Sep 052019
 
 September 5, 2019  Posted by at 8:30 am Finance Tagged with: , , , , , , , , ,  14 Responses »


Henri Matisse Bathers by a river 1909-16

 

UK Government Gives Up Trying To Stop Brexit Delay Bill In Parliament (R.)
Bill Designed To Stop No-Deal Brexit ‘Will Clear Lords’ (BBC)
Fed’s Rate-Cut Debate Focuses On ‘Robust’ US Consumer (R.)
Why Millions Of Millennials Are Not Homeowners (CNBC)
Inequality and Taxes (Flassbeck)
Chinese Paper Says Hong Kong Demonstrators Now Have No Excuse For Violence (R.)
John Doe Begs Judge Not To Name Names In Epstein Gal Pal Case (NYP)
‘Hundreds Of Other People Could Be Implicated’ In Epstein, Maxwell Case (CNBC)
Erdogan Says It’s Unacceptable That Turkey Can’t Have Nuclear Weapons (R.)
US Offered Millions In Cash To Captain Of Iranian Tanker (AFP)
400 Million Facebook Users’ Phone Numbers Exposed In Privacy Lapse (AFP)
Plastic Pollution Has Entered The Fossil Record (G.)

 

 

Good lines: “There was a realization by those on the other side that this was more than usually stupid, and they were looking stupid, and we needed to find a way forward .. ”

UK Government Gives Up Trying To Stop Brexit Delay Bill In Parliament (R.)

British Prime Minister Boris Johnson’s government abandoned attempts in the upper house of parliament to block a law aimed at stopping the country from leaving the European Union without a deal. The move paved the way for Johnson being required to ask the EU for a three-month extension to the Brexit deadline, if he fails to reach a renegotiated transition deal with the bloc by the middle of October. Johnson has said he is opposed to an extension and that he is prepared to take Britain out of the EU without a deal if necessary. Conservative Party members of the upper house of parliament had tabled a series of amendments in an attempt to run down the clock on the delay bill and prevent it being passed before parliament is suspended on Monday.


But in the early hours of Thursday, the government in the upper house, known as the House of Lords, announced it was dropping its opposition to the legislation. Richard Newby, an opposition member of the Lords, who had taken his duvet to parliament in preparation to spend the night discussing the law, said the government dropped its opposition after suffering heavy defeats on some of the proposed amendments. “There was a realization by those on the other side that this was more than usually stupid, and they were looking stupid, and we needed to find a way forward,” he told BBC Radio.

Read more …

OK, what’s next? Friday is the last day Parliament is in session until mid-October.

Bill Designed To Stop No-Deal Brexit ‘Will Clear Lords’ (BBC)

The government has said a bill to stop a no-deal Brexit will complete its passage through the Lords on Friday. The proposed legislation was passed by MPs on Wednesday, inflicting a defeat on Prime Minister Boris Johnson. There were claims pro-Brexit peers could deliberately hold up the bill so it could not get royal assent before Parliament is prorogued next week. But the Conservative chief whip in the Lords announced a breakthrough in the early hours after talks with Labour.


The peers sat until 01:30 BST, holding a series of amendment votes that appeared to support predictions a marathon filibuster session – designed to derail the bill – was under way. But then Lord Ashton of Hyde announced that all stages of the bill would be completed in the Lords by 17:00 BST on Friday. He added that the Commons chief whip had also given a commitment that MPs will consider any Lords amendments on Monday and that the government intends that the “bill will be ready” to be presented for royal assent.

Read more …

End the Fed.

Fed’s Rate-Cut Debate Focuses On ‘Robust’ US Consumer (R.)

Slowing global economies, the escalating trade war between Washington and Beijing and a warning sign of recession flashing in the U.S. Treasury market have all fed expectations the Federal Reserve is poised to lower rates at the close of its Sept. 17-18 meeting. But sentiment is much less well-defined within the Fed over whether to reduce borrowing costs for the second time this year, and if so by how much. In remarks this week, their last chance to speak publicly before their next rate-setting meeting, U.S. central bankers broadly agreed that trade policy uncertainty is hurting U.S. businesses. Whether they believe a rate cut is in order appears to hinge largely on their view of the consumer.

John Williams, president of the hugely influential New York Federal Reserve, said on Wednesday consumer spending is “robust” and one reason the U.S. economy is in a “favorable” place.” Still, after his prepared remarks he told reporters: “I don’t see consumer spending really continuing to grow faster into the future like it has been.” Household spending accounts for about 70% of the U.S. economy and surged last quarter despite a drop in business investment. The Fed, he said, is ready to “act as appropriate” to help America avoid an economic downturn, echoing closely language used by Fed Chair Jerome Powell used last month which fed expectations of another quarter-point interest-rate cut in September.

But Williams also told reporters he expects the economy to grow at an above-trend pace of 2.0%-2.5% in 2019. “Doesn’t sound like someone ready to ease 50 basis points. Or at all,” quipped Northern Trust economist Carl Tannenbaum on Twitter. Boston Fed President Eric Rosengren, who in July opposed the first Fed rate cut since 2008, said on Tuesday there is no reason to cut rates as long as the economy keeps growing at around 2%.

Read more …

Because the Fed has blown a gigantic housing bubble and made millenials poorer in the process. That’s why.

Why Millions Of Millennials Are Not Homeowners (CNBC)

Homeownership eludes millions of millennials. There is a whole host of reasons, including personal preferences and economic disadvantages, that explain why the homeownership rate for the largest generation in U.S. history is lower than that of their parents and grandparents. “In my generation — I’m a baby boomer — you bought a home as quickly as you could,” said Laurie Goodman of the Urban Institute. “You didn’t take a vacation for years to save for the down payment on your first home.” Millennials are in less of a rush to get their hands on house keys, Goodman said. Delayed marriage has one of the biggest impacts on their low homeownership rate, the Urban Institute found. Marriage increases one’s likelihood of owning a home by 18 percentage points.

Yet millennials are wedding later — and less. In 1960, the average age at which women and men first married was in their early 20s. Today, the median age for a first marriage is closer to 30. And millennials are three times as likely to have never married as members of the silent generation — those in their 70s and 80s — when they were young. “Homeownership represents a stable place to live for the rest of my life,” Goodman said. “And a lot of single people think this isn’t the rest of my life — I’m going to find a mate and we’re going to put roots down together.” To be sure, even without saying, “I do,” many young people still want to become homeowners. Unmarried couples accounted for 16% of first-time homebuyers in 2017, the highest share on record, according to the National Association of Realtors.

Single men and women accounted for a quarter of first-time homebuyers. Today, just 57% of first-time homebuyers are married, compared with 75% in 1985. Young people are also in no rush to have kids. The share of married households with children, aged 18 to 34, dropped to 25% in 2015, from 37% in 1990. And having a child increases a person’s chance of owning a house by 6 percentage points, the researchers at the Urban Institute calculated. Millennials are also a far more diverse generation than previous ones, and homeownership rates are lower among Hispanic, black and Asian Americans compared with white Americans. While almost 39% of white millennials, aged 18 to 34, own a house, just 14.5% of those black Americans do, according to the Urban Institute.

Read more …

Germany has much less of a housing bubble, but they’re not doing much better. The inequality discussion will have to be had. America’s most prosperous era, the baby boomer boom, took place against a backdrop of 70-80% income taxes for the rich.

Inequality and Taxes (Flassbeck)

A modest proposal by a small party to reintroduce a wealth tax is rejected by conservatives quietly foaming at the mouth. This shows us a little of what is really going on in Germany. Germany at the end of summer 2019 is a country lacking any perspective. It doesn’t know how to deal with climate change; it lacks any notion of what to do about the obvious recession in its own country; it has no way of tackling the serious shortcomings in its infrastructure; it has no idea how to tame its disrupted agriculture and prevent traffic congestion; it debates this and that, but largely without any sense and without any intellectual or political direction.

What is particularly remarkable is how the plans of a small party to (re)introduce a very small and modest wealth tax have been answered by fuming attacks across almost all media and conservative political parties. Remember, this tax was once disposed of politically simply by doing nothing after a limp ruling by the Federal Constitutional Court. It is also worth remembering that inequality in income and wealth has since reached completely new dimensions. Don’t forget that the conservative parties constantly make the average voter believe that they are there for him. The media and political reaction to this modest proposal, which currently has no chance of being implemented, gives an idea of what power-relations in the country really are like and what would happen if one seriously tried to do something about inequality.

The paid scribblers in the dominant media know exactly what they have to do when the interests of those in power in the big media houses are threatened. The fact that a newspaper like Handelsblatt comes up with the headline “Robbery of the rich” on the subject of a wealth tax shows that all reason has been abandoned and all standards set aside when it comes to issues of wealth distribution. The Süddeutsche Zeitung shamelessly characterises the SPD’s initiative as an attempt “to make the discrediting of performance and success socially acceptable”. The newspaper, which still has a liberal image, accuses the SPD of betraying its own goal of “advancement” and “mobilising against high performers” (although, to be fair, the SZ also wrote a commentary in favour of a wealth tax, which I should not conceal from you).

Read more …

Christopher Balding on Twitter: “No, she hasn’t formally withdrawn the bill. The video with the subtitles say she hasn’t withdrawn the bill. She will PROPOSE withdrawing the bill in a month when the legislature reconvenes.”

