectively by-pass the EU’s “single resolution board” which is supposed to handle bank failures in an orderly way and the “Banking Recovery and Resolution Directive,” which should act as the euro zone’s single rulebook. The advantage will be to spare senior bondholders but the cost will be huge: denting, perhaps irreversibly, the credibility of Europe’s newly formed institutions.

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And there we go. After years of trying to save them. One day we’ll realize just how epic this failure is.

Two Italian Zombie Banks Toppled Friday Night (WS)

When banks fail and regulators decide to liquidate them, it happens on Friday evening so that there is a weekend to clean up the mess. And this is what happened in Italy – with two banks! It’s over for the two banks that have been prominent zombies in the Italian banking crisis: Veneto Banca and Banca Popolare di Vicenza, in northeastern Italy. The banks have combined assets of €60 billion, a good part of which are toxic and no one wanted to touch them. They already received a bailout but more would have been required, and given the uncertainty and the messiness of their books, nothing was forthcoming, and the ECB which regulates them lost its patience. In a tersely worded statement, the ECB’s office of Banking Supervision ordered the banks to be wound up because they “were failing or likely to fail as the two banks repeatedly breached supervisory capital requirements.”

“Failing or likely to fail” is the key phrase that banking supervisors use for banks that “should be put in resolution or wound up under normal insolvency proceedings,” the statement said. This is the first Italian bank liquidation under Europe’s new Single Resolution Mechanism Regulation. The ECB explained: “The ECB had given the banks time to present capital plans, but the banks had been unable to offer credible solutions going forward. Consequently, the ECB deemed that both banks were failing or likely to fail and duly informed the Single Resolution Board (SRB), which concluded that the conditions for a resolution action in relation to the two banks had not been met. The banks will be wound up under Italian insolvency procedures.”

[..] nothing worked. Private sector money stayed away in droves. JP Morgan, which had been recruited to save the Italian banks, threw in the towel. These banks had been zombies for too long. Everybody knew it. But the government kept denying it. Just weeks ago, Italy’s Minister of Economy Pier Carlo Padoan insisted that the two banks would not be wound down. Last year, to dispel the mountain of evidence to the contrary, he insisted that that there would be no need of any future bail outs; and that, furthermore, Italy did not even have a banking problem. In early June, the two banks were instructed by the European Commission to raise an additional €1.25 billion in private capital. No one bit. Italy’s government then tried to persuade the European Commission and the ECB to water down the requirement to €600-800 million, and it urged Italian banks to chip in to the bank rescue fund. All that failed.

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That leaves 25 sovereign countries with nothing to say on issues that are vitally important to them. Who are we kidding?

‘Emmangela’ Show Reasserts EU’s Franco-German Alliance (AFP)

Emmanuel Macron and Angela Merkel used the French president’s first Brussels summit Friday to deliver an unmistakeable message: their countries intend to lead the EU’s post-Brexit revival. The Franco-German power couple held an unusual joint press conference after meeting their 26 European Union counterparts, against a backdrop of their respective flags and the bloc’s blue banner with yellow stars. “When France and Germany speak with one voice, Europe can move forward,” newcomer Macron told a room almost filled to bursting point with reporters as he stood alongside the German chancellor. “There can be no pertinent solution if it is not a pertinent solution for France and Germany,” the 39-year-old centre-right leader.

Despite her more pragmatic tone, the message from 62-year-old Merkel was the same. “This press conference shows that we are resolved to jointly find solutions to problems,” she said. The joint press conference came exactly a year after Britain’s shock referendum vote to become the first country to leave the European Union, which prompted dire predictions of the break-up of the bloc. But Europe has jumped on the bandwagon of Macron’s stunning election victory over French far-right leader Marine Le Pen to trumpet a newfound optimism after years of austerity and crisis despite Brexit. At the heart of that is the idea that Macron may be able to repair the traditional “engine” behind European integration – the post-war alliance of Paris and Berlin after centuries of conflict.

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Can the Greek finance minister please state that Schaeuble lies to Germans? Just to see the reaction?!

Schaeuble Says British Were ‘Lied To’, ‘Deceived’ In Brexit Campaign (R.)

British people were “endlessly lied to and deceived” in last year’s Brexit referendum campaign, German Finance Minister Wolfgang Schaeuble said on Friday. Speaking in Berlin on the first anniversary of the Brexit vote, Schaeuble was scathing about the “leave” campaigners who persuaded a majority of voters to opt to quit the EU. “The Britons were endlessly lied to and deceived,” Schaeuble told a conference of family-run companies. When the Brexit campaigners “happened to be successful, the ones who did it ran away because they said they can’t take responsibility”. The two sides in Britain’s referendum campaign swapped bitter accusations they were making misleading or untrue statements, such as the claim that leaving the EU would free up large sums for public health spending.

In the days after the vote, Prime Minister David Cameron, who called the referendum, resigned, and several prominent leave campaigners dropped out of the race to succeed him. Schaeuble said the 70 years of growth and prosperity Europe had known since World War Two was not based on pure majoritarianism but on sustainable democratic models. “(We need) not just mechanisms that consist of my promising something to a majority,” he said. “Then you only have to look at the demographics to see that you’ll end up with endless debates about redistribution that lead to jealousy.”

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May has become a very damaging force in Britain.

UK MPs Plan Cross-Party Alliance To Defeat May, Hard Brexit (Ind.)

MPs from all parties are already planning an alliance to defeat Theresa May’s plans for a hard Brexit, just days into the new Parliament. Strategies to amend future legislation – including a key immigration bill – to force ministers to listen to business groups and to show the EU that Parliament wants a “softer” exit are being drawn up, The Independent has learned. One Conservative MP said the aim was to give confidence to “bullied” ministers who are reluctant to “speak out”, despite sharing the view that the Prime Minister’s plans put Britain on the road to disaster. Another MP outlined the importance of convincing Brussels that Parliament can “coordinate” to present a different, more EU-friendly policy to that of the Government. “It would really show how power has shifted if Parliament can coordinate itself – and that’s not impossible,” the MP said.

Pro-EU Tory Anna Soubry told The Independent: “We are talking to each other and will continue to talk to each other – this is something that transcends normal party political considerations. “It doesn’t have to be about forcing votes, but it may come to that. Certainly, the threat of losing a vote will weigh very heavily on the Government’s mind.” Another MP spoke of giving voice to changing public opinion, amid the first evidence that some people who voted Leave a year ago are changing their minds. Ms Soubry added: “I am up for working with everybody. Hopefully something concrete will come out of it, because this is the most important thing that’s been done in decades.” She said she was in contact with some of the 34 Labour MPs who, this week, challenged Jeremy Corbyn to change course by fighting to stay in the single market.

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Noy much use, perhaps. Don’t say it out loud. Just wait for the Tories to blow up.

Corbyn Vows To Force Early British Election (Ind.)

Jeremy Corbyn has said he will look to “force an early general election” after claiming it was “ludicrous” to suggest Theresa May could stay in power. The Labour leader made the claim before speaking at Unison’s annual conference in Brighton and also added he was pleased with the party’s recent surge in opinion polls. Mr Corbyn’s approval rating has been on the rise since the general election and it appears he will now attempt to pile pressure on the Prime Minister. “Mrs May called the election so not to have a coalition of chaos, but that is exactly what we have got, they don’t seem to have come to an agreement with the DUP two weeks after the election,” Mr Corbyn told the Daily Mirror. “We will challenge this Government at every step and try to force an early general election.”

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George Osborne has some accounts to settle. And a very easy target to blame his own whoppers on.

May Blocked Plan To Guarantee Rights Of EU Citizens In UK After Brexit (Ind.)

Theresa May single-handedly blocked a plan to immediately guarantee the future rights of the 3m EU citizens in the UK last summer, George Osborne has revealed. The then-Home Secretary was the only member of the Cabinet to oppose David Cameron, who “wanted to reassure EU citizens they would be allowed to stay”, after Brexit. “All his Cabinet agreed with that unilateral offer, except his Home Secretary, Mrs May, who insisted on blocking it,” revealed the Evening Standard, now edited by Mr Osborne. The proposal was discussed “in the days immediately after the referendum” exactly one year ago, said the newspaper. Ms May has denied the accusation and said that “was certainly not my recollection” of events. But Tom Brake, the Liberal Democrat Brexit spokesman, said: “It is a badge of shame that Theresa May blocked attempts to guarantee the rights of EU nationals after the referendum.

“It shows how cold and heartless she is. “Now that mean-spirited decision is coming back to haunt her as we see an exodus of skilled EU workers, from nurses to academics.” The revelation comes after EU citizens in the UK protested that Ms May’s “generous” offer – outlined last night – will leave them with less rights after Brexit than “British jam”. The Prime Minister’s proposals also ran into trouble from other EU leaders who warned of “open questions” and a “long, long way to go” before agreement. Ms May was forced to defend her position and said she wants to give EU citizens in the UK “certainty” but the details of the arrangement would be outlined during the negotiation process. Since reaching No 10, Ms May has faced down pleas to act unilaterally, insisting she would only offer guarantees to EU citizens if British ex-pats in the EU were given the same protection.

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It’ll happen only after the round of rate hikes. There’s not enough room to go down right now.

The Fed Needs to Acknowledge the Slowing Economy (DDMB)

As any market veteran can tell you, those on the sell-side are the second-to-last to concede to a slowdown in economic activity. It’s unseemly to make negative calls when a firm’s main objective is keeping its clients fully invested in risky assets; the two aims naturally conflict. Hence the surprise when Bank of America Merrill Lynch said autos are headed for a “decisive downturn” that will trough in 2021 at around a 13-million-unit annualized rate, down from last year’s blistering record 17.6 million. A week earlier, Morgan Stanley, whose numbers are not quite as grim, also reduced its sales forecast, recognizing that the best days of the cycle have come and gone. The U.S. economy is consumption-centric. Growth in the current recovery has centered on three industries that have fed through to consumption in its various forms – autos, energy and financial services.

There’s something almost poetic in finance’s re-emergence, especially for those on Wall Street who’ve profited smartly from unprecedented levels of deal flow. Have a debt problem? Solve it with more debt. And why not? This system has worked for generations; insatiable demand for debt is why interest rates have staged their historic decline. Debt lit the fire that ignited the shale revolution. Debt put a floor under and then helped commercial real estate reach for the skies. Debt kept dying retailers alive. And debt made easier back-to-back years of record car sales. The question so many bullish economists must answer is what debt can do for the economy in the future. Much to the Saudis’ dismay, the energy industry is as lean and mean as it’s ever been; operating efficiency gains have been magnificent in a do-or-die environment. Energy is growth neutral going forward.

[..] It’s all good and well that strained industries want to extract what value remains from their CRE exposure as part of their exit strategies. But this only works in isolation. If motivated sellers move in tandem, you can bet teetering CRE valuations will be among the casualties, taking many over-exposed mid-size and small banks down with them. Call it a confluence of factors that bodes ill for the economic recovery, even as optimists hope the growth streak can stretch into a 10th year. By the way, leading the optimists’ charge is the Federal Reserve itself. Central bank policy makers’ expectations for future growth indicate the current economic recovery will unseat the record holder, the expansion that finally flamed out in 2001 after enjoying a life of exactly 10 years. But then it is the Fed that’s the very last to capitulate, to say nothing of forecast, a slowdown in economic activity.

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“The best thing to do is to break Illinois into pieces right now. Just wipe us off the map.”; “Illinois is merely the canary in the coal mine.”

Unfunded Liabilities Have Turned Illinois Into A Banana Republic (Lang)

Illinois is the perfect example of what happens when your state is run by fiscally irresponsible dunces for decades. The state is buried in debt, and hasn’t passed a budget in over 700 days. 100% of their monthly revenue is being consumed by court ordered payments, and the Illinois Department of Transportation has revealed that they may not be able to pay contractors (who are working on over 700 infrastructure projects) after July 1st if the state doesn’t pass a budget. To top it all off, the state’s credit rating is one step away from junk status, the lowest of any state. Because of these factors, Illinois may become the first state to declare bankruptcy since the Great Depression. Governor Bruce Rauner has gone so far as to call his state a “banana republic.” The state’s comptroller has admitted that “We are in massive crisis mode.”

And a reporter for the Chicago Tribune thinks Illinois has gone so far past the point of no return, that the state should be broken up. He recently wrote what basically sounds like a suicide note for Illinois. “Dissolve Illinois. Decommission the state, tear up the charter, whatever the legal mumbo-jumbo, just end the whole dang thing. We just disappear. With no pain. That’s right. You heard me. The best thing to do is to break Illinois into pieces right now. Just wipe us off the map. Cut us out of America’s heartland and let neighboring states carve us up and take the best chunks for themselves. The group that will scream the loudest is the state’s political class, who did this to us, and the big bond creditors, who are whispering talk of bankruptcy and asset forfeiture to save their own skins. But our beloved Illinois has proved that it just doesn’t deserve to survive.”

So how did it get to this point? The root of the problem is Illinois’ unfunded pension liabilities, which amount to $130 billion. The state’s leaders simply promised what could not be delivered. Most of their employees can retire in their 50’s, and many of them will receive 1-2 million dollars over the course of their retirements. As the debts associated with those pensions reached astronomical levels, the government increased taxes so much that many of the wealthiest and most productive citizens and businesses have moved away, leaving an even smaller tax base to draw from. In short, Illinois is in a death spiral, but it’s not alone. Illinois is merely the canary in the coal mine.

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America’s Health-Care Rain Dance (Jim Kunstler)

The cost of everything medical is worked out in a private rain-dance between the aforementioned manifold concerned parties on the basis of what they think they can get away with in any particular case. In hospitals, this is enabled by the notorious ChargeMaster system which, to put it as simply as possible, allows hospitals to just make shit up. Any bill in congress that affects to reform the gross financial malfeasance in healthcare ought to start with the absolute requirement to publicly post the cost of everything that doctors and hospitals do, and enable the “service providers” to get paid only those publicly posted costs — obviating the lucrative rain-dance for dividing up the ransoms paid by hostage-patients who come to the “providers,” after all, in extremis. Notice that this crucial feature of the crisis is missing not only from the political debate but also from the supposedly public-interest-minded pages of The New York Times and other organs of the news media.

Perhaps this facet of the problem never entered the editors’ minds — in which case you really have to ask: how dumb are they? (The funniest claim about ObamaCare in today’s New York Times is the statement that 20 million citizens got access to health care under the so-called Affordable Care Act. Really? You mean they got health insurance policies with $8000-deductables, when they don’t even have $500 in savings to pay for car repairs? What planet do The New York Times editorial writers live on?) The corollary questions about deconstructing the insurance armature of the health care racket, and assigning its “duties” to a “single-payer” government agency is, of course, a higher level of debate. I’m not saying it would work, even if it was modeled on one of the systems currently working elsewhere, say in France.

But Americans have acquired an allergy to even thinking about that, or at least they’ve been conditioned to imagine they’re allergic by self-interested politicians. So, the current product of debate in the US Senate is just a scheme for pretending to reapportion the colossal flow of grift among the grifters. Spare yourself the angst of even worrying about the outcome of the current healthcare debate. It’s not going to get “fixed.” The medical system as we know it is going to blow up, and soon, just like the pension systems across the country, and the treasuries of the fifty states themselves, and the rest of the Potemkin US economy.

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“The coalition says it takes as many precautions as possible within the laws of warfare..”

US-Led Coalition Kills Almost 500 Syrian Civilians In One Month (NW)

The U.S.-led coalition’s strikes against the Islamic State militant group (ISIS) in two Syrian provinces killed 472 civilians in the last month, according to a monitor. The Syrian Observatory for Human Rights (SOHR), a U.K.-based monitoring group that has an extensive network of contacts on the ground in Syria, said the toll was more than double the month prior and the highest for a single month since raids began in September 2014. In Raqqa province, where the city of the same name is located, coalition strikes killed 250 civilians, including 53 children, SOHR said. In Deir ez-Zor, strikes killed 222 civilians, 84 of which were children. Rami Abdul Rahman, director of SOHR, told the AFP news agency that the total deaths caused by coalition strikes in Syria now amounted to 1,953. Of the deceased, 456 were children and 333 were women.

The coalition continues its bombing campaign in and around the eastern Syrian city of Raqqa, the largest under ISIS’s control in the country. It is supporting an Arab-Kurdish alliance waging a ground offensive against ISIS in the de facto capital of its self-declared caliphate that straddles the Iraqi-Syrian border. The coalition says it takes as many precautions as possible within the laws of warfare, but top coalition generals have admitted that civilian deaths are inevitable in the campaign to defeat ISIS. Some 100,000 civilians remain under ISIS control in the northern Iraqi city of Mosul, and thousands remain in Raqqa. Human rights groups have criticized the coalition for not exercising enough caution. One case in particular was a March 17 strike in Mosul that killed more than 100 civilians. The coalition investigated the incident and concluded that ISIS had placed booby traps in the building that maximized the damage on impact.

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Greece must refuse.

The Unfinished Negotiations For A Greek “Super-Memorandum” (Press Project)

They say that history repeats itself first as a tragedy then as a farce. It’s a commonplace expression that is nevertheless clearly true in crisis-ridden Greece. During the SYRIZA-AnEl coalition’s time in power(especially under the second mandate), even the seasons of the year have come to resemble each other. Winter is a time of tension, harsh disagreement and bluster. Spring is the season for gradual capitulation. May (2016 and 2017) is the month for government betrayal; June for further prerequisites and an “agreement.” The rest of the summer then marks a period of government euphoria, followed by an autumn of initial discussions with an eye to the next set of negotiations. By using what happened over the same span of time in 2016—along with the language of the Third (and “fourth”)Memorandum of Understanding—as a kind of textbook, it’s easy to tell where we are and where we’re headed.

The June 15 Eurogroup joint statement condenses all the results of the most recent set of negotiations. These are the most essential and specific points: “The reform measures cover areas such as pensions, income tax, the labour market as well as the financial and energy sectors. These should make Greece’s medium-term fiscal strategy more robust and support the growth-friendly rebalancing of the economy. The Eurogroup invited Greece together with the institutions and relevant third parties to develop and support a holistic, growth enhancing strategy.”

In this paragraph, the Eurozone Finance Ministers are essentially borrowing a page from 1984. In that legendary novel by George Orwell, war is peace; freedom is enslavement; ignorance is power. For the Eurogroup (as per usual), pension cuts, reductions in tax exemptions, an administration well-disposed to mass lay-offs, and the sale of Public Power Corporation shares all count as positive “reform measures.” Greece’s sentence to a “long-term memorandum,” requiring surpluses of 3.5% until 2022 and a little over 2% until 2060, constitutes “support [of] a holistic, growth enhancing strategy.” “The Eurogroup reconfirmed its approach to the sustainability of Greece’s public debt that was agreed in May 2016, while providing some further detail on the medium-term debt measures that could accrue to Greece. These measures would be implemented after successful completion of the programme, if a new debt sustainability analysis were to confirm that such measures are necessary.”

These two brief paragraphs finalize the results of the multi-month Greek debt negotiations. In short and as is plainly evident, the Greek government gained nothing in terms of its debt, while after months of Eurozone attempts to secure further relief the Eurogroup simply determined that everything decided back in May 2016 still holds. Even the government’s recent expectation that the (highly dangerous) phrase “if necessary” would be removed from the relief-program wording was ultimately frustrated. “The Eurogroup welcomed Greece’s commitment to maintain a primary surplus of 3.5% of GDP until 2022, and a fiscal path consistent with the European fiscal framework thereafter. According to analysis by the European Commission, such compliance would be achieved with a primary surplus of equal to or above but close to 2.0% of GDP in the period of 2023-2060.”

