Apr 112016
 
 April 11, 2016  Posted by at 9:41 am Finance Tagged with: , , , , , , , , , ,  


Dorothea Lange Butter bean vines across the porch, Negro quarter, Memphis, Tennessee 1938

US Banks’ Dismal First Quarter Spells Trouble For 2016 (Reuters)
US Faces ‘Disastrous’ $3.4 Trillion Pension Funding Hole (FT)
Abenomics Rebuked As BlackRock Joins $46 Billion Japan Pullout (BBG)
Beijing Risks ‘Sterling-Style’ Currency Crisis As Deflation Persists (AEP)
Chinese Buyers Double Their Aussie Property Investments, Again (BBG)
In BP’s Final $20 Billion Gulf Settlement, US Taxpayers Pay $15.3 Billion (F.)
British Banks’ ‘Misconduct Bill’ Has Reached Nearly $75 Billion (Reuters)
The 1% Hide Their Money Offshore – Then Use It To Corrupt Our Democracy (G.)
Hit By Panama Row, Cameron Announces New Tax Evasion Law In 2016 (Reuters)
Italy Pushes For ‘Last Resort’ Bank Rescue Fund (FT)
Austria Regulator Imposes 54% Haircut, Long Wait On Heta Bank Creditors (R.)
As Ukraine Collapses, Europeans Tire of Us Interventions (Ron Paul)
State Of Emergency Over Suicide Epidemic In Canada’s First Nations (G.)
Mass Coral Bleaching Now Affects Half Of Great Barrier Reef (G.)
Fewer Than 0.1% Of Syrians In Turkey In Line For Work Permits (G.)
Hundreds Hurt As Refugees Confront FYROM Border Police Tear Gas (AP)

When TBTF starts failing, watch your wallet.

US Banks’ Dismal First Quarter Spells Trouble For 2016 (Reuters)

It is only April, but some on Wall Street are already predicting a rotten 2016 for U.S. banks. Analysts say it has been the worst start to the year since the financial crisis in 2007-2008 and expect poor first-quarter results when reporting begins this week. Concerns about economic growth in China, the impact of persistently low oil prices on the energy sector, and near-zero interest rates are weighing on capital markets activity as well as loan growth. Analysts forecast a 20% decline on average in earnings from the six biggest U.S. banks, according to Thomson Reuters I/B/E/S data. Some banks, including Goldman Sachs, are expected to report the worst results in over ten years.

This spells trouble for the financial sector more broadly, since banks typically generate at least a third of their annual revenue during the first three months of the year. “What’s concerning people is they’re saying, ‘Is this going to spill over into other quarters?'” Goldman’s Richard Ramsden said in an interview. “If you do have a significant decline in revenues, there is a limit to how much you can cut costs to keep things in equilibrium.” Investors will get some insight on Wednesday, when earnings season kicks off with JPMorgan, the country’s largest bank. That will be followed by Bank of America and Wells Fargo on Thursday, Citigroup on Friday, and Morgan Stanley and Goldman Sachs on Monday and Tuesday, respectively, in the following week.

Banks have been struggling to generate more revenue for years, while adapting to a panoply of new regulations that have raised the cost of doing business substantially. The biggest challenge has been fixed-income trading, where heavy capital requirements, new derivatives rules, and restrictions on proprietary trading have made it less profitable, leading most banks to simply shrink the business. Bank executives have already warned investors to expect major declines across other areas as well. Citigroup CFO John Gerspach said to expect trading revenue more broadly to drop 15% versus the first quarter of last year. JPMorgan’s Daniel Pinto said to expect a 25% decline in investment banking. Several bank executives have warned about declining quality of energy sector loans.

Read more …

“California, Illinois, New Jersey, Chicago and Austin, would need to put at least 20% of their revenues into their pension plans to prevent a rise in their deficits, while Nevada would have to contribute almost 40%.”

US Faces ‘Disastrous’ $3.4 Trillion Pension Funding Hole (FT)

The US public pension system has developed a $3.4tn funding hole that will pile pressure on cities and states to cut spending or raise taxes to avoid Detroit-style bankruptcies. According to academic research shared exclusively with FTfm, the collective funding shortfall of US public pension funds is three times larger than official figures showed, and is getting bigger. Devin Nunes, a US Republican congressman, said: “It has been clear for years that many cities and states are critically underfunding their pension programmes and hiding the fiscal holes with accounting tricks.” Mr Nunes, who put forward a bill to the House of Representatives last month to overhaul how public pension plans report their figures, added: “When these pension funds go insolvent, they will create problems so disastrous that the fund officials assume the federal government will have to bail them out.”

Large pension shortfalls have already played a role in driving several US cities, including Detroit in Michigan and San Bernardino in California, to file for bankruptcy. The fear is other cities will soon become insolvent due to the size of their pension deficits. Joshua Rauh, a senior fellow at the Hoover Institution, a think-tank, and professor of finance at the Stanford Graduate School of Business, who carried out the study, said: “The pension problems are threatening to consume state and local budgets in the absence of some major changes. “It is quite likely that over a five to 10-year horizon we are going to see more bankruptcies of cities where the unfunded pension liabilities will play a large role.” The Stanford study found that the states of Illinois, Arizona, Ohio and Nevada, and the cities of Chicago, Dallas, Houston and El Paso have the largest pension holes compared with their own revenues.

In order to deal with the large funding shortfall, many cities and states will have to increase their contributions to their pension funds, either by raising taxes or cutting spending on vital services. Olivia Mitchell, a professor at the Wharton School at the University of Pennsylvania, told FTfm last month that US public pension plans face “grave difficulties”. “I do believe that US cities and towns will continue to suffer, and there will be additional bankruptcies following the examples of Detroit,” she said. Currently, states and local governments contribute 7.3% of revenues to public pension plans, but this would need to increase to an average of 17.5% of revenues to stop any further rises in the funding gap, the research said. Several cities and states, including California, Illinois, New Jersey, Chicago and Austin, would need to put at least 20% of their revenues into their pension plans to prevent a rise in their deficits, while Nevada would have to contribute almost 40%.

Read more …

“A lot of people are starting to doubt Abenomics.” Very few have ever believed in it. But there was free money to be had.

Abenomics Rebuked As BlackRock Joins $46 Billion Japan Pullout (BBG)

For global equity investors and Shinzo Abe, it’s splitsville. Starting in the first days of 2016, foreign traders have been pulling out of Tokyo’s stock market for 13 straight weeks, the longest stretch since 1998. Overseas traders dumped $46 billion of shares as economic reports deteriorated, stimulus from the Bank of Japan backfired and the yen’s surge pressured exporters. The benchmark Topix index is down 17% in 2016, the world’s steepest declines behind Italy. Losing the faith of foreigners would be a blow to the Japanese prime minister – they’re the most active traders in a market Abe has held up as a litmus on his growth strategies. “Japan is back,” and “Buy my Abenomics!” he proclaimed during a visit to the New York Stock Exchange in September 2013, when shares were marching to an eight-year high.

Now about half of those gains are gone and BlackRock, the world’s largest money manager, is among firms ending bullish calls on Japan equities. “Japan has been disappointing,” said Nader Naeimi, Sydney-based head of dynamic markets at AMP Capital Investors, which oversees about $115 billion. He’s a long-time fan of Tokyo equities who says he’s now looking for opportunities to sell. “A lot of people are starting to doubt Abenomics.” While markets elsewhere are climbing back from a global selloff, investors in Japan see fewer reasons for optimism. Growing concern that Abenomics – the three-pronged strategy of fiscal and monetary stimulus and structural reform – is falling flat has spurred speculation the nation will slip into deflation, setting back efforts to end three decades of malaise.

Masahiro Ichikawa, a senior strategist at Sumitomo Mitsui, fears a downward spiral. Foreigners are needed to boost the stock market, and if equities don’t rise the public will lose confidence and curb spending, as he sees it. That could send Japan back into deflation. “If foreigners don’t come back, the future of Abenomics could be jeopardized,” he said.

Read more …

“Reserves will continue to fall until we devalue. Once we get towards $2 trillion the markets will start to panic. They won’t believe that the government can control it any longer..”

Beijing Risks ‘Sterling-Style’ Currency Crisis As Deflation Persists (AEP)

A top adviser to the Chinese government has warned that Beijing risks a currency blow-up akin to Britain’s traumatic ordeal in 1992, if it continues trying to defend its exchange rate peg amid a deepening deflation crisis. Yu Hongding, a director of the Chinese Academy of Social Sciences, said China is caught in two concurrent “deflationary spirals” that are feeding on the other. A major devaluation and a blast of well-targeted fiscal stimulus will be needed to break out of the trap. “They must stop intervening on the exchange market. China needs to devalue by 15pc. They are creating conditions for speculators,” he told the Daily Telegraph, speaking at the Ambrosetti forum of global policymakers on Lake Como.

Prof Yu, a former rate-setter for the PBOC and currently a member of the national planning committee, said the government is making a serious mistake in trying to defend the yuan by burning through foreign exchange reserves, already down to $3.2 trillion from $4 trillion in mid-2014. He warned that the slowdown in capital outlows in March may prove fleeting. “Reserves will continue to fall until we devalue. Once we get towards $2 trillion the markets will start to panic. They won’t believe that the government can control it any longer,” he said. Prof Yu said Beijing had been caught off guard by the relentless slowdown over the last five years. “In 2011 we thought the economy would stabilize, and we thought the same thing in 2012, and again in 2013, and it continued to slide,” he said.

It is far from clear whether the world could handle a 15pc devaluation given the vast scale of Chinese overcapacity, or that the US Treasury and Congress would tolerate such a move. Fears of uncontrollable capital flight and a yuan devaluation were key reasons for the plunge in global equity markets earlier this year, and are clearly what prompted the US Federal Reserve to delay rate rises. The fate of China’s currency has become the most neuralgic issue in global finance. One worry is that a sharp drop in the yuan would set off a second round of ‘currency wars’ across East Asia, transmitting a deflationary shock through the international system as cheap Asian exports flooded into Western markets.

Prof Yu’s life is a remarkable story of achievement in Maoist China. He worked for ten years in a machine factory, wrestling with Marx’s Das Kapital at night before discovering western economics. He devoured Paul Samuelson’s classic text, ‘Foundations of Economic Analysis’, first in a Chinese translation and then in the original after teaching himself English, no easy feat in the Cultural Revolution. He went onto to earn a doctorate at Oxford University, and was still in England when sterling was blown out of the European Exchange Rate Mechanism in September 1992. He still recalls the exact details of the debacle, including the two desperate rate rises by the Bank of England in a single day. “The British experience is very interesting for us,” he said.

Read more …

Keeps the bubble alive until it doesn’t.

Chinese Buyers Double Their Aussie Property Investments, Again (BBG)

Chinese appetite for property in Australia shows no sign of waning after buyers doubled investment in the nation’s homes and offices for a second straight year. Spending on Australian residential and commercial real estate rose to A$24.3 billion ($18.4 billion) in the 12 months through June 2015, up from A$12.4 billion a year earlier and A$5.9 billion in 2013, according to the Foreign Investment Review Board’s annual report. All Chinese investors in a survey conducted by KPMG and the University of Sydney want to allocate more money to Australia, a separate report showed on Monday. Real estate is fueling inflows from the world’s second largest economy, which last year overtook the U.S. as Australia’s largest foreign investor.

“Overall we are seeing a strong story of Chinese investment into Australia’s broader economy which is in line with premium products, services and lifestyle-oriented themes,” Doug Ferguson, head of KPMG Australia’s Asia and International Markets and co-author of the report, said in a statement. Purchases by foreigners, many with a connection to China, helped drive an almost 55% jump in home prices across Australia’s capital cities in the past seven years as mortgage rates dropped to five-decade lows. The rising demand has triggered community concern that locals are being priced out of the property market, prompting the government to tighten scrutiny of foreign investment.

Read more …

Like so many other things these days, perfectly legal.

In BP’s Final $20 Billion Gulf Settlement, US Taxpayers Pay $15.3 Billion (F.)

Now that a judge has approved BP’s $20 billion settlement over the 2010 gulf oil spill, it is appropriate to look at the overall societal costs, as well as the bottom line to BP. And at tax time, people understandably think about their own taxes, too. The government struck a $20 billion settlement with BP, which is a big number. Yet BP should be able to deduct the vast majority, a whopping $15.3 billion, on its U.S. tax return. That means American taxpayers are contributing quite a lot to this settlement, whether they know it or not. BP can write off the natural resource damages payments, restoration, and reimbursement of government costs. Only $5.5 billion is labeled as a non-tax-deductible Clean Water Act penalty. One big critic of the deal is U.S. Public Interest Research Group, which often rails against tax deductions by corporate wrongdoers.

U.S. Public Interest Research Group has asked the Justice Department to deny tax deductions for BP and other corporate defendants. U.S. PIRG’s has a research report on settling for a lack of accountability that details the tax deductions corporations can claim for legal settlement. However, a change to the tax code may be the only way to get there. The proposed Truth in Settlements Act (S. 1898) would require agencies to report after-tax settlement values. Another bill, S. 1654, would restrict tax deductibility and require agencies to spell out the tax status of settlements. The present tax code allows businesses to deduct damages, even punitive damages. Restitution and other remedial payments are also fully deductible. Only certain fines or penalties are nondeductible. Even then, the rules are murky, and companies routinely deduct payments unless it is completely clear that they cannot.