Chinese Paper Says Hong Kong Demonstrators Now Have No Excuse For Violence (R.)

Hong Kong leader Carrie Lam’s withdrawal of a controversial extradition bill that had sparked widespread protests was an olive branch that leaves demonstrators with no excuse to continue violence, the official China Daily said on Thursday. The withdrawal of the bill on Wednesday came after weeks of protests that had sometimes turned into pitched battles across the former British colony of more than 7 million people. More than 1,000 protesters have been arrested. The bill would have allowed extraditions to mainland China, where courts are controlled by the Communist Party. Its withdrawal was one of the five key demands of the protesters.


The state-run China Daily said the decision was “a sincere and earnest response to the voice of the community … (that) could be interpreted as an olive branch extended to those who have opposed the bill over the past few months”. The protests began in March but snowballed in June and have evolved into a push for greater democracy for the city, which returned to China in 1997 as a Special Administrative Region (SAR). It was not clear if pulling the bill – which had been suspended since June – would help end the unrest. The headline of the China Daily’s editorial said “protesters now have no excuse to continue violence”

Read more …

Who do we protect, the victims or some John Doe?

John Doe Begs Judge Not To Name Names In Epstein Gal Pal Case (NYP)

An anonymous man terrified he’s about to be named in court papers related to Jeffrey Epstein and Ghislaine Maxwell’s alleged child sex trafficking ring is begging a judge not to release his name and identities of others accused — because it could tarnish their reputations, according to a surprise motion filed Tuesday. Lawyers for the John Doe filed the letter Tuesday — just a day before Epstein’s self-proclaimed “sex slave” Virginia Roberts Giuffre is expected to join her lawyers in court as they continue efforts to unseal thousands of pages of documents related to her civil lawsuit against the dead pedophile’s alleged procuress.

“As a non-party to these proceedings, Doe lacks specific knowledge about the contents of the Sealed Materials,” his lawyers wrote to Manhattan federal court judge Loretta Preska. “But it is clear that these materials implicate the privacy and reputational interests of many persons other than the two primary parties to this action, Giuffre and Maxwell.” The letter goes on to say a prior judge overseeing the case summarized the still-secret documents as containing a “range of allegations of sexual acts involving Plaintiff and non-parties to this litigation, some famous, some not; the identities of non-parties who either allegedly engaged in sexual acts with Plaintiff or who allegedly facilitated such acts.”

Doe’s lawyers do not say in the papers if he is famous, or what accusations he expects to face in the court papers. Meanwhile, Giuffre’s lawyer David Boies told The Post he expects Wednesday’s hearing to determine a roadmap for how to deal with the remaining mountain-range of material. “It’s a whole new set of documents, five to 10 times larger in volume than what has been released so far,” the lawyer said, referring to nearly 2,000 pages of case documents that were made public on Aug. 9 — just a day before Epstein’s death by suicide at a lower Manhattan jail. Boies said the still-sealed tranche contains depositions from never-before-heard witnesses, but declined to provide any names. And he said that while his client is planning to attend, he doubts her legal adversary will appear.

Read more …

Why we need Julian Assange. He helped Australian police track down pedophiles, he can do it again in the US.

‘Hundreds Of Other People Could Be Implicated’ In Epstein, Maxwell Case (CNBC)

Still-secret court filings related to sexual predator Jeffrey Epstein and his alleged procurer Ghislaine Maxwell could implicate “hundreds of other people,” Maxwell’s lawyer said Wednesday during a hearing. But finding out who they are will take some time. Maxwell’s lawyer and an attorney for women who claim Epstein, a financier, sexually abused them told U.S. District Judge Loretta Preska they have not agreed how the documents should be unsealed. Preska was clearly irritated with their lack of progress on the documents, which are part of a defamation lawsuit that one of Epstein’s accusers, Virginia Giuffre, filed several years ago against Maxwell, a British socialite.

The case files are known to contain claims by Giuffre that she was sexually abused by “numerous prominent American politicians, powerful business executives, foreign presidents, a well-known Prime Minister and other world leaders.” “Did you people not talk about this?” Preska asked the lawyers in federal court in Manhattan when she was told there was no plan in place for reviewing the documents. Preska ended the hearing with a tentative plan to have the attorneys take the next two weeks to hash out a process for categorizing the thousands of pages of sealed documents. After that, the lawyers would have a week to designate which group of documents should be unsealed first, with a rolling week-to-week process thereafter to evaluate the material and argue over how much or how little should be disclosed publicly.

There could be up to 10 categories for the documents. Jeffrey Pagliuca, a lawyer for Maxwell, said the sealed documents include “literally hundreds of pages of investigative reports that mention hundreds of people.” “There are hundreds of other people who could be implicated” in the documents, Pagliuca said.

Read more …

Patriotism on steroids.

Erdogan Says It’s Unacceptable That Turkey Can’t Have Nuclear Weapons (R.)

Turkish President Tayyip Erdogan said on Wednesday it was unacceptable for nuclear-armed states to forbid Ankara from obtaining its own nuclear weapons, but did not say whether Turkey had plans to obtain them. “Some countries have missiles with nuclear warheads, not one or two. But (they tell us) we can’t have them. This, I cannot accept,” he told his ruling AK Party members in the eastern city of Sivas. “There is no developed nation in the world that doesn’t have them,” Erdogan said. In fact, many developed countries do not have nuclear weapons. Turkey signed the Nuclear Nonproliferation Treaty in 1980, and has also signed the 1996 Comprehensive Nuclear-Test-Ban Treaty, which bans all nuclear detonations for any purpose.

Read more …

“Having failed at piracy, the US resorts to outright blackmail..”

US Offered Millions In Cash To Captain Of Iranian Tanker (AFP)

A senior US official personally offered several million dollars to the Indian captain of an Iranian oil tanker suspected of heading to Syria, the State Department confirmed Wednesday. The Financial Times reported that Brian Hook, the State Department pointman on Iran, sent emails to captain Akhilesh Kumar in which he offered “good news” of millions in US cash to live comfortably if he steered the Adrian Darya 1 to a country where it could be seized. “We have seen the Financial Times article and can confirm that the details are accurate,” a State Department spokeswoman said. “We have conducted extensive outreach to several ship captains as well as shipping companies warning them of the consequences of providing support to a foreign terrorist organization,” she said, referring to Iran’s elite Revolutionary Guards.


The Adrian Darya 1 was held for six weeks by the British overseas territory of Gibraltar on suspicion that it was set to deliver oil from Iran to its main Arab ally Syria — a violation of European Union sanctions on President Bashar al-Assad’s iron-fisted regime. Gibraltar released the ship, formerly called the Grace 1, on August 18 over US protests after receiving written assurances that the vessel would not head to countries sanctioned by the European Union. Iranian Foreign Minister Mohammad Javad Zarif mocked Hook’s initiative as he pointed to the Financial Times story. “Having failed at piracy, the US resorts to outright blackmail — deliver us Iran’s oil and receive several million dollars or be sanctioned yourself,” Zarif tweeted.

Read more …

Facebook does not rhyme with privacy.

400 Million Facebook Users’ Phone Numbers Exposed In Privacy Lapse (AFP)

Phone numbers linked to more than 400 million Facebook accounts were listed online in the latest privacy lapse for the social media giant, US media reported Wednesday. An exposed server stored 419 million records on users across several databases — including 133 million US accounts, more than 50 million in Vietnam, and 18 million in Britain, according to technology news site TechCruch. The databases listed Facebook user IDs — unique digits attached to each account — the profiles’ phone numbers, as well as the gender listed by some accounts and their geographical locations, technology website TechCrunch reported.


The server was not password protected, meaning anyone could access the databases, and remained online until late Wednesday when TechCrunch contacted the site’s host. Facebook confirmed parts of the report but downplayed the extent of the exposure, saying that the number of accounts so far confirmed was around half of the reported 419 million. It added that many of the entries were duplicates and that the data was old. “The dataset has been taken down and we have seen no evidence that Facebook accounts were compromised,” a Facebook spokesperson told AFP.

Read more …

We can not stop ourselves.

Plastic Pollution Has Entered The Fossil Record (G.)

Plastic pollution is being deposited into the fossil record, research has found, with contamination increasing exponentially since 1945. Scientists suggest the plastic layers could be used to mark the start of the Anthropocene, the proposed geological epoch in which human activities have come to dominate the planet. They say after the bronze and iron ages, the current period may become known as the plastic age. The study, the first detailed analysis of the rise in plastic pollution in sediments, examined annual layers off the coast of California back to 1834. They discovered the plastic in the layers mirrors precisely the exponential rise in plastic production over the past 70 years.

Most of the plastic particles were fibres from synthetic fabrics used in clothes, indicating that plastics are flowing freely into the ocean through waste water. “Our love of plastic is being left behind in our fossil record,” said Jennifer Brandon, at the Scripps Institution of Oceanography at the University of California San Diego, who led the study. “It is bad for the animals that live at the bottom of the ocean: coral reefs, mussels, oysters and so on. But the fact that it is getting into our fossil record is more of an existential question. “We all learn in school about the stone age, the bronze age and iron age – is this going to be known as the plastic age?” she said. “It is a scary thing that this is what our generations will be remembered for.”