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Mar 242017
 March 24, 2017  Posted by at 8:59 am Finance Tagged with: , , , , , , , , , , ,  4 Responses »

DPC “Broad Street and curb market, New York” 1906


Trump Ultimatum: Pass Health Bill Now Or Live With Obamacare (MW)
The US Has the Most Expensive Healthcare System in the World (Statista)
‘Deaths of Despair’ Surge in White US Middle Class (Vox)
The Retail Apocalypse Has Officially Descended On America (BI)
WikiLeaks Releases Vault 7 “Dark Matter”: CIA Bugs “Factory Fresh” iPhones (WL)
China’s Property Bubble Risks Youth Revolt (CNBC)
China’s Largest Dairy Operator Crashes Over 90% In Minutes (ZH)
Eurozone Whistles Past its Biggest Threat: Italy’s Multi-Headed Hydra (ZH)
Schäuble Annoyed By Foreign Minister Saying Germany Should Pay More To EU (R.)
Greek Objections Mar Preparations For EU’s 60th Birthday (R.)
Greece Says To Support Rome Declaration, Calls For EU Backing On Reforms (R.)
40% Of Greek Businesses Say Likely To Close Shop Within The Year (K.)
EU Envoy: Three Million Migrants Waiting To Cross Into Greece (K.)
Over 250 Migrants Feared Drowned On ‘Black Day’ In Mediterranean (AFP)



This will attract some media attention. Better do it after the markets close.

Trump Ultimatum: Pass Health Bill Now Or Live With Obamacare (MW)

President Donald Trump reportedly laid down an ultimatum to House Republicans on Thursday night: Pass the health-care bill, as is, on Friday, or live with Obamacare. The hard line came after more than a day of frantic negotiations to win the support of conservative Republicans who oppose the bill, and could block its passage. A vote on the bill had been scheduled for Thursday night, but was postponed earlier in the day after the GOP couldn’t win over holdout lawmakers. White House budget director Mitch Mulvaney dropped Trump’s demand in a meeting with rank-and-file House Republicans, and said the administration and House Speaker Paul Ryan were done with negotiations, according to a report in The Wall Street Journal. If Friday’s bill fails, Trump is resigned to live with Obamacare and move on, he said.

CNN similarly reported that the closed-door meeting ended with an ultimatum, and Rep. Chris Collins (R-N.Y.) told the network that the vote is expected to be held Friday afternoon. The move is a gamble by the Trump administration, which has placed much political capital in its promise to repeal and replace the Affordable Care Act, also known as Obamacare. “They’re going to bring it up, pass or fail,” Rep. Mike Simpson (R-Idaho) told the Washington Post. The GOP can’t afford more than 21 dissenting votes, but CNN counted 26 “no” votes and four more “likely” no votes. Every House Democrat is expected to oppose the bill.

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And what’s worse, no way out.

The US Has the Most Expensive Healthcare System in the World (Statista)

If the American Healthcare Act, President Trump’s first major legislative effort, is going to a vote in the House of Representatives as scheduled on Thursday, it is by no means clear that it will receive the 215 votes it needs for passage. When the Republican healthcare plan was first presented to the public on March 6, it left people from both sides of the political spectrum dissatisfied. While Democrats fear that the suggested bill, which would repeal large portions of Obama’s Patient Protection and Affordable Care Act, would leave millions of Americans uninsured and hurt the poor and vulnerable, many Republicans think it doesn’t go far enough in erasing all traces of Obamacare.

For many years now, the American healthcare system has been flawed. As our chart illustrates, U.S. health spending per capita (including public and private spending) is higher than it is anywhere else in the world, and yet, the country lags behind other nations in several aspects such as life expectancy and health insurance coverage. This chart shows health spending (public and private) per capita in selected countries.

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Not my original observation, but true: it looks a lot like Russia in the 1990s.

‘Deaths of Despair’ Surge in White US Middle Class (Vox)

In 2015, a blockbuster study came to a surprising conclusion: Middle-aged white Americans are dying younger for the first time in decades, despite positive life expectancy trends in other wealthy countries and other segments of the US population. The research, by Princeton University’s Anne Case and Angus Deaton, highlighted the links between economic struggles, suicides, and alcohol and drug overdoses. Since then, Case and Deaton have been working to more fully explain their findings. They’ve now come to a compelling conclusion: It’s complicated. There’s no single reason for this disturbing increase in the mortality rate, but a toxic cocktail of factors. In a new 60-page paper, “Mortality and morbidity in the 21st Century,” out in draft form in the Brookings Papers on Economic Activity Thursday, the researchers weave a narrative of “cumulative disadvantage” over a lifetime for white people ages 45 through 54, particularly those with low levels of education.

[..] The US, particularly middle-aged white Americans, is an outlier in the developed world when it comes to this mid-life mortality uptick. “Mortality rates in comparable rich countries have continued their pre-millennial fall at the rates that used to characterize the US,” Case and Deaton write. “In contrast to the US, mortality rates in Europe are falling for those with low levels of educational attainment, and are doing so more rapidly than mortality rates for those with higher levels of education.” If American wants to turn the trend around, then it has to become a little more like other countries with more generous safety nets and more accessible health care, the researchers said.

Introducing a single-payer health system, for example, or value-added or goods and services taxes that support a stronger safety net would be top of their policy wish list. (America right now is, of course, moving in the opposite direction under Trump, and shredding the safety net.) They also admit, though, that it’s taken decades to reverse the mortality progress in America, and it won’t be turned around quickly or easily. But there is one “no-brainer” change that could help, Case added. “The easy thing would be close the tap on prescription opioids for chronic pain.” Unlike health care and increasing taxes, opioids are actually a public health issue with bipartisan support. Deaton, for his part, was hopeful. Paraphrasing Milton Friedman, he said, “All policy seems impossible until it suddenly becomes inevitable.”

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“Visits declined by 50% between 2010 and 2013..” “What’s going on is the customers don’t have the fucking money. That’s it. This isn’t rocket science.”

The Retail Apocalypse Has Officially Descended On America (BI)

Thousands of mall-based stores are shutting down in what’s fast becoming one of the biggest waves of retail closures in decades. More than 3,500 stores are expected to close in the next couple of months. Department stores like JCPenney, Macy’s, Sears, and Kmart are among the companies shutting down stores, along with middle-of-the-mall chains like Crocs, BCBG, Abercrombie & Fitch, and Guess. Some retailers are exiting the brick-and-mortar business altogether and trying to shift to an all-online model. For example, Bebe is closing all its stores — about 170 — to focus on increasing its online sales, according to a Bloomberg report. The Limited also recently shut down all 250 of its stores, but it still sells merchandise online.

Others, such as Sears and JCPenney, are aggressively paring down their store counts to unload unprofitable locations and try to staunch losses. Sears is shutting down about 10% of its Sears and Kmart locations, or 150 stores, and JCPenney is shutting down about 14% of its locations, or 138 stores. According to many analysts, the retail apocalypse has been a long time coming in the US, where stores per capita far outnumber that of any other country. The US has 23.5 square feet of retail space per person, compared with 16.4 square feet in Canada and 11.1 square feet in Australia, the next two countries with the most retail space per capita, according to a Morningstar Credit Ratings report from October. Visits to shopping malls have been declining for years with the rise of e-commerce and titanic shifts in how shoppers spend their money. Visits declined by 50% between 2010 and 2013, according to the real-estate research firm Cushman & Wakefield.

[..] as longtime retail analyst Howard Davidowitz observed in 2014, “What’s going on is the customers don’t have the fucking money. That’s it. This isn’t rocket science.”

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This could be a huge blow to Apple. Who wants to buy something the CIA has already tinkered with in the factory? Expect giant lawsuits too. Apple knew.

WikiLeaks Releases Vault 7 “Dark Matter”: CIA Bugs “Factory Fresh” iPhones (WL)

Today, March 23rd 2017, WikiLeaks releases Vault 7 “Dark Matter”, which contains documentation for several CIA projects that infect Apple Mac Computer firmware (meaning the infection persists even if the operating system is re-installed) developed by the CIA’s Embedded Development Branch (EDB). These documents explain the techniques used by CIA to gain ‘persistence’ on Apple Mac devices, including Macs and iPhones and demonstrate their use of EFI/UEFI and firmware malware. Among others, these documents reveal the “Sonic Screwdriver” project which, as explained by the CIA, is a “mechanism for executing code on peripheral devices while a Mac laptop or desktop is booting” allowing an attacker to boot its attack software for example from a USB stick “even when a firmware password is enabled”. The CIA’s “Sonic Screwdriver” infector is stored on the modified firmware of an Apple Thunderbolt-to-Ethernet adapter.

“DarkSeaSkies” is “an implant that persists in the EFI firmware of an Apple MacBook Air computer” and consists of “DarkMatter”, “SeaPea” and “NightSkies”, respectively EFI, kernel-space and user-space implants. Documents on the “Triton” MacOSX malware, its infector “Dark Mallet” and its EFI-persistent version “DerStake” are also included in this release. While the DerStake1.4 manual released today dates to 2013, other Vault 7 documents show that as of 2016 the CIA continues to rely on and update these systems and is working on the production of DerStarke2.0.

Also included in this release is the manual for the CIA’s “NightSkies 1.2” a “beacon/loader/implant tool” for the Apple iPhone. Noteworthy is that NightSkies had reached 1.2 by 2008, and is expressly designed to be physically installed onto factory fresh iPhones. i.e the CIA has been infecting the iPhone supply chain of its targets since at least 2008. While CIA assets are sometimes used to physically infect systems in the custody of a target it is likely that many CIA physical access attacks have infected the targeted organization’s supply chain including by interdicting mail orders and other shipments (opening, infecting, and resending) leaving the United States or otherwise.

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A lot of cities around the world share that risk.

China’s Property Bubble Risks Youth Revolt (CNBC)

China faces the risk of youth disenchantment as property prices rise beyond their reach, a renowned Chinese economist said Friday. “In a regular country, wealth should be concentrated in the financial markets, not fixed assets,” said Renmin University of China Vice President Wu Xiaoqiu at a media interview at the Boao Forum in the province of Hainan. He highlighted the risks from the current property bubble in China, such as negative asset values if prices tank. More importantly, the social risks that come from the property bubble in the form of youth disenchantment with not being to afford a home will be damaging, he said. “If young people lose hope, the economy will suffer, as housing is a necessity,” he said.

Wu said he was hopeful the authorities would find a solution to constrain the froth in Chinese real estate, but admitted that repeated measures to curb speculation have so far only met with short-term success. Wu’s comments follow a People’s Bank of China survey published on Tuesday, which found that 52.2% of urban households perceived housing prices to be “unacceptably high” in the first quarter of the year, Reuters reported. In February, gains in Chinese home prices picked up pace after they slowed in the previous four months despite government efforts to curb speculation, Reuters reported on Sunday. Prices in the big cities of Beijing, Shanghai and Shenzhen rose 22.1%, 21.1% and 13.5%, respectively, from a year ago.

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China’s Largest Dairy Operator Crashes Over 90% In Minutes (ZH)

In December 2016, Muddy Waters’ Carson Block said China’s largest dairy farm operator, Hong-Kong listed China Huishan Dairy, is “worth close to zero” and questioned its profitability in a report. Today, with no catalyst, it suddenly almost is. The stock collapsed over 90% in minutes to a record low. The sudden crash wiped out about $4.2 billion in market value in the stock, which is a member of the MSCI China Index.

In December, Muddy Waters alleged that Huishan had been overstating its spending on its cow farms by as much as 1.6 billion yuan to “support the company’s income statement.” The report also alleged that the company made an unannounced transfer of a subsidiary that owned at least four cow farms to an undisclosed related party and Muddy Waters concluded that Chairman Yang Kai controls the subsidiary and farms. Those findings came from several months of research including visits to 35 farms and five production facilities, drone flyovers of Huishan sites and interviews with alfalfa suppliers, according to the report. Muddy Waters said it has shorted Huishan’s stock.

“It will be even harder for Huishan to get funded in the capital market after the report, amid a couple of earlier allegations that have raised some red flags to investors,” said Robin Yuen at RHB OSK Securities Hong Kong. Still, Huishan’s shares and operations are unlikely to “collapse” due to its high share concentration and sufficient cash flow generated by its dairy business, he said by telephone. About 73% of Huishan’s shares are held by Champ Harvest Ltd., a company that’s in turn 90% owned by Yang. A buying spree by Yang had supported the shares last year, making it a painful trade for short sellers. A one-year rally of about 80% through a peak in June had made the shares expensive.

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“If roughly half of all Italians are against the single currency today, imagine what it will be like when austerity begins really biting.”

Eurozone Whistles Past its Biggest Threat: Italy’s Multi-Headed Hydra (ZH)

For the last three years, the political establishment in Italy and beyond have had a field day attacking, ridiculing, and vilifying Beppe Grillo’s 5-star movement. Europe’s media have tarred him with the brush of populism. In 2013 The Economist labelled him a clown on its front cover. Yet his party still leads the polls. And that lead is growing. A new Ipsos poll in Corriere della Sera newspaper has put Beppe Grillo’s 5-Star Movement on 32.3% – its highest ever reading. It placed 5.5 points ahead of the governing PD, on 26.8%, after the PD dropped more than three%age points in a month, as former prime minister Matteo Renzi battles to reassert his authority following a walkout by a left-wing faction. Internal political battles are nothing new in Italy. The country enjoys a hard-earned reputation for political instability and paralysis, having seen 63 governments come and go since 1945.

The problem this time around is that internal weakness and strife in Italy’s traditional center-left and center-right parties could end up gifting the next election to a party that refuses to play by the book. If it wins the next elections, which could be brought forward to as early as June this year, 5-Star Movement has pledged to hold a referendum of its own – albeit a non-binding one – on Italy’s membership of the euro. As polls have shown, there is much broader public apathy toward the single currency than in just about any other euro zone nation. Grillo’s plan could also receive the backing of former prime minister Silvio Berlusconi who is determined to pull off a political comeback and is talking of restoring the Italian Lira.

As Reuters reports, such a scenario could spook financial markets “wary of both the 5-Star’s euroskepticism and the threat of prolonged political instability in Italy,” which boasts a public debt burden of over €2 trillion (133% of GDP). In any normal situation that would be a problem. But Italy is not in a normal situation; it is on the cusp of a potentially very large financial crisis that, if mishandled, could bring down Europe’s entire financial system. Unlike many other Eurozone economies like Spain, Ireland Portugal, Italy did not experience a real estate or stock market bubble in the 2000s; nor were its banks heavily exposed to the financial derivatives that helped spread the fallout from the U.S. subprime crisis all around the world. As such, Italy has not had cause to bail out its financial system — until now.

[..] Italy’s current predicament is a multi-headed hydra: a banking crisis, an economic crisis, a debt crisis, and a political crisis all rolled into one, and all coming to a head at the same time. It’s the reason why economists including Deutsche Bank’s Marco Stringa are calling Italy, not France or Greece, the “main risk” to euro-area stability. From a Eurozone-stability point of view, and from a bondholder point of view, the best-case scenario would be the rescue of Italy’s banks, with taxpayers bearing most of the brunt. That should help steady investor nerves and put an end to the gathering exodus of funds out of Italian assets. But even then, the social, political and economic price to be paid in a country already with public debt of over €2 trillion, youth unemployment of almost 40%, and an economy that is 12% smaller than it was 10 years ago, will almost certainly be way too high. If roughly half of all Italians are against the single currency today, imagine what it will be like when austerity begins really biting.

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He’s blowing up the EU without noticing a thing.

Schäuble Annoyed By Foreign Minister Saying Germany Should Pay More To EU (R.)

German Finance Minister Wolfgang Schaeuble on Friday criticised Foreign Minister Sigmar Gabriel for saying Germany should provide more money for Greece and the European Union overall. Schaueble told Deutschlandfunk radio he was annoyed by Gabriel’s suggestion because it “goes in the wrong direction completely” and sent the wrong message. He added that Europe’s problem was not primarily money but that its money needed to be used in the right way. On whether Greece can stay in the euro zone, Schaeuble said: “Greece can only do that if it has a competitive economy.” He said the country needed to carry out reforms and that would take time, adding: “But if the time is not used to carry out reforms because that’s uncomfortable, then that’s the wrong path.”

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Feels like a funeral party.

Greek Objections Mar Preparations For EU’s 60th Birthday (R.)

Greece has stuck to its objections to a declaration to mark the European Union’s 60th anniversary, officials in Brussels and Athens said on Thursday, a potentially embarrassing setback for the bloc as it seeks to rebuild unity ahead of Brexit. The leaders of the EU’s 27 remaining states will mark the anniversary on Saturday at a gathering in Rome overshadowed by Britain’s unprecedented decision to leave. London is due to formally trigger the divorce negotiations next week. Athens has threatened not to sign the Rome declaration charting the future of the post-Brexit EU, making a link between agreeing to the text and separate talks on reforms that lenders are seeking from Greece in exchange for new loans. “The negotiations on the draft Rome Declaration have ended as the text was finalized by the EU27,” an EU source said. “Only Greece has a general reservation on the text.”

Greece has said it wants the Rome text to spell out more clearly the protection of labor rights. Greece’s separate debt talks with international lenders are now stuck over this specific issue. One diplomat in Brussels said the issue may now only be resolved at the highest level with Greek Prime Minister Alexis Tsipras. Another EU diplomat said any attempt by Athens to win leverage on the international debt talks by holding off in Rome should not succeed: “We won’t be blackmailed by one member state which is linking one EU issue with a totally different one.” As well as Greece, Poland indicated on Thursday it might also refuse to endorse the declaration, though diplomats played down the threat. Warsaw is particularly opposed to a ‘multi-speed Europe,’ an idea promoted by Germany, France and Brussels, among others, to help improve decision-making in the post-Brexit EU.

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“Whether, in other words, the European acquis is valid for all member states without exception, or for all except Greece.”

Greece Says To Support Rome Declaration, Calls For EU Backing On Reforms (R.)

Greece will support a declaration marking the EU’s 60th birthday but needs the bloc’s backing against IMF demands on labour reforms, Greek Prime Minister Alexis Tsipras said ahead of a Summit in Rome on Friday. In a letter addressed to EU Council President Donald Tusk and Commission President Jean Claude Juncker, Tsipras called for a clear statement on whether the declaration would apply to Greece, as talks over a key bailout review hit a snag again. “We intend to support the Rome Declaration, a document which moves in a positive direction,” Tsipras said. “Nevertheless, in order to be able to celebrate these achievements, it has to be made clear, on an official level, whether they apply also to Greece. Whether, in other words, the European acquis is valid for all member states without exception, or for all except Greece.”

Earlier this week, Greece threatened not to sign the Rome declaration, demanding a clearer commitment protecting workers’ rights – an issue on which it is at odds with its international lenders who demand more reforms in return for new loans. The disagreements among Athens, the EU and the IMF – which has yet to decide whether it will participate in the country’s current bailout – have delayed a crucial bailout review. As leaders prepared for the summit, Greek ministers were negotiating with lenders’ representatives in Brussels pension cuts and labour reforms, including freeing up mass layoffs and on collective bargaining. The latest round of talks ended inconclusively late on Thursday, according to Greek officials. [..] Greece has cut pensions 12 times since it signed up to its first bailout in 2010. It has also reduced wages and implemented labour reforms to make its market more flexible and competitive.

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Just imagine that. And then talk about recovery. No, all you need to do is reform!

40% Of Greek Businesses Say Likely To Close Shop Within The Year (K.)

Four in 10 Greek businesses (40.3%) consider it likely that they will have to close shop within the year, according to a survey by the Hellenic Confederation of Professionals, Craftsmen and Merchants (GSEVEE), presented by the ANA-MPA news agency on Thursday. According to the survey, around 18,700 businesses will close in the first six months of the year, forcing thousands to join growing unemployment lines in the crisis-hit country. The majority of shutdowns, according to GSEVEE, will be in and around the capital and will concern the manufacturing sector, while some 34,000 jobs will be lost by the closure of companies that are currently considered high risk. 7 in 10 businesses have reported increasing liquidity problems and a shortage of capital from the market, with the number of firms indebted to the state and their suppliers growing by 10% compared to last year.

Over four in five small and medium-sized businesses (SMEs) admit to being exposed to credit risks, seeing a slump in economic activity and operating with the prospect of shrinking rather than expanding in the near future. In terms of employment, the forecasts for the first half of the year do not bode well, as for every two businesses (8.1% of the total) that plan to hire new staff, another three will be letting people go. GSEVEE estimates that 2,000 salaried jobs will be lost by June, without accounting for the impact on employment of the projected shutdowns. Moreover, 40% of those businesses that do plan to hire staff in the first half of 2017 said they won’t be offering payroll positions, but part-time or outsourced work.