Read more …

No bankers have been indicted, and no shareholder has taken them to court.

British Banks’ ‘Misconduct Bill’ Has Reached Nearly $75 Billion (Reuters)

Lawsuits and misconduct fines have cost Britain’s largest retail banks and customer-owned lenders almost 53 billion pounds ($74.86 billion) over the past 15 years, a new study has found. The scale of the payouts has hampered banks’ efforts to rebuild capital, restricted the amount they are able to lend and reduced dividends for investors. Britain’s banks have been hit by scandals ranging from the manipulation of foreign exchange and benchmark interest rates to the mis-selling of loan insurance and complex interest-rate hedging products. While lenders have struggled to return money to shareholders because of the charges, they have continued to pay billions of pounds in bonuses to staff, the study by the independent think-tank New City Agenda said.

“The profitability of UK retail banks has been imperilled by persistent misconduct,” said John McFall, a director of New City Agenda and former Treasury Committee chairman. “This has made every citizen poorer through our pension funds and our ownership of the bailed out banks.” The report said the mis-selling of payment protection insurance alone cost banks at least 37.3 billion pounds in Britain’s costliest consumer scandal. Lloyds had to set aside 14 billion pounds to cover misconduct between 2010 and 2014, almost twice the amount of any other British lender, the report said.

Read more …

Yup, that’s how it works.

The 1% Hide Their Money Offshore – Then Use It To Corrupt Our Democracy (G.)

Over the past 72 hours, you have seen our political establishment operating at a level of panic rarely equalled in postwar history. Britain’s prime minister has had yanked out of him some of his most intimate financial details. Complete strangers now know how much he’s inherited so far from his mum and dad, and the offshore investments from which he’s profited. Yesterday he even took the unprecedented step of revealing the taxes he’d paid over the past six years. Leaders of other parties have responded by summarily publishing their own HMRC returns. In contemporary Britain, where one’s extramarital affairs are more readily discussed in public than one’s tax affairs, this is jaw-dropping stuff. And it will not stop here.

Whatever the lazy shorthand being used by some commentators, David Cameron has not released his tax returns, but merely a summary certified by an accountants’ firm. That halfway house will hardly be enough. If Jeremy Corbyn, other senior politicians and the press keep up this level of attack, then within days more details of the prime minister’s finances will emerge. Nor will the flacks of Downing Street be able to maintain their lockdown on disclosing how many cabinet members have offshore interests: the ministers themselves will break ranks. Indeed, a few are already beginning to do so. But the risk is that all this will descend into a morass of semi-titillating detail: a string of revelations about who gave what to whom, and whether he or she then declared it to the Revenue.

The story will become about “handling” and “narrative” and individual culpability. That will be entertaining for those who like to point fingers, perplexing for those too busy to engage in the detail – and miss the wider truth revealed by the leak which forced all this into public discussion. Because at root, the Panama Papers are not about tax. They’re not even about money. What the Panama Papers really depict is the corruption of our democracy. Following on from LuxLeaks, the Panama Papers confirm that the super-rich have effectively exited the economic system the rest of us have to live in. Thirty years of runaway incomes for those at the top, and the full armoury of expensive financial sophistication, mean they no longer play by the same rules the rest of us have to follow. Tax havens are simply one reflection of that reality.

Discussion of offshore centres can get bogged down in technicalities, but the best definition I’ve found comes from expert Nicholas Shaxson who sums them up as: “You take your money elsewhere, to another country, in order to escape the rules and laws of the society in which you operate.” In so doing, you rob your own society of cash for hospitals, schools, roads… But those who exited our societies are now also exercising their voice to set the rules by which the rest of us live. The 1% are buying political influence as never before. Think of the billionaire Koch brothers, whose fortunes will shape this year’s US presidential elections. In Britain, remember the hedge fund and private equity barons, who in 2010 contributed half of all the Conservative party’s election funds – and so effectively bought the Tories their first taste of government in 18 years.

Read more …

He will have to reveal a lot more of his own finances, no matter what laws he has lying on the shelf.

Hit By Panama Row, Cameron Announces New Tax Evasion Law In 2016 (Reuters)

British Prime Minister David Cameron will say on Monday that new legislation making companies criminally liable if employees aid tax evasion will be introduced this year, as he seeks to repair the damage from a week of questions about his personal finances. Cameron published tax records on Sunday to try and defuse criticism over his handling of the fallout from the Panama Papers, in which his late father was mentioned for setting up an offshore fund. After four carefully worded statements in four days, Cameron bowed to pressure and admitted that he had benefited from selling his share in his father’s fund in 2010. He recognized on Saturday that he had mishandled the disclosure. Cameron is leading efforts to persuade British voters to stay in the EU in a June 23 referendum that the polls suggest will be tight, and the tax row has raised concerns among the “in” camp that their cause may have been damaged.

The prime minister will attempt to regain the upper hand when he appears in the House of Commons later on Monday. “This government has done more than any other to take action against corruption in all its forms, but we will go further,” Cameron will say, according to advance excerpts of his statement circulated by his Downing Street office. “That is why we will legislate this year to hold companies who fail to stop their employees facilitating tax evasion criminally liable,” he will say. The plan had already been announced by finance minister George Osborne in March 2015, but previously the commitment was to introduce the legislation by 2020, Downing Street said. The decision to speed up that particular measure is unlikely to satisfy Cameron’s many critics in opposition parties and in some campaign groups that say Britain already has the tools it needs to crack down on tax evasion but lacks the will.

Read more …

Debt restructuring is still a four letter word in Europe.

Italy Pushes For ‘Last Resort’ Bank Rescue Fund (FT)

Italy is rushing to cobble together an industry-led rescue to address mounting concerns over the solidity of a banking sector whose woes pose a risk to the wider eurozone economy. Finance minister Pier Carlo Padoan has called a meeting in Rome on Monday with executives from Italy’s largest financial institutions to agree final details of a “last resort” bailout plan. Yet on the eve of that gathering, concerns remain as to whether the plan will be sufficient to ringfence the weakest of Italy’s large banks, Monte dei Paschi di Siena, from contagion, according to people involved in the talks. Italian bank shares have lost almost half their value so far this year amid investor worries over a €360bn pile of non-performing loans — equivalent to about a fifth of GDP. Lenders’ profitability has been hit by a crippling three-year recession.

The plan being worked on, which could be officially announced as soon as Monday evening, recalls the Sareb bad bank created in 2012 by the Spanish government to deal with financial crisis in its smaller cajas banks, say people involved. Although the details remain under discussion, it foresees the establishment of a private vehicle that will include upwards of €5bn in equity contributions – mostly from Italy’s banks, insurers and asset managers – and then a larger debt component. The fund will then mop up shares in distressed lenders. A second vehicle will seek to buy non-performing loans at market prices. “It is a backstop fund,” said one person involved in the talks. The Italian government can provide only limited financial backing because of EU state aid rules and because it is already struggling under a public debt load that amounts to 132.5% of GDP.

The bailout marks the latest and most wide-reaching attempt by Italy to shore up confidence having already sponsored the rescue of four small banks last year and passed a law intended to speed up the sale of bad loans. Both earlier measures failed to eradicate market concerns. [..] people involved in the talks question whether the plan would have the financial scope to provide a buffer of last resort for Monte dei Paschi di Siena. Italy’s third-largest bank was the worst performer in the 2014 European stress tests, with about €170bn in assets and about €50bn in bad loans. It is considered by many bankers to be the major risk to Italian financial stability and regarded as too big to fail. “Monte Paschi is the elephant in the room,” says one of Italy’s top bankers.

Read more …

Is this an attempt to let Carinthia go broke after all?

Austria Regulator Imposes 54% Haircut, Long Wait On Heta Bank Creditors (R.)

Austria’s financial markets regulator FMA on Sunday cut the nominal value of “bad bank” Heta Asset Resolution’s senior bonds by more than half, highlighting the long struggle creditors face for repayment if a settlement is not reached. The FMA, which is overseeing the wind-down of Heta, on Sunday announced measures including the bail-in, or haircut, of 54%, the extension of bonds’ maturities to 2023 and the cancellation of coupon payments as of March of last year.The announcement is the latest chapter in a standoff between the province of Carinthia and Heta’s creditors, many of which insist on repayment in full because their bonds were guaranteed by Carinthia, which could push the province into insolvency.

Carinthia guaranteed the bonds of local lender Hypo Alpe Adria before it collapsed and Heta was formed to wind it down. Carinthia says it cannot afford to fully honour the remaining guarantees, which the FMA put at €11.1 billion. Creditors are likely to sue Carinthia to recover the difference between what is paid out to them under Heta’s wind-down and their bonds’ full face value. The FMA put that difference at €6.4 billion, roughly three times the annual budget of Carinthia, a southern province of about 560,000 people that borders Italy and Slovenia and was long the stronghold of far-right politician Joerg Haider. The haircut’s size is based on the amount the FMA expects will be recovered from the sale of Heta’s assets by 2020.

It had said the estimate would be conservative to ensure that, if it is wide of the mark, there is extra revenue to be shared out. Only by the end of 2023 will it be possible to pay out all funds owed, the FMA said, partly in anticipation of many court cases, meaning creditors face a wait of seven years for their repayment of 46% of senior bonds’ face value. Carinthia offered to buy back the bonds it guaranteed, with loans from the Austrian government, for 75% of senior bonds’ face value, plus a last-minute sweetener by the Austrian government that brought the offer to around 82%. Too few creditors accepted the offer when it expired last month, and the question is now whether a compromise can be found or whether the dispute will be settled in court.

Read more …

Ron Paul doesn’t capture the entire picture, but from a US perspective he’s largely right.

As Ukraine Collapses, Europeans Tire of Us Interventions (Ron Paul)

On Sunday Ukrainian prime minister Yatsenyuk resigned, just four days after the Dutch voted against Ukraine joining the European Union. Taken together, these two events are clear signals that the US-backed coup in Ukraine has not given that country freedom and democracy. They also suggest a deeper dissatisfaction among Europeans over Washington’s addiction to interventionism. According to US and EU governments – and repeated without question by the mainstream media – the Ukrainian people stood up on their own in 2014 to throw off the chains of a corrupt government in the back pocket of Moscow and finally plant themselves in the pro-west camp. According to these people, US government personnel who handed out cookies and even took the stage in Kiev to urge the people to overthrow their government had nothing at all to do with the coup.

When Assistant Secretary of State Victoria Nuland was videotaped bragging about how the US government spent $5 billion to “promote democracy” in Ukraine, it had nothing to do with the overthrow of the Yanukovich government. When Nuland was recorded telling the US Ambassador in Kiev that Yatsenyuk is the US choice for prime minister, it was not US interference in the internal affairs of Ukraine. In fact, the neocons still consider it a “conspiracy theory” to suggest the US had anything to do with the overthrow. I have no doubt that the previous government was corrupt. Corruption is the stock-in-trade of governments. But according to Transparency International, corruption in the Ukrainian government is about the same after the US-backed coup as it was before.

So the intervention failed to improve anything, and now the US-installed government is falling apart. Is a Ukraine in chaos to be considered a Washington success story? This brings us back to the Dutch vote. The overwhelming rejection of the EU plan for Ukrainian membership demonstrates the deep level of frustration and anger in Europe over EU leadership following Washington’s interventionist foreign policy at the expense of European security and prosperity. The other EU member countries did not even dare hold popular referenda on the matter – their parliaments rubber-stamped the agreement.

Brussels backs US bombing in the Middle East and hundreds of thousands of refugees produced by the bombing overwhelm Europe. The people are told they must be taxed even more to pay for the victims of Washington’s foreign policy. Brussels backs US regime change plans for Ukraine and EU citizens are told they must bear the burden of bringing an economic basket case up to European standards. How much would it cost EU citizens to bring in Ukraine as a member? No one dares mention it. But Europeans are rightly angry with their leaders blindly following Washington and then leaving them holding the bag.

Read more …

This continues to make my half-Canadian heart bleed. It’s been going on for so long.

State Of Emergency Over Suicide Epidemic In Canada’s First Nations (G.)

A Canadian First Nation community of 2,000 people has declared a state of emergency after 11 of its members tried to take their own lives, national media reported. CTV News reported on Sunday that the remote northern community of the Attawapiskat First Nation in Ontario experienced an additional 28 suicide attempts last month. More than 100 people in the community have attempted suicide since last September, and one person died, according to CTV. The youngest was 11, the oldest 71. Charlie Angus, the local member of parliament, told the Canadian Press it was part of a “rolling nightmare” of more and more suicide attempts among young people throughout the winter. The Canadian Press said the regional First Nations government was sending a crisis response unit including social workers and mental health nurses to the community following the declaration.

The Health Canada federal agency said in a statement that it had sent two mental health counsellors as part of that unit. Attawapiskat resident Jackie Hookimaw told The Canadian Press that the epidemic started in the autumn when her 13-year-old niece Sheridan killed herself after being bullied at school. “There’s different layers of grief,” she said. “There’s normal grief, when somebody dies from illness or old age. And there’s complicated grief, where there’s severe trauma, like when somebody commits suicide.” Canadian prime minister Justin Trudeau said on Twitter: “The news from Attawapiskat is heartbreaking. We’ll continue to work to improve living conditions for all Indigenous peoples.” Another Canadian First Nation community in the western province of Manitoba appealed for federal aid last month, citing six suicides in two months and 140 suicide attempts in two weeks.

