Hong Kong Archives - Page 6 of 6 - The Automatic Earth

If the mainstream media is to be believed, the Kremlin’s network of hackers and bots could give the Illuminati a run for its money. When its operatives aren’t electing British prime ministers, embarrassing American politicians on debate night and flogging dildos to undermine democracy, they’re overseeing a team of assets earning their borscht openly in the United States. Thankfully, the intrepid detectives in the American press have named and shamed these double agents. We’ve compiled a list here.

Mitch McConnell, alias: Moscow Mitch McTreason

Cleverly posing as a Republican Senator from Kentucky since 1985, Mitch McConnell was outed as a Russian asset by the Washington Post last week when he shot down a trio of bills that would have supposedly beefed up American election security from foreign interference. Never mind that McConnell opposed the bills based almost entirely on partisan disagreements with the Democrats, the Post exclaimed “Mitch McConnell is a Russian asset,” and MSNBC’s Joe Scarborough dubbed the southern Republican “Moscow Mitch.” With his nefarious plan exposed, #MoscowMitchMcTreason had no choice but to shrug, and continue about his day.

Lindsey Graham, alias: Leningrad Lindsey

#LeningradLindsey began trending after the South Carolina lawmaker helped push a controversial asylum bill through the Senate Judiciary Committee on Thursday. Though the bill had nothing to do with Russia, the nickname stuck. Cleverly, Leningrad Lindsey has spent his career on Capitol Hill posing as a Russia-baiter. Graham has repeatedly called for Russia to “pay a price” for allegedly meddling in the 2016 presidential election, and co-sponsored an anti-Russia “sanctions bill from hell.” With a record like that, nobody would suspect that he was secretly a Russian asset all along. Note too that Leningrad does not exist any more. Perhaps Graham’s treachery dates back to the communist era? Either that or Letnerechenskiy Lindsey didn’t have the same ring to it.

I can’t seem to figure out on what specific grounds though.

• Majority of House Democrats Favor Starting Impeachment Proceedings (R.)

A majority of Democrats in the U.S. House of Representatives now favor launching impeachment proceedings against Republican President Donald Trump, after a California lawmaker on Friday became the 118th Democrat to call for the process to begin. “In the past few years, our nation has seen and heard things from this president that have no place in our democracy,” Representative Salud Carbajal said in a statement that accused Trump of “criminal” behavior. “I believe it is time to open an impeachment inquiry into President Donald Trump,” Carbajal said. The Democrats have a majority of 235 members in the House of Representatives. Support for an impeachment inquiry has jumped by more than two dozen Democrats since former Special Counsel Robert Mueller testified on July 24 about his probe of Trump and Russian interference in the 2016 election.

But the total of 118 is still far short of the 218 House votes needed to approve an impeachment resolution, and opinion polls continue to show voters sharply divided over the issue. The House is currently on a summer recess and will not return until Sept. 9. Having a majority of her own caucus favor impeachment could put new pressure on House Speaker Nancy Pelosi, who opposes impeachment as a politically risky move unless investigators find powerful evidence of misconduct by Trump that can unify public opinion. In a statement issued Friday, Pelosi gave no sign she was about to change her cautious approach. Instead, she outlined in considerable detail her strategy of Democrats continuing to investigate the president, while also moving in court to get access to more evidence.

“Democrats in the Congress continue to legislate, investigate and litigate,” Pelosi declared. “The president will be held accountable.” Democrats opposing impeachment say the best way to remove Trump is by defeating him in 2020, when he is up for re-election. Some Democrats worry that too strong a focus on impeachment could eclipse other issues like healthcare and threaten the re-election of Democrats who pried seats away from Republicans last year in regions where many voters oppose impeachment. Trump has denied any wrongdoing and says he was vindicated by the Mueller report, but the special counsel made clear in his testimony to Congress that that was not the case.

In his report, Mueller described in detail the extensive contact Trump’s team had with Russia during the 2016 election campaign, and how Trump tried to impede Mueller’s investigation. While he stopped short of concluding Trump had committed a crime or that his aides had conspired with Moscow, Mueller did not clear him and indicated it was up to Congress to decide the next steps. Democrats on the House Judiciary Committee effectively rebranded their six-month-old oversight investigation of Trump as an impeachment probe last week, when they asked a federal judge for access to Mueller’s grand jury evidence to determine whether to recommend articles of impeachment against Trump.