Sentiment is also bleak, with 58.8% of respondents expecting conditions to deteriorate and just 11% seeing a possible improvement through June. As such, just 3.6% of businesses plan to make new investments and 6.4% have applied to investment funding programs for that period. “There needs to be a national plan for the country irrespective of who is in power, and politicians need to learn how to make decisions and give orders,” GSEVEE President Giorgos Kavvathas was quoted by the ANA-MPA news agency as saying. “Moreover, the uncertainty of the situation concerning the outcome of the negotiation [with foreign creditors] exacerbates fears and risks, which in turn make small businesses and the self-employed more vulnerable.”

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Could be another scary spring and summer.

EU Envoy: Three Million Migrants Waiting To Cross Into Greece (K.)

European Commissioner for Migration Dimitris Avramopoulos on Thursday underlined the need to safeguard a deal between Brussels and Ankara to curb human smuggling in the Aegean, noting that some 3 million refugees were in Turkey waiting to cross into Greece in a bid to reach Western and Northern Europe. In comments during a visit to Athens, Avramopoulos said the deal signed last year between Turkey and the EU had reduced an influx of migrants toward Europe and curbed deaths at sea. Reception centers on the islands of the eastern Aegean, the first point of arrival for most migrants arriving in Greece from Turkey, are already overcrowded. A woman and a child were injured in clashes between Afghan and Algerian migrants on Chios on Wednesday night.

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We’re on track for multiple records.

Over 250 Migrants Feared Drowned On ‘Black Day’ In Mediterranean (AFP)

More than 250 African migrants were feared drowned in the Mediterranean Thursday after a charity’s rescue boat found five corpses close to two sinking rubber dinghies off Libya. The UN’s refugee agency (UNHCR) said it was “deeply alarmed” after the Golfo Azzuro, a boat operated by Spanish NGO Proactiva Open Arms, reported the recovery of the bodies close to the drifting, partially-submerged dinghies, 15 miles off the Libyan coast. “We don’t think there can be any other explanation than that these dinghies would have been full of people,” Proactiva spokeswoman Laura Lanuza told AFP. “It seems clear that they sunk.” She added that the inflatables, of a kind usually used by people traffickers, would typically have been carrying 120-140 migrants each.

“In over a year we have never seen any of these dinghies that were anything other than packed.” Lanuza said the bodies recovered were African men with estimated ages of between 16 and 25. They had drowned in the 24 hours prior to them being discovered shortly after dawn on Thursday in waters directly north of the Libyan port of Sabrata, according to the rescue boat’s medical staff. Vincent Cochetel, director of the UN refugee agency (UNHCR)’s Europe bureau, said NGO boats patrolling the area had been called to the aid of a third stricken boat on Thursday afternoon, raising fears others may have perished on what Proactiva called “a black day in the Mediterranean.”

Despite rough winter seas, migrant departures from Libya on boats chartered by people traffickers have accelerated in recent months from already-record levels. Nearly 6,000 people have been picked up by Italian-coordinated rescue boats since the end of last week, bringing the number brought to Italy since the start of 2017 to nearly 22,000, a significant rise on the same period in previous years. Aid groups say the accelerating exodus is being driven by worsening living conditions for migrants in Libya and by fears the sea route to Europe could soon be closed to traffickers. Prior to the latest fatal incident, the UN had estimated that at least 440 migrants had died trying to make the crossing from Libya to Italy since the start of 2017. Its refugee agency estimates total deaths crossing the Mediterranean at nearly 600.

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Jul 222015
 July 22, 2015  Posted by at 8:49 pm Finance Tagged with: , , , , , ,  5 Responses »

Ilargi The Other Human crew, Monastoraki Square, Athens July 2015

I owe you all a major update on the AE for Athens Fund, and perhaps an apology for this taking so long. It’s been over a week since I made the latest donation, and I even left Greece 6 days ago already. As I noted before, I will have to go back, and take Nicole with me, and I’m planning to do that soon, in August. It’s just that because of my mother’s condition, here in Holland, it’s sort of in limbo when exactly that’s going to happen.

I have gotten a much better overview of where to donate your money during my three week stay, so hopefully we can move a bit faster next time around. I guess it’s always a toss up between doing these things fast and doing them properly. I would always pick the latter, giving away your money is a large responsibility. It simply takes time.

I have donated €3000 so far, €1000 each to two Solidarity clinics, and $1000 to Constantinos (Kostas) Polychronopoulos, who I wrote about in AE for Athens Fund 2nd Donation: The Man Who Cooks In The Street. I went back to see Kostas and gave him another €500. Can’t think of anyone less selfish and more deserving of support.

Here’s Kostas’ crew in Monastiraki square with the food to be handed out. He didn’t arrive till later, he had a meeting at the Health Ministry. Probably a good thing, they recognize what he does. Still, as I said before, he wants no government or NGO involvement.

Most of these people are homeless, the others are supporters in one way or another. They’re all remarkably nice and gentle. They’re an amazing crew that Kostas gathered around him, and gave a sense of belonging.

That same day, I donated €1000 to a second clinic, much more on that below. A third clinic didn’t happen because of a general strike and riots. But they’re the first when I return. We now also have a more or less comprehensive list of solidarity clinics, that’ll make things easier. Just need to find the most needy ones; some are already well funded.

At the second clinic, in Peristeri, Dimitri and I were told, by everyone in one voice, when we asked where the greatest needs were: insulin. For some reason the clinic has a hard time even importing it, and there are many diabetics. We’re trying to find out why what the issue is, and if perhaps we can bring some from Holland, either in our bags or by FedEx. Finding those things out, too, takes time.

But still … all in all, I managed to donate “only” €3000 so far. I would have signed up for that in a heartbeat a month ago, but not anymore. Because the total for the AE for Athens Fund today stands at an bewildering $11,681.95(!!!). That’s American dollars. I converted what came in in euros and Canadian dollars on the day itself, so with the rising USD we actually won a bit more there lately.

If we put the euro at $1.11 (it’s even less now), I still have over €7000 left to donate. And no, that doesn’t mean I think you should stop donating. Quite the contrary. I did mention before that all the money will be donated, right? That our flights and expenses will not come out of the Fund. Just wanted to make that clear again.

Even if the government seems to have surrendered for now to the Troika, and there’s money being exchanged from the ECB, through Athens, and then straight back to the ECB and IMF, the Greek people won’t see a penny of it.

The lack of solidarity that the rest of Europe have shown with Greece is quite stunning, really. That the big shots have no perception of compassion is one thing, it’s what selects them to be big shots, but that the people themselves don’t either, is quite another.

The solidarity clinics and “men who cook in the streets” will be needed in Greece for a long time, no matter what happens. A society gutted to the bone over a 5-year period takes a long time to rebuild, and that’s presuming any such efforts will be made to begin with. Raising VAT on basic necessities paints a dark future.

And we may not be able to solve the problem, but we can certainly alleviate some of it. All it takes is to go to the right places. And that’s what I intend to continue doing.

We have a bunch of clinics lined up, and I want to do something for children in need, and for the refugee problem. Even if the latter is fast becoming such an overwhelming issue it will take billions of euros, not the thousands you guys entrusted me with.

When I look at that, at how thousands of people are being left stranded daily somewhere in bankrupt Greece, I’m thinking there’s little doubt that Europe as a whole is financially bankrupt, but I care much less about that than that it’s morally bankrupt. Of which the condition of the Greek people themselves is evidence enough by itself, of course.

Please make sure donations keep coming in. Here’s how, through a quote from a number of weeks ago:

I don’t think I can go to Athens and not try to see if there’s something I can do to alleviate some of the misery in my own small way. But since that way would be extremely small given where the Automatic Earth’s financial situation and funding stand at the moment, I thought of something.

I’m hereby setting up an “Automatic Earth for Athens” fund (big word), and I’m asking you, our readership, to donate to that fund. I will make sure the revenues will go to clinics and food banks, to the worthiest causes I can find. To not mix up donations for Athens with those for the Automatic Earth, which are also badly needed, I suggest I take any donation that ends with 99 cents, as in $25.99, and single those out for Greece. Does that sound reasonable? Let me know if it doesn’t, please.

If you prefer to donate Bitcoin, our address is: 1HYLLUR2JFs24X1zTS4XbNJidGo2XNHiTT.

On to the second clinic that received some of your generosity. My friend, photographer and interpreter Dimitri said when we were on our way there on July 14 that these people have no idea what’s happening to them; they are busy all the time with what cannot be done, with trying to provide people with even the most basic care, and here comes this stranger who says he’ll give them €1000, just like that. A surefire recipe to make a body feel small.

By the way, Dimitri is also the author of a great line on the Europe/Greece financial conundrum:

Since I can’t pay on my bankrupt loans and you won’t renegotiate them with me, how’s about paying yourself back with a bridge loan to me so you won’t have to write off your debt, which I’ll likewise not pay back, to give you guys some more breathing room until you realize that I already told you I can’t pay you back.

A keeper for sure. On to Peristeri:

Some data I picked up: Peristeri is an Athens district with a population of 400,000 people. Most state health clinics have been shut. There were 150 doctors in the district before, there are now only 50. A population of 400,000 people with no access to gynaecologists or dermatologists, and just two cardiologists. Thousands of doctors have left the country. Those that have stayed, including senior hospital doctors, earn about €12,000 a year.

Social Solidarity Clinic of Peristeri

Xrisolora 1 & Ag, Pavlou, Athens, Peristeri 12132 

The clinic also functions as a pharmacy, they feed dozens of homeless people, and are involved in action against water privatization.

Dimitri and I talked to Nikos, the only person who spoke reasonable English, and Dr. Apostolos Gianopoulos, a retired physician who donates a lot of his time to the clinic. What an amazing bunch of people. Can you imagine this happening where you live?

Here’s the wonderfully chaotic drug cabinet:

How the drugs typically arrive, after volunteers go out and collect them:

The obligatory group portrait with yours truly:

And since I don’t seem to be able to find back the receipt they wrote, after looking for well over an hour yesterday (it’ll turn up), the actual handing over of the €1000:

A French film crew recently made a documentary about the clinic, and there is a video on YouTube. Unfortunately, it’s not in English, but you get a picture of the entire operation. They have all of 55 square meters at their disposal.

The blurb from the video:

For Two Years, Volunteers Run A Social Clinic/Pharmacy  

Today, more and more Greeks find themselves without health insurance. All over the country, clinics and pharmacies are organizing solidarity to support them. Reportage in one of them, in Athenian suburbs.

The small waiting room of the clinic at Peristeri is never empty in the late morning. In this suburb of Athens, a three-room apartment serves as both pharmacy and medical office. People come here to get medicines and also see a doctor, make an appointment to the dentist or even just talk. All this without paying anything.

Between calls, Georgette and Martina, the two volunteers in secretariat today, find a moment to discuss with each patient. “Now we know everyone,” says the latter. They, along with Dr. Gianopoulos and 50 volunteers and doctors, launched the initiative of a solidarity clinic and pharmacy two years ago. “With the crisis, more and more people have lost their social security for their families she explains. You really had to do something. ”

More than 3,000 patients

More than 3,000 patients walked through its doors. It has integrated the network of fifty solidarity clinics/pharmacies that cover the country. On the desk lies a secretariat agenda with impressive dimensions. The Bible testifies to the collective’s success and especially the willingness of the team to ensure regular monitoring of patients. “We receive many diabetics, people with asthma or heart,” says Dr. Apostolos Gianopoulos. Everyone can re-establish the treatment which had given up due to the loss of social security rights. “I remember a diabetic man who had lost two toes because it no longer followed his treatment,” says Martina.

“People in need were ashamed to ask for help”

More than the distribution of medicines, volunteers seek to create a space for solidarity and confidence. “At the beginning of the crisis, people in need were ashamed to ask for help, says Matina. They felt guilty not being able to support their families. But progressively, we have managed to establish a relationship of trust and anticipate their needs. ” In addition to the distribution of medicines, the medical center has also set up a food collection.

Coming to seek her package for the week, Anastasia demonstrates its involvement in the clinic work. After a successful career in the pharmaceutical industry, the single mother found herself unemployed. Today, she lives with her mother, who receives no pension, her 13 year old son and his brother, who earns only €400 per month. “I come here to get some medicine for my mom who is sick, she says. In exchange, I participate in various collections of food and medicine. ”

“The superstar here is the psychiatrist”

Like everyone who comes here, Anastasia will not depart only with a package but also with a smile. For Matina, it is also the moral support that people come up there. “We have a pediatrician, general practitioner, a dentist and several other doctors , but the superstar here is the psychiatrist,” she says.  At the social solidarity clinic of Peristeri volunteers claim a twofold objective: to provide primary healthcare, but also push people to make their voices heard on social issues.

I think the message is clear: the recipients of your donations are more than deserving, they do things, they show a wealth of solidarity, that in the rich nations of the world would be hard to imagine, and they merit our support in making that possible.

Our support in alleviating misery, pain, hunger, and also, crazy as it is, in saving people from dying from afflictions that are perfectly treatable, and that are treated all over Europe as a routine part of the healthcare system. That hardly anyone even gives a second thought in Germany, Holland, Britain, France. How can Brussels take that away from a nation? A nation that is highly educated to boot, that has plenty of doctors, of scientists?

In Greece, these treatments are no longer routine. People there have found another, much darker, routine. And we can make a difference. Not everywhere, but in plenty places, in plenty ways, and for a whole lot of people.

Jul 082015
 July 8, 2015  Posted by at 1:15 pm Finance Tagged with: , , , ,  8 Responses »

G. G. Bain On beach near Casino, Asbury Park 1911

Found myself talking to very lovely and very young Melanie from Ottawa, on a solo world tour, last evening in a bar in the Plaka district of Athens. And as I was telling her about what I do, and why, I noticed it was very hard to explain to her what exactly is happening to the Greek health care system.

Being from Canada, which has ‘universal’ health care, along the British NHS model, she had a hard time wrapping her mind around the fact that many Greeks simply can’t get any care. Other than through solidarity clinics, staffed entirely with volunteers, and run on donations. Melanie kept insisting that it must all be a matter of money: ‘are the drugs too expensive here?’ No, sweetheart, to a large extent there are no drugs. And people don’t have anything left, no money, no nothing, and if not for the volunteers, they wouldn’t get any care at all. Many already don’t.

And it is of course hard to understand that in a modern western nation, where there are plenty highly educated doctors and nurses, the health care system can be this depleted and gutted. It’s very unjust and morally despicable that this is possible in a country that is part of a rich monetary union and a large political union.

So I’m very happy that with the support of the Automatic Earth readership, we can do at least something to ease the pain. Monday I donated €1000 to the Piraeus Solidarity Clinic, a wonderful initiative run by dedicated volunteers, 60 different doctors also all volunteering, and medicines donated through all sorts of channels, including -former- patients. The Greeks have (re)discovered a very strong sense of solidarity amongst themselves, and it’s an honor to be able to help out in that.

The staff at the clinic did explain that since Syriza is in power, conditions have improved, since all sorts of restrictions have been lifted that were keeping the system from functioning. It’s become easier for people to be admitted to a hospital, for instance. But the government is broke, as we all know, and in that respect the solidarity clinics will probably be needed for a long time. A quote I picked up a while ago said “..if you are sick in Greece now, you have an expiration date.” That cannot be.

In their own words:


Tel: 00302104960790 Daily 9.30 am – 8.30 pm
Xenofontos 5 & Pelopida – 3rd floor
Memou Square, Korydallos – 18120

Active citizens and health workers, doctors, nurses and caregivers have joined together to form the Piraeus Solidarity Clinic, because the economic crisis, the poverty and the unemployment exclude many fellow citizens from the public health services. The Piraeus Solidarity Clinic offers primary health care, medical and dental treatment, medicines, occupational therapy, logotherapy, as well as social and psychological support to non-insured fellow citizens at no cost, in a specially designated area provided by the Korydallos Local Authority.

Our pharmacists help unemployed or pensioners with small pensions or economically weak fellow citizens with special needs by providing them medicines that they can not afford any more. We offer our services to anyone who come to us, without making any racial discrimination and we distinguish ourselves from the philanthropy of the rich, because our target is to stretch out solidarity so that no one feels alone in the crisis. Hence, we’ve built a network with other solidarity clinics all around Greece and alongside the direct health provisions, we demand from the state better public health system conditions.

The Piraeus Solidarity Clinic project was an initiative of 12 people, which started in February of 2013 and currently exceeds 108 volunteers: 63 doctors of various specializations plus 45 volunteers who work in different shifts every day to help organize the appointments of our clinic.

Here’s picture of the line of patients waiting in the hallway:

And the wonderful staff, along with yours truly:

Plus the receipt for the donation:

Thank you so much for making this donation possible, along with the others I will soon make. And please understand that we can never do enough, so keep your donations coming. Here’s once again what I said three weeks ago:

Now, I don’t think I can go to Athens and not try to see if there’s something I can do to alleviate some of the misery in my own small way. But since that way would be extremely small given where the Automatic Earth’s financial situation and funding stand at the moment, I thought of something.

I’m hereby setting up an “Automatic Earth for Athens” fund (big word), and I’m asking you, our readership, to donate to that fund. I will make sure the revenues will go to clinics and food banks, to the worthiest causes I can find. To not mix up donations for Athens with those for the Automatic Earth, which are also badly needed, I suggest I take any donation that ends with 99 cents, as in $25.99, and single those out for Greece. Does that sound reasonable? Let me know if it doesn’t, please.

As things stand now, I can make 4 more donations like this. Or a few extra smaller ones. I’d like to do more, and you can help with that.

Let’s show solidarity with solidarity.

Apr 142015
 April 14, 2015  Posted by at 9:41 pm Finance Tagged with: , , , , , , , ,  4 Responses »

DPC French Market, New Orleans 1910

From southern Europe to the far north, matters are shifting, sometimes slowly, sometimes faster. There are moments when it seems all that goes on is the negotiations over the Greek dire financial situation and its bailout conditions, but even there nothing stands still. The Financial Times ran a story claiming Greece is about to default on is debt(s), and many a pundit jumped on that, but there was nothing new there. Of course they are considering such options, but they are looking at many others as well. That doesn’t prove anything, though.

Yanis Varoufakis’ publisher, Public Affairs Books, posted a promo for an upcoming book by the Greek Finance Minister, due out only in 2016, mind you, that reveals a few things that haven’t gotten much attention to date. It’s good to keep in mind that most of the book will have been written before Yanis joined the new Greek government on January 26, and not see it as a reaction to the negotiations that have played out after that date.

Varoufakis simply analyzes the structure of the EU and the eurozone, as well as the peculiar place the ECB has in both. Some may find what he writes provocative, but that’s beside the point. It’s not as if Europe is beyond analysis; indeed, such analysis is long overdue.

Indeed, it may well be the lack of it, and the idea in Brussels that it is exempt from scrutiny, even as institutions such as the ECB build billion dollar edifices as the Greek population goes hungry, that could be its downfall. It may be better to be critical and make necessary changes than to be hardheaded and precipitate your own downfall. Here’s the blurb for the book:

And The Weak Suffer What They Must
Europe’s Crisis and America’s Economic Future

“The strong do as they can and the weak suffer what they must.” —Thucydides

The fate of the global economy hangs in the balance, and Europe is doing its utmost to undermine it, to destabilize America, and to spawn new forms of authoritarianism. Europe has dragged the world into hideous morasses twice in the last one hundred years… it can do it again. Yanis Varoufakis, the newly elected Finance Minister of Greece, has a front-row seat, and shows the Eurozone to be a house of cards destined to fall without a radical change in direction. And, if the EU falls apart, he argues, the global economy will not be far behind.

Varoufakis shows how, once America abandoned Europe in 1971 from the dollar zone, Europe’s leaders decided to create a monetary union of 18 nations without control of their own money, without democratic accountability, and without a government to support the Central Bank.

This bizarre economic super-power was equipped with none of the shock absorbers necessary to contain a financial crisis, while its design ensured that, when it came, the crisis would be massive. When disaster hit in 2009, Europe turned against itself, humiliating millions of innocent citizens, driving populations to despair, and buttressing a form of bigotry unseen since WWII.

In the epic battle for Europe’s integrity and soul, the forces of reason and humanism will have to face down the new forms of authoritarianism. Europe’s crisis is pregnant with radically regressive forces that have the capacity to cause a humanitarian bloodbath while extinguishing the hope for shared prosperity for generations to come. The principle of the greatest austerity for the European economies suffering the greatest recessions would be quaint if it were not also the harbinger of misanthropy and racism.