Read more …

“..three to four times worse than in 1998 or the second great bleaching in 2002.”

Mass Coral Bleaching Now Affects Half Of Great Barrier Reef (G.)

The mass coral bleaching event smashing the Great Barrier Reef has severely affected more than half its length and caused patches of bleaching in most areas, according to scientists conducting an extensive aerial survey of the damage. “The good news with my last flight is that I found 50 reefs that weren’t bleached, so that may be the southern boundary,” said Terry Hughes from James Cook University. Hughes is the head of the national coral bleaching task force, which has been conducting flights over the length of the reef, mapping bleached areas and recording the severity of the damage. Climate change and a strong El Niño have caused hundreds of kilometres of the reef to bleach, as the higher water temperatures stress the coral, and they expel their symbiotic algae.

If the bleaching is bad enough, or the temperatures remain high for long enough, the corals die, putting the future of reefs at risk. The mass bleaching on the Great Barrier Reef is part of what the US National Oceanographic and Atmospheric Administration has called the third global bleaching event – the first occurred in 1998. Initial reports suggested only the most northern and remote areas of the Great Barrier Reef were bleaching, but as aerial surveys have continued, scientists have struggled to find a southern boundary. The latest find of a stretch of unaffected reefs around Mackay was a small piece of good news, Hughes said. But he said its significane would be unclear until reefs further south were examined. “It may be a false southern boundary,” Hughes said.

The reefs around Mackay have unusually large tides, which might have pulled in cooler water and saved the coral there. [..] Two weeks ago, the Great Barrier Reef Marine Park Authority reported half the coral in the northern parts of the reef were dead. Hughes said that was consistent with reports from divers north of Port Douglas. Hughes said this was by far the worst bleaching event to have hit the Great Barrier Reef. He said it was three to four times worse than in 1998 or the second great bleaching in 2002. Last year, the Great Barrier Reef narrowly escaped being listed as “in danger” by Unesco, even though environmental groups said it clearly met the criteria. Hughes said the “outstanding universal value” of the reef was now “severely compromised”.

Ariane Wilkinson, a lawyer at Environmental Justice Australia, said the bleaching might cause Unesco to reconsider its decision. “[Unesco] weren’t scheduled to examine the reef this year but in light of the terrible bleaching it is entirely possible that they may decide to look at the reef,” she said. “If the World Heritage system is to have any value, it must address the most serious threats to the most iconic examples of world heritage,” she said. “If any site falls into this category, it is the … Great Barrier Reef.”

Read more …

Safe third country.

Fewer Than 0.1% Of Syrians In Turkey In Line For Work Permits (G.)

Fewer than 0.1% of Syrians in Turkey currently stand to gain the right to work under much-vaunted Turkish labour laws, undermining EU claims that the legislation excuses a recent decision to deport Syrian asylum-seekers back to Turkey. Turkish employers have allowed roughly 2,000 – or 0.074% – of Turkey’s 2.7 million Syrians to apply for work permits under new legislation enacted two months ago, according to government figures provided to aid workers at a meeting in late March. The number of permits granted has not yet been disclosed. More applications are expected in the coming months, but the statistic nevertheless highlights how the new law, enacted in January, does not offer blanket access to the labour market for all Syrians in Turkey.

Instead work permits can only be given to those who have the blessing of their employers, many of whom may still be unaware of the law, or unwilling to comply with it since it would require them to pay their employees the minimum wage. The figure was revealed in a speech to aid groups by the head of Turkey’s general directorate for migration management, who said he hoped the number would rise once more people became aware of the law. The news will complicate the new EU-Turkey deal to deport all asylum-seekers arriving to Greece back to Turkey, since the EU has justified the controversial agreement by claiming Turkey was a place that upheld internationally agreed obligations to refugees, including access to legal work. While Turkey is not a full signatory to the 1951 UN refugee convention, EU politicians have sometimes cited the January law as an example of how Turkey maintains the values of the convention by other means.

But in reality the law does not automatically offer most refugees a route out of the black market, several Syrians argued in interviews. Most problematically, the law requires an employer to give his employees a contract before they can apply for a permit. But this is an unattractive proposition for many employers, since they often employ Syrians precisely because they are easily exploited, said Hussam Orfahli, CEO of an Istanbul-based firm that helps Syrians apply for paperwork in Turkey. “If he wants you to have a work permit, then you can get it – but if he doesn’t, then you won’t,” said Orfahli, who has applied for permits on behalf of 60 wealthy clients, but has yet to hear whether any of them have been successful. “The minimum wage is 1,300 Turkish lira [£320] and most employers refuse to give contracts so that they can pay less, and don’t have to pay your health insurance.”

Read more …

Children injured by (8 hours of!) tear gas. Europe 2016.

Hundreds Hurt As Refugees Confront FYROM Border Police (AP)

Migrants waged running battles with Macedonian police Sunday after they were stopped from scaling the border fence with Greece near the border town of Idomeni, and aid agencies reported that hundreds of stranded travelers were injured. Macedonian police used tear gas, stun grenades, plastic bullets and a water cannon to repel the migrants, many of whom responded by throwing rocks over the fence at police. Greek police observed from their side of the frontier but did not intervene. More than 50,000 refugees and migrants have been stranded in Greece after Balkan countries closed their borders to the massive flow of refugees pouring into Europe. Around 11,000 remain camped out at the border with Macedonia, ignoring instructions from the government to move to organized shelters as they hold out hope to reach Western Europe.

Clashes continued in the afternoon as migrant groups twice tried to overwhelm Macedonian border security. The increasing use of tear gas reached families in their nearby tents in Idomeni’s makeshift camp. Many camp dwellers, chiefly women and children, fled into farm fields to escape the painful gas. Observers held out hope that evening rainfall, which began about seven hours into the clashes, would dampen hostilities. The aid agency Doctors Without Borders estimated that their medical volunteers on site treated about 300 people for various injuries. Achilleas Tzemos, deputy field coordinator of Doctors Without Borders, told the AP that the injured included about 200 experiencing breathing problems from the gas, 100 others with cuts, bruises and impact injuries from nonlethal plastic bullets.

He said six of the most seriously injured were hospitalized. The clashes began soon after an estimated 500 people gathered at the fence. Many said they were responding to Arabic language fliers distributed Saturday in the camp urging people to attempt to breach the fence Sunday morning and “go to Macedonia on foot.” A five-member migrant delegation approached Macedonian police to ask whether the border was about to open. When Macedonian police replied that this wasn’t happening, more than 100, including several children, tried to scale the fence. Greece criticized the Macedonian police response as excessive. Giorgos Kyritsis, a spokesman for the government’s special commission on refugees, said Macedonian forces had deployed an “indiscriminate use of chemicals, plastic bullets and stun grenades against vulnerable people.”

Read more …

Mar 182015
 
 March 18, 2015  Posted by at 6:25 am Finance Tagged with: , , , , , , , , , ,  


DPC Station at foot of incline, American Falls, Niagara Falls 1890

The US Economy Just Keeps Disappointing (Bloomberg)
‘Hell Will Break Loose’ If Fed Loses Patience (MarketWatch)
Options Market Signals 2007-Like Crash Risk, Goldman Warns (Zero Hedge)
US Housing Starts Plunge Most in Four Years (Bloomberg)
New BoE Regulator Warns Of Risks From US Rate Hikes, Dollar Strength (Reuters)
Europeans Defy US To Join China-Led Development Bank (FT)
Debunking $1.4 Trillion Europe Debt Myth in Post-Heta Age (Bloomberg)
Greek PM Tsipras To Meet Merkel, Draghi In Brussels On Friday (Kathimerini)
Greece WWII Reparations Cause Split Among German MPs (RT)
Athens Furious At Eurogroup Suggestion Of Capital Controls (Kathimerini)
Greece Grabs Cash as More Than $2 Billion in Payouts Loom (Bloomberg)
Greece’s Euro Exit Seems Inevitable (Bloomberg)
EU Warns Against Bills On Debt Settlement, Humanitarian Crisis (Kathimerini)
Japan Exports Slow Sharply In February But Beat Expectations (CNBC)
China New Home Prices Post Sixth Consecutive Monthly Decline (CNBC)
BoE’s Brazier Says Greek Shock Could Trigger Market Correction (Bloomberg)
EU Support for Russia Sanctions Is Waning (Bloomberg)
ECB Celebration of Its New $1.4 Billion Tower Spoiled by Protests (Bloomberg)
Bolivia: A Country That Dared to Exist (Benjamin Dangl)

“..relative to where economists thought we would be, the U.S. is missing by a large margin..”

The US Economy Just Keeps Disappointing (Bloomberg)

Last week, we reported on how the U.S. economy was the most disappointing major economy in the world based on the Bloomberg Economic Surprise Index, which measures incoming economic data against economist expectations. These measures tend to move in cycles, as they reflect both the absolute economic data as well as the optimism or pessimism of the forecasters, which is in itself cyclical. For the U.S. we keep driving lower, hitting depths not seen since the economic crisis. Again, this doesn’t mean that the economy is anywhere near as bad as it was then. But whether it’s a slowdown caused by the harsh winter or something else, relative to where economists thought we would be, the U.S. is missing by a large margin.

Read more …

“On the other hand, if Janet is patient and says so, we’re all going to make an absurd amount of money.”

‘Hell Will Break Loose’ If Fed Loses Patience (MarketWatch)

Daytraders tend to relish when the market bounces around like a leprechaun on a hot griddle. But for everybody else, it’s tense times in the trading pits these days. While a calm often settles over markets in the days leading into a hyped-up Fed statement, recent action says to gird for more rockiness. Dips are being bought and profits are being scalped. Yet for all the sparks flying on the S&P, its up only 1% so far this year. That’s better than down, of course, unless you’re betting the “don’t pass” line. But compare that with the 24% explosion to the upside on Germany’s main index, and you’d be pardoned for suffering Teutonic envy. Shanghai, while no Germany, is also doing better than U.S. stocks, and a tandem of brokers are feeling the bull run in China has a long way to run (see call of the day).

Nevertheless, the U.S. is still firmly entrenched in its own bull party, despite recent queasiness. In fact, we’re just about 2,200 days into it. Another two months, and this bull market will overtake the one from 1974-1980 as the third-longest since 1929, according to Bloomberg. Getting there just might hinge on the Fed’s next move. It could go either way, according to the Fly from the iBankCoin blog, who spoke of extremes. “If we find out this Wednesday that [Janet Yellen] is not, in fact, patient, hell will break loose and 66 seals of hell will be broken — paving way for actual centaurs to roam, wall-kicking people in the faces with their hooves,” he wrote. “On the other hand, if Janet is patient and says so, we’re all going to make an absurd amount of money.”

Read more …

“..an epic decoupling of put prices and S&P P/E ratios”

Options Market Signals 2007-Like Crash Risk, Goldman Warns (Zero Hedge)

Although US equity prices have demonstrated a remarkable propensity to completely disregard apparently unimportant things like macro fundamentals, forward earnings estimates, and top-line growth projections, we’ve long argued that eventually, reality will come calling and the farther stretched valuations become in the meantime, the more painful the correction will be. As we noted on Sunday, the cracks are starting to form as DB became the first sell-side firm to predict that EPS will in fact not grow in 2015, prompting us to remark that “EPS growth in 2015 [is] now a wash (if not negative), which implies the only upside for the S&P 500 will once again come from substantial multiple expansion.” Against this backdrop of declining revenues, declining earnings, and pitiable economic projections (thanks a lot Atlanta Fed Nowcast), we bring you yet another sign that a “correction” may indeed be in the cards: an epic decoupling of put prices and S&P P/E ratios. Here’s Goldman:

Long-dated crash put protection costs on the SPX have more than doubled over the past 9 months. We believe it is an important development to watch as it implies investors are increasingly concerned about downside risk even as US equities trade near all-time highs. Based on our conversations with investors over the past few months, it appears the increase in long-dated put prices has largely gone unnoticed among equity and credit investors. In fact, Investment Grade credit spreads have actually tightened slightly over the same period. The rise in long-dated equity put prices may signal an increasing fear that a substantial market correction is on the horizon, despite low short-term put prices which suggest low probably of a near-term drawdown vs history.

Read more …

“It was just the weather, basically..”: “Starts of single-family properties dropped 14.9%..” “New construction slumped a record 56.5% in the Northeast..”

US Housing Starts Plunge Most in Four Years (Bloomberg)

Housing starts slumped in February by the most in four years as bad winter weather in parts of the U.S. prevented builders from initiating new projects. Work began on 897,000 houses at an annualized rate, down 17% from January and the fewest in a year, the Commerce Department reported Tuesday in Washington. The median estimate of 80 economists surveyed by Bloomberg called for 1.04 million. “It was just the weather, basically,” said Richard Moody, chief economist at Regions Financial Corp. in Birmingham, Alabama. Still, “my view of the recovery in single-family housing is that it’s coming more gradually than others think.” An increase in building permits was driven by applications for multifamily units, indicating single-family construction, the biggest part of the market, will keep struggling.

While stronger hiring and low borrowing costs have helped the industry advance, sales remain challenged by limited supply of cheaper homes and sluggish wage growth. The median estimate of 81 economists in the Bloomberg survey called for 1.04 million starts. Estimates ranged from annualized rates of 975,000 to 1.08 million after a previously reported January pace of 1.07 million. Building permits climbed 3% to a 1.09 million annualized pace, the fastest since October, after a 1.06 million rate a month earlier. They were projected at 1.07 million, according to the Bloomberg survey median. Permits for single-family dwellings were the lowest since May.