Many millions of tonnes of plastic are discarded into the environment every year and are broken down into small particles and fibres that do not biodegrade. Microplastics have been found everywhere from the deepest oceans to high mountains and even the Arctic air, showing pervasive pollution of the planet. Research is limited but eating plastic is known to harm marine creatures. Humans are believed to consume at least 50,000 microplastic particles a year through food and water. The health impact is unknown but microplastics can release toxic substances and may penetrate tissues.

Read more …

 

The Hong Kong government runs ads in the international press:

 

 

 

 

 

Oct 282018
 


Salvador Dali City of drawers – The Anthropomorphic Cabinet 1936

 

OECD Countries’ Retirement Assets Surpass $43 Trillion In 2017 (PiO)
As The Housing Market Stagnates, American Homeowners Are Staying Put (MW)
Economist Slams ‘China Model’ That ‘Inevitably Leads To Confrontation’ (SCMP)
Rand Paul Seeks To Punish Saudi Arabia For Khashoggi Killing (Pol.)
Saudi Arabia Says It Is A Beacon Of Light Fighting ‘Dark’ Iran (G.)
EU To Make Contingency Plans For A Second Brexit Referendum (Ind.)
Germany’s Fragile Coalition Braced For More Upsets (G.)
Russia-Turkey-Germany-France Talks On Syria Kick Off (RT)
“My” Suspended Twitter Account (Paul Craig Roberts)
Mexico Honors Migrants At Day Of The Dead As Caravan Treks North (R.)

 

 

2/3(?!) of it is in the US.

OECD Countries’ Retirement Assets Surpass $43 Trillion In 2017 (PiO)

Retirement assets in OECD countries hit a record $43.4 trillion at the end of 2017, well above the pre-crisis level. The OECD said in its annual Pension Markets in Focus report that assets invested in all funded and private pension systems across 87 jurisdictions grew 12.1% over the year, and increased 53.9% compared with figures at the end of 2007. The report said assets are unevenly distributed worldwide, with less than $200 billion across 78% of the reporting countries, while 8% held more than $1 trillion each: the U.S. with about $28.2 trillion; the U.K. with $2.9 trillion; Canada at $2.6 trillion; Australia with $1.8 trillion; the Netherlands with $1.6 trillion; Japan at $1.4 trillion; and Switzerland with $1 trillion. The remaining 9% of assets, or about $3.9 trillion, are split among the other 29 OECD countries.

The largest amounts of assets are located in some of the biggest economies in the world and with a long history of retirement savings. High investment returns from equity markets partially explain the growth of these assets, said the report, with the real net investment rate of return on retirement assets exceeding 4% on average in 2017. U.S. retirement plans achieved a 7.5% real net investment rate of return in 2017, added the OECD. Funding levels for DB funds improved in the U.S., to 59.6% at end-2017 from 56% a year earlier; but worsened from 2007 figures of 68.6%. The funding ratio was calculated as the ratio of total investment and net technical provisions for occupational defined benefit plans using values reported by national authorities in the OECD template.

U.K. funding levels improved to 90.5% as of the end of 2017, up from 85.8% a year earlier, but down from 108.8% as of the end of 2007. Denmark had the highest funding level of OECD countries in the report, at 135.1%. However, that level was down from 146.1% a year earlier, but improved over the 127.4% funding level as of the end of 2007.

Read more …

Bad time to become a real estate agent.

As The Housing Market Stagnates, American Homeowners Are Staying Put (MW)

Housing-market headwinds are keeping American homeowners in their properties for the longest stretches on record, in a sharp distortion of the mobility Americans have for decades prized. Across the country, homes that sold in the third quarter of this year had been owned an average of 8.23 years, according to an analysis from Attom Data Solutions. That’s almost double the length of time a home sold in 2000, when Attom’s data begin, had been owned. It’s partly the long tail of the housing crisis that’s created stagnant conditions and a less dynamic housing market, Attom spokesman Daren Blomquist told MarketWatch.

As of the second quarter, 2.2 million homeowners were still underwater on their mortgages, meaning they owe more to their lending institution than the home is worth, according to data from CoreLogic. Another 550,000 have 5% equity or less, meaning that if that property were to be sold the transaction costs, such as a real-estate agent’s commission, would likely leave the homeowner with nothing. The hypercompetitive market that’s emerged from the wreckage of the crisis is also keeping people in place. Many homeowners have ample equity in their homes, but hesitate to list those homes because they’re worried about finding a property to buy if they do sell. A few others may be trapped by “rate lock” — enjoying the benefits of their ultralow mortgage rates, and unwilling to spend more on financing costs.

Read more …

Interesting that he gets to say it.

Economist Slams ‘China Model’ That ‘Inevitably Leads To Confrontation’ (SCMP)

Using the “China model” to explain the country’s economic success over the past four decades is wrong and dangerous, according to an influential Chinese economist, who says this misconception has inevitably led to antagonism between China and the West. Zhang Weiying, one of the most prominent liberal economists in the country and a professor at prestigious Peking University, made the comments in a lecture on October 14. An edited version of his speech was published on the university’s website on Wednesday. The speech is a wholesale negation of the “China model” theory that has gained traction in recent years, as the country becomes more confident in promoting its own development path under President Xi Jinping.

Zhang lashes out at those who attribute China’s economic growth to an exceptional “China model”, which includes a powerful one-party state, a colossal state sector and “wise” industrial policy, saying it is not only factually wrong, but also detrimental to the country’s future. “The theory of the ‘China model’ sets China as a frightening anomaly from the Western perspective, and inevitably leads to confrontation between China and the West,” he said. “The hostile international environment we face today is not irrelevant to the wrong interpretation of China’s achievement in the past 40 years by some economists.”

The economist’s rejection of the “China model” comes as debates about the country’s economic future are heating up. The world’s second largest economy is losing steam – growth is at its slowest pace since 2009 – as it marks 40 years since its market reforms. At home, it is grappling with a mountain of debt, plunging stocks and an ailing private sector. Abroad, tensions over the prolonged trade war with the United States appear to be spilling over into defence, diplomacy and politics. Zhang said the trade war not only reflected conflict between China and the US, but between China and the larger Western world. It also went beyond trade to reflect the clash over value systems, he said.

Read more …

Like his dad, strongly anti-war.

Rand Paul Seeks To Punish Saudi Arabia For Khashoggi Killing (Pol.)

Sen. Rand Paul says he’s not going to let Saudi Arabia off the hook after journalist Jamal Khashoggi was killed in Turkey by agents linked to the Saudi government. The Kentucky Republican said Saturday he’s intent on forcing another vote to block billions in arm sales to the autocratic Middle Eastern kingdom and won’t settle for targeted sanctions, seeking to capitalize on negative public sentiment surrounding the Oct. 2 killing. “Are we going to do fake sanctions? Are we going to pretend to do something by putting sanctions on 15 thugs. Or are we going to do something that hurts them?” Paul said in an interview here, explaining that he thinks Saudi Arabia is trying to wait him out until Khashoggi fades from the headlines before announcing the arms sale, which would allow him to try and stop it.

“They know if they have the vote they might lose. So they’re probably not going to make any announcement until this dies down,” Paul said. Rather than focusing simply on Khashoggi, Paul has made a broader critique of Saudi Arabia as supporting “violent Jihad” and a brutal civil war in Yemen. But he’s noticed a substantive shift in the way his colleagues are now talking about the country. [..] Paul, a longtime Saudi critic, has previously forced votes to block the arms sales, but they have failed given a strong hawkish wing in the Senate that wants to keep a key ally against Iranian influence in the Middle East. Paul says that has changed. “We would win the vote right now. It would be a very bad vote if 60, 65, or even 70 people voted to cut the arms sales for now and the president were to veto that, that would be bad,” he said.

President Donald Trump has been more circumspect when discussing arms sales, questioning the wisdom of canceling sales that he believes creates hundreds of thousands of jobs. Paul said he’s tried to convince the president to come to his position, but he’s not there yet. “He says he doesn’t want to disrupt the arm sales. And it’s something we have an honest disagreement on. I don’t think arms are jobs programs,” Paul said. He said their “discussions aren’t really that much that back and forth.” [..] Paul also broke further with the president on foreign policy. He called it a “terrible idea” for the United States to back away from nuclear and weapons agreements with Russia and said he’s asked Trump to appoint nuclear negotiators in a bid to preserve the NEW START treaty and the INF agreement.

Read more …

Not sure how this would help their case at this point.

Saudi Arabia Says It Is A Beacon Of Light Fighting ‘Dark’ Iran (G.)

Saudi Arabia’s foreign minister has described the kingdom as a “vision of light” in the region as it tries to control the fallout from Jamal Khashoggi’s killing – its biggest diplomatic crisis since the 9/11 attacks. After more than two weeks of international outrage over the journalist and dissident’s death, Adel al-Jubeir sought to portray the country as the moral beacon of the Middle East, in stark opposition to Iran, Saudi Arabia’s arch-rival. “We are now dealing with two visions in the Middle East,” Jubeir told a security summit in Bahrain on Saturday. “One is a [Saudi] vision of light … One is [an Iranian] vision of darkness which seeks to spread sectarianism throughout the region. History tells us that light always wins out against the dark.”