Here, Varoufakis offers concrete policies that the rest of the world can take part in to intervene and help save Europe from impending catastrophe, and presents the ultimate case against austerity. With passionate, informative, and at times humorous prose, he warns that the implosion of an admittedly crisis-ridden and deeply irrational European capitalism should be avoided at all cost. Europe, he argues, is too important to be left to the Europeans.

How dire the situation is in Greece becomes obvious from the following article by documentary film maker Constantin Xekalos, posted on Beppe Grillo’s site. It makes you wonder how Europe dare let this happen. How it could possibly have insisted prior to the January elections that the Greeks should vote for the incumbent government, and how someone like Eurogroup head Dijsselbloem could ever have had the gall to point to “all the progress we’ve made”.

Greece, The Euro’s Greatest “Success”

Greece is a social disaster zone. 3 million people are without guaranteed healthcare, 600,000 children are living under the breadline and more than half of them are unable to meet their daily nutritional needs. 90% of families living in the poorer areas rely on food banks and feeding schemes for survival, and unemployment is approaching 30%, with youth unemployment approaching 60%. These are not just numbers, they are real people. In order to show their faces and tell their stories, writer and documentary film maker from Crete and now living in Florence, Constantin Xekalos, decided to make a documentary film entitled: “Greece, the Euro’s greatest success “. In today’s Passaparola he talks about this documentary film and about the suffering of the Greek people that he has encountered in his personal experience. Today it is all happening, but is Italy next?

The healthcare tragedy in Greece When we made this documentary it was said that 1/3 of the Greek population, (more than 3 million people,) were without any guaranteed healthcare. In the interim that number has grown. They have been abandoned. If you go to a hospital, obviously a public one, they will treat you and they will accept you if it is an emergency, but if you are admitted, you then have to pay. If you are unable to pay, they send the bill to the Receiver of Revenue’s office and they take it from there. If you have no money, they start with foreclosure, even your home , even if it is your only home!

This is crime against society that is totally unacceptable. In an advanced and so-called democratic Country that is part of the western world, things like this are totally inconceivable, absurd and unacceptable. I repeat, this is crime against society that we absolutely cannot accept! If you are ill, democracy guarantees the treatment you need, otherwise it should be called by some other name. When a child is not guaranteed the nutrition he/she needs, a mere helpless child, or elderly people that are no longer able to look after themselves, then that is no longer democracy. Some of the older Greeks were telling me that when the Germans were there during the occupation in the Second World War, the people lived exactly like they are living now.

The Greeks are dying of hunger 90% of Greek families living in the poorer areas are obliged to rely on food banks and feeding schemes in order to survive. Unfortunately there are many in this situation. We toured a number of Athens’ districts and in each and every district there is a square where good people, people who care about others and truly have a sense of community have rolled up their sleeves and, with the help of the Church, are providing meals for those who would otherwise have nothing to eat. Every district has its own square. I saw children passing out because of lack of food, but are too embarrassed to admit it. We simply cannot accept this kind of thing. It’s a crime when children go without food to eat. I will shout that from the rooftops until I burst and I hope that they lay charges against me: it is a crime when a child cannot get enough to eat!

The disappearance of the Greek middle-class Many good people found themselves unemployed from one day to the next, not through any fault of their own and not by choice, not lazy people as they would have us believe. They want to work but at this point there simply are no jobs any more. The social fabric is gone, there is no more middle-class, it is virtually nonexistent. All there is is an ever-shrinking oligarchy of very wealthy people and then the rest of the people who are becoming ever poorer. Very real poverty! Currently, and here I’m talking about the latest data from a month ago now, someone who does indeed find a job has to accept a salary of €300 a month . Take into account that Athens is a very expensive city to live in, even more so than Florence. I happen to live in Florence so this is just by way of example, but I was horrified at the thought. How on earth do these people manage to live? There is no way that they can live decently, there is no longer any dignity and therefore they cannot be free: they are destroying your soul as well as you body!

Over 50% of young people are unemployed Youth unemployment is now standing somewhere between 50% and 60% . The young people do whatever they can, they accept any kind of position, even things that not right and unfair, simply because necessity forces them to accept job offers that should not even be made. I saw jobs offered at €100 a month . This sort of thing is now happening here in Italy as well.

What all this will eventually lead to, inevitably so, becomes clear from the following. Anti-euro, anti-immigrant, anti-bailout and down the line anti anything to do with the failed European project. In Finland, of all places, the anti-euro party looks certain to get into the next government. Finland’s economy is in tatters, despite its AAA rating, and people increasingly choose to see the world through blinders.

Anti-Euro Finnish Party Gets Ready to Rule as Discontent Brews

The anti-euro The Finns party, which eight years ago got just 4% of the vote, is now dressing itself up for Cabinet seats as Finnish voters are set to oust the government after four years of economic failure. The Finns, whose support is based on equal parts of anti-euro, anti-immigrant and anti-establishment sentiment, have captured voters on the back of the euro-area’s economic crisis and a home-grown collapse of key industries. In the 2011 election, during the height of the euro crisis, it shocked the traditional parties by winning 19% of the vote. “We can’t be ignored, because a strong majority government won’t be possible without us,” Timo Soini, the party leader, said [..]

The country is struggling to emerge from a three-year recession after key industries such as its papermakers have buckled amid slumping demand and Nokia Oyj lost in the smartphone war, cutting thousands of jobs. The government has raised taxes and lowered spending, adding to unpopularity, and on top of that have been bailout costs for Greece and Portugal, among others, which have eroded finances for Finland, still top-rated at Fitch Ratings and Moody’s Investors Service. “Our stance will be very tight, no matter what,” Soini said. “Nothing is forcing Finland to participate in these bailout policies. If we don’t want to take part, we can refuse.”

Soini’s recipe for fixing the economy includes encouraging exports, backing entrepreneurship, investing in road infrastructure and cutting red tape. The party seeks to balance public finances through budget cuts of as much as €3 billion and higher taxes for the wealthy. The euro-skeptic group will probably join a three-party coalition. Polls predict more than 50 seats out of 200 for the opposition Center Party.

The Center Party backed bailouts and loans for Greece, Portugal and Ireland while in government in 2010 and 2011 and was then ousted. It has since opposed further help, alongside The Finns party. The Center Party and us will have a majority within the government, if it keeps the stance it has had,” Soini said. His group isn’t currently pushing for Finland to exit the euro. Still, “Finland should under no circumstances declare it will always and forever stay,” he said.

The party first negotiated joining government after the 2011 elections, after catapulting to third place with 39 lawmakers. Its opposition to euro-area bailouts in the height of the crisis meant the door to government was closed. In 2007, its five seats didn’t qualify for an invitation to join talks to form a ruling coalition. “We’ve grown, we’ve moved forward, we’ve stabilized,” Soini said. “It’s a key goal for us to consolidate our backing and be one of the big parties, so that we’re not just a one-vote wonder.”

Of course, there are worse options than the True Finns. You can get from anti-immigrant to downright extreme right wing, where Greece may be headed if Europe doesn’t adapt to Syriza’s view of what the eurozone might be.

The prevailing views amongst Europe’s richer nations, and its domestic banking sectors, don’t look promising. And when the European project crashes to a halt, things are not going be pretty. The wisest thing for Brussels to do may well be to try and dismantle itself as peacefully as it can. But Brussels is far too loaded with people seeking to hold on to the power they have gathered.

Still, there’s no denying they have held sway over rapidly deteriorating conditions on the ground (though they will prefer to lay the blame elsewhere), which will down the line lead to their own downfall. They better listen to Yanis now.

May 012014
 May 1, 2014  Posted by at 2:08 pm Finance Tagged with: , , , ,  3 Responses »

Jack Delano Two Trains passing on Atchison, Topeka & Santa Fe Railroad near Ash Fork, AZ March 1943

It was strange to see two Bloomberg articles side by side yesterday that didn’t look as if they were written in the same universe. Not Bloomberg’s fault, I think, they simply reported on an FOMC statement and incoming US economy numbers. But it was strange nonetheless. First, here’s the FOMC’s reasoning behind its decision to taper more:

Fed Says Economy Has Picked Up As It Trims Bond Buying Further

Growth “has picked up recently,” the Federal Open Market Committee said today in a statement in Washington, hours after a government report showed gross domestic product barely grew in the first quarter. “Household spending appears to be rising more quickly.”

But as we could see absolutely everywhere in the news, growth as it is normally defined has not ‘picked up’, and there’s something about that household spending too:

Growth Freezes Up As US Business Spending, Exports Slump

The U.S. economy barely grew in the first quarter as harsh winter weather chilled investment and exports dropped. The expansion stalled even as consumer spending on services rose by the most in 14 years. Gross domestic product grew at a 0.1% annualized rate from January through March …

So much for growth. There ain’t none. It’s a mere rounding error. And if anyone ever talks about the weather again, they risk corporal punishment. I liked the comment today, I forget by whom, sorry, that the polar vortex this year has apparently decided to skip Canada, because its economy shows no signs at all of having been hurt by the cold.

Household spending got some more ‘texture’ in that quote as ‘consumer spending on services’. Wonder what those services are?! Tyler Durden is among those who figured it out:

If It Wasn’t For Obamacare, Q1 GDP Would Be Negative

… if it wasn’t for the (government-mandated) spending surge resulting from Obamacare, which resulted in the biggest jump in Healthcare Services spending in the past quarter in history and added 1.1% to GDP … [..] … real Q1 GDP (in chained 2009 dollars), which rose only $4.3 billion sequentially to $15,947 billion, would have been a negative 1.0%!

And then just now, Bloomberg runs this story, which seems a tad less innocent on their part:

Consumer Spending in U.S. Jumps by Most in Five Years

Consumer spending surged in March by the most in almost five years as warmer weather brought shoppers back to auto-dealer lots and malls, a sign the U.S. economy gained momentum heading into the second quarter. Household purchases, which account for about 70% of the economy, climbed 0.9%, the most since August 2009, after a 0.5% gain in February that was larger than previously estimated …

Hey, what did I just say about talking about the weather? More importantly, did you guys at Bloomberg completely miss the Obamacare spending bit? Or did you decide to ignore it? I know, I know, Durden’s comment covers January through March, and this number is just March, but given the above, does anyone believe the numbers are entirely unrelated? Here’s Durden again, just in, on the rise in consumer spending.

US Savings Rate Drops To 2nd Lowest Since 2008 To Pay For March Spending Spree

Curiously the increase in goods spending was the single biggest monthly increase also since August 2009. As for services, the systematic increase on spending over the past several months is unmistakable as far more money is allocated toward healthcare, that one major spending category which rescued Q1 GDP.

It would appear there was no “harsh weather” effect in March, even though corporations, and not to mention the Q1 GDP, can’t complain fast enough about how horrible the month and the quarter both were. End result: since spending was so much higher than income for one more month, at least according to the bean counters, the savings rate tumbled once more, and at 3.8% (down from 4.2% in February), was the second lowest since before the Lehman failure with the only exception of January 2013 after the withholding tax rule changeover.

So for all those clueless sellside economists who are praying that the March spending spree, funded mostly from savings, will continue into Q2 (because remember March is in Q1, which as we already know had an abysmal 0.1% GDP growth rate), we have one question: where will the money come from to pay for this ongoing spending spree?

And sure, income went up a little, and a few more people did buy a few more fridges and cars, as they undoubtedly always do in March, but the rise in spending has a very solid link to healthcare services, and while that may boost GDP, so do traffic accidents. And those don’t raise the standard of living either. Which leaves me still wondering why Janet Yellen et al “defended” their taper decision with referring to growth and consumer spending, i.e. a recovering economy. I’m wholly in favor of removing the stimulus related distortions from the markets, even if that means applying shock therapy, but must you guys really lie about the reasons you do it? Isn’t people’s confidence worth anything to you? Or do you feel that confidence has been shot anyway?

Fed Says Economy Has Picked Up As It Trims Bond Buying Further (Bloomberg)

The Federal Reserve said it will keep trimming the pace of asset purchases as the economy shakes off the winter doldrums, putting the central bank on a course to end the unprecedented stimulus program by the close of 2014. Growth “has picked up recently,” the Federal Open Market Committee said today in a statement in Washington, hours after a government report showed gross domestic product barely grew in the first quarter. “Household spending appears to be rising more quickly.” The committee pared monthly asset buying to $45 billion, its fourth straight $10 billion cut, and said further reductions in “measured steps” are likely. At that pace, the quantitative easing program intended to push down borrowing costs for companies and consumers would end in December.

Read more …

Growth Freezes Up As US Business Spending, Exports Slump (Bloomberg)

The U.S. economy barely grew in the first quarter as harsh winter weather chilled investment and exports dropped. The expansion stalled even as consumer spending on services rose by the most in 14 years. Gross domestic product grew at a 0.1% annualized rate from January through March, compared with a 2.6% gain in the prior quarter, figures from the Commerce Department showed today in Washington. The median forecast of 83 economists surveyed by Bloomberg called for a 1.2% increase. Household purchases rose at a 3% pace, spurred by utility outlays and spending on health care tied to President Barack Obama’s Affordable Care Act.

The pullback in growth came as snow blanketed much of the eastern half of the country, keeping shoppers from stores, preventing builders from breaking ground and raising costs for companies including United Parcel Service Inc. Gains in retail sales, employment and manufacturing at the end of the quarter indicate the setback will be temporary, so Federal Reserve policy makers meeting today in Washington will probably take little heed. “So much of this is conditioned by that anomalous drop in exports and inventories and by the weather effect, and if anything one expects more of a rebound in the second quarter,” said Samuel Coffin, an economist at UBS Securities LLC in New York, who projected a 0.5% gain in GDP. Coffin called this an “odd day” for Fed policy makers. “I think they’re still tapering. I think they’ll blame this on the weather.”

Read more …

If It Wasn’t For Obamacare, Q1 GDP Would Be Negative (Zero Hedge)

Here is a shocker: for all the damnation Obamacare, which according to poll after poll is loathed by a majority of the US population, has gotten if it wasn’t for the (government-mandated) spending surge resulting from Obamacare, which resulted in the biggest jump in Healthcare Services spending in the past quarter in history and added 1.1% to GDP …

… real Q1 GDP (in chained 2009 dollars), which rose only $4.3 billion sequentially to $15,947 billion, would have been a negative 1.0%!

It’s curious how the weather impacted (or rather is used as an excuse to explain) everything but government-mandated healthcare spending in the first quarter. And of course, for all those who correctly point out that mandatory spending on healthcare, also known as malinvestment, took away from spending on every other discretionary item possible, well… you are right.

Read more …

Recovery? What Recovery? (Bloomberg)

There’s really not much good to say about this morning’s first-quarter gross domestic product numbers. An annualized growth rate of 0.1% is not so much a growth rate as a rounding error. There are, of course, the standard caveats: These are preliminary numbers, which are notoriously volatile; they may well get revised upward in the coming months. And the lousy winter weather probably depressed retail sales, housing starts and other things that generally contribute to economic growth. But these caveats aren’t really all that cheering. The figures seem quite likely to be revised upward, but quite unlikely to be revised upward to, say, 3% annual growth – a figure that we used to view as solid but not spectacular, rather than hopelessly aspirational.

Relatedly, it’s undoubtedly true that the weather depressed economic output. But it didn’t depress economic output enough to explain these lackluster figures. If economic growth were actually healthy, it shouldn’t be possible to see numbers this low. No, despite the caveats, the fact remains that we seem to be stuck. Six years after the financial crisis, we still haven’t entered anything that could really be called a “recovery.” A recovery would mean some sort of catch-up growth that reabsorbed stranded workers and capital. Instead, we’re barely limping forward, and the most cheerful thing we can say about any of it is that at least we’re no longer falling back.

Read more …

Weird story developing. I should come back to this.

Criminal Charges Against Banks Risk Sparking Crisis (Bloomberg)

As U.S. Justice Department prosecutors angle to bring the first criminal charges against global banks since the financial crisis, they’ll have to stare down warnings of uncontainable collateral damage. Stung by lawmakers’ criticism that multi-billion-dollar settlements have done too little to punish Wall Street in the wake of the financial crisis, prosecutors are considering indictments in probes of Credit Suisse Group AG (CSGN) and BNP Paribas, a person familiar with the matter said. Even after talking with financial regulators about ways to mitigate damage — such as ensuring banks keep charters — prosecutors might not fully understand consequences for the market, according to industry lawyers and bankers who are following the case.

Bank clients — including trustees, fiduciaries and pension funds — could be forced to cut ties with a financial institution labeled a criminal enterprise, the lawyers and bankers said, asking not to be named because they weren’t authorized to talk publicly. Counterparties also might think twice before entering into billion-dollar transactions with such firms. Damaging a bank’s business could lead to broader fallout across the financial industry, just as Lehman Brothers Holdings Inc.’s collapse in 2008 prompted investors to withdraw from other firms on concern its exit would set off a wave of losses. Criminal action would have to be handled so that any review of a bank’s charter wouldn’t spook customers or revoke a firm’s license, said Gil Schwartz, a partner at Schwartz & Ballen LLP and a former Federal Reserve lawyer. “The mere threat of requiring a hearing could cause customers to lose confidence in the institution and could cause a run on the bank,” Schwartz said.

Read more …

Prosecutors Rarely Charge Banks Since Result Can Be Fatal (Bloomberg)

If the Justice Department follows through on a threat to bring criminal charges against Credit Suisse and BNP Paribasm it would go against years of standard prosecutorial practice. The government rarely charges large banks – or any other corporation – because it usually proves fatal for the company. The 2002 indictment of accounting firm Arthur Andersen put some 85,000 people out of work and created a public relations debacle for the Justice Department that still influences its decision-making, former officials and defense lawyers said. “If you indict a major financial institution, absent orchestrated board-level crimes, it will have ramifications for years,” said Jamie Wareham, a partner at DLA Piper law firm in Washington who stressed he was not commenting on specific firms. “Who pays for that? Customers, shareholders, the community.”

Six years past the financial crisis, U.S. prosecutors and Wall Street regulators have continued to probe the industry as lawmakers and advocacy groups argue that no bank executive has paid the price for helping drive the country into recession. Attorney General Eric Holder added to the furor last year when he told a congressional panel that some banks may have become too large to prosecute. Still, history shows, that has long been the case. In the few instances where banks have pleaded guilty to U.S. criminal charges – the Bank of Credit and Commerce International in 1992 and Washington’s Riggs Bank in 2005 – the firms were already finished.

Read more …

It’s been bad news for a while now.

This Is Bad News For US Housing (Yahoo!)

Home prices may be up, but don’t make the mistake of thinking the housing market is strong. The S&P/Case-Shiller Home Price Index of 20 metropolitan areas showed a seasonally-adjusted gain of 0.8% in February from January and 12.9% from the previous year. But, that gain was based on the sale of fewer homes, according to David M. Blitzer, chairman of the committee at S&P Dow Jones Indices which administers the index. He said several factors are pointing to a frail housing market. “Despite continued price gains, most other housing statistics are weak,” Blitzer said in a statement on Tuesday.

“Sales of both new and existing homes are flat to down. The recovery in housing starts, now less than one million units at annual rates, is faltering. Moreover, home prices nationally have not made it back to 2005. Mortgage interest rates, which jumped in May last year and are steady since then, are blamed by some analysts for the weakness. Others cite difficulties in qualifying for loans and concerns about consumer confidence. The result is less demand and fewer homes being built.” Steve Cortes, founder of Veracruz TJM, said Blitzer doesn’t go far enough to describe the state of the housing market. “I think that he’s being too tepid to say that it’s weak,” Cortes said. “I think that it’s very weak to extremely weak.”

Cortes cited recent U.S. Census data showing homeownership rates have fallen to 64.8%, a 19-year low. Though household formations have declined slightly in the past decade, Cortes found it troubling that near-record low interest rates haven’t been enough to encourage more homeownership. That could translate as long-term bad news for homebuilder stocks. “When low rates can’t convince people to buy homes, I think what you have is a structural problem,” Cortes said. “This kind of secular change in the housing market means that housing stocks will do worse from here.”

Read more …

Wait for regret “numbers” when rates go up.

Many US Homeowners Regret Buying A House (Yahoo!)