More impeachment nonsense.

• The Rise and Fall of Superhero Robert Mueller (Matt Taibbi)

The conspiracy tale has validated every Trump criticism about both crooked media and the deep state. The whole narrative is the brainchild of Clinton hacks, a handful of overzealous intelligence nuts, and a subset of the Democratic Party’s weakest elected minds, in particular murine ex-prosecutor Schiff, a man who should be selling Buicks back in his hometown Burbank. Take a good look at Schiff, at our paranoid outpatient of an ex-CIA chief John Brennan, and at excuse-making Clinton campaign chief Robby Mook (a.k.a. the captain of the Democratic Titanic), and ask if you really want to be re-writing history for those people. They’re making the press accomplices in the most imbecilic effort at political opposition in recent American history.

Hence the desperate public comments and the string of wacked-out stunts, like putting Mueller under oath. Impeachment will be the next adventure in doubling down blind. A significant portion of the original conspiracy theory vanished via a series of under-circulated news reports just in the months since the end of the Mueller probe. Remember the Southern District of New York campaign finance probe that arose in connection with Trump lawyer Michael Cohen, the one described as a “major danger” to Trump? Remember all that talk about how “Trump can’t run the Mueller playbook on the New York feds?” Experts told us that the Cohen probe posed a “significant threat” of new indictments for Trump and his family.

When that investigation closed with no new charges the same week Mueller testified, the commentariat barely noticed. Same with the Democrats v. Earth lawsuit/publicity stunt, in which the Democratic National Committee sued Trump, the Russian government, and Wikileaks under a RICO claim. Plaintiffs charged the Trump campaign conspired to steal and release DNC emails. But a federal judge tossed the suit on the grounds that the Trump campaign “did not participate in the theft.” Moreover, the Clinton-appointed judge said published documents were “of public concern” and therefore protected like any other journalistic work product. The judge also ruled that allegations about all the non-Russian defendants (including Wikileaks) were “insufficient to hold them liable” for any illegality involved in obtaining DNC emails.

More superheroes.

• Obama Looms over the Primary in Invisible Ways (TPM)

When Bernie Sanders got into the race in 2016 in many ways his campaign was premised on the idea that Obama had gotten most things wrong. Perhaps his presidency wasn’t a disaster, as my friend argues. But the premises of Sanders’ campaign was that Democrats needed to move in a dramatically different direction and that Obama’s policies and presidency were – while better than the GOP alternative – fundamentally misguided. Sanders was pretty straightforward about this before getting into the race. And he didn’t really hide it once he got in. But in the nature of things, since Obama was a popular incumbent, it wasn’t a point he emphasized during his campaign.

We also know that the entire country has moved left on a number of issues over the last decade (LGBTQ issues and marijuana legalization are just two examples). Democrats, meanwhile, have moved significantly to the left on a much broader range of issues. Some of this is an on-going trend. Some of it is in reaction to Trump, having his extremity lead to a reevaluation of practices that most Democrats didn’t focus much on. Maybe the best example of this is on immigration. As immigration advocates were saying very clearly at the time, the Obama administration deported lots and lots of people. It’s hard to see that in quite the same light after what we’ve all been exposed to about the mechanics of ICE, detention, deportation and everything that goes with it.

But with all of this, there’s a shift that has taken place that manages to be both all but invisible and yet very obvious. Part of it is Sanders deep imprint on the 2020 policy conversation – especially on health care and student debt but on other issues as well. Part of it is the wave of left activism that predates Trump but has intensified under his presidency. But taken together they’ve created a 2020 campaign policy conversation which at least implicitly gives a pretty negative verdict on Obama and his presidency. Perhaps not a disaster as my friend puts it but in many regards a mistake rather than something to build on. That, I think, is the root of Biden’s continuing strength, even with all the bobbles, flubs, the archaic policy histories and all the rest. It’s not just because he was Obama’s Vice President and people like Obama. It’s because the terms of the policy debate are in conflict – when forced together – with where the great majority of Democrats are, which is holding Obama and his presidency in very high regard.

“Maybe the Democratic Party should move out of the ghetto it’s built for itself.”