Condemning the media coverage of Khashoggi’s killing as “hysterical”, Jubeir rejected a call from Recep Tayyip Erdogan, the Turkish president, to try the 18 suspects in Turkey, stressing that they would be “held accountable” on Saudi soil. [..] Erdogan reiterated during an address to parliament on Friday that Riyadh must disclose the location of Khashoggi’s body and identify who ordered his killing – a sign that Ankara is willing to keep up the pressure on the beleaguered kingdom and its de facto ruler, the crown prince Mohammed bin Salman. [..] Jim Mattis, the US defence secretary, who also spoke at the summit in Manama, said that Khashoggi’s killing had “undermined regional stability”. Washington was considering additional punitive measures against those responsible after issuing visa bans for the suspects in the case, Mattis added.

Read more …

5 months left. Nothing decided on.

EU To Make Contingency Plans For A Second Brexit Referendum (Ind.)

The EU’s chief negotiator has been warned to make contingency plans for a second Brexit referendum, as pressure builds to give the public a final say on leaving. Prominent Remain politicians met with Michel Barnier in Brussels this week and said it was time to start “serious contingency planning”, as The Independent’s petition neared one million signatures and the future of Brexit looks increasingly uncertain. In a visit on Friday, Sadiq Khan, the mayor of London, told Mr Barnier that the negotiating period should be extended so Britain could have “time to have a referendum”. The warning comes after 700,000 people took to the streets of London last weekend to make the case for a vote on the final deal.

For there to be time to hold a referendum, the EU would likely have to extend the Article 50 negotiating period, which will automatically expire on 29 March 2019, leaving Britain to slide out with a no-deal Brexit. The calls for an extension came from across a number of parties. Liberal Democrat leader Vince Cable said following a meeting with Mr Barnier on Thursday: “My message to Michel Barnier was clear: it’s time to start serious contingency planning for a People’s Vote. We know the UK government has started making such plans as a result of the growing demand for such a vote, demonstrated by last weekend’s march. “The EU should do the same, because MPs who back the People’s Vote are fast forming the biggest and most cohesive bloc in Westminster.”

Read more …

This will have an increasing effect on Europe as a whole. Who’s going to listen to Merkel as she’s fading at home?

Germany’s Fragile Coalition Braced For More Upsets (G.)

[..] voters in the central state of Hesse have the power to deliver a second electoral upset within a fortnight to Germany’s embattled ruling parties, potentially plunging both into fresh crises. The regional election is seen as decisive for the future of Merkel’s rickety coalition government. Last-minute polling showed support plummeting for both her Christian Democrat Union (CDU) and coalition partner the Social Democrats (SPD) in a swing state traditionally seen as a bellwether for national politics. Both parties were predicted to drop 10 points each since the state’s last regional election in 2013. Such a trouncing would come on the heels of a disastrous result in Bavaria that was widely seen as a protest against the failings of the Berlin government.

“None of the parties are there for us,” said Müller, who has voted for both CDU and SPD in the past, but was still undecided. “What should I do? I have to vote, it’s my duty to stop the far right getting into power. But I also know I won’t be heard. I can vote for whoever I like; the politicians will still do whatever they want.” Hesse, home to Germany’s financial centre, Frankfurt, has been governed by CDU-led coalitions for the past two decades. But polls have the party nosediving to 28%, a result that would end the state’s CDU-Green coalition and leave a question mark over the future of CDU state premier and close Merkel ally Volker Bouffier.

With tensions running high in the CDU, mutinous members have implied that if Bouffier falls, it may cost the chancellor vital votes when she stands for re-election as party leader at its conference in early December. But Merkel, who joined Bouffier on the campaign trail last week, was at pains to play down the significance of the regional vote for her party, government and chancellorship. “Hesse, and what happens here, is being watched and considered from far beyond Germany’s borders,” Merkel told supporters on Thursday in Fulda. “I want to point out once again that on Sunday the vote is about Hesse. Afterwards we’ll talk again about Berlin.”

Read more …

The fighting in Idlib must cease. It’s the only outcome.

Russia-Turkey-Germany-France Talks On Syria Kick Off (RT)

Leaders of Russia, Turkey, Germany and France have gathered in Istanbul to discuss the Syrian peace process. While the outcome of such tricky talks is hard to predict, the new format appears to be, at least, quite refreshing. Russia’s President Vladimir Putin, his French counterpart Emmanuel Macron and German Chancellor Angela Merkel arrived in Istanbul on Saturday to talk Syrian reconciliation. The host, Turkey’s leader Recep Tayyip Erdogan, has put high expectations on the gathering. “The whole world is watching this meeting. I hope, that the hopes will be met,” Erdogan said, while opening the summit. The four leaders are also expected to be joined by UN Special Envoy to Syria Staffan de Mistura.

The four-way summit is an entirely new format of talks on the war-torn country, which has endured years-long conflict. The meeting is all about testing the waters and trying to bring about different formats of talks on Syria, as if the leaders were to “synchronize watches” rather than reach a breakthrough, Kremlin spokesman Dmitry Peskov said. Similar opinion was expressed by Germany, with Foreign Minister Heiko Maas stating that the summit effectively brings different sides together for the very first time. “There are Russians and Turks, who have been at the same format of talks with Iran. And on the other side, there are French and us, who partake in the so-called ‘Friends of Syria’ group,” Maas said ahead of the event, adding that having a “joint conversation” was a viable idea.

Read more …

Turns out, the story was a bit different than many reported.

“My” Suspended Twitter Account (Paul Craig Roberts)

Dear Readers:

It is all over the internet and international media that Twitter has suspended my account. This is not the case. I do not use social media. I discovered that a Twitter account was operating in my name. I requested that the account be taken down. I have no recollection of giving anyone permission to operate a Twitter account in my name. I am still extremely busy trying to help family relatives impacted by Hurricane Michael and could only quickly look at the Twitter postings. It seemed to be mainly innocuous, consisting of links or quotes from my posted columns.

However, there were other things, such as appeals that money be sent to Alex Jones InfoWars and other things. I have no objection to Alex Jones. However, my webmaster and I were concerned that things could be posted that would be dangerous for me, such as libel, death threats to others, and so forth. To repeat, the account was closed at my request. To repeat, I do not use social media.

Paul Craig Roberts

Read more …

There’s something cynical about this, but also beautiful.

Mexico Honors Migrants At Day Of The Dead As Caravan Treks North (R.)

Mexico City dedicated its Day of the Dead parade on Saturday to migrants, just as thousands of Central Americans were trekking from the country’s southern border toward the United States under pressure from U.S. President Donald Trump to disband. In an a twist on the traditional dancing skeletons and marigold-adorned altars making their way down the capital’s main thoroughfare, the parade also referenced Mexicans who emigrated as well as foreigners who settled in the capital. “The parade… is dedicated to migrants, who in their transit to other countries have lost their lives, and who in their passing through the country have contributed to a true ‘Refuge City,’” the Mexico City government said on Twitter.

In one segment, gray metallic panels representing the Mexico side of the U.S. border wall were stenciled with the phrase, “There are also dreams on this side.” Other presentations honored exiled Spaniards, Argentineans and Jews, Mexico City’s culture ministry said. The event ahead of Nov. 1 and 2, when Mexicans observe Day of the Dead in town squares, homes and cemeteries, coincided by chance with the journey of a migrant caravan traveling into Mexico, many fleeing violence and poverty in Honduras and Guatemala.

Read more …

Sep 302017
 
 September 30, 2017  Posted by at 8:45 am Finance Tagged with: , , , , , , , ,  11 Responses »


Vincent van Gogh Boulevard de Clichy, Paris 1887

 

Trump’s 1,500-word Airball (Stockman)
Puerto Rico Supply Failure Stops Food, Water Reaching Desperate Residents (G.)
Abenomics: Bat-Shit-Crazy (Muir)
Congress Can Give Every American A Pony (Kelton)
Homeowners Face Double Whammy Of Interest Rates And Slumped Market (Ind.)
ECB Wants to Weed Out Smaller Banks to Cut Competition (DQ)
VW’s Dieselgate Bill Hits $30 Billion After Another Charge (R.)
Could Ryanair’s ‘Pilotgate’ Spell The End Of Cheap Flights? (Ind.)
Citizens United No More (Jim Kunstler)
The Slimy Business of Russia-gate (Robert Parry)
Catalan Government Says Millions Will Turn Out For Referendum (G.)
Aid Programs Are Designed To Keep Countries In Poverty (Ren.)

 

 

The White House should consult with Stockman. He’s been there. This is going nowhere good. “..after nine months of work these geniuses have come up with $6 trillion of easy to propose tax rate cuts and virtually no plan whatsoever to pay for them..”

Trump’s 1,500-word Airball (Stockman)

The Donald’s strong point isn’t his grasp of policy detail. The nine page bare-bones outline released yesterday is nothing more than an aspirational air ball that lacks virtually every policy detail needed to assess its impact and to price out its cost. It promises to shrink the code to three rates (12%, 25%, 35%), for example. But it doesn’t say boo about where the brackets begin and end compared to current law. Needless to say, a taxpayer with $50,000 of taxable income who is on the 15% marginal bracket today might wish to know whether he is in the new 12% or the new 25% bracket proposed by the White House. After all, it could change his tax bill by several thousand dollars. Similarly, to help pay for upwards of $6 trillion of tax cuts over the next decade, it proposes to eliminate “most” itemized deductions. These “payfors” would in theory increase revenues by about $3 trillion.