One out of four homeowners admit they wouldn’t buy their home again if they had the chance, according to a recent survey by real estate brokerage Redfin.m The biggest factor contributing to homebuyers’ remorse appeared to be affordability. Nearly one-third of homeowners who reported a household income of less than $100,000 said they were unhappy with their decision. In contrast, just 14% of homeowners who earned more than $100,000 said they were unhappy, according to the survey. Younger homeowners were also more likely to have regrets. About 28% of homeowners under 65 said they regretted buying their home, compared to 14% of senior homeowners.

And one in five homeowners with kids still living at home said they regretted their home purchase as well. Redfin’s findings come around the same time as new home sales have begun to lag in the U.S. Sales of single-family homes fell by 14.5% to an eight-month low in March, with just 384,000 units sold. Experts have blamed slow sales on bad weather, low home inventory, rising mortgage rates, and a rise in vacant homes (homes that are under repair or being rented). Whatever the case, one thing is certain — buyers today are at a distinct disadvantage when it comes to finding a home that meets every point on their checklist.

Read more …

Core question: how long can you get people to buy cars with savings and plastic?

U.S. Lost $11.2 Billion in GM Bailout (Bloomberg)

The U.S. Treasury’s bailout fund lost $11.2 billion on the rescue of General Motors with the government’s exit of the largest U.S. automaker, a report said. The total includes $826 million that the Treasury wrote off in March for its remaining claim in old GM, the special inspector general for the Troubled Asset Relief Program said in a report to Congress today. In December, the government had put the loss at about $10.5 billion on its $49.5 billion investment. The Treasury sold its remaining shares in GM in December, signaling the end of Government Motors, as the Detroit-based automaker was derisively labeled by some critics after the U.S. government stepped in with emergency funding in 2008.

Bailouts from the George W. Bush and Barack Obama administrations helped GM avoid liquidation and reorganize in a 2009 bankruptcy that has given new life to the company. “The goal of Treasury’s investment in GM was never to make a profit, but to help save the American auto industry, and by any measure that effort was successful,” Adam Hodge, a Treasury spokesman, said in an e-mail. Buoyed by lower debt, reduced labor costs and a focus on only its strongest brands, GM is emblematic of a revitalized U.S. auto industry. While the government lost money, its exit paved the way for an influx of fresh investor capital.

Read more …

More public funds at risk. Great risk, given the ugly housing numbers.

Stress Test Reveals Fannie, Freddie Could Need Another $190 Billion (Bloomberg)

Fannie Mae and Freddie Mac could require an additional bailout of as much as $190 billion in a severe economic downturn, according to the results of stress tests released by the regulator for the U.S.-owned companies. The two mortgage-finance giants, which have already taken $187.5 billion in taxpayer aid since 2008, would need more funds to stay afloat if home prices plummeted in a severe downturn, the Federal Housing Finance Agency said in a report today. The stress tests, mandated by the Dodd-Frank Act, use the same assumptions that the Federal Reserve does in gauging the ability of the nation’s largest banks to withstand a recession.

The results reflect the terms of the companies’ bailout, which require them to send to the Treasury all of their quarterly profits above a minimum net worth threshold. That money, counted as a return on the U.S. investment, prevents them from rebuilding capital or paying down debt to taxpayers. “These results of the severely adverse scenario are not surprising given the company’s limited capital,” Fannie Mae Senior Vice President Kelli Parsons said in a statement. “Under the terms of the senior preferred stock purchase agreement, Fannie Mae is not permitted to retain capital to withstand a sudden, unexpected economic shock of the magnitude required by the stress test.” The companies would need $84 billion to $190 billion by the end of 2015 in the worst circumstances, depending on accounting assumptions, the tests showed.

Read more …

This will get worse.

Japan’s Consumption Hangover Begins as Car Sales Decline (Bloomberg)

Vehicle deliveries last month in Asia’s second-largest auto market fell to the lowest since December 2012 after Japan raised its consumption tax for the first time 17 years, according to industry figures released today. In the run-up to the levy being increased 3 percentage points to 8% on April 1, sales had surged for seven straight months. More broadly, the figures may foreshadow the extent of the consumer backlash resulting from the higher taxes Prime Minister Shinzo Abe imposed to counter the world’s biggest debt burden. Economists estimate that this quarter, Japan will see its biggest economic contraction since the earthquake and tsunami that ravaged the country three years ago.

“Any sane person was buying big-ticket items in February or March rather than in April,” Martin Schulz, an economist at Fujitsu Research Institute in Tokyo, said by telephone. “The Japanese carmakers will have to prove how much they really can work this very difficult market.” Total sales fell 5.5% to 345,226, according to the Japan Automobile Dealers Association and Japan Mini Vehicle Association. The slump may deepen this month as poor weather prevented some customers, who placed orders before the sales tax increase, from getting their cars delivered until April.

Read more …

Tokyo keeps pretending to have unlimited funds. It doesn’t.

Japan Props Up More Power Utilities to Avoid Rate Increases (Bloomberg)

Japan moved to prop up another two unprofitable power companies after they posted losses of 159 billion yen ($1.6 billion), underscoring how the idling of atomic reactors is forcing losses on most of the nation’s utilities. Kyushu Electric Power and Hokkaido Electric Power will receive a combined 150 billion yen from a state-owned Japanese bank, joining Tokyo Electric Power Co., operator of the wrecked Fukushima plant, on the list of utilities to secure government aid. The investment comes as the government seeks to forestall electricity rate increases by utilities that could hinder the country’s fragile economic recovery. The investment from the Development Bank of Japan Inc. would help the utilities offset fossil fuel costs that have soared since the 2011 accident at the Fukushima Dai-Ichi nuclear plant idled their atomic plants.

Read more …

Weakness is the proper term for China.

China April Manufacturing Data Add to Signs of Weakness (Bloomberg)

China’s manufacturing grew less than analysts estimated in April, highlighting weakness in the economy from exports to construction that could force extra government measures to support growth. The Purchasing Managers’ Index was at 50.4, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today in Beijing, less than the 50.5 median estimate of 38 analysts in a Bloomberg News survey. March’s reading was 50.3, with numbers above 50 signaling expansion.

Today’s data showed weakness in export orders that may make it harder for Premier Li Keqiang to avoid a deeper slowdown after property construction plunged in the first quarter and economic growth cooled. China’s gross domestic product is projected to expand 7.3% this year, the weakest pace since 1990, as the government reins in credit. “We continue to expect growth to slow,” said Zhang Zhiwei, chief China economist at Nomura Holdings Inc. in Hong Kong. “We expect the government to loosen fiscal and monetary policies in the next few months,” he said, adding that banks’ reserve ratios may be reduced in May or June and then again in the third quarter.

Read more …

Cutting reserve ratios for banks that have very questionable leding standards may not be the brightest idea.

China Plans Measures to Boost Trade After Unexpected Drop (Bloomberg)

China will implement measures to stabilize the country’s “severe and complicated” foreign-trade situation, Premier Li Keqiang said. “Arduous efforts” are needed to ensure the government meets its full-year trade target, Li said during a State Council meeting yesterday, according to a statement posted on the central government’s website. March data showed exports and imports unexpectedly dropped. The government will accelerate the development of cross-border e-commerce, further streamline trade processes, reduce the types of merchandise that require inspection, improve trade financing and encourage trade in services to support growth, according to the statement.

China’s government has rolled out some economic support measures, such as reserve-ratio cuts for rural banks and faster spending on railways, while pledging to avoid broader stimulus for now. Li’s government is chasing a growth target of about 7.5% for the year, compared with expansion in the first quarter of 7.4%. A manufacturing index to be released later today will give the latest reading on the strength of the world’s second-biggest economy. While exports fell 6.6% in March from a year earlier, the customs administration said the drop was partly caused by distortions in previous data.

Read more …

What, not doing so well, mates?

Australian Asset Sales, Cuts to Welfare Urged to Lower Debt (Bloomberg)

Australia should privatize its rail and postal assets and cut family welfare payments as Prime Minister Tony Abbott seeks to meet election pledges to rein in record public debt, a report ordered by his government advised. Australian Rail Track Corp. and Australian Postal Corp. are among 10 bodies that should be sold, the National Commission of Audit said in Canberra today as it identified measures that could save as much as A$70 billion ($65 billion) a year within a decade. Among recommendations, it called for the pension age to be raised, payments for doctor visits, and cuts to the number of government bodies. “Australia confronts a substantial budgetary challenge,” the report said. “The fiscal situation is far weaker than it should be and the long-term outlook is ominous due to an unsustainable increase in expenditure commitments.”

Abbott and Treasurer Joe Hockey, preparing the Liberal-National coalition’s May 13 budget, face a A$123 billion shortfall for the four years through June 2017. Fiscal austerity comes at the same time mining companies are cutting back on projects, threatening to damp a recovery in domestic demand and pressuring the central bank to maintain low borrowing costs. In the next decade, Australia should adopt fiscal rules including reaching a budget surplus of 1% of gross domestic product, substantially reducing net debt and keeping tax receipts below 24% of GDP, the commission said today.

Read more …

Looking good in borrowed clothes.

Polish $300 Billion Aid Package Hides EU Expansion Flaws (Bloomberg)

The pristine metal and glass laboratories and landscaped lawns of the Olsztyn Science and Technology Park are a shiny emblem of Poland’s transition from communist state to European Union member, at least on appearance. Paid for with EU aid, the $23 million development 200 kilometers (124 miles) north of Warsaw opened in November to attract startup companies. Yet with two smaller science parks already close to the northeastern Polish town, half of the space remains empty in a region with among the highest poverty rates in Europe and where more people are leaving than arriving.

“The EU certainly helps fulfill Polish dreams, even the completely unrealistic and costly ones,” said Sylwia Tymicka, 40, who set up her accounting and business advice company in Olsztyn just as Poland joined the EU on May 1, 2004. “That often leads to spending for spending’s sake. It doesn’t correspond to basic needs.” As Poles mark 10 years of absorption into the world’s biggest single market, the fault lines remain. Halfway through a 229 billion-euro ($317 billion) EU aid package, more than the entire Marshall Plan for postwar Europe in today’s dollars, the money kept the Polish economy growing when the rest of the continent went into recession. The new business parks, highways, soccer stadiums and airport terminals also mask how for many Poles the passage to prosperity is still to come, with 17% of families of four living on less than $400 a month.

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Not shale, but land speculation. There’s your driver.

Shale Revolution Luring Trading Houses Into US Energy Assets (Bloomberg)

Merchants from Vitol Group, the largest independent oil trader, to a company backed by billionaire Paul Tudor Jones are amassing physical energy assets in the U.S. at an unprecedented rate as shale output revives stagnant fuels markets. Castleton Commodities International LLC, financed in part by hedge fund managers Tudor Jones and Glenn Dubin, acquired Texas gas wells in February. Mercuria Energy Group Ltd. is buying JPMorgan’s physical commodities business. Vitol and Trafigura AG are helping build oil pipelines, and Freepoint Commodities LLC is investing in offshore production. Of the $1 billion Trafigura has invested in the U.S., the majority was spent in the past five years, the company said.

“International trading companies have been buying assets all along, just not so much in America,” JP Fjeld-Hansen, managing director of Musket Corp., a commodity supplier and trading company in Houston, said April 29. “Now we’ve had this renaissance of U.S. energy markets and they’re bringing their capital here.” The world’s biggest commodity merchants, most privately owned, are buying or building more physical assets in the U.S. as drilling technologies unleash record oil and gas volumes from shale, creating arbitrage opportunities between regions. They’re also stepping in as banks including Barclays, JPMorgan Chase and Morgan Stanley reduce their commodity businesses as returns decline and regulatory scrutiny intensifies.

“Companies are realizing if you can understand the physical flows, there’s a value chain from source all the way through to consumption here,” Gary Morsches, managing director for global energy at CME Group in Chicago, said in an interview at Bloomberg’s Houston office this month. “You don’t care whether prices go up or down because you know you can arb 50 cents out of this because of your supply arrangements.”

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Yay! More gambling!

Drillers Hooked on Oil Bolster Goldman $6 Gas Outlook (Bloomberg)

U.S. energy producers are sticking with oil over natural gas, boosting Goldman Sachs Group Inc.’s view that gas at a six-year high may still have room to rally. Drillers switched their focus to oil in 2012, when gas futures dropped to a decade low. While gas has more than doubled since then, surging this year as frigid weather eroded stockpiles, crude remains more profitable, according to Loomis, Sayles & Co., which manages $200 billion. Goldman Sachs said this month that gas may have to trade between $5.75 and $6.50 per million British thermal units to spur a supply increase, up at least 19% from current prices. Chesapeake Energy, the second-largest U.S. gas producer, estimated that its output in 2014 will grow at half the rate of the company’s oil production.

“You need either $6 gas or oil at $70 a barrel for drilling to switch back to natural gas,” Salil Sharma, vice president and portfolio manager at Loomis, Sayles in Boston, said in an April 28 phone interview. “The industry has both the resources and the ability to fill the storage deficit. It’s just a question of at what price.” Natural gas for June slipped 1.6 cents to settle at $4.815 per million Btu today on the New York Mercantile Exchange. Futures have gained 14% in 2014 and are trading at the highest level for this time of year since 2008. Prices surged to $6.493 on Feb. 24, the highest intraday price since Dec. 2, 2008.

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How US State Dept. Exposes Itself To Propaganda (RT Editor-in-Chief)

Mr. Richard Stengel, the US Under Secretary of State who wrote such an impassioned “takedown” of RT in the US State Department blog, did get one thing right. Propaganda IS the deliberate dissemination of information that you know to be false or misguided. And boy, does Mr. Stengel make a valiant attempt at propagandizing, because anyone would be hard-pressed to cram more falsehoods into a hundred words:

“From assertions that peaceful protesters hired snipers to repeated allegations that Kiev is beset by violence, fascism and anti-Semitism, these are lies falsely presented as news.” (…) “Consider the way RT manipulated a leaked telephone call involving former Ukrainian Prime Minister Yulia Tymoshenko. Through selective editing, the network made it appear that Tymoshenko advocated violence against Russia.” Or the constant reference to any Ukrainian opposed to a Russian takeover of the country as a “terrorist.” “Or the unquestioning repetition of the ludicrous assertion last week that the United States has invested $5 billion in regime change in Ukraine. These are not facts, and they are not opinions. They are false claims, and when propaganda poses as news it creates real dangers and gives a green light to violence.”

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I thought that was funny comment from Rogozin.

US May Need Trampoline To Get Into Space (ITWire)

A Russian official stated that if U.S. sanctions continue to be directed at Russia due to its activities in the Ukraine, then the United States might try using a trampoline to get its astronauts to the International Space Station. Russian deputy prime minister Dmitry Rogozin used his Twitter account to state, “After analyzing the sanctions against our space industry, I suggest to the USA to bring their astronauts to the International Space Station using a trampoline.” The NBC News article Trampoline to Space? Russian Official Tells NASA to Take a Flying Leap, by Alan Boyle, should be read to learn more about this interesting way to launch astronauts into low-Earth orbit (LEO).

In fact, one of the Twitter responses to Rogozin was highlighted by Boyle. Douglas Burke (@doug_burke) stated, “@planet4589 how come you never mentioned trampolines as an effective space launch method? https://www.nbcnews.com/storyline/ukraine-crisis/trampoline-space-russian-official-tells-nasa-take-flying-leap-n92616 …” And, Jonathan McDowell (@planet4589) tweets, “@doug_burke Back of the envelope calculation suggests you may need to dig 50 km hole for trampoline to stretch into, jump on it from plane” Then, Elon Musk (@elonmusk), the CEO and founder of SpaceX, responds with, “Sounds like this might be a good time to unveil the new Dragon Mk 2 spaceship that @SpaceX has been working on w @NASA. No trampoline needed.”

Read more …

And we’re off!!

BP Pipeline Sprays ‘Oily Mist’ Over 33 Acres Of Alaskan Tundra (RT)

Alaska state officials confirmed Wednesday that an oily mist sprung from a compromised oil pipeline and sprayed into the wind without stopping for at least two hours, covering 33 acres of the frozen snow field in the oil well’s vicinity. The discovery was at the BP-owned Prudhoe oil field on Alaska’s North Slope, the northernmost region of the state where a number of profitable oil fields sit beneath the tundra. The Alaska Department of Environmental Conservation (DEC) revealed that BP officials found the mist during a routine inspection on Monday. Initial reports said that 27 acres had been covered, although that figure was updated later on Wednesday.

The cause is still under investigation, according to the Associated Press, but officials know that the mist was made up of a mixture of gas, crude oil, and water. They also reported that while the noxious mist was distributed over such a wide area by 30 mph winds, no wildlife was impacted. BP spokeswoman Dawn Patience said the company is “still assessing repairs” and will soon know what, if any, long-term effects the spill could have. The Prudhoe Bay region, like elsewhere in the North Slope, is home to a great number of migratory birds and caribou, as well as other animals, such as a massive porcupine herd. Clean-up efforts are expected to be complete before birds pass through the region again in the coming weeks.

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You got to hope this won’t get out of hand, like with highly contagious diseases, or you friends and family will start dropping like flies.

‘Devastating’ Implications Of Drug-Resistant Superbugs Now A Reality (RT)

Deadly antibiotic-resistant superbugs are a ‘serious threat’ to world health and no longer merely a prediction for the future, according to a new report by the World Health Organization (WHO). Previously treatable illnesses can now once again kill. “The world is headed for a post-antibiotic era, in which common infections and minor injuries which have been treatable for decades can once again kill,” said Keiji Fukuda, the WHO’s assistant director-general for health security. The new resistance has the capacity to strike anyone, of any age, on a global scale according to the WHO report, entitled ‘Antimicrobial resistance: global report on surveillance’, released on Wednesday. It’s the organization’s first ever global report on antibiotic resistance. “The implications will be devastating,” stated Fukuda.

Data spanning 114 different countries was utilized in the study and superbug resistance was found in all regions of the world. The infections were even resistant to a class of antibiotic which fall into a category known as carbapenems – a broad-spectrum beta-lactam antibiotic considered one of the last resorts in the treatment of infectious bacterial diseases. Resistance to last-resort treatments for potentially deadly hospital infections caused by the common Klebsiella pneumoniae bacteria have been found in all parts of the world, as has resistance to the most common drugs to treat urinary tract infections caused by E.coli, as well as last resort gonorrhea treatment in 10 developed countries – among them the UK.

Read more …

Mar 132014
 March 13, 2014  Posted by at 3:06 pm Finance Tagged with: , , , ,  13 Responses »

Carl Mydans Auto transport at Indiana gas station. May 1936

Britain’s Institute of Economic Affairs (IEA) recently issued a report on the future of pensions and healthcare that reads as one big warning sign. But the chances that the warning will be heeded are slim to none, simply because the task is too daunting for both politicians and their voters to even begin to contemplate.

No politician who tells the truth about the report’s contents has a chance in frozen over hell of being elected, and thus the issues, which have been many decades in the making, will simply continue to be ignored by everyone. Until the dam breaks and perhaps the first shot is fired. But then it will be way too late. Not that it isn’t already. It’ll be interesting to see how people across the board claim ignorance and innocence, but it will of course do nothing to even come close to solving anything at all.

And frankly speaking, there are no solutions available within the present political system that could be executed and still let people get away relatively unscathed. We seem to have reached an inherent and built-in boundary and limitation of the democratic system, an event horizon of which we are bound to see a lot more going forward. What some 20 years ago Jay Hanson phrased as

“Democracy only works until people realize they can vote themselves an ever bigger piece of the pie”

IEA program director Philip Booth says in these words:

For too long people have voted themselves benefits to be paid for by the next generation of taxpayers, not by sacrifices that they will make themselves.

It truly is democracy as a Ponzi scheme. A development that has been so carefully and utterly neglected and ignored that bringing it out into the open risks evoking such severe denial that entire societies could be ripped to shreds, with one group teaming up against the other in clashes that can easily turn violent. Or, in Booth’s words:

We have never been in a situation like this before. It is quite possible that we will not find our way through without serious social breakdown and/or mass emigration of the most mobile and productive people.