• Race Hustle (Jim Kunstler)

The shriekings of “racism” aren’t helping much anymore. Few observers have missed the fact that the city of Baltimore has been run by an African American city hall (Mayor, Police Chief, District Attorney) for many years, with over a billion dollars in additional federal assistance. So, if political power is the answer, how’s that working out? Add some extra shrieking about “white privilege” to explain the situation? How does “white privilege” explain the fact that 86 percent of kids in Baltimore primary schools can’t read and 89 percent can’t do arithmetic to grade level? This, despite the fact that at $15,564 per pupil, Baltimore is fourth highest per student of the 100 largest school districts in the nation, according to the U.S. Census Bureau.

Maybe becoming the party of a national race hustle isn’t such a good idea. The race hustle is wearing out its welcome in American politics, and the more the Democratic Party resorts to race hustling as its chief strategy, the sooner the party will go extinct. That is, if it doesn’t incite some kind of civil war first. Cue the cry, “That’s racist!”

Maybe there is a whole range of human values and human behaviors that have nothing to do with race — like reading to small children and helping them learn the English language so they don’t grow into adults who have to say “know what I mean?” every other sentence because they’ve barely acquired enough language skill themselves to know what they mean. Maybe there’s something called an American common culture that contains values and behaviors worth emulating rather than opposing. Maybe “multiculturalism” wasn’t such a good idea after all. Maybe ghetto culture is not such a precious foundation for a successful life. Maybe the Democratic Party should move out of the ghetto it’s built for itself.

‘Even if my career is over, I can’t put my name to this.’

• Tory Rebels Threaten Boris Johnson After Majority Cut To One (G.)

Boris Johnson faced a grave threat to his control of parliament on Friday as he was warned that Conservative rebels could cross the House of Commons to foil Brexit in the aftermath of a byelection that reduced his working majority to just one MP. Overnight, the Liberal Democrats’ Jane Dodds won a crucial byelection in Brecon and Radnorshire by a margin of 1,425, overturning the Tories’ previous majority of more than 8,000. The result prompted immediate recriminations across the party. Conservative no-deal sceptics warned about the rapidly growing threat the government could face from the reinvigorated Lib Dems, while insiders blamed Theresa May’s administration for choosing a candidate who had already been ousted for expenses fraud.

One of the most prominent Conservative supporters of a second referendum told the Guardian on Friday he was actively considering defecting to the Lib Dems or sitting as an independent, a move that would leave Johnson at the helm of a minority government. Dr Phillip Lee, the former justice minister, who first suggested he could quit the party in his own podcast, On the House, told the Guardian he was not alone among colleagues considering defecting or resigning if the government pursued no deal. “I have things to think about over the summer, but it is not just me,” he said.

“There are a number of colleagues who are spending the summer reflecting on what is the right way for them to confront this no-deal scenario. Of course, it is difficult for all of us because we joined the Conservative party, but it has morphed into something a lot different to what I joined in 1992.” Although Johnson might be able to rely on Labour Brexiters and independents to vote for a deal, Lee suggested that the government could still be threatened by the many Conservatives in the party’s centre who had been alienated by the number of rightwingers in Johnson’s cabinet. “At the moment Boris Johnson has a very difficult pitch to play and that has been made even harder by the formation of this cabinet,” he said. “There are increasingly people who think, ‘Even if my career is over, I can’t put my name to this.’

“[..] the pound has plummeted since his appointment. It is currently the second worst performing currency in the world – after the Madagascan Ariary.”

• Watch Out Boris Johnson the Chickens are Coming Home to Roost (English)

[..] a week is a long time in politics and Prime Minister Johnson quickly ran out of hot air. Just saying stuff will happen does not make stuff happen. You can’t strike a better deal if you refuse point blank to meet your opposite numbers. You see, incredibly, instead of setting up meetings with his fellow heads of state and selling his Brexit vision, Johnson has declared that he won’t meet Angela Merkel, Emmanuel Macron or any of the EU heads unless they scrap the backstop. This is the same ludicrous negotiating tactic he deployed when as Mayor of London he refused to engage with London Underground union reps. It didn’t work then and led to long strikes. It’s even less likely to work now – and the end result will be far more damaging.