Then again, the plan explicitly excludes the two biggest deductions – the charitable deduction and mortgage deduction – which together account for $1.3 trillion of that total. And it doesn’t name a single item among the hundreds of deductions that account for another $1 trillion of current law revenue loss. They’re just mystery meat to be stealthily extracted during committee meetings after Congressman have run the gauntlet of lobbyists prowling the halls outside. Stated differently, after nine months of work these geniuses have come up with $6 trillion of easy to propose tax rate cuts and virtually no plan whatsoever to pay for them. In fact, this latest nine pages of puffery contains just 1,500 words – including obligatory quotes from the Donald and page titles. I hate to get picky, but the Donald’s team has been on the job for 250 days now. And all they came up with amounts to just three words each per day in office.

Read more …

Blaming Puerto Rico on Trump as well is cheap and easy. The Jones Act must go, but Congress has left it intact. So have successive presidents.

Puerto Rico Supply Failure Stops Food, Water Reaching Desperate Residents (G.)

Nine days after Hurricane Maria struck Puerto Rico, thousands of containers of food, water and medicine are stuck in ports and warehouses on the island, as logistical problems continue to stop desperately needed supplies from reaching millions of Americans. In many parts of the US territory, food, medicine and drinking water are scarce, and amid a growing humanitarian crisis, local researchers have suggested the death toll could be much higher than the 16 deaths reported so far. On Thursday, the White House temporarily waived the Jones Act – the 1920 legislation which had prevented foreign ships from delivering supplies from US ports to Puerto Rico. But the breakdown of the island’s supply chain has left many concerned that the move will not be enough to get goods to the people who need them most.

Yennifer Álvarez, a spokesperson for Puerto Rico’s governor, said about 9,500 shipping containers filled with cargo were at the port of San Juan on Thursday morning as the government struggled to find truckers who could deliver supplies across the island. The delivery issue is aggravated by an intense shortage of gasoline. About half of Puerto Rico’s 1,100 gas stations are out of action; at those that are open, people have been queuing for up to nine hours to buy fuel for vehicles or the generators which have become essential since the island is still without electricity. Rafael Álvarez, vice-president of Méndez & Co, a food distribution company based in San Juan, said he was worried that if fuel was not efficiently distributed soon, people might get desperate. “I really hope things are worse today than they are going to be tomorrow,” he said.

“People are getting very anxious with the heat and the lack of easily accessible drinkable water.” Because of Puerto Rico’s crippling economic crisis, few people had the money to afford more than a week’s worth of emergency supplies, said Alvarez. But if fuel was readily available, Alvarez said, goods could be efficiently delivered around the island and generators would reliably function, resolving many of the territory’s most pressing concerns. Alvarez’s warehouse is at 100% capacity with shelf-stable products including cereals, granola bars and pasta sauce. Yet although the goods are ready to move to local grocery stores, only around 25% of his normal distribution fleet is available, because of the shortage of fuel or damage inflicted by the storm. And few stores are open because they need diesel to power their generators.

“The food industry is really intact except for diesel fuel,” Alvarez said. “We need diesel fuel to operate.” Federal and state officials have said there is enough diesel on the island, but it too has been difficult to distribute. “You know, the gas and fuel issue is not a matter of how much do we have – it’s a matter of how we can distribute it,” Puerto Rico’s governor, Ricardo Rosselló, told NPR.

Read more …

“And just like that, Abeconomics was born. Since then the Bank of Japan balance sheet has swelled from 30% of GDP to 95%!”

Abenomics: Bat-Shit-Crazy (Muir)

Between 1999 and 2012, the Bank of Japan increased their balance sheet threefold, raising it from 10% of GDP to 30%. Many a pundit screamed about Japan’s irresponsible monetary policy, but then the 2008 Great Financial Crisis hit, and suddenly the BoJ’s policies didn’t seem that extreme. The Fed embarked on a massive quantitative easing program, followed by most of the rest of the developed world. Next thing you knew, the Bank of Japan’s bloated balance sheet seemed like just one of many. Post GFC, the rate at which these other Central Banks were expanding their balance sheet put extreme stress on the Japanese economy as the BoJ’s relatively tame quantitative easing policy was overwhelmed by the rest of the world. Global deflation was exported to Japan. And just when things couldn’t get worse, Japan was hit by the tsunami/nuclear disaster.

Paradoxically, this caused a spike in the USDJPY rate down to 75, with the Yen hitting an all-time high value against the US dollar. This proved the final straw for the Japanese people, and Prime Minister Abe was elected on a platform of breaking the back of deflation through innovative extreme policies. And just like that, Abeconomics was born. Since then the Bank of Japan balance sheet has swelled from 30% of GDP to 95%! It’s too easy to take this for granted. The blue tickets just seem to keep coming, and coming, and coming. Pretty soon, it all seems so normal. But it isn’t. Not even close. This is bat-shit-crazy monetary expansion. Forget about arguing whether it is appropriate or needed. It doesn’t matter. The markets don’t give a hoot about your opinion. Nor does the BoJ. Heck, they barely even care what Yellen or Trump thinks.

They are going to do what they think best for their people, and that means inflating the shit out of their currency. What I find amazing is how complacent the markets have become about all of this. Sure when Abeconomics first came to pass there were tons of worrisome hedge fund presentations about the inevitability of disaster. But since then Kyle Bass and all the other Japan skeptics have moved on to China, or to the most recent hedge-fund-herding-theme-of-the-day. Yet at one point a few years back a reporter asked Kyle if he could put on one trade for the next decade and couldn’t touch it, what would it be? Bass answered gold denominated in Yen. I have this sneaking suspicion our favourite Texas hedge fund manager’s call was way more prescient than even he imagines (I just hope Kyle hasn’t taken it all off to bet on the China collapse.)

Read more …

At the very least the topic warrants a serious discussion. Just saying Stephanie’s crazy is not that.

Congress Can Give Every American A Pony (Kelton)

In her new book, Hillary Clinton mocks Sen. Bernie Sanders’ populist agenda. BERNIE: I think America should get a pony. HILLARY: How will you pay for the pony? You might find Clinton’s question intuitively reasonable. If you promise to fight for big things, then you should draw a detailed road map to the treasure chest that will fund them all. After all, the money has to come from somewhere. But what if I told you that your intuition was all wrong? What if it turned out that the government really could give everyone a pony — and a chicken and car? That is, so long as we could breed enough ponies and chickens and manufacture enough cars. The cars and the food have to come from somewhere; the money is conjured out of thin air, more or less.

When Clinton asks where the money will come from, she’s ordering the government’s fiscal operations like so:
1. Government collects money from us in the form of taxes (T)
2. Government figures out how much it wants to spend and then borrows any additional money it needs (B)
3. Government spends the money it has collected (S)

Since none of us learned any differently, most of us accept the idea that taxes and borrowing precede spending – TABS. And because the government has to “find the money” before it can spend in this sequence, everyone wants to know who’s picking up the tab. There’s just one catch. The big secret in Washington is that the federal government abandoned TABS back when it dropped the gold standard. Here’s how things really work:
1. Congress approves the spending and the money gets spent (S)
2. Government collects some of that money in the form of taxes (T)
3. If 1 > 2, Treasury allows the difference to be swapped for government bonds (B)

In other words, the government spends money and then collects some money back as people pay their taxes and buy bonds. Spending precedes taxing and borrowing – STAB. It takes votes and vocal interest groups, not tax revenue, to start the ball rolling. If you need proof that STAB is the law of the land, look no further than the Senate’s recent $700-billion defense authorization. Without raising a dime from the rest of us, the Senate quietly approved an $80-billion annual increase, or more than enough money to make 4-year public colleges and universities tuition-free. And just where did the government get the money to do that? It authorized it into existence.

Read more …

The future inside all housing bubbles. And there are more of those than anyone acknowledges.

Homeowners Face Double Whammy Of Interest Rates And Slumped Market (Ind.)

Homeowners are facing a twin blow of increased mortgage payments and a slowing housing market, with London prices falling for the first time in eight years. Across the UK the average price of a home increased at its slowest slowest pace in more than four years in September, Nationwide said on Friday. The news came shortly after Bank of England governor Mark Carney gave his clearest signal yet that the central bank’s Monetary Policy Committee would raise its benchmark interest rate from 0.25%. “What we have said, that if the economy continues on the track that it’s been on, and all indications are that it is, in the relatively near term we can expect that interest rates would increase somewhat,” he told BBC Radio 4’s Today Programme, on Friday. A rate hike would mean more expensive home loans for homeowners who have grown used to ultra-low interest rates.

The MPC meets on 2 November to make its decision and a rate rise would be the first in more than a decade. Any increase is expected to be small but would place additional strain on households already stretched amid higher inflation and weak wage growth. A 0.25% rise would mean a person with a £200,000 mortgage on the average UK variable rate of 4.6% would pay an extra £28.72 per month. An increase of 1% would add an extra £117.10 to payments, though this scenario is not expected to become a reality in the short term. Higher payments could prove painful for homeowners, especially as the housing market begins to stutter. London house prices fell 0.6% in the year to September, Nationwide said – the first annual drop since the aftermath of the financial crisis in 2009. It was the first time since 2005 that London was the worst performing region in the country.

Read more …

Centralization is dead.