Stock-index futures held losses after the figures. The contract on the Standard & Poor’s 500 Index maturing in June dropped 0.3% to 2,063.3. Starts of single-family properties dropped 14.9% to a 593,000 rate in February. Construction of multifamily projects such as condominiums and apartment buildings decreased 20.8% to an annual rate of 304,000. New construction slumped a record 56.5% in the Northeast and fell 37%, the most since January 2014, in the Midwest. Starts also dropped in the South and West, indicating weather was only partly to blame.

Read more …

Hollow.

New BoE Regulator Warns Of Risks From US Rate Hikes, Dollar Strength (Reuters)

The start of U.S. interest rate rises could inject volatility into global financial markets and create risks for Britain’s financial stability, a new member of the Bank of England’s top panel of financial regulators said on Tuesday. Alex Brazier, who took a seat on the BoE’s Financial Policy Committee on Monday, cited the normalisation of U.S. borrowing costs as one of the main global risks for markets. The FPC was set up in 2013 after the failure of Britain’s financial regulation to protect the country against the 2007-08 financial crisis. Last year it imposed curbs on large mortgages and required banks to hold more reserves against potential losses. Brazier – in remarks which share concerns expressed by other BoE officials – said rate hikes by the U.S. Federal Reserve or a change in perceptions of their timing and scale would reflect good news about the U.S. economic recovery.

“However, it would probably reduce the extent of the search for yield and prompt a reduction in global risk appetite,” Brazier said in answer to questions from members of parliament who are reviewing his appointment. Brazier joined the BoE in 2001 after university, and most recently served as principal private secretary to Governor Mark Carney and his predecessor, Mervyn King. “Both of them pushed me to the edges of my limits,” Brazier said, noting that his hair had turned prematurely grey. Brazier is now the BoE’s executive director for financial stability, strategy and risk. This is a new role created last year by Carney as part of a shake-up of the bank. BoE chief economist Spencer Dale briefly held the job before he quit to become chief economist for oil company BP.

Read more …

“.. the White House criticism of Britain was a case of sour grapes: “They couldn’t have got congressional approval to join the AIIB, even if they wanted to.”

Europeans Defy US To Join China-Led Development Bank (FT)

France, Germany and Italy have all agreed to follow Britain’s lead and join a China-led international development bank, according to European officials, delivering a blow to US efforts to keep leading western countries out of the new institution. The decision by the three European governments comes after Britain announced last week that it would join the $50bn Asian Infrastructure Investment Bank, a potential rival to the Washington-based World Bank. Australia, a key US ally in the Asia-Pacific region which had come under pressure from Washington to stay out of the new bank, has also said that it will now rethink that position.

The European decisions represent a significant setback for the Obama administration, which has argued that western countries could have more influence over the workings of the new bank if they stayed together on the outside and pushed for higher lending standards. The AIIB, which was formally launched by Chinese President Xi Jinping last year, is one element of a broader Chinese push to create new financial and economic institutions that will increase its international influence. It has become a central issue in the growing contest between China and the US over who will define the economic and trade rules in Asia over the coming decades. When Britain announced its decision to join the AIIB last week, the Obama administration told the Financial Times that it was part of a broader trend of “constant accommodation” by London of China.

British officials were relatively restrained in their criticism of China over its handling of pro-democracy protests in Hong Kong last year. Britain tried to gain “first mover advantage” last week by signing up to the fledgling Chinese-led bank before other G7 members. The UK government claimed it had to move quickly because of the impending May 7 general election. The move by George Osborne, the UK chancellor of the exchequer, won plaudits in Beijing. Britain hopes to establish itself as the number one destination for Chinese investment and UK officials were unrepentant. One suggested that the White House criticism of Britain was a case of sour grapes: “They couldn’t have got congressional approval to join the AIIB, even if they wanted to.”

Read more …

A potential bombshell.

Debunking $1.4 Trillion Europe Debt Myth in Post-Heta Age (Bloomberg)

Austria’s decision to burn bondholders of a failed state bank may mean almost €1.3 trillion of European debt once deemed risk-free now comes with a hazard warning. Austria is the first country to wind down a bank, Heta, under the EU’s new Bank Recovery and Resolution Directive after changing laws last year to allow it to write down subordinated debt of its failed predecessor, Hypo Alpe-Adria-Bank. The government is also refusing to stand behind guarantees by the province of Carinthia on Heta’s senior debt. The moves are putting bondholders at risk of losses. As age-old banking mores clash with modern banking rules, investors are being forced to take a second look at how governments have used explicit or implicit promises in the past to issue debt that doesn’t show up in official ledgers.

“People had too much trust in public authorities,” said Otto Dichtl, a credit analyst for financial companies at Stifel Nicolaus. “Austria dropping Carinthia like this is an extraordinary step. We have to see just how this is carried out. From a legal perspective, this is uncharted territory.” Based on current bond prices, Heta’s senior creditors, who bought securities covered by a guarantee from Carinthia province, face losses of more than 40% on their €10.2 billion of debt. Carinthia, a southern Austrian region of 556,000 people with annual revenue of less than €2.4 billion, may face insolvency if the guarantees are triggered. Until this year, figures for debt guarantees weren’t disclosed in most European countries, a fact that helped Greece conceal its true debt levels to gain entry to the euro in 2001.

Greece undertook the biggest debt restructuring on record in 2012. New rules by the European Council, known as the “six pack” directive, led to data as of 2013 being published for the first time last month, revealing €1.28 trillion of government guarantees. The EU introduced the six laws in 2011. As the EU’s biggest user of guarantees, Austria has contingent liabilities corresponding to 35% of national output, or €113 billion, the data show. It isn’t just Austria that has liberally applied state guarantees. Ireland has contingent liabilities equivalent to 32% of its economy, reflecting the collapse of its banking system, while Germany’s tally stands at more than 18% of output. German guarantees, encompassing €512 billion, are the biggest in absolute terms, followed by Spain with €193 billion and France with €117 billion.

Read more …

Merkel gets closer.

Greek PM Tsipras To Meet Merkel, Draghi In Brussels On Friday (Kathimerini)

With Greece rapidly running out of funds, Prime Minister Alexis Tsipras has proposed an urgent meeting on the sidelines of the European Union summit that begins on Thursday in a bid to reach an agreement that would allow Athens to get more funds. Greece urgently needs between €3 and €5 billion. Tsipras on Tuesday telephoned European Council President Donald Tusk and asked him to convene a meeting with Chancellor Angela Merkel, President Francois Hollande, ECB President Mario Draghi and EC President Jean-Claude Juncker. The meeting will be held on Friday morning, despite the fact that European officials questioned its use.

Sources in Brussels said the proposal was a mistake, as it focused on meeting with the leaders of two countries, and the heads of the ECB and the Commission, rather than pursuing a collective agreement in the EU, and it was not clear what Tsipras wanted to achieve. If the aim was to achieve more funding, this would have to be the subject of technical discussions between experts and could not be dealt with at the political level. However, with teams of experts still unable to reach a conclusion as to Greece’s financing needs and its compliance with the bailout agreement, agreement at the political level is precisely what Tsipras is after.

He wants an agreement on a framework that will set out what Greece must do in order to get the ECB to allow his country to borrow more, a source in Tsipras’s office told Kathimerini. Tsipras is prepared to accept reforms that will be proposed by Greece’s partners, including privatization, the same source said. They stressed that Athens would draw the line at adopting further austerity measures. “We accept everything else, on the basis of the commitments made in [Finance Minister] Yanis Varoufakis’s letter to the Eurogroup,” the source added. The Greek prime minister is to meet the German chancellor in Berlin on March 23, following an invitation from Merkel on Monday.

Read more …

That’s what I said: “Germany can’t simply sweep the demands from Greece off the table.”

Greece WWII Reparations Cause Split Among German MPs (RT)

Several senior Social Democrats (SPD) and Greens have for the first time acknowledged that Greece has a case for WWII reparations. This contradicts the stance of German Chancellor Angela Merkel’s government which had ruled it out. “We should make a financial approach to victims and their families,” said Gesine Schwan, chairwoman of the Social Democratic Party (SPD) values committee told Der Spiegel Online on Tuesday. “It would be good for us Germans to sweep up after ourselves in terms of our history,” she said. “Victims and descendants have longer memories than perpetrators and descendants,” said Schwan, who was nominated as a candidate for President twice in 2004 and 2009. SPD deputy leader Ralf Stegner agreed that the issue should be resolved, however independently from the current debate over the Euro crisis and Greek sovereign debt.

“But independently, we must have a discussion about reparations,” Ralf Stegner told Spiegel. “After decades, there are still international legal questions to be resolved.” SPD is the second major party in Germany that shares power with Merkel’s conservative Christian Democratic Union and the Christian Social Union (CDU/CSU). The SPD were joined by the Green party, with leader Anton Hofreiter saying that “Germany can’t simply sweep the demands from Greece off the table.” “This chapter isn’t closed either morally or legally.” Demands for reparations from Germany dating back to the Nazi occupation during World War II have been voiced by Greek politicians over the past 60 years, but have gained renewed energy amid the recent financial crisis and tough austerity measures in exchange for largely German-backed loans.

In April 2013 Greece officially declared that it would pursue the reparations scheme. Greece’s Prime Minister Alexis Tsipras leader of the anti-austerity Syriza party relaunched the heated debate in February by saying that Athens has a “historical obligation” to claim from Germany billions of euros in reparations for the physical and financial destruction committed during Nazi occupation. However, Germany’s government has said that this issue has already been legally resolved, arguing that Greece is trying to detract attention from the serious financial problems the country is facing.

Read more …

“We cannot easily understand the reasons that pushed him to make statements that are not fitting to the role he has been entrusted with.”

Athens Furious At Eurogroup Suggestion Of Capital Controls (Kathimerini)

The chairman of the Eurogroup, Dutch Finance Minister Jeroen Dijsselbloem, on Tuesday became the first European Union official to suggest the possibility of capital controls to prevent Greece leaving the euro, drawing a furious reaction from Athens, which accused him of “blackmail.” “It’s been explored what should happen if a country gets into deep trouble – that doesn’t immediately have to be an exit scenario,” Bloomberg quoted the head of the eurozone’s finance ministers telling his country’s BNR Nieuwsradio. On Cyprus, he said, “we had to take radical measures, banks were closed for a while and capital flows within and out of the country were tied to all kinds of conditions, but you can think of all kinds of scenarios.”

Greece is scrambling to pay its obligations as revenues drop and it needs the European Central Bank to allow it to borrow more funds. Its eurozone partners are awaiting the result of an inspection into Greece’s finances and its compliance with the bailout program. In Athens, the government issued an angry reply. “It would be useful for everyone and for Mr. Dijsselbloem to respect his institutional role in the eurozone,” Gavriil Sakellaridis said. “We cannot easily understand the reasons that pushed him to make statements that are not fitting to the role he has been entrusted with. Everything else is a fantasy scenario. We find it superfluous to remind him that Greece will not be blackmailed.”

Read more …

Schaeuble keeps at it: “Greek leaders are “lying to the population..”

Greece Grabs Cash as More Than $2 Billion in Payouts Loom (Bloomberg)

Greece will begin debating measures to boost liquidity as the cash-starved country braces for more than €2 billion in debt payments Friday. Unable to access bailout funding and locked out of capital markets, the government will outline emergency plans to parliament Tuesday to increase funding. Payments due March 20 include interest on a swap originally arranged by Goldman Sachs, said a person familiar with the matter who asked not to be identified publicly discussing the derivative. Prime Minister Alexis Tsipras’s government is burning through cash while trying to get its creditors – euro area member states, the ECB and the IMF – to release more money from its €240 billion bailout program.

European governments have said they won’t disburse any more emergency loans unless the government in Athens implements a set of economic overhauls agreed last month, including pension and sales tax reform. “As days go by, room for maneuver becomes ever smaller,” said Theodore Pelagidis at the Brookings Institution. “The impression given is that there’s no plan A or plan B. There’s nothing.” The government’s revenue-boosting plan includes eliminating fines on those who submit overdue taxes by March 27 to encourage payment, helping cover salaries and pensions due at the end of the month. The bill also requires pension funds and public entities to invest reserves held at the Bank of Greece in government securities and repurchase agreements, and transfers €556 million from the country’s bank recapitalization fund to the state.

A vote on the measures is scheduled for Wednesday. Greek stocks rebounded Tuesday, ending four days of declines, with the benchmark Athens Stock Exchange gaining 2.6%. Yields on 3-year bonds rose 8 basis points to 20.25%. The government said March 14 it has a plan to “enhance its liquidity” and won’t have problems meeting payments for civil servants and retirees due just one week after the March 20th debt payments. Tsipras has pledged to meet the country’s obligations while at the same time ending austerity measures. “None of my colleagues, or anyone in the international institutions, can tell me how this is supposed to work,” German Finance Minister Wolfgang Schaeuble said in Berlin Monday. Greek leaders are “lying to the population,” he said.

Read more …

“Put them in front of their contradictions. Make them face the contradictions of the eurozone themselves.”