Johnson is all about image and image management. His team has already set to work on a £100 million taxpayer-funded propaganda campaign – the biggest of its kind since World War Two – to convince the British people that a ‘no deal’ Brexit will be fine and, failing that, it will be everyone else’s fault. Every single reputable economist disagrees. And so do the markets, which is why the pound has plummeted since his appointment. It is currently the second worst performing currency in the world – after the Madagascan Ariary.

Some Brexit cultists argue that a weak currency is good for the economy. They’re wrong. Unless you’re a hedge fund manager or a holiday lettings firm in Cornwall, a weak pound is a disaster. It’s bad for consumers and calamitous for manufacturers relying on tight margins and supply chains. It’s awful for pensioners, holiday-makers or anyone who has an interest in the British economy functioning. A falling currency is like a failing heart. If it were otherwise, then Madagascar would be the economic powerhouse of the global economy and Italy would have been the envy of the world in the Berlusconi years.

Freedom’s just another word for nothing.

• Pentagon Testing Mass Surveillance Balloons Across The US (G.)

The US military is conducting wide-area surveillance tests across six midwest states using experimental high-altitude balloons, documents filed with the Federal Communications Commission (FCC) reveal. Up to 25 unmanned solar-powered balloons are being launched from rural South Dakota and drifting 250 miles through an area spanning portions of Minnesota, Iowa, Wisconsin and Missouri, before concluding in central Illinois. Travelling in the stratosphere at altitudes of up to 65,000ft, the balloons are intended to “provide a persistent surveillance system to locate and deter narcotic trafficking and homeland security threats”, according to a filing made on behalf of the Sierra Nevada Corporation, an aerospace and defence company.

The balloons are carrying hi-tech radars designed to simultaneously track many individual vehicles day or night, through any kind of weather. The tests, which have not previously been reported, received an FCC license to operate from mid-July until September, following similar flights licensed last year. Arthur Holland Michel, the co-director of the Center for the Study of the Drone at Bard College in New York, said, “What this new technology proposes is to watch everything at once. Sometimes it’s referred to as ‘combat TiVo’ because when an event happens somewhere in the surveilled area, you can potentially rewind the tape to see exactly what occurred, and rewind even further to see who was involved and where they came from.”

“even smaller-scale intervention could spark a knee-jerk exodus from the city’s financial markets..”

• What Would Chinese Military Intervention In Hong Kong Look Like? (ZH)

According to a new lengthy Bloomberg exploration outlining the possibilities that China’s military could intervene against the now eight weeks-long increasingly violent protests that have gripped Hong Kong streets, a central question now on everyone’s mind is, What will the Chinese military do? Reports began appearing late last week of a Chinese security forces build-up just outside the semi-autonomous city, setting nerves on edge, and this week the chief of the Chinese military garrison in Hong Kong warned that the army stands ready to “protect” Chinese sovereignty. And then there was also the extremely provocative just released “riot control” video, showing People’s Liberation Army (PLA) solders conducing a drill to invade a city in an imagined armed crackdown on protesters and unrest.

The Bloomberg report begins by noting that though Chinese army occupation of Hong Kong remains unlikely, it remains that “even smaller-scale intervention could spark a knee-jerk exodus from the city’s financial markets, drag down property prices and prompt international companies to reconsider their presence in the territory, analysts say.” The major financial hub could suffer “irreparable damage” by such an exodus, along with severely weakening the “one country, two systems” concept in effect since 1997. Chinese military officials, and especially state media have begun floating the argument for “military options” and intervention. Officials also recently described the US as a “black hand” behind the anti-Beijing protests – which began over a proposed extradition bill – something which the US state department dismissed as “ridiculous”.

And all the sinners saints.

• First Human-Monkey Chimera Raises Concern Among Scientists (G.)

Efforts to create human-animal chimeras have rebooted an ethical debate after reports emerged that scientists have produced monkey embryos containing human cells. A chimera is an organism whose cells come from two or more “individuals”, with recent work looking at combinations from different species. The word comes from a beast from Greek mythology which was said to be part lion, part goat and part snake. The latest report, published in the Spanish newspaper El País, claims a team of researchers led by Prof Juan Carlos Izpisúa Belmonte from the Salk Institute in the US have produced monkey-human chimeras. The research was conducted in China “to avoid legal issues”, according to the report.