ECB Wants to Weed Out Smaller Banks to Cut Competition (DQ)

The biggest financial problem in Europe these days is that it is “over-banked,” according to Daniele Nouy, Chair of the ECB’s Supervisory Board, and thus in charge of the Single Supervisory Mechanism, which regulates the largest 130 European banks. In a speech bizarrely titled “Too Much of a Good Thing: The Need for Consolidation in the European Banking Sector,” Nouy blamed fierce competition for squeezing profits for many of Europe’s banks while steadfastly ignoring the much larger role in the profit squeeze played by the ECB’s negative-interest-rate policy. ECB President Mario Draghi agrees. The profits of the largest 10 European banks rose by only 5% in the first half of 2017, compared to 19% for the US banks, which benefited from higher interest rates, stronger capital markets, better capitalization, and larger market shares, according to a new report by Ernst and Young.

In its latest annual health check of European banks, Bain Capital found that 31 institutions, or 28% of the 111 financial institutions they assessed, are in the “high-risk” quadrant. Location seemed to be a far more important factor than size. Banks in Italy, Greece, Portugal and Spain have become “a breed apart in continued distress,” the report said, adding: “Every single bank that has failed in the past decade and for which there are financial statements available…fell into this quadrant before their demise.” Scandinavian, Belgian, and Dutch banks figured prominently among the 38% of the banks that attained the strongest position, outperforming on virtually all financial indicators. By contrast, many German and UK banks fell into the second category, that of “weaker business model.” In fact, virtually all the large German names fit into this category as their profitability and efficiency languish at levels comparable with their Greek counterparts.

They include Deutsche Bank, which in the midst of its third revamp in so many years, just reported its worst revenues in three and a half years. Deutsche Bank is far from alone. The dismal reality is that nine long years after the global financial crisis began, many systemic European banks pose as big a risk to the financial system, if not bigger, as they did back then. The only major difference is that now they’re hooked on Draghi’s myriad monetary welfare schemes (LTRO, TLTRO I and II…), which have managed to keep them afloat even as the ECB’s monetary policy puts a massive squeeze on their lending margins by driving interest rates to unfathomably low levels. But rather than raising interest rates — a scary thought given how major Eurozone economies like Italy and Spain have come to depend on QE to keep servicing their public debt — the ECB plans to reduce competition in the banking sector by weeding out smaller banks.

It’s a process that is already well under way, as Nouy explained in her speech: “Since 2008, the number of banks in the euro area has declined by about 20%, to around 5,000. And the number of bank employees has fallen by about 300,000, to 1.9 million. Total assets of the euro area banking sector peaked in 2012 at about 340% of GDP. Since then, they have fallen back to about 280% of GDP.” But this is not about shrinking the size of the banking sector; it’s about shrinking the number of players within it and in the process creating trans-European banking giants. To achieve that goal, all Europe needs are “brave banks” that are willing to conquer new territory: “Cross-border mergers would do more than just help the banking sector to shrink. They would also deepen integration. And this would take us closer to our goal of a truly European banking sector.”

Read more …

Time for Merkel to stop cozying up to carmakers.

VW’s Dieselgate Bill Hits $30 Billion After Another Charge (R.)

Volkswagenis taking another $3 billion charge to fix diesel engines in the United States, lifting the total bill for its emissions test cheating scandal to around $30 billion. Shares in the German carmaker fell as much as 3% on Friday, as traders and analysts expressed dismay the company was still booking charges two years after the scandal broke. “This is yet another unexpected and unwelcome announcement from VW, not only from an earnings and cash flow perspective but also with respect to the credibility of management,” said Evercore ISI analyst Arndt Ellinghorst. Europe’s biggest automaker admitted in September 2015 it had used illegal software to cheat U.S. diesel emissions tests, sparking the biggest business crisis in its 80 year history. Before Friday, it had set aside 22.6 billion euros ($26.7 billion) to cover costs such as fines and vehicle refits.

On Friday, it said hardware fixes were proving tougher than expected, as it booked an additional 2.5 billion euro provision. “We have to do more with the hardware,” a VW spokesman said, adding U.S. customers were having to wait longer for their cars to be repaired. The news relates to the program to buy back or fix up to 475,000 2 liter diesel cars. In Europe, where only a software update is required for the 8.5 million affected cars, besides a minor component integration for about 3 million of those, fixes are running smoothly, the spokesman added. The additional provision will be reflected in third-quarter results due on Oct. 27, VW said. Ellinghorst, who has an “outperform” rating on VW shares, expects the company to report third-quarter group earnings before tax and interest of €4.04 billion. “You have to ask if this is a bottomless pit,” said one Frankfurt-based trader of the U.S. charges.

Read more …

Something needs to stop it.

Could Ryanair’s ‘Pilotgate’ Spell The End Of Cheap Flights? (Ind.)

Ryanair has apologised to 800,000 passengers for cancelling their flights because of a pilot shortage, and then misleading them about their rights. But an obligation to meet travellers’ out-of-pocket expenses has raised fears that airlines’ costs – and fares – could soar because of demands for recompense. Airlines who cancel flights appear to have an open-ended liability for out-of-pocket expenses, which could include anything from tickets for an FC Barcelona Champions’ League football match to lost wages. The payments are additional to EU requirements to cover hotel rooms and meals connected with flight disruption. Costs could feed through to more expensive tickets – which, with supply reduced because of mass cancellations by Ryanair, are already rising.

[..] The Civil Aviation Authority (CAA) had demanded a statement from Ryanair explaining its obligations under European passengers’ rights rules. The airline complied shortly before the 5pm deadline. The statement explains in unprecedented detail the options open to passengers whose flights are cancelled: a Ryanair flight, if one is available on the same route on the same or next day; a Ryanair flight from a nearby airport; a flight on one of Ryanair’s seven “disruption partner airlines”, including easyJet, Jet2, Aer Lingus and Norwegian; or “comparable alternative transport” by air, rail or road. Europe’s biggest budget airline also promises to “reimburse any reasonable out-of-pocket expenses incurred by customers as a result of these flight cancellations”.

Passengers who have already accepted a refund or alternative Ryanair flight are able to reconsider, while those who have booked on a rival airline can claim the difference in fare paid. The improved offer to passengers could double Ryanair’s previous estimate of €50m in extra costs because of the debacle. This represents less than 5% of its expected full-year profit. But the obligation to refund “any reasonable out-of-pocket expenses” could add significantly more. “This could open the floodgates to claims,” said one senior aviation executive.

[..] The move came two weeks after Ryanair began to cancel hundreds of flights at very short notice, having “messed up” rostering of pilots. It initially cancelled a tranche of 2,100 departures until the end of October, saying that its winter programme would be unaffected. But on 27 September Ryanair said it would ground 25 of its jets this winter – representing one-16th of its fleet – and cut 18,000 flights from the schedules. By giving more than two weeks’ notice of cancellations, the airline avoided the obligation to pay cash compensation. Affected passengers were emailed with two options: a refund, or re-booking on a different Ryanair flight. The option to fly on a rival airline at Ryanair’s expense was not mentioned – an omission that infuriated the CAA’s chief executive, Andrew Haines.

Read more …

“..Okefenokee Swamp of identity politics and Russia paranoia..”

Citizens United No More (Jim Kunstler)

I have an idea for the political party out of power, the Democrats, sunk in its special Okefenokee Swamp of identity politics and Russia paranoia: make an effort to legislate the Citizens United calamity out of existence. Who knows, a handful of Republicans may be shamed into going along with it. [..] corporations have not always been what they are deemed to be today. They evolved with the increasingly complex activities of industrial economies. Along the way — in Great Britain first, actually — they were deemed to exist as the equivalent of legal persons, to establish that the liabilities of the company were separate and distinct from those of its owners. In the USA, forming a corporation usually required an act of legislation until the late 19th century.

After that, they merely had to register with the states. Then congress had to sort out the additional problems of giant “trusts” and holding companies (hence, anti-trust laws, now generally ignored). In short, the definition of what a corporation is and what it has a right to do is in a pretty constant state of change as economies evolve. [..] This homework assignment should be given to the Democratic members of congress, since they are otherwise preoccupied only with hunting for Russian gremlins and discovering new sexual abnormalities to protect and defend.

The crux of the argument is that corporations cannot be said to be entirely and altogether the equivalent of persons for all legal purposes. In law, corporations have duties, obligations, and responsibilities to their shareholders first, and only after that to the public interest or the common good, and only then by pretty strict legal prescription. It may be assumed that the interests of corporations and their shareholders are in opposition to, and in conflict with, the public interest. And insofar as elections are fundamentally matters of the public interest, corporations must be prohibited from efforts to influence the outcome of elections.

Read more …

“.. we are now in a phase of Russia-gate in which NGO “scholars” produce deeply biased reports and their nonsense is treated as front-page news..”

The Slimy Business of Russia-gate (Robert Parry)

The “Field of Dreams” slogan for America’s NGOs should be: “If you pay for it, we will come.” And right now, tens of millions of dollars are flowing to non-governmental organizations if they will buttress the thesis of Russian “meddling” in the U.S. democratic process no matter how sloppy the “research” or how absurd the “findings.” And, if you think the pillars of the U.S. mainstream media – The Washington Post, The New York Times, CNN and others – will apply some quality controls, you haven’t been paying attention for the past year or so. The MSM is just as unethical as the NGOs are. So, we are now in a phase of Russia-gate in which NGO “scholars” produce deeply biased reports and their nonsense is treated as front-page news and items for serious discussion across the MSM.