Greece’s Euro Exit Seems Inevitable (Bloomberg)

Greece’s money troubles resemble a game of pass the parcel, where each successive participant rips another sheet of wrapping paper off the box — which turns out to be empty when the final recipient reaches the core. With time and money running out, a successful endgame seems even less likely than it did a week or a month ago. It’s increasingly obvious that the government’s election promises are incompatible with the economic demands of its euro partners. Something’s got to give. The current money-go-round is unsustainable. Euro-region taxpayers fund their governments, which in turn bankroll the ECB. Cash from the ECB’s Emergency Liquidity Scheme flows to the Greek banks; they buy treasury bills from their government, which uses the proceeds to …repay its IMF debts! No wonder a recent poll by German broadcaster ZDF shows 52% of Germans say they want Greece out of the euro, up from 41% last month.

There’s blame on both sides for the current impasse. Euro-area leaders should be giving Greece breathing space to get its economic act together. But the Greek leadership has been cavalier in its treatment of its creditors. It’s been amateurish in expecting that a vague promise to collect more taxes would win over Germany and its allies. And it’s been unrealistic in expecting the ECB to plug a funding gap in the absence of a political agreement for getting back to solvency. There’s a YouTube video making the rounds on Twitter this week of a lecture Yanis Varoufakis gave in Croatia in May 2013. The most arresting section comes after about two minutes, when the current Greek finance minister literally flips the bird at Germany [..] And if what Varoufakis went on to say is instructive of the game-theory professor’s mind-set, the lack of progress in negotiations with lenders isn’t so surprising:

The most effective radical policy would be for a Greek government to rise up or a Greek prime minister or minister of finance, to rise up in EcoFin in the euro group, wherever, and say “folks, we’re defaulting. We shall not be repaying next May the 6 billion that supposedly we owe the ECB. My God you know, to have a destroyed economy that is borrowing from the ESM to pay to the ECB is not just idiotic, but it’s the epitome of misanthropy.

Say no to that. Put them in front of their contradictions. Make them face the contradictions of the eurozone themselves. Because the moment that the Greek prime minister declares default within the euro zone, all hell will break loose and either they will have to introduce shock absorbers, or the euro will die anyway, and then we can go to the drachma.

Read more …

A sovereign nation?

EU Warns Against Bills On Debt Settlement, Humanitarian Crisis (Kathimerini)

The European Commission’s chief representative on the technical team monitoring Greece, Declan Costello, has described draft laws aimed at tackling the humanitarian crisis and launching a 100-installment payment scheme for taxpayers to settle their debts to the state as unilateral actions taken in a fragmentary fashion, according to a text he has reportedly sent to the Greek side. Costello effectively vetoes the bills in his letter, arguing that they are not compatible with the Eurogroup’s February 20 agreement with Athens, as Paul Mason – a journalist who claims to have seen the correspondence between Costello and the Greek authorities – revealed on Tuesday.

There was no reaction to the news from the Finance Ministry up until late last night, with officials pointing to the list of seven actions that Finance Minister Yanis Varoufakis submitted to the latest Eurogroup meeting which, according to the ministry, included the above bills. Nevertheless other government officials confirmed the existence of the text sent by Costello and noted that certain points related to the draft laws – especially those concerning the settlement of debts to tax authorities – must be clarified.

According to the text that Mason published as a Costello letter, the Commission representative says that those bills will have to be included in the general context of reform promotion. “We would strongly urge having the proper policy consultations first, including consistency with reform efforts. There are several issues to be discussed and we need to do them as a coherent and comprehensive package,” Costello reportedly told the government: “Doing otherwise would be proceeding unilaterally and in a piecemeal manner that is inconsistent with the commitments made, including to the Eurogroup as stated in the February 20 communique.” The debt settlement bill was tabled in Parliament on Tuesday night.

Read more …

“A plunge in export volumes offset another decline in the cost of oil imports. Net exports should therefore become a drag on [GDP] growth soon..”

Japan Exports Slow Sharply In February But Beat Expectations (CNBC)

Japan’s exports rose at a faster-than-expected pace in February but slowed sharply from the previous month as exports to China waned amid the Lunar New Year holidays. Exports rose 2.4% on year, Ministry of Finance data showed on Wednesday, above expectations for a 0.3% increase in a Reuters poll, but down from a 17% on-year rise in January. Despite the above-view reading, exports were sharply lower compared to January’s reading largely due to 17.3% on-year drop in exports to China, which celebrated the Lunar New Year holiday during February. “A plunge in export volumes offset another decline in the cost of oil imports. Net exports should therefore become a drag on [GDP] growth soon,” Marcel Thieliant, Japan economist at Capital Economics, said in a note.

But Mizuho Bank analysts were more optimistic. “We think this supports the [Bank of Japan’s] view of an ongoing, gradual recovery, underpinning its decision to withhold from adding further stimulus even as [central bank governor] Kuroda expresses his view that inflation might turn negative due to oil prices,” it say in a note. Meanwhile, imports fell 3.6% on year in February, sharply below expectations for a 3.1% increase in a Reuters poll. “[The] drop in import values was largely caused by another decline in petroleum import values, which reached the lowest since late 2010,” Thieliant said. “Judging by the Bank of Japan’s import price index, the plunge in the price of crude oil since last summer has now mostly been reflected in the cost of oil imports. However, import prices of natural gas, which tend to follow the price of crude oil with a lag of about six months, have just started to fall. The trade shortfall may therefore still narrow a touch further in the near-term.”

Read more …

“New home prices fell 5.7% on year in February..”

China New Home Prices Post Sixth Consecutive Monthly Decline (CNBC)

China new home prices registered their sixth straight month of annual decline in February, as tepid demand continued to weigh on sentiment despite the government’s efforts to spur buying. New home prices fell 5.7% on year in February, according to Reuters calculations based on fresh data from the National Bureau of Statistics on Wednesday. The reading was worse than January’s 5.1% decline and marks the largest drop since the current data series began in 2011. Meanwhile, both Beijing and Shanghai clocked home price declines. In Beijing, prices fell 3.6% on year following a 3.2% drop in January, while prices in Shanghai fell 4.7%, following January’s 4.2% drop.

However, in a statement after the data was released the Chinese statistics bureau said that home sales are expected to show a significant rebound in March, according to Reuters. “The news isn’t great, and it hasn’t been great for some time. The credit crunch in China is very real and prices do have to adjust after a very long time,” John Saunder, head of APAC at Blackrock told CNBC. “I think the China government is trying to make moves to stabilize things. They’ve undergone a lot of policies and obviously the [central bank] is now reducing the policy rates, so that will all help. but you can’t turn it around instantly,” he said.

Read more …

No kidding.

BoE’s Brazier Says Greek Shock Could Trigger Market Correction (Bloomberg)

A failure to find a political solution to Greece’s sovereign debt problem could trigger a market correction, Bank of England official Alex Brazier said. “A bad outcome in these negotiations could trigger a broader reassessment of risk in financial markets,” Brazier, executive director for financial stability at the BOE, told U.K. lawmakers in London on Tuesday. “We start from a position where market pricing looks potentially subject to correction,” he said. “I don’t view Greece as a big direct risk but it could potentially be a trigger for a market reappraisal” Greek Prime Minister Alexis Tsipras’s government is negotiating with euro-area member states, the ECB and the IMF to release more money from its bailout program.

European governments have said they won’t disburse any more emergency loans unless the government in Athens implements a set of economic overhauls agreed last month, including pension and sales tax reform. “I don’t presume to know how likely it is for Greece to leave the euro,” Brazier said. “Although the economic issue is in some ways very simple – there’s a debt overhang that needs to be dealt with – the way that is dealt with is a political issue and I don’t presume to be able to forecast in any way” how the talks will progress, he said. Brazier said U.K. banks’ direct exposure to Greece was small, “amounting to about £2 billion ($3 billion), which is about 1% of their common equity.”

Read more …

Given the propaganda underlying the sanctions, inevitable.

EU Support for Russia Sanctions Is Waning (Bloomberg)

For evidence of the European Union’s diminishing appetite for sanctions against Russia, look no further than Vladimir Putin’s Kremlin guestbook. Cyprus President Nicos Anastasiades visited the Russian leader in February, granting the Russian navy access to Cypriot ports; March brought Italian Prime Minister Matteo Renzi, labeled a “privileged partner” by Putin; Greek Prime Minister Alexis Tsipras is due next in Moscow, in April. Along with Hungary, Slovakia, Austria and Spain, the three countries were reluctant backers of economic curbs to protest Russia’s interference with Ukraine. As a wobbly truce takes hold in eastern Ukraine, the anti-sanctions bloc will lay down a marker at an EU summit starting Thursday in Brussels.

“The likeliest outcome is that they will not agree to roll over the sanctions now and they will put off a decision until the last possible moment before the sanctions expire,” Ian Bond, a former British diplomat now with the Centre for European Reform in London, said by phone. EU governments halted trade and visa talks with Russia and started blacklisting Russian politicians and military officers last March, after the annexation of Crimea. Those asset freezes and travel bans were extended by six months in January 2015. It took the shooting down of a Malaysian passenger jet over eastern Ukraine in July to prompt wider-ranging curbs including bans on financing of major Russian banks and the sale of energy-exploration gear to Russia’s resource-dependent economy. Those “stage three” measures are set to expire in July.

Proponents of extending them are led by Poland, the Baltic states and the U.K., and count as one of their own the EU president and summit chairman: former Polish Prime Minister Donald Tusk. The hawks have already backed down by seeking a five-month prolongation until the end of 2015, instead of the usual 12 months. “At some time there should be a decision in our view about the extension of the sanctions until the end of the year,” Lithuanian Foreign Minister Linas Linkevicius said in an interview in Brussels at a meeting of EU diplomats on Monday. Even that is a stretch, at least at this week’s summit. Sanctions require all 28 EU countries to agree, enabling skeptics to play for time, shape policies to their liking and, in the extreme, cast a veto. Greece’s new government, for example, voiced discomfort about renewing the blacklists in January before finally going along.

Read more …

As it should be. How can you spend $1.4 billion in tax money, where a few million would have done, when people have no health care, unless you’re a full-blown megalomaniac?!

ECB Celebration of Its New $1.4 Billion Tower Spoiled by Protests (Bloomberg)

As the ECB prepares to inaugurate its new headquarters four months after moving in, more than 10,000 protesters are seeking to spoil the party. Frankfurt, the euro area’s financial capital and home of the common currency, is bracing for demonstrations and sit-ins on Wednesday at locations throughout the city by anti-austerity groups and organizations sympathizing with the plight of Greece. At the ECB’s €1.3 billion premises in the east end, police have erected barbed wire and barricades to keep the protesters at least 10 meters (33 feet) away. “We want a march open to anyone, peaceful and not harming anyone,” Ulrich Wilken, a lawmaker for the Left Party in the Hesse state parliament, said on Tuesday after meeting with police to outline the marchers’ objectives.

“We want an atmosphere of peaceful protest, not the kind of situation the police prepares for with its tanks.” Nine days after the ECB started buying sovereign debt in a €1.1 trillion plan to revive inflation and rescue the economy, protesters are laying the blame for recession and unemployment in the 19-nation euro area at the doors of ECB President Mario Draghi and German Chancellor Angela Merkel. A new government in Greece, led by the leftist Syriza party, is preparing emergency measures to boost liquidity as the cash-starved country braces for more than €2 billion in debt payments on Friday. The country is unable to access bailout funding as it haggles with euro-area governments over the terms of its aid program. Its lenders have been cut off from regular ECB finance lines and pushed onto emergency credit from the Greek central bank.

“In the past, we protested against things like the rescue of the banks in Europe,” said Werner Renz, a representative of protest group Attac. “The focus of our protests this year is on Greece. We need more of Athens in Europe and less of Berlin. There is no way Greece can repay all its debt. The situation can’t be solved by austerity alone.” Draghi is scheduled to host an inauguration ceremony at 11 a.m. with guests including Frankfurt Mayor Peter Feldmann and Hesse’s Economy Minister Tarek Al-Wazir.

Read more …

“..indigenous language education, gender parity in government, historical memory, indigenous forms of justice, anti-racism initiatives, and indigenous autonomy.”

Bolivia: A Country That Dared to Exist (Benjamin Dangl)

This movement toward decolonization in the Andes is as old as colonialism itself, but the process has taken a novel turn with the administration of Morales, Bolivia’s first indigenous president. Morales, a former coca farmer, union organizer, and leftist congressman, was elected president in 2005, representing a major break from the country’s neoliberal past. Last October, Morales was re-elected to a third term in office with more than 60% of the vote. His popularity is largely due to his Movement Toward Socialism (MAS) party’s success in reducing poverty, empowering marginalized sectors of society, and using funds from state-run industries for hospitals, schools and much-needed public works projects across Bolivia.

Aside from socialist and anti-imperialist policies, the MAS’s time in power has been marked by a notable discourse of decolonization. Five hundred years after the European colonization of Latin America, activists and politicians linked to the MAS and representing Bolivia’s indigenous majority have deepened a process of reconstitution of indigenous culture, identity and rights from the halls of government power. Part of this work has been carried forward by the Vice Ministry of Decolonization, which was created in 2009. This Vice Ministry operates under the umbrella of the Ministry of Culture, and coordinates with many other sectors of government to promote, for example, indigenous language education, gender parity in government, historical memory, indigenous forms of justice, anti-racism initiatives, and indigenous autonomy.