Chimeras are seen as a potential way to address the lack of organs for transplantation, as well as problems of organ rejection. Scientists believe organs genetically matched to a particular human recipient could one day be grown inside animals. The approach is based on taking cells from an adult human and reprogramming them to become stem cells, which can give rise to any type of cell in the body. They are then introduced into the embryo of another species. Izpisúa Belmonte and other scientists have previously managed to produce both pig embryos and sheep embryos which contain human cells, although the proportions are tiny: in the latter case, researchers estimate that only one cell in 10,000 was human.

Pig-human and sheep-human chimeras are attractive in part because pigs and sheep have organs about the right size for transplantation into humans. However Alejandro De Los Angeles, from the department of psychiatry at Yale University, said it was likely monkey-human chimeras were being developed to explore how to improve the proportion of human cells in such organisms. “Making human-monkey chimeras could teach us how to make human-pig chimeras with the hope of making organs for transplantation,” he said. “It could teach us which types of stem cells we should be using, or other ways of enhancing what’s called ‘human chimerism levels’ inside pigs.”

Debt Rattle July 22 2019

Jul 222019

July 22, 2019 Posted by Raúl Ilargi Meijer at 8:56 am Finance Tagged with: Assange, backstop, Boris, Brexit, Hong Kong, Japan, Jimmy Carter, Mueller, Nadler, populism, Puerto Rico, Trump 7 Responses »

Claude Monet Impression, sunrise 1872

• Nadler: Mueller Has Evidence Of Trump High Crimes And Misdemeanours (G.)

• Trump Has Nothing To Fear From Mueller (Hill)

• Boris Johnson’s Brexit Plans Under Threat From Ministers’ Resignations (G.)

• Incoming Prime Minister Poses A Brexit Puzzle For Brussels (G.)

• From Hammond on to Johnson – Where Next For Fiscal Policy? (PE)

• Abe Fails To Get Enough Votes To Change Japan’s Pacifist Constitution (AT)

• Armed Mob Violence On Protesters Leaves Hong Kong In Shock (BBC)

• Puerto Rico’s Week Of Massive Protests, Explained (Vox)

• The Secret Sources of Populism (Bruno Maçães)

• Latest Secret Government File Reveals UK Middle East Policy (TP)

• Kicked Off the Land (New Yorker)

• Losing My Religion For Equality (Jimmy Carter)

Curious to see what that evidence is, and curious to know why iot has remained hidden to date.

• Nadler: Mueller Has Evidence Of Trump High Crimes And Misdemeanours (G.)

The eyes of America will be trained on Capitol Hill on Wednesday, as Robert Mueller testifies before two House committees about his report on Russian election interference, links between the Trump campaign and Moscow and potential obstruction of justice by the president. On Sunday, the chairman of the judiciary committee indicated the stakes when he said the 448-page report contained “very substantial evidence that the president is guilty of high crimes and misdemeanours” – the benchmark for impeachment. “It’s important that we not have a lawless administration and a lawless president,” the New York Democrat Jerrold Nadler told Fox News Sunday.

“And it’s important that people see what we’re doing and what we’re dealing with.” Nadler’s committee would initiate impeachment proceedings. Mueller, a former director of the FBI, will also appear before the intelligence panel. “The report presents very substantial evidence that the president is guilty of high crimes and misdemeanours,” he said, “and we have to present, or let Mueller present those facts to the American people and then see where we go from there because the administration must be held accountable and no president can be above the law.”

Surprise: not everyone agrees with Nadler. Is everybody citing from the same report? Bradley A. Blakeman was a deputy assistant to President George W. Bush from 2001 to 2004.

• Trump Has Nothing To Fear From Mueller (Hill)

The president has nothing to fear from the testimony from Robert Mueller because nothing Mueller could possibly say will change the result of the report he delivered. He conclusively found that there was no collusion with the Russians by the Trump 2016 campaign, and he did not bring any indictments for obstruction of justice against the President or even a referral. What Mueller left open with regard to obstruction — if at all — was conclusively dealt with by the Justice Department through the Attorney General and Deputy Attorney General who found that there was no probable cause to bring criminal charges against the president.