Yet, there’s even an implicit confession about how pathetic some of this “scholarship” is in the hazy phrasing that gets applied to the “findings,” although the weasel words will slip past most unsuspecting Americans and will be dropped for more definitive language when the narrative is summarized in the next day’s newspaper or in a cable-news “crawl.” For example, a Times front-page story on Thursday reported that “a network of Twitter accounts suspected of links to Russia seized on both sides of the [NFL players kneeling during the National Anthem] issue with hashtags, such as #boycottnfl, #standforouranthem and #takeaknee.” The story, which fits neatly into the current U.S. propaganda meme that the Russian government somehow is undermining American democracy by stirring up dissent inside the U.S., quickly spread to other news outlets and became the latest “proof” of a Russian “war” against America.

However, before we empty the nuclear silos and exterminate life on the planet, we might take a second to look at the Times phrasing: “a network of Twitter accounts suspected of links to Russia.” The vague wording doesn’t even say the Russian government was involved but rather presents an unsupported claim that some Twitter accounts are “suspected” of being part of some “network” and that this “network” may have some ill-defined connection – or “links” – to “Russia,” a country of 144 million people. It’s like the old game of “six degrees of separation” from Kevin Bacon. Yes, perhaps we are all “linked” to Kevin Bacon somehow but that doesn’t prove that we know Kevin Bacon or are part of a Kevin Bacon “network” that is executing a grand conspiracy to sow discontent by taking opposite sides of issues and then tweeting.

Read more …

What will Barcelona look like on Monday morning?

Catalan Government Says Millions Will Turn Out For Referendum (G.)

The Catalan government has laid out its plans for the referendum on independence from Spain, claiming that more than 7,200 people will staff 2,315 polling stations across the region to stage a vote that has triggered the country’s worst territorial crisis since its return to democracy four decades ago. On Friday afternoon, the pro-independence regional government unveiled plastic ballot boxes and predicted that 60% of Catalonia’s 5.3 million eligible voters would head to the polls on Sunday in defiance of the Spanish government, the police and the courts. “Catalans will be able to vote,” said the region’s vice-president, Oriol Junqueras. “Even if someone attacks a polling station, Catalans will still be able to vote.” Junqueras gave no further details but called on people to behave responsibly and to ignore the “provocations of those who want to stop the vote”.

His words were echoed by the Catalan president, Carles Puigdemont, who told Reuters: “I don’t believe there will be anyone who will use violence or who will want to provoke violence that will tarnish the irreproachable image of the Catalan independence movement as pacifist.” On Friday afternoon, a large convoy of tractors driven by Catalan farmers and flying independence flags rolled into Barcelona to show support for the vote and to protest against moves to halt it. Both the Spanish government and the country’s constitutional court have declared the vote illegal. Over the past 10 days, the authorities have stepped up their efforts to stop the referendum, arresting 14 senior Catalan government officials, shutting down referendum websites, and seizing millions of ballot papers. Spain’s interior ministry has deployed thousands of extra police officers to the region and the infrastructure ministry announced on Friday that the airspace over Barcelona would be closed to helicopters and light aircraft until Monday.

Read more …

Nothing new.

Aid Programs Are Designed To Keep Countries In Poverty (Ren.)

The income gap between rich countries and poor countries is not diminishing. It has been increasing dramatically, and not only during colonialism. Since the 1960s, the income gap between north and south has tripled. “There’s something fundamentally wrong and it won’t be changed with a bit of aid here in there,” Hickel says. “We need to fundamentally restructure the global economy and make it fair.” Hickel’s central thesis is that there is nothing natural about poverty. His book examines structurally determined behaviour, designed in fact, to deliver the poverty outcomes we witness around the world. “One of the dominant understandings out there that I seek to question in the book is the idea that rich countries are giving aid to poor countries in any meaningful quantity,” he says.

“In fact there is a lot of aid given – it’s about $130 billion per year transferred from rich countries to poor countries. That’s an enormous amount of money.” Some of the money comes in the form of charity. A lot of it in the form of loans, with debt strings – and conditions – attached. “A lot of the aid that’s given comes with conditions attached that the recipients of the aid have to implement certain economic policies, or have to votes with the donor country in UN agreements and so on,” says Hickel. “There’s no free lunch.” “But even if we assume that there was a free lunch, that $130 billion dollars are really being transferred for free from rich countries the poor countries, even that is misleading because in fact vastly more than that amount flows in the opposite direction – from poor countries to rich countries – for all sorts of reasons.

“The biggest one is probably illicit financial flows, most of which are in the form of tax evasion by major multinational companies operating in the global south, headquartered often in rich countries that are effectively stealing wealth, their profits from global south countries and stashing them away in tax havens because of rules written by the WTO that make this practice possible.” The World Trade Organisation basically governs the rules of global trade, for the most part, centrally. It is a very anti-democratic institution, where the vast majority of bargaining power has long been in the hands of a handful of countries which get to determine rules that end up serving their interests. “That’s one of the reasons that we see these financial flows in such magnitude,” says Hickel.

“These financial flows outstrip the aid budget by a factor of 10. So for every dollar of aid that poor countries receive, they lose 10 dollars to multinational tax havens. Another one is debt service. Poor countries pay $200 billion per year in debt service to banks in rich countries. “And that’s just the interest payments on debts, many of which have been paid-off already many times over, some of which are accumulated by legitimate dictators. That’s a direct cash transfusion from from poor to rich. That outstrips the aid budget by a factor or two.”

Read more …

Oct 272014
 
 October 27, 2014  Posted by at 8:28 pm Finance Tagged with: , , , , , , ,  9 Responses »


Albert Freeman Effect of gasoline shortage in Washington, DC 1942

Europe had hundreds of inspectors check 130 banks for a year in that stress test. Who do you think picked up the tab for that? And what did Europe’s taxpayers get in return? As I’m looking right now, they got falling stocks and 3 Italian banks in which trading was halted. What was the ECB’s goal with the tests again?

Oh right, to restore confidence in the markets … Well, with WTI oil falling fast below $80, I think we can now confidently say the Boys of Brussels are either not up to the job, or they’re letting the whole caboodle rapidly drift south on purpose. Probably a bit of both.

But don’t forget that if things continue on this present path, the next thing out of Draghi et al will be about the survival of the eurozone and likely the euro itself. Which means an outcome as awful as the one we’re seeing right now may be intended to be the final straw to break the Germans’ back, and make them give up their resistance to full blown outhouse paper purchases.

Meanwhile, the ECB bought a grand total of €1.7 billion in covered bonds last week, so at that pace it will take only 587 more weeks to get to the $1 trillion in purchases they aim for. Solid plan.

Sure, oil will rebound above $80 at some point today, the blows must be softened, and European stocks will cut losses on their plunge protection services, but if there was any idea of fooling the financial markets wit the tests, that went off the rails. Still, the people in the street, aka consumers, are still plenty fooled, and maybe that was all Brussels ever wanted. After all, Draghi is Goldman, so whaddaya know, right?

But I wanted to get back to some things I noticed late last week, about US housing. Though the call to not buy a home – at least one with a substantial loan attached – is a global one. Conditions in which you would own such a home, and pay for the loan, are set to change in radical ways, and the risks of the home becoming a trap are simply too high.

More importantly, you would be paying far too much. Fannie and Freddie and the rest of the US real estate five families will loosen requirements again soon, but they don’t do that because they want to do you a favor, they do it because they are looking to smoke out the last remaining greatest fools and suckers left out there. Don’t be one.

Leave the housing industry in your country alone, for five years or so, and allow for prices to come down to a level where homes become affordable again to young people. If the industry doesn’t get to that level, it has no future anyway. If the baby boomer generation can’t sell to their children at prices the latter can afford, US housing is dead. Already, a third of sales are cash only to investment companies, and that’s not a healthy development at all. Don’t go gently into that dark night.

Alexis Leondis and Clea Benson at Bloomberg had some major lamenting last Friday on how regulations stifle the US real estate business. And I’m thinking for once Washington bureaucracy has some positive side effects, but the authors don’t agree.

For me, US and many European housing industries have gone so far off track from, pick a date, 1997 to 2007, that it needs a major correction, something the industry itself, governments and central banks have only tried as hard and as expensively as they could muster, to prevent. We know that every bubble ends at a level below where it started, and housing is nowhere near that bottom yet.

Yes, builders and contractors and lenders and servicers and owners and borrowers will all be hit hard, but what’s the use of keeping up a virtual good face it that means killing off the future of the entire industry? Besides, don’t young people everywhere deserve a shot at a future, building a family etc., without having to bend over backwards just to be allowed to live somewhere?

And I don’t just mean the happy few kids, I want the 50% unemployed youth in southern Europe to be part of this as well, and the 25% or so in the US. You can’t just put out those kinds of numbers of people by the curb and expect to have a working society, let alone housing industry. Nor should you want to. Here’s that Bloomberg thing:

Lenders Facing Soaring Costs Shutting Out U.S. Homebuyers

Clem Ziroli Jr.’s mortgage firm, which has seen its costs soar to comply with new regulations, used to make about three loans a day. This year Ziroli said he’s lucky if one gets done. His First Mortgage Corp., which mostly loans to borrowers with lower FICO credit scores and thick, complicated files, must devote triple the time to ensure paperwork conforms to rules created after the housing crash.