Before becoming the Vice Minister of Decolonization when the office opened, Félix Cárdenas had worked for decades as an Aymara indigenous leader, union and campesino organizer, leftist politician and activist fighting against dictatorships and neoliberal governments. As a result of this work, he was jailed and tortured on numerous occasions. Cárdenas participated the Constituent Assembly to re-write Bolivia’s constitution, a progressive document which was passed under President Morales’ leadership in 2009. This trajectory has contributed to Cárdenas’ radical political analysis and dedication to what’s called the Proceso de Cambio, or Process of Change, under the Morales government.

Read more …

Mar 092015
 
 March 9, 2015  Posted by at 7:05 am Finance Tagged with: , , , , , , , , ,  


NPC Skating night, Washington DC 1919

The Global Dollar Funding Shortage Is Back With A Vengeance (Zero Hedge)
“Ignore This Measure Of Global Liquidity At Your Own Peril” (Zero Hedge)
China Inc Flocks To Euro Debt For Funding (FT)
Heta Damage Spreads in Austrian Downgrades, German Losses (Bloomberg)
Europe Is Being Torn Apart – And The Torture Will Be Slow (Guardian)
IMF Could Do More For EU Than ECB’s QE (CNBC)
Tsipras At Crossroads Between Euro And Drachma (Kathimerini)
Juncker Urges EU To Face Up To ‘Serious’ Greek Troubles (AFP)
Jean-Claude Juncker Calls For EU Army (Guardian)
Greece Mulls Referendum as No Deal With Lenders in Sight (Bloomberg)
Greece Threatens New Elections If Eurozone Rejects Planned Reforms (Guardian)
Eurozone: Greek Reform Outline Helpful, But Needs ‘Troika’ Scrutiny (Reuters)
UK Treasury ‘Not Ready For Next Financial Crisis’ (Guardian)
An Inflection Point For Keynesian Parlor Tricks (Mark St. Cyr)
Goldman Sachs Stress Test Results Could Endanger Big Profit Source (NY Times)
Russia’s Anti-US Sentiment Now Is Even Worse Than It Was In Soviet Union (WaPo)
How Everything Will Change Under Climate Change (Naomi Klein)
Upcoming Supermoon Eclipse Will Dazzle Britain, Hit Europe’s Power Grids (RT)

“..different to previous episodes of dollar funding shortage such as the ones experienced during the Lehman crisis or during the euro debt crisis, the current one is not driven by banks.”

The Global Dollar Funding Shortage Is Back With A Vengeance (Zero Hedge)

[..].. all else equal, there is at least enough downside to push the fx basis as far negative at -50 bps: this would make the USD shortage the most acute it has ever been, at least as calculated by this key metric! And since this is essentially a risk-free arb for credit issuers, and since there are many more stock buybacks that demand credit funding, one can be certain that the current fx basis print around – 20 bps will most certainly accelerate to a level never before seen, a level which would also hint that something is very broken with the financial system and/or that transatlantic counterparty risk has never been greater. Unlike us, JPM hedges modestly in its forecast where the basis will end up:

Whether the above YTD trends continue forward is a difficult call to make. The widening of USD vs. EUR credit spreads shown in Figure 4 has the propensity to sustain the strength of Reverse Yankee issuance putting more downward pressure on the basis. On the other hand, this potential downward pressure on the basis should be offset to some extent by Yankee issuance the attractiveness of which increases the more negative the basis becomes.

In all, different to previous episodes of dollar funding shortage such as the ones experienced during the Lehman crisis or during the euro debt crisis, the current one is not driven by banks. It is rather driven by the monetary policy divergence between the US and the rest of the world. This divergence appears to have created an imbalance in funding markets and a shortage in dollar funding. It is important to monitor how this dollar funding shortage and issuance patterns evolve over time even if the currency implications are uncertain.

And to think the Fed’s cheerleaders couldn’t hold their praise for the ECB’s NIRP (as first defined on these pages) policy. Because little did they know that behind the scenes the divergence in Fed and “rest of the world” policy action is leading to two things: i) the fastest emergence of a dollar shortage since Lehman and ii) a shortage which will be arbed to a level not seen since Lehman, and one which assures that over the coming next few months, many will be scratching their heads as to whether there is something far more broken with the financial system than merely an arbed way by US corporations to issue cheaper (hedged) debt in Europe thanks to Europe’s NIRP policies.

If and when the market finally does notice this gaping dollar shortage (as is usually the case with the mandatory 3-6 month delay), watch as the Fed will once again scramble to flood the world with USD FX swap lines in yet another desperate attempt to prevent the global dollar margin call from crushing a matched synthetic dollar short which according to some estimates has risen as high as $10 trillion. Until then, just keep an eye on the Fed’s weekly swap line usage, because if the above is correct, it is only a matter of time before they are put to full use once again. Finally what assures they will be put to use, is that this time the divergence is the direct result of the Fed’s actions, and its insistence that despite what is shaping up to be a 1% GDP quarter, that it has to hike rates. Well, as JPM just warned it in not so many words, be very careful what you wish for, and what you end up getting in your desire to telegraph just how “strong” the US economy is.

Read more …

Absolute must read: “when the dollar rallies strongly, as is the case now, FX intervention rapidly dries up and can even reverse, exerting a massive monetary tightening on emerging economies and ultimately the entire over-inflated global financial complex…”

“Ignore This Measure Of Global Liquidity At Your Own Peril” (Zero Hedge)

With all eyes squarely on the ECB as Mario Draghi prepares to flood the EMU fixed income market with €1.1 trillion in new liquidity starting Monday, Soc Gen’s Albert Edwards reminds us that “another type of QE” is drying up thanks largely to the relative strength of the US dollar. The printing of currency to buy US dollar denominated assets in an effort to prop up “mercantilist export-led growth models [is] no different to the Fed’s QE,” Edwards says, explicitly equating EM FX intervention with the asset purchase programs employed by the world’s most influential central banks in the years since the crisis. Via Soc Gen:

Clearly when the dollar is declining sharply, global FX intervention accelerates as the Chinese central bank, for example, needs to debauch its own currency at the same rate. Conversely, when the dollar rallies strongly, as is the case now, FX intervention rapidly dries up and can even reverse, exerting a massive monetary tightening on emerging economies and ultimately the entire over-inflated global financial complex… The swing in global foreign exchange reserves is one key measure of the global liquidity tap being turned on and off ? with the most direct and immediate effect being felt in emerging economies.

Given the above, we should expect to see global foreign exchange reserves falling…

… with the most pronounced move in EM reserves…

Edwards goes on to note that even as China dials back the market’s expectations for Chinese GDP growth, a look at the variables that Premier Li Keqiang himself has said are a better proxy for economic growth in the country (electricity usage, rail freight volume, and credit growth) suggest GDP growth in China may actually be running below 4%…

The bottom line is that in a world of over-inflated asset values, the strength of the dollar is resulting is a rapid tightening of global liquidity as emerging economies (and indeed the Swiss) stop printing money to buy the US dollar. This should be seen for what it is a clear tightening of global liquidity. Traditionally these periods of dollar strength are highly disruptive to emerging markets and often end in the weakest links blowing up the entire EM and commodity complex and sometimes much else besides! Investors ignore this at their peril.

Read more …

The craziness continues unabated.

China Inc Flocks To Euro Debt For Funding (FT)

Chinese companies are ditching the renminbi and flocking to the euro to raise new offshore debt, as the imminent launch of quantitative easing in the single currency bloc sends ripples through global markets. So far this year, mainland-based companies have sold $2.9 billion worth of euro-denominated debt, according to Dealogic, compared with nothing in the first quarter of last year and within striking distance of the $3.3 billion raised during the whole of 2014. Meanwhile, Chinese borrowers have shunned offshore renminbi debt, known better as “dim sum” bonds. The total raised in the market this year is only $250 million, a dramatic drop from the $6.6 billion issued during the first three months of last year. US dollar borrowing has been steadily high, with $16.3 billion of bonds sold this year.

Funding costs for euro debt have been tumbling since the ECB announced plans to start its own program of quantitative easing, which is due to begin on Monday. More than €1.5 trillion of sovereign eurozone bonds now offer investors negative yields, according to JPMorgan estimates. The new focus on euro debt also marks a change in Chinese corporate funding habits, in part a reflection of increasing eurozone assets held by some of Asia’s most acquisitive companies. Euro bonds can be used for deal financing or for currency management. In the past six months, the euro has dropped 13% against the renminbi, which has a managed peg to the US dollar.

Beijing-based State Grid, which owns stakes in grid operators in Portugal and Italy, borrowed €1 billion in January. Another euro bond issuer, Fosun International, already owns financial and healthcare assets in Portugal, duty free shops in Greece, and German fashion brand Tom Tailor. It successfully completed a €939 million deal for French holiday resort group Club Méditerranée last month. “Going out and borrowing in euros is a pretty good way to hedge,” said Jon Pratt, head of debt capital markets in Asia at Barclays, adding that many more Chinese companies were expected to tap the euro market in the coming months. “Investors are starting to follow it as an asset class. It’s reaching a real critical mass.”

Read more …

Wait till German exposure starts to hit.

Heta Damage Spreads in Austrian Downgrades, German Losses (Bloomberg)

Austria’s decision to wind down Heta Asset Resolution sent ripples through the financial system, causing credit rating downgrades in Austria and bank losses in Germany. Moody’s cut the rating of Carinthia province, which guarantees €10.2 billion of Heta’s debt, by four levels to Baa3 from A2, and said it may lower the ratings of three state-owned Austrian banks exposed to it. Dexia’s German unit, Deutsche Pfandbriefbank and NRW.Bank said yesterday they own Heta bonds that may suffer losses. “Notwithstanding the intention of the central government to protect taxpayers under the new banking resolution regime, Moody’s sees the steps taken so far as adding higher uncertainty to developments,” the ratings company said late Friday in a statement on the Carinthia downgrade. “Susceptibility to an adverse scenario has increased as a result.”

Austria paved the way for imposing losses on Heta’s bondholders when it ruled out further support for the “bad bank” of Hypo Alpe-Adria-Bank March 1. Using powers set out in European Union and Austrian bank laws covering debt reorganization, the Finanzmarktaufsicht regulator ordered a 15-month debt moratorium while it plans resolution of Heta’s €18 billion of assets. Carinthia’s guarantees, which peaked at €25 billion in 2006, were the main justification for Hypo Alpe’s public rescue in 2009 and the biggest conundrum in its wind-down. With budgeted revenue of €2.36 billion this year, the southern province of 556,000 people would be unable to honor the guarantees if they came due now or in a year’s time, Governor Peter Kaiser told Austrian radio ORF on Tuesday.

The guarantees “could exceed Carinthia’s liquidity resources, lead to increased financial leverage and could require some form of extraordinary central government support,” Moody’s said. Finance Minister Hans Joerg Schelling has said repeatedly that the Austrian government isn’t liable to cover Carinthia’s guarantees. Among Heta’s liabilities affected by the moratorium and a future bail-in are €1.24 billion Heta owes to Pfandbriefbank, which issues bonds on behalf of Austrian provincial banks.

Read more …

“There is a great deal of ruin in a nation,” said Adam Smith.”

Europe Is Being Torn Apart – And The Torture Will Be Slow (Guardian)

“If the euro fails, Europe fails”: thus spake Angela Merkel. Unfortunately, the euro is failing, but it is failing slowly. Even if Greece grexits, the eurozone seems unlikely to fall apart in the near future, although there is still a chance that it will. There is a much higher chance that it will grind along like a badly designed Kazakh tractor, producing slower growth, fewer jobs and more human suffering than the same countries would have experienced without monetary union. However, the misery will be unevenly distributed between debtor and creditor countries, struggling south and still prospering north. These different national experiences will be reflected through rational elections, creating more tensions of the kind we have already seen between Germany and Greece. Eventually, something will give, but that process may take a long time.

“There is a great deal of ruin in a nation,” said Adam Smith. Given the extraordinary achievements of the 70 years since 1945, and the memories and hopes still invested in the European project, there is a lot of ruin still left in our continent. I recently participated in an event in Frankfurt attended by representatives of leading European investors. A multiple-choice instant poll was taken, offering a number of scenarios for how the eurozone would look in five years’ time, and asking which we found most probable. Nearly half those present opted, as I did, for “Japan in the 1990s”. Around 20% voted for “what eurozone?”; 18% went for “the UK after Thatcher”, by which they presumably meant a leaner, meaner economy, with the policies of austerity and structural reform producing growth, but also dislocation and inequality.

The catch is that even in this last, “best” case, the inequality would not be within one country, such as Britain, but unevenly distributed between different countries. Germans and a few other north European nations would go on taking most of the gain, others the pain. To say this is to endorse an economic analysis that mainstream German politicians and economists will fiercely dispute. Austerity and structural reform are the one true way to salvation, they insist. As Merkel put it in 2013: “What we have done, everyone else can do.”

There are at least three problems with this. First, as every wise doctor knows, even the theoretically right medicine can be disastrous if administered in too strong a dose to a weakened patient. Second, Greeks, Italians and French are not Germans. Their economies certainly need structural reforms, which have, for example, boosted exports from Spain, but their societies and companies simply do not respond in the same way. Third, even if the whole eurozone becomes one giant German-style Exportweltmeister, who will be the consumer? Some of the demand must come from inside the eurozone, and especially from richer countries such as Germany. If everyone else is to behave more like Germany, then Germany must behave a bit less like Germany. But Germany is not prepared to do that.