And it all seemed to be going so well for so long, with cars and smartphones and far away vacations and retirement bungalows in the sun for – almost – everyone. People believed it because they wanted to believe it, and politicians were all too eager to prolong the dream that for the first time in history everyone could live like kings and queens of old. Cheap energy was one leg of the dream, ignoring future consequences of present behavior was another. Booth:

“The underlying problem is that successive governments have made promises which can simply not be honoured from the existing tax base. The electorate is grazing a fiscal commons at the expense of future generations … “

The price must now be paid. There is no more postponing the inevitable. First, retirement age will go to 70, then 75, and then the point will come when there’s no money left for any pensions or other entitlements. We will also return to large numbers of people dying of entirely preventable afflictions, simply because healthcare systems become unaffordable, because the base of people paying taxes shrinks, while the number of those who need care rises exponentially as the population ages.

Here’s the Telegraph article the quotes come from:

UK faces ‘crippling’ tax rises and spending cuts to fund pensions and healthcare

Britain faces “crippling” tax rises and spending cuts if it is to meet the needs of an ageing population, according to the Institute of Economic Affairs. The IEA calculated the Government would need to slash spending by more than a quarter or impose significant tax hikes because official calculations had failed to factor in future pension and healthcare liabilities. “As populations age, tax bases will grow more slowly while government spending rises faster,” the report said.

… the think-tank said Britain faced tax rises equivalent within just two years to more than 17% of GDP – more than £300 billion ($500 billion) – in order to meet all future spending commitments. This is larger than the entire annual NHS budget and would increase taxes from 38% to 55% of national income.[..] … tax increases of this magnitude would be “impossible” to implement “without choking off economic growth and actually reducing tax revenues”.

Can you imagine such tax raises? While the economy is in the doldrums? Me neither. But that would mean:

In the absence of further tax hikes [..] total spending would have to be cut by more than 25% or health and welfare expenditure by 53% compared with the current implied level if all future spending was to be met out of tax revenue.

[..] … it said policies were being implemented too slowly and were “inadequate” on their own [..] … policies to address pension saving and healthcare costs were needed now or the problem would quickly grow out of control. “Without significant changes to spending levels, huge sacrifices will have to be made by future generations either through significantly higher taxes or reduced benefits [..]

The IEA calculated that delaying crucial pension and healthcare reforms by just a few years would dramatically increase the burden because of growing debt interest payments. It said the ratio would increase from 13.7% of GDP in 2010 – already higher than the EU average of 13.5% – to almost 17.1% by 2016 if no policy adjustments were made.

People will be forced to work longer and longer, till they’re 75, 80 and so on. And they’ll be forced to pay a fast growing part of their healthcare bill themselves. And even then both healthcare and pension systems have no chance of surviving in the long run. Because too many people have been promised too much for too long.

And just in case you were thinking that raps her up, here’s another piece of fine news from yesterday:

UK Interest Rates Could Rise Sixfold In Three Years (Telegraph)

Interest rates will rise six-fold by 2017 as Britain’s economy becomes one of the fastest growing in the developed world, the Bank of England Governor said on Tuesday. The increase to more “normal” levels will be welcomed by many savers who have faced record low rates for more than six years, but is likely to plunge many borrowers into financial difficulty. Mark Carney said that Bank rate could reach 3% within three years, six times the current 0.5%.

[..] Industry calculations suggest that an increase of 2.5 percentage points on a typical £150,000 repayment mortgage would push up monthly payments by around £230 a month. For interest-only mortgages, the rise would be even steeper. The cost of servicing an interest-only loan that tracks the Bank rate plus 1% would jump from £188 a month to £500.

Nationwide, one of Britain’s biggest mortgage lenders, said last month that the long period of low rates had left a generation of house- buyers with no experience of higher borrowing costs, leaving some at financial risk. Around 8% of all mortgage- holders currently have to spend more than 35% of their pre-tax income paying off the loan. Bank data suggests that this proportion would double if rates rose by 2.5 percentage points.

Mr Carney said the Bank was now carrying out more research into how many borrowers are “most vulnerable” to higher rates.

Yup. Your taxes will go up, slowly at first because the government will delay dealing with serious issues as long as it can get away it, and faster later when they have no such choice left. Meanwhile, interest rates will rise, which is bad news if you have debt, which is about everyone. And it’s not just your debt: there’s a lot of government debt that will need to be serviced, and guess how we’re going to pay for that? Raise taxes.

This simple pattern is not exclusive to Britain at all of course, but then you know that. This is what will happen in every western – formerly – rich country. And you can therefore safely ignore any proclamations about recovery. The first major hit, developing as we speak, is Japan, where people are more cautious and fearful and perhaps better informed. The Japanese started cutting back on their spending 20 years ago (they stopped buying things they didn’t need), and are now in a deflation that no stimulus will get them out of anymore (it’ll just make it worse).

But at least they have savings. In most formerly rich countries, people have counted on entitlements instead of savings. And now those entitlements turn out to be based on elaborate Ponzi schemes, sanctioned by successive governments that all had one thing in common: short term views.

David Stockman knows a thing or two …

Yellenomics: The Folly of Free Money (David Stockman)

The Fed and the other major central banks have been planting time bombs all over the global financial system for years, but especially since their post-crisis money printing spree incepted in the fall of 2008. Now comes a new leader to the Eccles Building who is not only bubble-blind like her two predecessors, but is also apparently bubble-mute. Janet Yellen is pleased to speak of financial bubbles as a “misalignment of asset prices,” and professes not to espy any on the horizon.

Let’s see. The Russell 2000 is trading at 85X actual earnings and that’s apparently “within normal valuation parameters.” Likewise, the social media stocks are replicating the eyeballs and clicks based valuation madness of Greenspan’s dot-com bubble. But there is nothing to see there, either–not even Twitter at 35X its current run-rate of sales or the $19 billion WhatsApp deal. Given the latter’s lack of revenues, patents and entry barriers to the red hot business of free texting, its key valuation metric reduces to market cap per employee–which computes out to a cool $350 million for each of its 55 payrollers. Never before has QuickBooks for startups listed, apparently, so many geniuses on a single page of spreadsheet.

Indeed, as during the prior two Fed-inspired bubbles of this century, the stock market is riddled with white-hot mo-mo plays which amount to lunatic speculations. Tesla, for example, has sold exactly 27,000 cars since its 2010 birth in Goldman’s IPO hatchery and has generated $1 billion in cumulative losses over the last six years—–a flood of red ink that would actually be far greater without the book income from its huge “green” tax credits which, of course, are completely unrelated to making cars. Yet it is valued at $31 billion or more than the born-again General Motors, which sells about 27,000 autos every day counting weekends.

Even the “big cap” multiple embedded in the S&P500 is stretched to nearly 19X trailing GAAP earnings—the exact top-of-the-range where it peaked out in October 2007. And that lofty PE isn’t about any late blooming earnings surge. At year-end 2011, the latest twelve months (LTM) reported profit for the S&P 500 was $90 per share, and during the two years since then it has crawled ahead at a tepid 5 percent annual rate to $100.

So now the index precariously sits 20% higher than ever before. Yet embedded in that 19X multiple are composite profit margins at the tippy-top of the historical range. Moreover, the S&P 500 companies now carry an elephantine load of debt—$3.2 trillion to be exact (ex-financials). But since our monetary politburo has chosen to peg interest rates at a pittance, the reported $100 per share of net income may not be all that. We are to believe that interest rates will never normalize, of course, but in the off-chance that 300 basis points of economic reality creeps back into the debt markets,that alone would reduce S&P profits by upwards of $10 per share.

America’s already five-year old business recovery has also apparently discovered the fountain of youth, meaning that recessions have been abolished forever. Accordingly, the forward-year EPS hockey sticks touted by the sell-side can rise to the wild blue yonder—even beyond the $120 per share “ex-items” mark that the Street’s S&P500 forecasts briefly tagged a good while back. In fact, that was the late 2007 expectation for 2008—a year notable for its proof that the Great Moderation wasn’t all that; that recessions still do happen; and that rot builds up on business balance sheets during the Fed’s bubble phase, as attested to by that year’s massive write-offs and restructurings which caused actual earnings to come in on the short side at about $15!

In short, recent US history signifies nothing except that the sudden financial and economic paroxysm of 2008-2009 arrived, apparently, on a comet from deep space and shortly returned whence it came. Nor are there any headwinds from abroad. The eventual thundering crash of China’s debt pyramids is no sweat because the carnage will stay wholly inside the Great Wall; and even as Japan sinks into old-age bankruptcy, it demise will occur silently within the boundaries of its archipelago. No roiling waters from across the Atlantic are in store, either: Europe’s 500 million citizens will simply endure stoically and indefinitely the endless stream of phony fixes and self-serving lies emanating from their overlords in Brussels.

Read more …

Russia Said to Ready for Iran-Style Sanctions (Bloomberg)

Russian government officials and businessmen are bracing for sanctions resembling those applied to Iran after what they see as the inevitable annexation of Ukraine’s Crimea region, according to four people with knowledge of the preparations.

Iran-style retaliation from the West, which would include freezing Russia’s foreign reserves, banking assets and halting lending to companies, is being treated as an unlikely worst case, according to the people, who asked not to be identified as talks are confidential. Still, officials are calculating the economic cost of a sanctions war with the West, the people said. “If Russia begins to answer sanctions with sanctions, it will be a pure loss for the country,” Natalia Orlova, chief economist at Alfa Bank in Moscow, said by phone. “More than 40% of consumption is imported goods.”

Some Russian political leaders are hoping that President Vladimir Putin will moderate his response to the crisis, the people said. Putin is consulting with the security forces and military about Ukraine, and some officials are afraid to voice opposition to what they see as a course he’s already chosen, two of the people said. Russia retaliating with sanctions against the West could wipe out 10 years of achievements in financial and monetary policy, one of the people said. Such escalation could erase as much as a third of the ruble’s value, another said.

The ruble has slumped 9.8% against the dollar this year, the worst-performer after Argentina’s peso among 24 emerging-market currencies tracked by Bloomberg. The yield on Russia’s February 2027 ruble bond was unchanged from yesterday’s record-high close of 9.36%.

The Ukraine crisis triggered the worst standoff between Russia and the West since the end of the Cold War after Russian forces seized the Crimean peninsula. German Chancellor Angela Merkel said today Russia risks “massive” political and economic damage, after saying yesterday that a round of European Union sanctions is “unavoidable” if Putin’s government fails to take steps to ease tensions. [..]

The government is in talks with Russian billionaires and state companies about risks they face in case of Western sanctions, the people said. The Kremlin needs to know which companies are most likely to be affected by fallout including loss of access to new foreign loans and the prospect of margin calls, they said.

Business is not yet showing too much concern about the possible sanctions, according to three top executives who took part in the meetings. The EU, Ukraine and Russia are economically dependent on each other in many regards, so strict sanctions will be hard on all sides, Putin has said. “In the modern world, when everything is interconnected and everybody depends on each other one way or another, of course it’s possible to damage each other — but this would be mutual damage,” Putin told reporters March 4.

The Russian economy’s prospects in a “difficult global economic environment” were the topic of a closed meeting between Putin and senior officials yesterday in the Black Sea resort of Sochi, Peskov said by phone. Putin yesterday urged the government to ensure Russia’s “ability to react immediately to internal and external risks.”

The Russian government is also in talks with companies about speeding up state support in the form of guaranteed loans to reduce potential damage from sanctions, said two of the people. Business leaders have asked for a meeting with Russian Prime Minister Dmitry Medvedev to discuss the situation, the people said.

Read more …

The Truman show meme shows up more frequently, and it’s not a bad analogy.

Hedge fund managers face up to ‘Truman Show’ markets (FT)

In the Truman Show, the late nineties Hollywood film, the eponymous character lives a seemingly charmed world, snuggled comfortably into an American suburbia of white picket fences and crisply cut lawns. But gradually Truman starts to notice something is not quite right. He is actually trapped inside a film set controlled by hidden directors, and discovers to his horror that he is the unknowing star of the world’s most popular reality TV show.

The question some of the world’s biggest hedge funds are starting to ask is whether overly placid investors will also wake up to discover they are living in a “Truman Show market” – where central bankers’ ultra loose monetary policy has manufactured a fake reality that is bound to end. For Seth Klarman, the manager of the $27bn hedge fund the Baupost Group who recently coined the analogy in a letter to clients, investors have been lulled into a false sense of security that is creating an ever greater risk of a sharp correction.

“All the Trumans – the economists, fund managers, traders, market pundits – know at some level that the environment in which they operate is not what it seems on the surface,” Mr Klarman wrote in his letter, later adding: “But the zeitgeist is so damn pleasant, the days so resplendent, the mood so euphoric, the returns so irresistible, that no one wants it to end.”

But no matter how sceptical hedge fund managers may be, they find themselves in a bind. While the assumption that central bank bond-buying will continue for the foreseeable future has been a boon to broader markets, indiscriminately surging equities have made life frustrating for most specialised stock pickers.

At the same time other hedge fund strategies, such as making bets on interest rates and currencies according to views on the direction of the global economy, have faltered as markets have refused to obey previously presumed iron rules, such as money printing leading to devaluation. Of late these so-called global macro funds have retreated from such trades as their performance has suffered.

“Many hedge funds continue to predict this ongoing drift upwards in asset prices due to an implicit backstop from central banks, who want to believe they are omnipotent, and that when data is bad they can just turn on the taps again and make it go away,” says Anthony Lawler, portfolio manager at GAM, one of the world’s biggest investors in hedge funds. As a result, while many managers feel deeply uneasy with the lofty valuations attached to certain parts of the US stock market, and low returns offered by risky assets such as junk bonds, few are willing to step out just yet.

More recently, encouragement has been taken from falling correlations between assets, meaning some portfolio managers are confident they can start to exploit more effectively the pricing anomalies between better and worse quality securities. “The number of individual stocks mispriced to each other is high, there are some trading on vapour whilst others are still trading on reasonable valuations,” says Luke Ellis, president of Man Group, the world’s largest listed hedge fund. “Are there lots of cheap stocks? No, but on a long short basis there are opportunities.”

“The big question is when this is all going to change. From a purely intellectual point of view, it is interesting how central banks will reverse their policies. From a market point of view, it is uncertain and complicated.”

Sir Michael Hintze, chief executive and founder of CQS, one of Europe’s largest hedge funds, has argued that loose central banks have actually increased the riskiness of markets as a result of their policies forcing too much money into the same assets, meaning any corrections are likely to be sharper than normal. “Everyone is thinking the same and being driven into the same trade,” he wrote in a note to clients. “Shifts when moving from one state to another can be difficult and abrupt. It is not healthy to have a ‘rigged’ market”.

Yet, for now, as long as markets continue to believe in the willingness and ability of central bankers to maintain current conditions, few hedge fund managers are ready to make any big bets against a reversal. “Few argue that equities are cheap on any metric, but the majority of hedge fund managers are opting to remain invested,” says Mr Lawler of GAM. The Truman Show market looks set to continue, even if an increasing number of participants have started to spot the cameras hidden behind the trees.

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America must get rid of the Fed and the big banks, or it will turn into a scorched landscape.

Engine Of Wall Street Profits Sputters In First Quarter (FT)

Wall Street’s once lucrative fixed income divisions are set for their worst start to the year since before the financial crisis, with revenue declines of up to 25% prompting banks to plan more redundancies on top of the tens of thousands of job cuts they have already made.

Citigroup and JPMorgan Chase have warned publicly that fixed income revenues – the engine of most investment banks’ profits since 2000 – will be down by double digits when they report first-quarter earnings next month. But other banks privately warn that their year-on-year declines could exceed 25% after both institutional investors and banks shied away from trading. The first quarter is traditionally a high point for revenues. “Effectively, the casino is empty this quarter,” said Brad Hintz, analyst at AllianceBernstein.

The top 10 banks are expected to make a combined $24.8bn of revenues in fixed income trading, which includes bonds, currencies and commodities, according to Morgan Stanley and Credit Suisse estimates, more than 40% below the first quarter of 2009 when the market rebounded sharply from the crisis.

Two of the top five fixed income divisions told the Financial Times they expected to respond by cutting more jobs because the market is worse than expected, with traders blaming patchy macroeconomic data, interest rate uncertainty, regulation that limits risk taking and worries about the situation in Ukraine. Analysts now expect Goldman Sachs to record its weakest first quarter since 2005 and JPMorgan Chase and Bank of America are forecast to see their lowest revenues since they bought Bear Stearns and Merrill Lynch, respectively, in 2008.

The weakness is expected to be even more severe among European banks such as Deutsche Bank and Credit Suisse, which are looking to meet new capital requirements by shrinking their balance sheets. “Anecdotally it seems Europeans are losing most share in the US itself and so are losing global diversification,” said Huw van Steenis, analyst at Morgan Stanley. Some US banks hope their European rivals will cede market share. “Those outside of the top five will have to think about if they can continue to be in that business,” said James Chappell, analyst at Berenberg.

New regulations such as the Volcker rule – which prohibits proprietary trading – and tougher capital requirements restrict the risk banks can take and are sapping liquidity, bankers say, even though final versions of the rules have not proven as harsh as some feared.

Four years after the outlines of the post-crisis regulation were put into place, traders claim that outstanding areas of uncertainty are hitting activity among big bond traders such as JPMorgan, Citi, Deutsche Bank, Bank of America, Goldman and Barclays. “There’s a significant amount of uncertainty about what the endgame is going to be,” said the head of trading at one bank. “We probably haven’t reached a peak of effort and management time. We’re not turning the page yet on regulation.”

Christian Bolu, analyst at Credit Suisse, estimated that US government bond trading volumes are down about 8% so far this year compared with the same period in 2013. Trading of mortgage-backed securities backed by the US government is down 41%, while corporate bond trading has increased by 12%.

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Funny to see how George Soros says Europe is the only place that got it right, while others, like Ambrose Evans-Pritchard here, say it got it terribly wrong.

Paralysed ECB leaves Europe at the mercy of deflation shock from China (AEP)

Most of western Europe is already in outright deflation. So are the Balkans, the Baltic states and the old Habsburg core. The Continent has left its flank open to an external shock from Asia. There is a high chance that this will occur as China attempts to extricate itself from a $24 trillion credit misadventure by debasing its currency to regain lost competitiveness and bail out its export industry.

The yuan has fallen by nearly 2% against the dollar since early January, and 4% against the euro. For all the talk of weaning China off chronic over-investment, Beijing engineered a record $5 trillion of investment in fixed capital last year – up 20% from the year before, and as much as the US and Europe combined. This has created a vast overhang of excess manufacturing capacity in the global system. It is coming our way in the form of a slow, powerful, deflationary undercurrent.

Europe’s headline price data understate the full deflation risk. Eurostat’s HICP index “at constant taxes” – stripping out the one-off effects of austerity – shows that 23 of the EU’s 28 countries have seen a fall in prices over the past seven months. “The risk of deflation is definitely before us,” said Olivier Blanchard, the International Monetary Fund’s chief economist.

By this measure, inflation since June has been running at a rate of -1% in France, -2% in Holland, Belgium and Slovenia, -4% in Italy, Spain and Portugal, -6% in Greece and -10% in Cyprus. Sweden and Switzerland are also in deflation. Germany rolled over in July. The UK still clings to a little inflation – now a precious commodity – but it too turned negative in September.

This is a nightmare for the debt-stricken states of southern Europe, still trapped in a slump with mass unemployment regardless of whether they manage to eke out the odd quarter of miserable growth. With Germany at zero inflation, they have to go into even deeper deflation to claw back lost competitiveness within EMU under “internal devaluations”.

This, in turn, plays havoc with debt dynamics through the denominator effect. Their debt loads are rising on a base of flat or contracting nominal GDP. It is a key reason why Italy’s public debt has risen from 119% to 133% of GDP since 2010 despite achieving a primary budget surplus, or why Portugal’s debt jumped from 94% to 129% (IMF data).

These countries have an impossible task, damned if they do and damned if they don’t. Mr Blanchard said their gains in competitiveness risk being overwhelmed by a rise in the “real value” of their debt. “The danger is that the second effect dominates the first, leading to lower output and further deflation.”

There is, of course, no magic line when inflation falls below zero. A recent IMF study said the effects become lethal for economies with high public/private debt loads – mostly over 300% of GDP in Club Med – even at “lowflation” rates. The European Central Bank is betting that this downward lurch in prices is a temporary blip due to lower energy costs, insisting that inflation expectations remain “firmly anchored”. The collapse of iron ore and copper prices over recent days – on China jitters – should puncture these illusions.