Question no 1: what’s wrong with doing ‘only’ one mortgage a day? Is Mr. Ziroli modeling himself after Angelo Mozilo?

To ease the burden, Ziroli hired three executives a few months ago to also focus on lending to safe borrowers with simpler applications. “The biggest thing people are suffering from is the cost to manufacture a loan,” said Ziroli, president of the Ontario, California-based firm and a 22-year industry veteran. “If you have a high credit score, it’s easier. For deserving borrowers with lower scores, the cost for mistakes is prohibitive and is causing lenders to not want to make those loans.”

[..] Federal rules put in place after the 2008 financial crisis attempt to prevent such reckless lending. The Consumer Financial Protection Bureau in January began implementing the qualified mortgage rule, a 52-page document mandating that lenders must take detailed steps to prove that borrowers have the ability to repay their mortgages. The measure also cracks down on risky loan features such as balloon payments and large fees by leaving lenders exposed to legal liability if they issue such loans.

So far, nothing that upsets me. Lenders have to be more careful about loans they issue, and that costs them a bit more, but not so much that they go out of business. So is that the problem, or is the problem that until 2007 they had thrown all caution to the wind? I think I have an idea.

“The industry as a whole did a terrible job of self-policing and they should not be shocked that there’s now more oversight than there was before,” Gordon said. The CFPB has issued eight rules since 2011 governing everything from appraisals to compensation for loan officers. Six regulators including the Federal Reserve jointly issued a 553-page document this week containing instructions for when lenders must retain a stake in mortgages that they package for sale to investors. [..]

The higher costs and concerns about buybacks are driving the decline in mortgages for home purchases. It will slow to $635 billion this year, a 13% drop from 2013, according to MBA estimates. Banks have constrained home lending to many borrowers deemed creditworthy by mortgage finance companies Fannie Mae and Freddie Mac. Applicants approved for mortgages to purchase homes had an average FICO credit score of 755 in August, according to Ellie Mae, a company that makes software used to process mortgage applications. In contrast, Fannie Mae and Freddie Mac guidelines allow for credit scores as low as 620 for fixed-rate mortgages in some cases. Lenders reported a 30% median increase in compliance costs this year from 2013 …

That’s a steep fall alright, but don’t let’s forget we came from a time of complete lunacy. And that banks are more cautious than the government agencies should perhaps tell you something about the latter. But what’s the real worry? Looks to me like a pretty normal comedown from an abnormally exultant high. Which cost everyone dearly.

Banks are passing some of the costs of compliance to borrowers. Initial fees and charges paid by consumers on agency fixed-rate purchase loans have increased 10% to 1.21% as of August compared with a year earlier [..] Smaller lenders may be hurt the most by compliance costs, said Guy Cecala, publisher of Inside Mortgage Finance, a trade publication. They have fewer resources to maintain records and train employees, which is essential to protecting lenders in the new regulatory environment, he said. “There’s no question in this newer market it’s harder for smaller lenders to survive,” Cecala said.

These lenders, which have smaller balance sheets, generally can’t hold the loans on their books and have to sell them to government agencies or investors. At 1st Priority Mortgage, based outside of Buffalo, New York, one investor who buys the company’s loans requires employees to fill out a seven-page form verifying compliance with qualified mortgage standards. Other investors each require different forms, said 1st Priority’s President Brooke Anderson Tompkins.

That last bit is typical of Washington ineptitude, but as I said, for once that works out well, and besides, US screw ups on the ebola file have far more serious implications.

Then, the same day, Barry Ritholtz whined about his own difficulties in getting a mortgage. Which of course, he got anyway, because Barry’s a Wall Street man, investor man, analyst etc. Just like Ben Bernanke got his loan refinanced after some much talked about ‘trouble’. Pardon me, but I’m much more interested in the people who don’t get things done, like anything at all.

I remember Barry as an astute guy at his Big Picture blog back when the crisis hit 7 years ago, and would have liked to see quite a bit more self-criticism, but there you go. Here’s the crux of Barry’s whine:

It Shouldn’t Hurt This Much to Get a Mortgage

Under normal circumstances, approving my mortgage application should be a no-brainer: High income, no debt, good credit score. The missus also makes a good income, has an almost-perfect credit score and has been working for the same business for 28 years. But these are not normal circumstances. Let me jump to the end: Yes, we got our mortgage. We put 20% down, bought a house that appraised for more than the purchase price and got a 3.25% rate on a mortgage that resets after seven years. We moved in last month. But the process was surreal. Indeed, it was such a bizarre experience that I started hunting for explanations from people in the industry about why mortgage lending has gone astray.

I spoke to numerous experts, many of whom spoke only on background. Today’s column is about what I learned. By just about any measure, credit is tighter today than it has been in decades. Although former Federal Reserve Chairman Ben Bernanke’s inability to refinance a mortgage is merely anecdotal, consider instead the gauge CoreLogic developed. It used 1998 as a baseline and considered six quantitative measurements to evaluate how loose or easy mortgage lending is. By those metrics, this is the tightest credit market for mortgage lending in at least 16 years.

The absurdities of my experience are worthy of its own rant, but rather than do that, I wanted to focus on what went wrong. The factors that led to the financial crisis were many …

Do read the rest at the link. My take on this is that when Barry says “credit is tighter today than it has been in decades” and “this is the tightest credit market for mortgage lending in at least 16 years”, I’m thinking not long ago he would have agreed that’s a good thing. We can argue about why this has come to pass, and blame regulation, not banks, but we all agreed in 2007 that too loose lending was a problem (both Barry and the Automatic Earth warned back then that the crisis would come, before it did a year later).

And anyway, I’m not here to show compassion with Ritholtz, I’m here because of all the other people, the young who see their dreams of a decent future cut off cold because of unemployment, low wages etc., and the old who see their pensions evaporate like so much smoke. And for both young and old, a further correction and demise of real estate will, largely – though not in every case – be a blessing. So, you’re wrong, Barry, it should hurt at least this much for you and everyone else to get a loan, if only because the pendulum was that far off its equilibrium in the other direction for so long.

Which is why I’m much more partial to what David Weidner said at MarketWatch on Thursday:

It Will Soon Get Easier To Buy A Home – But Don’t Do It

After an extended drought of credit available to consumers, it’s going to get easier to buy a home. The Federal Housing Finance Agency this week polished off a new set of guidelines that will allow government backing of loans that it had shunned since the mortgage crisis. And in a surprise move, the guidelines include a provision to consider some mortgages without down payments.

The FHFA and the Obama administration are both worried about the amount of credit available to the average American. It’s an epidemic problem. About a third of housing sales were to cash buyers in the first quarter, according to the National Association of Realtors. As I’ve written before, this is extraordinarily high, indicative of a housing market that favors the wealthy. So by lowering the standards of what types of loans are acceptable to the big mortgage giants, it’s obvious that the FHFA’s effort is about encouraging banks to provide more loans. The government is essentially saying: “Go ahead and lend; we’ll hold the paper.”

But in trying to ease credit and turn a mythic housing recovery into a real one, the FHFA may be overreaching. That’s because you know exactly who’s going to be taking out those loans: people who can’t afford them. And because there will always be some people who believe that because they can borrow, they can afford these loans, you know how this new policy is going to play out.

Consider a study issued Oct. 13 by mortgage data provider HSH.com. It found that 80% of homeowners had a regret about their purchase. Surprisingly, most of the regrets weren’t about costs. They were about the size of the home, the neighbors, the schools and other gripes. Then again, this was a post-foreclosure wave survey of 2,000 homeowners. The more than 4 million borrowers who lost their homes to foreclosure since the crisis probably weren’t asked and would have different regrets.

So, while the FHFA is certainly opening the door to another mortgage problem, it’s not ultimately the one to blame. That falls to the home buyer who bites off too much. [..] borrowers can no longer depend on banks and regulators to measure creditworthiness.

Historically, it was difficult to get a home loan. And down payments weren’t an option. They were the price of admission to the lending officer’s desk. But a series of government programs, low interest rates and tax breaks along with loosening standards at banks eroded this institutional test. So today it’s incumbent on the borrower to ask himself if he can afford the American Dream.

For many, the answer is probably “no.” [..] The FHFA will, in the end, encourage more lending. And this will translate into more credit for people who have been denied. But that policy isn’t the one that matters. It’s my policy, your policy, based on what we truly can afford that does.

Before the US, and the UK, Netherlands, Ireland, Spain and many other countries can ever have a healthy housing industry again, that industry will first have to come crashing down to levels indeed not seen in decades. Hurtful for some, beneficial for many others.

So it’s not such a bad thing if regulators choke that market, and people can’t buy properties they can only ‘afford’ is they can borrow 90%+ of the purchase price. After decades of insanity, the only way to get back to health is a severely strict diet and fitness regime. The one ultimate goal must be to make homes affordable to young people, the future of every single community and nation.

Reading through these kinds of articles, I don’t get the idea that anyone at all is aware of that, or even thinking about it. Our societies face a major economic – and therefore overall – reset, and housing is a big part of that, simply because it’s a huge percentage of the real economy. And pumping it up in artificial ways is a short term ‘policy’ that can only end in tears. It’s not exactly rocket science. If you can make a cup of coffee, you can figure this one out.