Read more …

Curious notion.

IMF Could Do More For EU Than ECB’s QE (CNBC)

Have you ever thought of the IMF as a peacemaker? Here is what Christine Lagarde, the IMF’s managing director, was telling the warring Ukrainians last Wednesday (March 4): “… We are trying to help Ukraine with … a set of reforms, massive financial support, but all of that is really going to depend on how it stabilizes … the east … and how the … conflict stops.” She went on to say that the fighting in the eastern part of Ukraine “has been a huge distraction” for the country’s leaders who, in her view, “are really determined to reform the economy.” The message is clear: Stop fighting, strive for peace and we – the IMF and international investors – will help you to rebuild, reform and modernize your economy. And here is the money. Ms. Lagarde announced that over the next four years $40 billion – half of that from the IMF – would be provided to support the Ukrainian economy.

If there is peace, you can think of these $40 billion as seed money. With its vast and fertile land, its skilled labor force and a diversified (if rusty) industrial base this beautiful country could easily attract large private direct investment inflows. The IMF is clearly playing a key role here, because it is hard to see how large-scale fund disbursements to support Ukraine’s meaningful and sustainable economic reforms can be carried out unless the guns fall silent. With no other source of finance readily available, the IMF’s political clout could be decisive in the successful implementation of the latest round of cease-fire and peace agreements negotiated in Minsk, Belarus, on February 12, 2015. Europe would then be extricated from the claws of its old demons of division, exclusion and medieval savagery.

That is what some European leaders are counting on. Their foreign policy chief Federica Mogherini told a meeting of the group’s top diplomats last Friday (March 6) that “… around our continent … cooperation is far better than confrontation.” She was echoing increasingly pressing calls to stop Ukraine’s fighting and restore Europe’s unimpeded flows of commerce and finance. All this puts the IMF in an interesting position. By forcing the warring parties in Ukraine to seek peace as a condition of economic survival, the IMF can also help the recovery of the European economy by removing obstacles to intra-regional trade that are costing hundreds of thousands of jobs.

Arguably, that would be of far greater help than the ECB’s debasement of the euro with an avalanche of new liquidity that no area economy needs with an already record-low interest rate of 0.05%. Even Germany opposed that ill-conceived policy. Never an advocate of a weak currency, Germany does not need a sinking euro to maintain a trade surplus exceeding 7% of its economy.

Read more …

“Clearly Tsipras has been persuaded that the eurozone and the ECB will not allow Greece to go bankrupt and that things will change politically in Europe come autumn.”

Tsipras At Crossroads Between Euro And Drachma (Kathimerini)

Prime Minister Alexis Tsipras will soon find himself having to choose between the euro and the drachma. He can’t take the euro road with Panayiotis Lafazanis and certain other SYRIZA officials on his team. Privatizations, looser labor laws, pension cuts and other measures required for a eurozone deal will not be approved by MPs who are of a completely different mindset. Nevertheless, the eurozone “bosses” have decided that rules are rules and that if the preliminary agreement with Tsipras and Finance Minister Yanis Varoufakis is not implemented swiftly the country’s liquidity will remain at zero. Meanwhile, the prime minister believes our partners are trying to bring back the troika and the memorandums through the back door.

Well, they never hid their intentions. While they may have dubbed the troika “institutions” and the memorandum “funding program,” they have never suggested that there would be no evaluation or a new program. Meetings with the troika may be taking place in Brussels and certain Greek government initiatives may be accepted but at the end of the day it comes down to strict supervision and the program. Some think that it is only Berlin insisting on terms. They are mistaken; everyone is behind it, from the governments of southern Europe, to the ECB and the IMF. People who care about our country, such as Commission chief Jean-Claude Juncker, have spent plenty of political capital by supporting Greece but will eventually give up. Besides, we have eroded their trust through leaks, irresponsible comments and an unbelievable lack of professionalism. We are losing friends on a daily basis and won’t admit it.

Clearly Tsipras has been persuaded that the eurozone and the ECB will not allow Greece to go bankrupt and that things will change politically in Europe come autumn. The problem is that autumn is too far away and a Greek default is no longer such a big threat. The IMF thinks it’s manageable, in contrast to 2012 when Christine Lagarde persuaded Angela Merkel of the opposite. Markets also believe it manageable and this is bad in terms of our own negotiating capital. Certain cabinet officials still suggest that a solution could come from China or Russia. Whatever assistance these countries could offer, it would not solve Greece’s funding problem or entail a rift with Europe.

Tsipras must keep his party and ministers under control in order to move on with the negotiation. He will also need to offer a couple of major trade-offs in order to persuade the “bosses” not to cut off the country’s cash flow. I don’t know what these could be but I can safely predict that they will not be an easy sell to his party. Tsipras cannot take the euro road as his party stands today. The danger is if he starts leaning toward a euro exit without actually having decided to do so, simply because time and political capital are running out.

Read more …

He may feel forced to act if Grexit takes shape. He’s responsible for keeping it all together.

Juncker Urges EU To Face Up To ‘Serious’ Greek Troubles (AFP)

European Commission head Jean-Claude Juncker called on the European Union to recognize the gravity of the situation in Greece — both for the country’s impoverished citizens and for the wider risks to the eurozone. “We must be sure that the situation does not continue to deteriorate in Greece. What worries me is that not everyone in the European Union has understood how serious the situation in Greece is,” Juncker told German paper Die Welt in an interview published Saturday. He did not specify whom his comments were aimed at, but they appeared two days after the European Central Bank took a tough stance on extending more financial help to Greece. Juncker noted in his comments that a quarter of Greeks are not covered by social security, unemployment is the highest in the eurozone and the country sees regular protests.

Although Greece’s debt problems are far from being resolved, Juncker repeated previous assertions that Athens should not leave the eurozone, noting this would amount to an “irreparable loss of reputation” for the single currency. However, the European Commission president also advised Greece to stick to reforms agreed upon with its creditors. “If the government wants to spend more money, it must compensate with savings or supplemental income,” he added. After July, when Greek bonds held by the European Central Bank come due, there needs to be “reflecting about the ways international creditors must behave toward countries that find themselves in a critical economic situation,” Juncker said. “It is not acceptable that a prime minister must negotiate reforms with civil servants. One is an elected official, the others are not,” he added.

Juncker did not directly mention the meeting of eurozone finance ministers set for Monday in Brussels nor the date of his next meeting with Greek Premier Alexis Tsipras. Tsipras called for the meeting just after a speech Thursday from ECB President Mario Draghi, which stated that all supplemental help to Greece would be conditional on the rapid completion of reforms promised by Athens. The ECB “is still holding the rope which we have around our necks,” said Tsipras, according to excerpts of an interview with German magazine Der Spiegel. The remark came after Athens received no help from the Frankfurt-based institution to address a cash squeeze caused by the non-delivery of promised loans.

Read more …

“Europe’s image has suffered dramatically and also in terms of foreign policy, we don’t seem to be taken entirely seriously.”

Jean-Claude Juncker Calls For EU Army (Guardian)

The EU needs its own army to help address the problem that it is not “taken entirely seriously” as an international force, the president of the European commission has said. Jean-Claude Juncker said such a move would help the EU to persuade Russia that it was serious about defending its values in the face of the threat posed by Moscow. However, his proposal was immediately rejected by the British government, which said that there was “no prospect” of the UK agreeing to the creation of an EU army. “You would not create a European army to use it immediately,” Juncker told the Welt am Sonntag newspaper in Germany in an interview published on Sunday. “But a common army among the Europeans would convey to Russia that we are serious about defending the values of the European Union.”

Juncker, who has been a longstanding advocate of an EU army, said getting member states to combine militarily would make spending more efficient and would encourage further European integration. “Such an army would help us design a common foreign and security policy,” the former prime minister of Luxembourg said. “Europe’s image has suffered dramatically and also in terms of foreign policy, we don’t seem to be taken entirely seriously.” Juncker also said he did not want a new force to challenge the role of Nato. In Germany some political figures expressed support for Juncker’s idea, but in Britain the government insisted that the idea was unacceptable. A UK government spokesman said: “Our position is crystal clear that defence is a national – not an EU – responsibility and that there is no prospect of that position changing and no prospect of a European army.”

Read more …

Would make sense. As I said earlier on, they need a mandate to act.

Greece Mulls Referendum as No Deal With Lenders in Sight (Bloomberg)

Greece’s anti-austerity coalition is considering calling a referendum on government policy as euro-area finance ministers are set to withhold further aid payments at a meeting in Brussels tomorrow. European Commission Vice President Valdis Dombrovskis said he doesn’t expect the Eurogroup to make any decisions on Greece on Monday. Reform proposals must first be approved by the Greek parliament and then implemented before the next bailout disbursement is made, Dombrovskis said in an interview with Frankfurter Allgemeine Zeitung. Dutch Finance Minister Jeroen Dijsselbloem said Greek reform plans are “far from” complete. No disbursements are seen in March, Dijsselbloem, who also chairs the meetings of the currency bloc’s finance ministers, said at an event organized by de Volkskrant in Amsterdam.

Greece’s anti-austerity coalition has so far been unable to agree with creditors on the terms for the disbursement of an outstanding aid tranche totaling about 7 billion euros ($7.6 billion). The deadlock threatens to lead the country into defaulting on its payments, since Greece’s only sources of financing are emergency loans from the euro area’s crisis fund and the International Monetary Fund. Its banks are being kept afloat by an Emergency Liquidity Assistance lifeline, subject to approval by the European Central Bank. “I can only say that we have money to pay salaries and pensions of public employees,” Greek Finance Minister Yanis Varoufakis told Italy’s Il Corriere della Sera in an interview today. “For the rest we will see.” In separate interviews this weekend, Greece’s finance and defense ministers said that if the country’s creditors raise requests which aren’t acceptable to the government, then the people of Greece may have to decide on how to break the deadlock.

Prime Minister Alexis Tsipras also signaled the referendum option is being considered. “If we were to hold a referendum tomorrow with the question, ‘do you want your dignity or a continuation of this unworthy policy,’ then everyone would choose dignity regardless of difficulties that would accompany that decision,” Tsipras told Der Spiegel Magazine, in an interview published Saturday. Greece may call new elections or hold a referendum if European finance ministers reject the government’s reform proposals, Varoufakis told Corriere della Sera. A referendum would only be held if negotiations with creditors fail, spokesman Gabriel Sakellaridis said by telephone. The government believes a solution will be found in negotiations with creditors, though it doesn’t expect an aid tranche disbursement decision from tomorrow’s meeting, Sakellaridis said. Any referendum is unlikely, and if held, it would approve or reject government policy, not consider Greece’s euro membership, he added.

Read more …

“If [lenders] question the will of the Greek people and of the government, one possible response would be to carry out a referendum..”

Greece Threatens New Elections If Eurozone Rejects Planned Reforms (Guardian)

Greece’s anti-austerity government has raised the spectre of further political strife in the crisis-plagued country by saying it will consider calling a referendum, or fresh elections, if its eurozone partners reject proposed reforms from Athens. Racheting up the pressure ahead of a crucial meeting of his eurozone counterparts on Monday, the Greek finance minister, Yanis Varoufakis, said the leftist-led government would hold a plebiscite on fiscal policy if faced with deadlock. “We are not attached to our posts. If needed, if we encounter implacability, we will resort to the Greek people either through elections or a referendum,” he told Italy’s Il Corriere della Sera in an interview on Sunday. Varoufakis was the second high-ranking official in as many days to suggest the possibility of a referendum being held.

On Saturday, Panos Kammenos, who heads the government’s junior partner in office, the small, rightwing Independent Greeks party, said such a ballot could be a “possible response” to protracted disagreement with creditor bodies propping up Greece’s debt-stricken economy. “If [lenders] question the will of the Greek people and of the government, one possible response would be to carry out a referendum,” Kammenos, who is also defence minister, told the financial weekly Agora. Reforms have been set as a condition for unlocking a €7.2bn (£5.2bn) tranche of aid that Athens has yet to draw down from its €240bn bailout programme agreed with the EU, ECB and IMF. With Greece shut out of capital markets, the disbursement is vital to meeting debt obligations.

A letter outlining prospective government reforms – including the novel idea of clamping down on tax evasion by enlisting the support of tourists and housewives – was dispatched to the Euro group chairman Jeroen Dijsselbloem on Friday. But with the proposals reportedly receiving a lukewarm response, the Greek finance ministry spent the weekend feverishly fine-tuning the policies. One EU official in Brussels was quoted as saying that the leaked letter “bore no relation” to the deal recently reached between Athens and its creditors enabling the country to extend its current bailout programme until June. Another described the proposals as “amateurish”. Faced with the prospect of a new credit crunch, the prime minister, Alexis Tsipras, also worked the phones at the weekend, speaking with French President François Hollande and the ECB president Mario Draghi.

Insolvent Greece has reached this point before. But patience is also running out with Athens. The elevation to office of Tsipras’ anti-establishment Syriza party has strained relations with partners – not least Germany, which has provided the bulk of Athens’s bailout finds – more than ever before.