The ECB’s expectations doctrine is in any case a Maginot Line. “Long-term inflation expectations on the eve of three deflationary episodes in Japan were also reassuringly positive,” said the IMF. Indeed, they were a lagging indicator and therefore useless. “One needs to act forcefully before deflation sets in,” said the Fund, adding that the Bank of Japan was too slow to cut rates and boost the money base. “In the event, it had to resort to ever-increasing stimulus once deflation set in. Two decades on, that effort is still ongoing.”

BoJ governor Yasuo Matsushita said as late as January 1998 that there was “no reason to expect that overall prices will drop sharply and exert deflationary pressure on the entire economy”. As a result of this lordly certitude, Japan suffered shattering effects when the East Asia crisis entered its second and more deadly phase that summer.

The ECB’s Mario Draghi risks going down in history as Europe’s Mr Matsushita, as he continues to insist that EMU inflation today is merely where it was in 2009 (in the post-Lehman mayhem) and therefore benign, and that Euroland is not remotely like Japan. “The ECB has taken decisive action at a very early stage of this crisis,” he said. The proof is in the monetary pudding, and this shows that EMU is already in worse shape than Japan in early 1998 by a large margin. Private lending is contracting at 2.3%, the M3 money supply has ground to a halt and EMU-wide unemployment is stuck at a near-record 12%.

The ECB is by definition ferociously tight. Marcel Fratzscher, head of the German Institute for Economic Research (DIW) in Berlin, is right to berate the bank for betraying its primary duty, demanding €60bn of bond purchases each month before it is too late. “It is high time for the ECB to act. Otherwise Europe risks falling into a dangerous downward spiral,” he said.

Euro Intelligence said failure to act would be “an existential disaster for the eurozone” and a “shocking derogation” of the ECB’s mandate. Mr Draghi has bent over backwards to assuage the hard-money monks at the Bundesbank – much to the fury of one ex-ECB governor who told me he had become the “captive” of Right-wing German elites – judging that it would be too risky for the Latin Bloc and their allies to mobilize their majority voting power and force through a reflation policy.

His task has become even more complicated since the German constitutional court ruled last month in thunderous language that the ECB’s bond rescue plan for Italy and Spain (OMT) “exceeds the ECB’s monetary policy mandate, infringes the powers of the Member States, and violates the prohibition of monetary financing of the budget”. It also said the OMT is probably “Ultra Vires”, meaning that the German Bundesbank may not take part.

The ruling is not final – and does not prohibit ECB bond purchases as such – but it raises the bar for quantitative easing to a punishingly high level. While the Fed and the Bank of England were able to act instantly once it became clear that QE on a huge scale was imperative, the ECB is paralysed by politics, ideology and judges.

There have been dovish mutterings from ECB members over recent days but any action is likely to be confined (for now) to token gestures such as a negative deposit rate or easier collateral rules for banks, not the €1 trillion blast of QE that is so obviously needed immediately. The rise in the euro to €1.39 against the dollar tells us that markets expect nothing of substance.

Europe is left at the mercy of world events. The Fed is pressing ahead with $10bn of tapering each meeting, slowly forcing up the global price of credit and tightening the vice further for emerging markets. The bank has ignored the pleas for mercy from the developing world – still addicted to dollar liquidity – just as it did in the months before the Asian crisis in 1998. The OECD warned this week that the real impact of Fed tapering has “only just begun” and the effects threaten to ricochet back into Europe through trade and banking stress in emerging markets.

China is tightening as well in what amounts to a G2 monetary squeeze. It has been so successful that shadow banking virtually froze in February, prompting the central bank to step back in consternation at its own handiwork. Some have a touching faith that the Communist Party knows what it is doing, even though it is the same body responsible for just having blown the most spectacular credit bubble of modern times, more than a match for the pre-Lehman booms in Greece, Spain or Ireland in character and much greater in scale. I prefer the Chinese metaphor of feeling the stones beneath the water, their way of saying trial and error.

China will not collapse because the banking system is an arm of the state, but it will have to cope with the colossal malinvestments left from a hubristic five-year blow-off. Deflation is already stalking the country. Factory gate inflation has dropped to -2%.

We can be sure that China will seek to pass this deflationary parcel to somebody else, just as the Japanese have already done with their epic devaluation under Abenomics. The package will land in Europe, the one region that lacks a proper central bank and the governing coherence to protect its own interests. The implications for the depression-wracked societies of the Mediterranean are nothing less than calamitous.

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UK faces ‘crippling’ tax rises and spending cuts to fund pensions and healthcare (Telegraph)

Britain faces “crippling” tax rises and spending cuts if it is to meet the needs of an ageing population, according to the Institute of Economic Affairs. The IEA calculated the Government would need to slash spending by more than a quarter or impose significant tax hikes because official calculations had failed to factor in future pension and healthcare liabilities. “As populations age, tax bases will grow more slowly while government spending rises faster,” the report said.

In a stark warning, the think-tank said Britain faced tax rises equivalent within just two years to more than 17% of GDP – more than £300bn – in order to meet all future spending commitments. This is larger than the entire annual NHS budget and would increase taxes from 38% to 55% of national income.

Philip Booth, the IEA’s programme director, said tax increases of this magnitude would be “impossible” to implement “without choking off economic growth and actually reducing tax revenues. “The underlying problem is that successive governments have made promises which can simply not be honoured from the existing tax base. The electorate is grazing a fiscal commons at the expense of future generations,” he said.

In the absence of further tax hikes, Jagadeesh Gokhale, the author of the report, said total spending would have to be cut by more than one quarter or health and welfare expenditure by 53% compared with the current implied level if all future spending was to be met out of tax revenue.

While the IEA said increases to the state pension age would help to soften the blow of future tax rises, it said policies were being implemented too slowly and were “inadequate” on their own. Mr Gokhale said policies to address pension saving and healthcare costs were needed now or the problem would quickly grow out of control. “Without significant changes to spending levels, huge sacrifices will have to be made by future generations either through significantly higher taxes or reduced benefits,” the report said.

The IEA calculated that delaying crucial pension and healthcare reforms by just a few years would dramatically increase the burden because of growing debt interest payments. It said the ratio would increase from 13.7% of GDP in 2010 – already higher than the EU average of 13.5% – to almost 17.1% by 2016 if no policy adjustments were made.

“We have never been in a situation like this before. It is quite possible that we will not find our way through without serious social breakdown and/or mass emigration of the most mobile and productive people,” said Mr Booth. The report also warned that governments would not be able to grow their way out of trouble, and were too often “fixated” on short term growth. It said while the Government’s decision to move assets of the Royal Mail pension fund had reduced short-term debt measures, long-term state pension liabilities had increased.

“The Government took the assets of the Royal Mail pension fund and gave the workers promises of government pensions in return,” the report said. “The explicit government debt was reduced but future government liabilities – in this case contractual – were increased.”

“Without reform, today’s young people are likely to be disappointed, either in terms of higher tax rates or in terms of reduced future benefits provided by government,” said Mr Booth. “The quicker the government changes policy, the more painlessly the situation will be resolved. For too long people have voted themselves benefits to be paid for by the next generation of taxpayers, not by sacrifices that they will make themselves.”

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A whole list of China related articles that all keep on pointing to the country’s vulnerability because of all the credit created there off late.

China premier warns on economic slowdown as data fans stimulus talk (Reuters)

Chinese Premier Li Keqiang warned on Thursday that the economy faces “severe challenges” in 2014 – comments that came as weak data fanned speculation the central bank would relax monetary policy to support stuttering growth. Li, speaking at a news conference on the final day of China’s yearly parliament, hinted Beijing would tolerate slower economic expansion this year while it pushes through reforms aimed at providing longer-term and more sustainable growth.

Data released shortly after his comments suggested that tolerance may face an early test. Growth in investment, retail sales and factory output all slumped to multi-year lows, suggesting a marked slowdown in the first two months of the year. “A storm is coming,” said Gao Yuan, an analyst at Haitong Securities in Shanghai, while Hao Zhou, the China economist for ANZ said “policy easing should be imminent.”

At the carefully orchestrated briefing where questions had to be vetted in advance, Li spent most time discussing the economy. But he also touched upon other topics, including friction in relations with Washington, corruption, pollution, and the disappearance of a Malaysia Airlines aircraft. While acknowledging the economy faced difficulties, Li suggested Beijing would not let growth slip too far. The government has targeted a rise of GDP in 2014 of 7.5% after actual growth last year of 7.7%. “We believe we have the ability, and all the means, to ensure that economic growth will stay within a reasonable range this year,” he said.

He also signaled the government will allow further debt defaults after Shanghai Chaori Solar Energy Science and Technology Co Ltd failed last Friday to pay an interest payment on its five-year bonds. The first default on a domestic bond was hailed by experts as a landmark that will impose more market discipline, a break from the past when bonds enjoyed an implicit guarantee because the government would bailout troubled firms to ensure stability.

Growth in Chinese corporate debt has been unprecedented. A Thomson Reuters analysis of 945 listed medium and large non-financial firms showed total debt soared by more than 260% to 4.74 trillion yuan ($777.3 billion) between December 2008 and September 2013. “We are reluctant to see defaults of financial products, but some cases are hard to avoid,” Li said. “We must enhance oversight and solve problems in a timely way to ensure no systemic and regional risks.” [..]

The signs of a slowdown in the economy this year have raised worries among some investors that China will miss the 7.5% growth target. “The momentum is really quite weak,” Wei Yao, China economist for Societe Generale said after Thursday’s data. “Q1 GDP growth is probably already below 7.5%. The government will probably do some easing.” Yao said she expected the central bank to reduce bank reserve requirements by 50 basis points. Major banks currently have to put aside a fifth of their cash as reserves and such a measure would represent the central bank’s strongest policy easing since 2012.

Li skillfully dodged a question on how far Beijing would let economic growth slip before it steps in with policy measures to support activity. Still, he hinted at tolerance for below-target growth, as long as enough new jobs are created. “The GDP growth target is around 7.5%. ‘Around’ means there is some flexibility and we have some tolerance,” he said, adding that the lower limit on growth must ensure job creation.

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China Data Show Economy Cooling as Indicators Trail Estimates (Bloomberg)

China’s industrial-output, investment and retail-sales growth cooled more than estimated in the first two months of the year, signaling a slowdown in the economy as leaders seek to sustain 7.5% expansion. Factory production rose 8.6% in the January-February period from a year earlier, the National Bureau of Statistics said today in Beijing, compared with the 9.5% median projection of analysts surveyed by Bloomberg News. Retail sales advanced 11.8%, while fixed-asset investment excluding rural households was up 17.9%.

Premier Li Keqiang today said there’s some flexibility around the nation’s growth goal this year and that the government’s key concerns are jobs and livelihoods. Even so, an extended slowdown would add to chances of stimulus and test the Communist Party’s commitment to give market forces a bigger role in the world’s second-largest economy while clamping down on overcapacity, debt and pollution.

The Shanghai Composite Index (SHCOMP) pared gains after the data and was up 0.9% at 1:50 p.m. local time. China combines data for industrial output, retail sales and fixed-asset investment for January and February, citing distortions from the weeklong Lunar New Year holiday, whose timing differs each year.

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People in the west will continue to cut their discretionary spending, and that seals China’s fate.

China Export Prowess Wanes in U.S., Europe (Bloomberg)

The Made in China label is losing traction with its two biggest customers. After three decades of gains, China’s share of U.S. imports has plateaued and in Europe it’s in decline. The steepest losses are in the European Union, where China’s share of imports slumped to 16.5% in the first 11 months of last year, from a 2010 high of 18.5%, according to data compiled by Bloomberg News. In the U.S. the needle has barely moved in the past five years, holding around 19%.

China’s low-cost vantage has been blunted by rising wages and an appreciating currency, with cheaper nations including Vietnam and Bangladesh competing to sell products from T-shirts to shoes. With an unexpected drop in total exports in February compounding the challenges, the trends underscore the need for President Xi Jinping’s government to foster competitiveness in higher-technology items from semiconductor chips to medical-imaging equipment to airplanes.

“It’s a sea change,” said Andrew Tilton, chief Asia economist at Goldman Sachs Group Inc. in Hong Kong, who previously worked for the international office of the U.S. Treasury Department. “China’s period of unusually strong competitive advantage in exports may have run its course.”

The yuan has appreciated about 35% against the dollar since July 2005, wages have tripled in the past decade and China’s labor force has begun to shrink. The currency weakened today for a fourth day to 6.1435 per dollar, while the benchmark Shanghai Composite Index of stocks fell 0.2%.

The nation’s working-age population began declining in 2012, Chinese government data show. The pool of 15- to 39-year-olds — the backbone of factories making clothes and toys — has contracted by 35 million in the past five years, a U.S. estimate indicates. The changes have led global manufacturers to begin shifting production to countries such as Bangladesh and Vietnam, which surpassed China in 2010 as the largest supplier of Nike Inc. footwear. Higher costs and wages in China are prompting some Asian companies to set up manufacturing plans in neighboring countries. Samsung Electronics Co. is building a $2 billion plant in Vietnam that may make 120 million handsets by 2015.

U.S. and European clothing makers are also looking elsewhere. Some 72% of chief purchasing officers who oversee a collective $39 billion in annual purchases for apparel firms expected to shift to lower-cost nations — with Bangladesh, Vietnam and India as the top three destinations for the coming five years, a survey conducted by advisory firm McKinsey & Co. in 2013 shows.

More than a decade ago, China was the darling as it entered the World Trade Organization, with expanding commerce helping it boost growth, which averaged 10.6% in the decade that followed 2001. The nation also reshaped the world economy as China put cheap toys, souvenirs and jeans on shop shelves from New York to London to Paris.

Now, the beneficiaries of China’s slide in developed markets can be found as far away as Mexico. Its share of U.S. imports rose to 12.4% last year from 10.3% in 2008. Before China became a WTO member, Mexico’s proportion was 11.2%. As China’s competitiveness wanes, Mexico is benefiting from its proximity to the U.S. market and lower transportation costs, said Louis Kuijs, chief China economist at Royal Bank of Scotland Group Plc in Hong Kong, who formerly worked at the World Bank and the International Monetary Fund.

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China needs to solve its debt crisis, says former Treasury minister (Telegraph)

China’s debt issues are the country’s biggest economic concern and need to be tackled, former Treasury minister and chairman of the China-Britain Business Council Lord Sassoon has said. Lord Sassoon, a former Treasury mandarin as well as Commercial Secretary to the Treasury from 2010 to 2013, told The Telegraph that Chinese debt is a more pressing worry than the recent mixed figures concerning the country’s economic growth rate.

“I think the biggest question I would have, and China itself has in the short term, is the debt issues which they need to resolve. “If there’s something to focus on, it’s around banking, shadow banking, provincial debt and I don’t know where that will all land”, he said.

Last year, China’s local government debt surged to nearly £1.8trn, 67% higher than in 2010. The rise brought China’s total public debt, including money owed by central government, to 58% of its £5.11trn economy. Meanwhile, China’s banks have overseen a rapid expansion of lending that has seen £9.1trn of credit created, and figures released in February showed that under-performing loans made by Chinese banks have risen to the highest level since the financial crisis.

China’s debt overhang has raised concerns about a credit crisis and slowdown of China’s economy. Recent economic figures have shown a decline in manufacturing PMI and exports, but Lord Sassoon said he’s more focused on long-term developments. “I think people can get excessively excited about China’s short term numbers, which have been mixed in recent months. “For me, it’s not so much one month’s, one quarter’s trade figures”, he said.

He went on to say that he believes the Chinese government are prepared and able to tackle the problems, however. “The new Chinese leadership recognise they’ve got a big problem they need to deal with immediately around the overhang of the public sector, particularly provincial, debt. “I think there’s a lot of issues for the Chinese government to work on but they’re not hiding them and they’ve got very good people on the case”, he said.

Lord Sassoon said the Asian super-power’s banks were also prepared to address their own issues. “If you go and talk to the big state-owned banks, the four big Chinese banks are very open and interesting on the subject of loans to sectors where there’s been over-capacity and there are businesses that have failed or failing. “I happen to believe there will be a soft landing because it’s the quality of the people in Beijing who are managing these issues”, he concluded.

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Chinese yuan’s decline leaves observers guessing (Barry Eichengreen)

Since December, when the US Federal Reserve began tapering its monthly purchases of long-term assets, emerging-market currencies have fallen across the board. The main exception until recently was China’s indomitable yuan. But now the yuan, too, has been falling against the dollar. So is this more evidence of the disruptive impact of the Fed’s policy? The yuan’s decline is not large, and whether it will continue is uncertain. But the movement is striking by the standards of what is still a heavily managed currency. And it is in the opposite direction from what everyone has come to expect.

Certainly, the Fed’s tapering of its quantitative-easing policy has had some effect. A standard money-making strategy for investors with access to Chinese financial markets has been to borrow dollars at low interest rates and buy high-yield Chinese assets. But tapering, by auguring higher US interest rates, makes it more expensive to borrow dollars and invest in Chinese assets. As “the carry trade” falls out of fashion, demand for the yuan declines and its exchange rate depreciates.

But, while the Fed has been tapering since December, the weakness of the yuan materialised only in February. Evidently something else is going on. The reality is that China’s tightly controlled currency falls only when the People’s Bank of China wants it to fall. The PBOC, not the Fed, calls the tune to which the yuan dances. So why has it been singing the depreciation song?

One possibility is that a weaker yuan is, paradoxically, part of the Chinese government’s strategy for encouraging its wider international use. China is committed to broadening the yuan’s role for foreign trade and investment-related purposes. Ultimately, it would like to see the yuan achieve an international status comparable to that of the dollar.

To do that, China will have to develop its financial markets and open them to foreign investors. But opening those markets is feasible only if the authorities eliminate the perception that exchange-rate movements are a one-way proposition. So long as investors believe that the yuan can only appreciate, opening the country’s markets will cause it to be flooded by foreign money, with unpleasant financial consequences, not the least of which is inflation.

Foreign investors therefore need to be reminded that the yuan can fall as well as rise. Some observers regard the yuan’s recent slide as an attempt to squeeze the speculators and signal the advent of a more flexible exchange rate. They believe that the PBOC is about to widen the currency’s trading band.

If so, the PBOC’s recent market moves are a good thing. If there is one clear lesson from history, it is that the combination of open financial markets and a rigid exchange rate is a disaster waiting to happen. China has already begun opening its financial markets. Thus, greater exchange-rate flexibility is overdue.

A second, less positive interpretation is that the PBOC is weakening the yuan in order to boost Chinese exports. Reacting against excesses in the country’s property markets and shadow banking system, the PBOC has moved, not unreasonably, to limit the availability of cheap credit. But this may have caused domestic demand growth to slow more rapidly than expected. And boosting exports is, of course, China’s customary response to weaker domestic demand.

This less encouraging interpretation of the yuan’s recent weakening suggests that official efforts to clamp down on the shadow banking system are not going well, and that the effort to engineer a soft economic landing is not on course. If this view is correct, efforts to rebalance the Chinese economy could now be put on hold, which would not bode well for future economic and financial stability.

Moreover, if China is pushing down the yuan in order to goose its exports, its policy will not sit well with its foreign competitors, be they the US or Japan. Complaints about currency manipulation and the associated diplomatic tensions will quickly return.

China is sufficiently opaque that it is hard to know from the outside which interpretation is correct. Future yuan movements will tell the tale. Mainly up-and-down fluctuations would be a sign that the policymakers’ goal is to eliminate one-way bets and advance the cause of yuan internationalisation. A secular decline, by contrast, would indicate that demand in China is weakening and rebalancing has been suspended. For now, the only thing observers can do is to watch closely and hope for the best. And it is the PBOC they should be watching, not the Fed.

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Using copper as collateral to buy more copper. Isn’t life wonderful?

Copper sell-off following China bond default brings market to four-year low (Reuters)

China’s first domestic bond default has shaken the foundations of the copper market, stoking investor worries about the possible unravelling of financing deals that have locked up vast quantities of copper. This anxiety has led to three days of heavy selling in the metal, while having little noticeable effect on other global financial markets.

The Shanghai Futures Exchange’s most-traded copper contract reached its lowest level in more than four years on Tuesday, and the London copper benchmark fell to its lowest in more than three years later in the day. “A lot of that is linked to the financing deals and you start to wonder, ‘are they at risk?’ and I think that is what the market is indeed worried about, and that’s why copper has taken the brunt,” BNP Paribas analyst Stephen Briggs said.