Read more …

Lovely choice of words/

Eurozone: Greek Reform Outline Helpful, But Needs ‘Troika’ Scrutiny (Reuters)

The reform outline sent by Greece to eurozone ministers to unblock loans is “helpful,” but needs to be scrutinized by representatives of the country’s creditors, according to the head of the Eurogroup of eurozone finance ministers. Jeroen Dijsselbloem, whose group meets on Monday to discuss Greece, was responding to a letter he received on Friday from the new left-wing government in Athens asking for an immediate resumption of talks with creditors. It also described seven reforms it wants to launch to achieve goals agreed to by the previous government. Once steps to reach these goals are taken, Greece would become eligible for more credit from the euro zone and the International Monetary Fund, and its banks could again finance themselves at ECB open market operations. But time is pressing because Greece will run out of cash later this month.

“This document will be helpful in the process of specifying the first list of reform measures,” Dijsselbloem said in a written reply to the Greek letter ahead of Monday’s meeting. Greece’s main creditors are eurozone governments and the IMF. They are represented in talks with Athens by three institutions dubbed the troika – the European Commission, the ECB and the IMF. “The proposals described in your letter will thus need to be further discussed with the institutions,” Dijsselbloem wrote in the letter, obtained by Reuters. “Let me also clarify that in the course of the current review the institutions will have to take a broad view covering all policy areas,” Dijsselbloem wrote. His remarks refer to plans of the new Greek government to replace some of the budget consolidation measures agreed to by the previous government with different reforms. Eurozone officials say such substitution is fine only if the end result in budgetary terms will be the same.

Read more …

Never will be.

UK Treasury ‘Not Ready For Next Financial Crisis’ (Guardian)

The Treasury is not doing enough to prepare for the possibility of another financial crash, a cross-party committee of MPs said on Monday. The Commons public administration committee said that it was surprised financial and economic risks were not included in the government’s national risk register and that, although some planning has taken place, it has not been thorough enough. “The Treasury has done a lot, but there is more to be done to be ready for another financial crisis,” said Bernard Jenkin, the Conservative MP and chair of the committee, which set out its comments in a general report on how Whitehall addresses future challenges. “We still have institutions which are ‘too big to fail’ but with so much national borrowing capacity used up, they may prove ‘too big to save’ if it happens again.

We did not find evidence that government and the City are actively practising and exercising for this worst case scenario.” The committee said that financial risks should be included in the government’s national risk register, and that the Treasury should plan for financial crises that could be triggered by non-financial events. It also said there was “no comprehensive understanding across government as a whole of the future risks and challenges facing the UK”. But a Treasury spokesman flatly rejected the committee’s analysis, saying the report “takes no account of the relevant facts”. He went on: “By focusing on Whitehall procedures they have entirely missed the point: the lessons of the financial crisis have been learned and acted upon by putting in place a reformed regulatory system, ring-fencing the banks, ending the ‘too big to fail’ problem, and dealing with the risks posed to the economy by an unsustainable deficit.

Read more …

“.. the rabbit falling out comatose in front of all the children seated in the front rows.”

An Inflection Point For Keynesian Parlor Tricks (Mark St. Cyr)

Suddenly everywhere you look, one after another, a story is making its way into the main stream press (albeit a trickle but that’s a tidal wave in comparison) that we may be, in fact; experiencing a “bubble” in stock prices. All I can say is the line made famous by Jim Nabors as Gomer Pyle, “Well surprise – surrrr-prise!” But there’s a whole lot more going on here and it too is bubbling up more and more for all to see. The once magic trick performed by the Federal Reserve via QE is turning from a one time grand spectacle of illusion used to levitate the markets; and is quickly being laid bare and exposed for its street corner value of tricks. That fact is becoming unavoidable. Even those who still believe in unicorns and rainbows (cue CNBC™) are finding it harder and harder to hold onto the magic.

Anyone with just a smidgen of common sense knows what’s being presented as “a miracle of economic intervention” has been nothing more than a grand escapade only made possible through the use of monetary smoke and mirrors. Everyone now knows how the tricks are being done. And those who continue espousing that this market is based on “fundamentals” as well as “fairly priced” (cue the media’s next in-rotation “everything is awesome” fund manager) are being hard pressed to control the snickering if not out right fits of laughter by others as they continue trying to make their case. e.g., “This past earnings season was a bona-fide beat!” In reality we all know its only been possible through the use of extraordinary record stock buy backs made possible by a ZIRP, along with such an adulteration of GAAP via Non-GAAP: it’s a wonder why they even need calculators any more.

These numbers (in my opinion) have more in common with illusion and magical thinking than anything based in reality – so why even bother. Be honest, just go for it, and declare, “We’re making all this shit up!” because: it just isn’t fooling anyone anymore. Now the real issue from here for both the Fed. as well as Keynesians everywhere will be in trying to maintain some form, as in: “illusion of control” going forward. Surely there’s more magical thinking and sleight of hand needed now more than ever to keep up this grand deceptive appearance or “wealth effect” we were all told we’d be experiencing by now. After all, unemployment just hit 5.5% and the markets are at record levels. “Where’s the pony?” Who needs an economy based on fundamental monetary principles when you can report economic numbers like this?

Unless you’re one of the over 92 million souls unable to find work. The Keynesian answer to this? You just apply today’s version of Keynesian economic math and principles to any statistic that gets in the way of the illusion. Then “poof” just like magic, another irritating issue to the “everything is awesome” narrative is gone. No cape required for that one. Yet the Fed board of magic seemed to have an issue with the illusion of “control” as it faltered a bit on Friday. Having more in common with an assistant dropping the magician’s hat: and the rabbit falling out comatose in front of all the children seated in the front rows.

Read more …

Crazy world. Making a profit from buying back your own shares.

Goldman Sachs Stress Test Results Could Endanger Big Profit Source (NY Times)

Concerns have emerged that Goldman Sachs — long the leader on Wall Street — may lose an important engine of profitability. On the Federal Reserve stress tests last week, Goldman performed poorly compared with other big banks. Now analysts and investors are worried that the bank could be barred by regulators from buying back its own stock or increasing dividends. Goldman has used dividends and share buybacks to appeal to investors at a time when other elements of the bank’s business have faced challenges. When companies buy shares of their own stock on the open market, it generally increases the amount of profits attributed to every share, an important metric for investors.

Several analysts have released research questioning whether the Federal Reserve would allow Goldman to continue its buyback programs given the results of the stress tests. Brian Kleinhanzl, an analyst with Keefe, Bruyette & Woods, estimated that if Goldman is unable to repurchase shares, it could earn 42 cents a share less than expected this year, and $1.78 a share less than expected next year. “There is an expectation that they could be at risk,” said Steve Chubak, a bank analyst with Nomura. Shares of Goldman fell 1.7% on Friday, the day after the stress tests, while the broader bank sector was up.

The bank’s predicament highlights how the Fed’s stress test, which has become a powerful tool for Wall Street regulators, can trip up even a bank like Goldman, which came out of the financial crisis looking stronger than many rivals. The stress tests are intended to ensure that banks have an adequate cushion to sustain losses if another financial crisis hits. The Fed does not allow banks to give money back to shareholders if it would leave the banks with less of a cushion than they would need in a severe crisis. The Fed will not publicly give its final verdict on Goldman’s buyback plans until Wednesday. Its decision is likely to hinge on how it analyzes the results of the stress test, and it may have determined that Goldman is strong enough to use profits to buy back shares.

Read more …

The WaPo just can’t believe it… How can they not love us? It must be that conspiracy propaganda…..

Russia’s Anti-US Sentiment Now Is Even Worse Than It Was In Soviet Union (WaPo)

Thought the Soviet Union was anti-American? Try today’s Russia. After a year in which furious rhetoric has been pumped across Russian airwaves, anger toward the United States is at its worst since opinion polls began tracking it. From ordinary street vendors all the way up to the Kremlin, a wave of anti-U.S. bile has swept the country, surpassing any time since the Stalin era, observers say. The indignation peaked after the assassination of Kremlin critic Boris Nemtsov, as conspiracy theories started to swirl – just a few hours after he was killed – that his death was a CIA plot to discredit Russia. (On Sunday, Russia charged two men from Chechnya, and detained three others, in connection with Nemtsov’s killing.) There are drives to exchange Western-branded clothing for Russia’s red, blue and white. Efforts to replace Coke with Russian-made soft drinks. Fury over U.S. sanctions.

And a passionate, conspiracy-laden fascination with the methods that Washington is supposedly using to foment unrest in Ukraine and Russia. The anger is a challenge for U.S. policymakers seeking to reach out to a shrinking pool of friendly faces in Russia. And it is a marker of the limits of their ability to influence Russian decision-making after a year of sanctions. More than 80% of Russians now hold negative views of the United States, according to the independent Levada Center, a number that has more than doubled over the past year and that is by far the highest negative rating since the center started tracking those views in 1988. Nemtsov’s assassination, the highest-profile political killing during Vladiimir Putin’s 15 years in power, was yet another brutal strike against pro-Western forces in Russia. Nemtsov had long modeled himself on Western politicians and amassed a long list of enemies who resented him for it.

The anti-Western anger stands to grow even stronger if President Obama decides to send lethal weaponry to the Ukrainian military, as he has been considering. The aim would be to raise the cost of any Russian intervention by making the Ukrainian response more lethal. But even some of Putin s toughest critics say they cannot support that proposal, since the cost is the lives of their nation’s soldiers. “The United States is experimenting geopolitically, using people like guinea pigs,” said Sergey Mikheev, director of the Kremlin-allied Center for Current Politics, on a popular talk show on the state-run First Channel last year. His accusations, drawn out by a host who said it was important to “know the enemy,” were typical of the rhetoric that fills Russian airwaves. “They treat us all in the same way, threatening not only world stability but the existence of every human being on the planet,” Mikheev said.

Read more …

A 2nd chapter from her book.

How Everything Will Change Under Climate Change (Naomi Klein)

The alarm bells of the climate crisis have been ringing in our ears for years and are getting louder all the time – yet humanity has failed to change course. What is wrong with us? Many answers to that question have been offered, ranging from the extreme difficulty of getting all the governments in the world to agree on anything, to an absence of real technological solutions, to something deep in our human nature that keeps us from acting in the face of seemingly remote threats, to – more recently – the claim that we have blown it anyway and there is no point in even trying to do much more than enjoy the scenery on the way down. Some of these explanations are valid, but all are ultimately inadequate. Take the claim that it’s just too hard for so many countries to agree on a course of action. It is hard.

But many times in the past, the United Nations has helped governments to come together to tackle tough cross-border challenges, from ozone depletion to nuclear proliferation. The deals produced weren’t perfect, but they represented real progress. Moreover, during the same years that our governments failed to enact a tough and binding legal architecture requiring emission reductions, supposedly because cooperation was too complex, they managed to create the World Trade Organisation – an intricate global system that regulates the flow of goods and services around the planet, under which the rules are clear and violations are harshly penalised. The assertion that we have been held back by a lack of technological solutions is no more compelling.

Power from renewable sources like wind and water predates the use of fossil fuels and is becoming cheaper, more efficient, and easier to store every year. The past two decades have seen an explosion of ingenious zero-waste design, as well as green urban planning. Not only do we have the technical tools to get off fossil fuels, we also have no end of small pockets where these low carbon lifestyles have been tested with tremendous success. And yet the kind of large-scale transition that would give us a collective chance of averting catastrophe eludes us.

Is it just human nature that holds us back then? In fact we humans have shown ourselves willing to collectively sacrifice in the face of threats many times, most famously in the embrace of rationing, victory gardens, and victory bonds during world wars one and two. Indeed to support fuel conservation during world war two, pleasure driving was virtually eliminated in the UK, and between 1938 and 1944, use of public transit went up by 87% in the US and by 95% in Canada. Twenty million US households – representing three fifths of the population – were growing victory gardens in 1943, and their yields accounted for 42% of the fresh vegetables consumed that year. Interestingly, all of these activities together dramatically reduce carbon emissions.

Read more …

Sounds awesome.

Upcoming Supermoon Eclipse Will Dazzle Britain, Hit Europe’s Power Grids (RT)

This spring should reward plenty of star-gazers, especially in Britain, which will experience its deepest solar eclipse in 15 years, as well as a Supermoon, all at the same time – an event that will sink the island into twilight for two whole hours. The Supermoon eclipse, as the phenomenon is known, is an astronomical alignment where the Moon is sent on a trajectory between the Sun and the Earth, depriving us of light. The event will occur on March 20 at around 8:40GMT. Scotland will have it best though, with a whopping 98% of the sky darkened, compared to about 85% for the south of England. For best results the Scottish need to look up starting 9:36 am. Other areas in Britain will only get around 30%. Similar events took place in 2006, 2008 and 2011, but neither of them can touch the upcoming Supermoon eclipse, except an event that occurred in 1999.

[..] Britain will remain relatively unscathed, compared to its European neighbors, where up to 10% of energy is generated sustainably, meaning they depend more on the sun. According to the UK’s energy body, only 1.5% of power there is generated by solar panels. And since people will be going out in droves to watch the spectacle, energy consumption should drop almost at the same time the shortages will strike, it says. The European Network Transmission System Operators for Electricity says, according to the Independent, “with the increase of installed photovoltaic energy generation, the risk of an incident could be serious without appropriate countermeasures.” “Within 30 minutes the solar power production would decrease from 17.5 gigawatts to 6.2GW and then increase again up to 24.6GW. This means that within 30 minutes the system will have to adapt to a load change of -10GW to +15GW,” said Patrick Graichen, executive director of the Berlin-based think-tank on renewable energy Agora Energiewende, as cited by the FT.

Read more …