The default on a bond payment by China’s Chaori Solar last week signalled a reassessment of credit risk in a market where even high-yielding debt had been seen as carrying an implicit state guarantee. On Tuesday, solar panel maker and power company Baoding Tianwei Baobian Electric announced a second straight year of net losses, leading to a suspension of its stock and bonds on the Shanghai Stock Exchange and stoking fears that it, too, may default.

The metals markets saw the default as a sign of tighter credit to come for users of metals and for financiers that have used the metal as collateral for borrowing, analysts said. If their loans are not renewed and financing deals start to unravel, the investors could unload their metal supplies on to the market.

Similar financing deals are in place using metals such as zinc and iron ore, but copper has been the preferred choice for the Chinese trade and finance community. “If there are worries in a general sense about financial conditions in China, copper is perhaps more exposed to that than other metals, because we’ve seen a substantial rise in inventories in China this year,” Briggs said.

At least one US scrap copper trader has suffered “large” losses after the Chinese default, one of the first signs that sinking prices and tightening credit are taking a toll on the physical market. Some analysts and traders estimated that 60% to 80% of China’s copper imports in recent years may have been used as collateral, although none of them could give a definitive figure for how much copper is now tied up in deals.

The mainland’s imports of copper products hit a record 536,000 tonnes in January, up 53% year on year, customs data showed. The inflow slowed in February to 379,000 tonnes but was still higher than in February 2013. Copper stocks in warehouses monitored by the Shanghai Futures Exchange are bulging, up 65% since early January to around 200,000 tonnes . Another 745,000 tonnes of the metal is held in bonded warehouses, minerals consultancy CRU estimated. No official figures are available.

“Given rising inventories, a negative arbitrage and a seemingly soft post-Lunar New Year increase in activity, we doubt that real demand lies behind the strong copper numbers,” Credit Suisse said in a research note. Benchmark Shanghai and London Metal Exchange copper prices have been falling steadily this year, mostly because of tepid economic growth in China, which accounts for more than 40 per cent of global demand for the metal.

But after the sharp price drops in recent days following the bond default, would-be importers in China are finding it tough to get credit. “Right now it is very difficult for clients to issue an LC (letter of credit) to import copper because the bank loan is very tight. Also if you import the copper in China, you will lose a lot of money,” one trader in Singapore said. [..]

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Want to grow? Get yourself an earthquake!

New Zealand Raises Key Rate, First Developed Nation to Tighten

New Zealand raised its key interest rate, the first developed nation to exit record-low borrowing costs this year, and said it plans to remove stimulus faster than previously forecast to contain inflation. “It is necessary to raise interest rates toward a level at which they are no longer adding to demand,” Reserve Bank of New Zealand Governor Graeme Wheeler said in a statement in Wellington after increasing the official cash rate by a quarter%age point to 2.75%, as forecast by all 15 economists in a Bloomberg News survey. The Kiwi gained after Wheeler said further increases are likely in coming months and the OCR may rise by a total of 125 basis points this year.

Soaring dairy prices, the NZ$40 billion ($34 billion) rebuild of earthquake-damaged Christchurch and the strongest immigration in 10 years are fueling growth in the South Pacific economy. Wheeler is departing from global peers as surging house prices in the nation’s biggest city of Auckland stoke concerns of a bubble and add to inflationary pressures. “We’re on a different planet,” Stephen Toplis, head of research at Bank of New Zealand Ltd. in Wellington, said in an interview. “New Zealand’s environment is fundamentally different to most of our peers” because of record-high commodity prices and construction, he said.

The RBNZ today lifted its forecast for the 90-day bank bill rate, suggesting borrowing costs will rise more quickly than previously expected. The tightening is set to come in an election year, with Prime Minister John Key seeking a third term in a poll set this week for Sept. 20.

Wheeler will raise rates at his next two opportunities in April and June then pause until December, according to the median forecast in a Bloomberg News survey of 15 economists conducted after today’s decision. Six analysts expect a rise at the Sept. 11 review. “If the economic environment makes it a pre-requisite, then he’ll go, but any central bank governor would prefer to not get involved in the election,” said Toplis.

New Zealand’s dollar rose to its highest since May 1 after the RBNZ decision. It bought 85.59 U.S. cents at 5:36 p.m. in Wellington, up from 84.65 cents immediately before the statement. “The bank does not believe the current level of the exchange rate is sustainable in the long run,” Wheeler said, reiterating that the currency’s strength is a “headwind” for exporters and local manufacturers who compete against imports.

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Fonterra’s link to China is painfully strong.

New Zealand’s Fonterra, World’s Largest Dairy Exporter, In Guilty Plea Over Food Safety (BBC)

New Zealand’s Fonterra has admitted four food-safety violations following a botulism scare last year that led to recalls of milk products in China. Government officials had filed charges against the dairy company, accusing it of processing and exporting dairy products which did not meet standards. Fonterra is also accused of failing to issue notification about its products not being fit for consumption.

The charges come as Fonterra faces civil court action from Danone. Earlier this year, the French company said it was suing Fonterra over recalls which Danone alleged led to the company losing hundreds of millions of dollars in sales. Danone uses Fonterra ingredients in its infant milk formula. Maury Leyland, a Fonterra manager said: “We have accepted all four charges, which are consistent with the findings of our operational review and the Independent Board Inquiry.” The dairy co-operative has since stepped up its quality control procedures.

In August last year Fonterra sparked a worldwide product recall and food-safety scare when it admitted there could be a bacteria in one of its products which could cause botulism, a severe form of food poisoning. The product suspected of containing the bacteria which could cause botulism was commonly used in infant formula. But the bacteria scare turned out to be a false alarm when later tests found another strain, but of a less harmful kind which does not cause food poisoning.

The threat of botulism led to many countries including China blocking imports of dairy products from New Zealand. The import ban was lifted about three weeks after the initial scare. Fonterra is the biggest dairy firm in New Zealand, which is the world’s largest exporter of dairy products.

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If only we frack till we drop, we will be saved! Hmm, so shy do Shell just announce it’s getting out of US shale because it can’t manage to make it profitable?

EU parliament excludes shale gas from environmental code (Guardian)

EU politicians on Wednesday voted for tougher rules on exposing the environmental impact of oil and conventional gas exploration, while excluding shale gas. Member states such as Britain and Poland are pushing hard for the development of shale gas, seen as one way to lessen dependence on Russian gas, as well as to lower energy costs as it has in the United States. The plenary vote of the European Parliament in Strasbourg, France follows a compromise deal on the draft law in December, which was struck only after negotiators agreed to leave out references to shale gas.

Member states are expected to give their endorsement over the coming weeks, after which the law will become final. Under the planned law, assessments of a range of infrastructure projects, as well as oil and gas, will include their impact on biodiversity and climate change, plus measures to ensure authorities granting approval have no conflict of interest. Industry said the new law avoided placing too many restrictions on projects during their early phases when commercial viability is unclear.

While not imposing unnecessary requirements on the upstream oil and gas industry, the new rules will guarantee that any development, including exploration for shale gas, will be subject to strict environmental standards, Roland Festor, director for EU affairs at the International Association of Oil & Gas Producers, said. Shale Gas Europe, which brings together companies such as Chevron, Total and Cuadrilla Resources, also welcomed the law. Shale gas could potentially play an important role in meeting Europe’s acute energy challenges, Marcus Pepperell, spokesman for Shale Gas Europe, said.

Green politicians, however, said the decision to leave out shale gas was a major setback and that the fracking process, which involves using chemicals to extract gas from the shale rock, posed risks to health and the environment. The Greens believe there is already sufficient evidence to ban fracking but ensuring informed permit decisions through the environmental impact assessment procedure must be the absolute minimum, Sandrine Belier, environment spokeswoman for the European Greens, said.

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Euan’s conclusion: “We seem set to become increasingly reliant upon Russia for gas supplies that also provides our electricity security”.

Blackout Britain? (Euan Mearns)

Why is there a perception that the UK faces an ongoing risk of electricity grid failures? At the end of May 2013 the UK had 416 power stations, counting wind farms and hydro dams, ranging in nameplate capacity from 1 to 3870 MW. The combined capacity in 2013, following large combustion plant closures, was 80,514 MW down from 92,044 MW in 2012 (Figure 1). With peak winter demand roughly 55,000 MW there still seems to be ample spare capacity to guarantee electricity supplies (Figure 1). Why then is there so much talk on the media, blogs and from the CEO of National Grid about pending blackouts in Britain? The answer is not what many may presume it to be.

Figure 1 During the 1960s to the 1980s Britain was largely dependent upon coal and nuclear power for electricity supplies. Natural gas (CCGT) was introduced in the early 1990s and expanded year on year until 2004. At the end of that decade a second phase of CCGT building got under way adding a further 9,274 MW of capacity, which with hindsight appears to be an extraordinary investment decision. The closure of 11,530 MW of large combustion plants has resulted in the decline of UK generating capacity. The expansion of wind got underway in the early 21st century. Wind capacity is not varied into the future. It can be expected to grow some, but not at the historic rate since companies are becoming shy of investing in Britain’s chaotic energy market. Data from DECC table dukes5_11.

Britain has 31,637 MW of CCGT capacity (combined cycle gas turbines) but lacks access to sufficient gas to run this fleet at anything close to capacity. During the cold spell at the end of last winter when gas storage was run down to empty the maximum output from the CCGT fleet was 22,000 MW, just 70% of the installed capacity. The closure of 11,530 MW of large combustion plants (coal and oil) has of course created the electricity supply crisis. But given that these power stations are now gone, it is a shortage of gas that creates the current blackout risk.

Figure 2 shows the pattern of electricity demand in the UK for January and July 2009. In 2009, peak demand was 58.9 GW at 6pm on a Tuesday in January and the minimum demand was 22.3 GW at 6 am on a Sunday morning in July. Peak demand is 2.64 times greater than the minimum demand and the electricity delivery system requires the flexibility and controllability to match supply with demand exactly at all times.

Figure 2 UK electricity demand for January and July 2009 shows three cycles in the pattern of demand. The daily cycle has peaks during day time, with maximum demand normally at 6pm, and troughs at night. The weekly cycle shows increased demand Monday to Friday with reduced demand on Saturday and Sunday. The annual cycle shows increased demand in winter compared with summer. This provides a picture of activity and expectations of the society we live in. We like to stay warm in winter, we go to bed at night and we have weekends off work.

For the time being, blackout risk in the UK is confined to the short periods of peak winter demand that invariably occur at 6pm in the winter months. And the blackout risk is hightened towards the end of the winter when our’s and Europe’s gas storage has been run down. Figure 3 shows gas generating capacity curtailed to 22,000 MW which is an approximation for current gas supply limits. Wind, that is not dispatchable, is removed.

Figure 3 An approximation for the deliverability from UK power stations with CCGT curtailed to 22,000 MW and wind power removed. On a calm, cold weekday at the end of a long cold winter, there is a risk of blackouts in the UK and that risk will increase as the decade progresses.

This now shows the nature of the blackout risk that we face. Should we have a cold winter that drains storage and cold weather in February or March and little wind across the UK and near continent then there is a blackout risk, especially if there are outages at nuclear or other generating plant, which is quite common. This risk will increase towards the end of the decade if planned nuclear closures go ahead and if there are further closures of large combustion plants.

At present, understanding the blackout risk in Britain boils down to understanding the security of future gas supplies and that is not a simple task. The hightened blackout risk of March 2013 came about because of LNG Heading East as a consequence of the Fukushima nuclear disaster in Japan. Closer to home, UK supplies may get some relief in the next few years as a number of new projects come on line, and if there are significant shale gas discoveries. Offsetting that are plans in the Netherlands to cut production in the giant Groningen field and the inevitability of a future peak in Norwegian gas production. We seem set to become increasingly reliant upon Russia for gas supplies that also provides our electricity security.

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Tim Berners-Lee on 25 Years of the Web (Spiegel)

In March 1989, Tim Berners-Lee, 58, established a place for himself in the history books by creating the World Wide Web. That month, the Briton, who at the time worked for the European Organization for Nuclear Research (CERN), wrote a paper titled “Information Management — A Proposal.” His research led to the development of the first Web browser and, finally, the World Wide Web. Today, Berners-Lee is a professor at the Massachussetts Institute of Technology (MIT) and the University of Southhampton in England.

SPIEGEL ONLINE: You are considered to be the father of the World Wide Web. When you look at how your idea developed over time, do you view the Web more with pride, disbelief or concern?

Berners-Lee: All of the above. Certainly all the people who have been part the Word Wide Web can be very proud of what has been achieved, and especially about the spirit of collaboration behind this amazing development. That said: All that collaboration and working together is to a certain extent under threat, because the Web has become so powerful, because it has become such an important technology for everyday life and almost everything we do. Therefore there is a strong tendency for governments, big organizations and companies to try to control it.

SPIEGEL ONLINE: It isn’t just China and Iran that are attempting to control the Internet and spy on its users. Intelligence agencies in the country of your birth, Britain, and the United States are acting like hackers, undermining security and even encryption standards. How big is the loss of trust, in your view, and what can be done about it?

Berners-Lee: What that has shown is the lack of oversight over the spying systems both in the United Kingdom and the US. That needs to change. We need a serious overhaul of those social systems around spying. Any country that has a part of the government or the police spying on the Internet to combat crime must demonstrate that they have a very solid level of accountability and that the information they get is never abused. The privacy of the individual must be respected and the data captured cannot be abused for commercial purposes. What’s really great about Edward Snowden revelations is that they raise awareness about these problems and about the Internet and its integrity.

SPIEGEL ONLINE: Some countries and companies want to build regional safe havens for data. For example, Brazil wants to force international companies to store Brazilian customers’ data on servers located inside the country. Germany’s Deutsche Telekom is thinking of a Schengen Net that would keep data inside the EU. What is your take on that?

Berners-Lee: Any division or Balkanization of the Web into segments is a very bad idea. The reason we had this shoot growth of creativity on the Web that got us to where we are now, to this incredible richness, is that the Web has been a non-national, open, universal thing. It initially grew without any reference to national borders. It is only when you try to police the Internet that you need to use laws, and most sets of laws we have are nation-based. So we must be very careful to make sure the Internet remains open.

SPIEGEL ONLINE: You and others are launching a global campaign to ensure the legal protection of Web users’ rights internationally. What would you include in your personal Magna Charta for the Web?

Berners-Lee: First, I would like us to have that conversation together. That is why we created webwewant.org. I want us to use this year to define the values that we as Web users are going to insist on. I would like every country to debate what that means in terms of their existing laws. In what areas must we enhance our regulations to guarantee fundamental rights on the Internet? The right to privacy must be in there, the right not to be spied on and the right not to be blocked. The commercial marketplace should be completely open. You should be able to visit any political website apart from the things that we all agree are illegal, nasty and horrible. Access to the Web is, of course, a fundamental right. As we celebrate the Web’s 25th anniversary, we need to think about the fact that less than half the world’s population uses the Web at all.

SPIEGEL ONLINE: How would you like to change that?

Berners-Lee: The advance of the mobile web has made the problem much easier to address. At best, a poor person in Africa will have a $10 mobile phone that still has no browser. The question now is how we can drive down the price of a basic smartphone with a browser on it. The next question is how we can we create data plans that are affordable and provide enough bandwidth to allow the user to participate in the Information Society. Then we need to them to write, share their creativity and not just read.

SPIEGEL ONLINE: You have suggested that the Web has developed quite well without national regulations. Do you see a role here for governments as well?

Berners-Lee: We started the Alliance for Affordable Internet (A4AI), which sees governments, NGOs and companies working together in order to overcome big drags.

SPIEGEL ONINE: What do you mean by “drags”?

Berners-Lee: Well, often there are seemingly “sweet deals” in which big foreign telecommunications companies offer to connect all schools for free in a certain country on the condition that they become the monopoly provider. That keeps prices high and hinders innovation. A4AI wants to make sure the regulatory landscape is good and to try to get companies to offer low start-up charges and fees for people who want to get onboard for the first time.

SPIEGEL ONLINE: Looking back 25 years, what was one of the most important milestones in the Web’s development?

Berners-Lee: When I first developed the Web technology at CERN in Geneva, there was another system called Gopher. I didn’t think it was as good as the Web, but it started earlier and had more users. At a certain point the University of Minnesota, which had created the Gopher system, said that in the future they would possibly charge a royalty for commercial uses. Gopher traffic immediately dropped off and people moved to the World Wide Web. CERN management then made a commitment — I can still remember the date, April 30, 1993 — that royalties would never be charged for using the Web. That was a very important step because it established a trend.

SPIEGEL ONLINE: So far the Web has been steered, administered and “governed” by many organizations. The US plays a dominate role through the Internet Corporation for Assigned Names and Numbers (ICANN), which manages the allocation of IP addresses and the .com and .net names of sites associated with them. Is this multistakeholder approach the right model for the next 25 years?

Berners-Lee: Nothing is perfect and every multistakeholder solution means hard work and involves a lot of communication. We need to revise how that works, but incrementally. It is also important for the US to formally let go of ICANN. But, yes, I think the solution for the future is a revised version of the existing multistakeholder model.

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Almost all animals see UV light. We do not.

Most Animals Can See UV Light, See Power Lines As Flashing Bands Across The Sky (Guardian)

Power lines are seen as glowing and flashing bands across the sky by many animals, research has revealed. The work suggests that the pylons and wires that stretch across many landscapes are having a worldwide impact on wildlife. Scientists knew many creatures avoid power lines but the reason why was mysterious as they are not impassable physical barriers. Now, a new understanding of just how many species can see the ultraviolet light – which is invisible to humans – has revealed the major visual impact of the power lines.

“It was a big surprise but we now think the majority of animals can see UV light,” said Professor Glen Jeffery, a vision expert at University College London. “There is no reason why this phenomenon is not occuring around the world.” Dr Nicolas Tyler, an ecologist at UIT The Arctic University of Norway and another member of the research team, said: “The flashes occur at random in time and space, so the power lines are not grey and passive, but seen as lines of light flashing.”

He said the discovery has global significance: “The loss and fragmentation of habitat by infrastructure is the principle global threat to biodiversity – it is absolutely major. Roads have always got particular attention but this will push power lines right up the list of offenders.” The avoidance of power lines can interfere with migration routes, breeding grounds and grazing for both animals and birds.

Autopsies on dozens of mammals from zoos and abbatoirs showed their eyes were able to see UV, including cattle, cats, dogs, rats, bats, okapi, red pandas and hedgehogs. Also on the list were reindeer and further work published in the journal Conservation Biology showed these animals, whose eyes are specially adapted to the dark Arctic winters, are particularly sensitive to UV light. UV vision helps reindeer find plants in snow cover, but in the depths of winter their wide irises and sensitive eyes means the power lines appear particularly bright.

The avoidance of power lines had been explained in the past by the corridors cut through forests to accomodate them, where animals would be exposed in the open to predators. But this explanation could not apply in the treeless tundra of northern Norway, where 220,000 reindeer are tended by 7,000 herders from the traditional Sami people. “Right now, there is a plan to build a 186-mile long power line in north Norway,” said Tyler. “This new work will encourage power companies to negotiate with herders about where they put the power lines.”

Around the world, Tyler said: “There are hundred of examples of animals avoiding power lines. Now we know that, not only do these clear-cut corridors mean exposure to predators, at the same time there is this damn thing flashing at you.” Jeffery said burying all power cables would be unrealistically expensive but added that one idea would be to put a non-conducting shield around the cable to screen it from view. The UV light, which is caused by electricity ionising the air around cables, are a major source of inefficiency for electricity companies and also cause the hissing or crackling noises sometimes heard.

Power companies already use helicopter-mounted UV cameras to monitor power cables, because the flashes can be an early sign of conduction problems, but the cameras only record a very narrow range of UV. “Animals see across the range, so the intensity of light seen by them is much more than seen by the helicopter flights,” said Jeffery.

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This article addresses just one of the many issues discussed in Nicole Foss’ new video presentation, Facing the Future, co-presented with Laurence Boomert and available from the Automatic Earth Store. Get your copy now, be much better prepared for 2014, and support The Automatic Earth in the process!