Congress is not bound by the Mueller investigation or its findings. Congress on its own could bring on impeachment proceedings in the House based on the report — if there was evidence contained therein to warrant such actions. Mueller’s testimony will add nothing other than to further politicize an investigation that was supposed to be apolitical. Mueller reminds me of the patient who decides not to be resuscitated only to find that doctors did so against his wishes. At best, Mueller is a reluctant witness and at worst — for Democrats — a hostile witness. He made it clear in his press conference months ago that he would like the report to speak for itself and that he would not go beyond his own reporting. Congress now runs the risk of further being seen as conducting a witch-hunt against the president by calling a witness who clearly has nothing further to add.

Quite a few could walk, starting today, but most on Wednesday, when he takes over.

• Boris Johnson’s Brexit Plans Under Threat From Ministers’ Resignations (G.)

Boris Johnson’s hoped-for triumphant march into Downing Street this week is set to be dampened by a carefully timed series of resignations by senior ministers, who will retreat to the backbenches with a vow to thwart any moves towards a no-deal Brexit. The announcements by Philip Hammond and David Gauke that they will step down on Wednesday, immediately before Johnson is likely to head to Buckingham Palace, highlight the perilous political climate for Theresa May’s expected successor. It comes amid predictions that the Conservatives’ already wafer-thin working Commons majority of three could entirely disappear by the time MPs return from their summer recess, with mooted defections to the Lib Dems coming on top of a predicted byelection defeat.

Barring a hugely unexpected twist, Johnson is expected to be announced on Tuesday as the victor over Jeremy Hunt in the vote of Conservative members, formally taking over the next day, after May holds a valedictory prime minister’s questions. However, some of the gloss will be removed with the promised resignations of Hammond, the chancellor, and Gauke, the justice secretary, with predictions that other ministers and junior ministers opposed to no deal, such as the international development secretary, Rory Stewart, could follow.

Headline is just wrong. The EU has seen Boris coming from miles away. They know he will put the blame with Brussels. They know he wants to ditch the backstop, and they won’t let him. Then Boris will be known as the man who broke the Good Friday Agreement.

• Incoming Prime Minister Poses A Brexit Puzzle For Brussels (G.)

While Westminster has been gripped by the Conservative leadership race, Brussels has been on a Brexit break. That respite will soon be over. And despite rumours of Brussels compromises in the works, the EU has no off-the-shelf Brexit plan for the new prime minister, who is expected to be announced on Tuesday. “It wouldn’t make any sense to start working on this now,” one senior EU source said. “Because we really need to know [what he wants]. The only thing we have seen are his public statements.” EU negotiators have had no contact with the teams of Boris Johnson – the widely presumed winner – or his rival, Jeremy Hunt. Danuta Hübner, a Polish centre-right member of the European parliament’s Brexit steering group, said there was a “worrying” lack of time to find a compromise before Britain’s departure day on 31 October.

She could not imagine the EU putting anything new on the table, but said it remained open to renegotiating the political declaration on future relations. “We cannot change the major red lines on our side, that there is no possibility of renegotiating the agreement, including the backstop.” Johnson and Hunt have vowed to tear up the backstop, the fallback plan to prevent a hard border on the island of Ireland, which both men have voted for at least once. Recent reports have suggested the EU is ready to offer a five-year transition to break the deadlock over the backstop. But three EU sources said this was a rehash of debates from the negotiation period, rather than fresh ideas. “It’s all quite ancient” and “not something that we are considering at all”, an official said.

Ann Pettifor: “Hammond has quietly overseen the dismantling through austerity of a decent society…..”

• From Hammond on to Johnson – Where Next For Fiscal Policy? (PE)

As Mr Johnson takes over as Leader of the Conservative Hard Brexit Cult, and by virtue thereof as Prime Minister, it is timely to take a quick look at what his economic and fiscal policy options are – at least in the lead up to DD-Day (Do or Die) on 31st October. It’s equally important to take stock of Mr Hammond’s record as he quietly fades away after three years as Chancellor of the Exchequer. Johnson proposes tax cuts for corporates (reduction in corporate tax rate, already one of the lowest of major economies), and praises President Trump’s example: “He has been very clever in allowing businesses to offset capital investment in tax, with capital allowances. I think we should think about that sort of thing for start-ups, in addition to cutting corporation tax, which would also be effective.” (Via Tom Newton Dunn, The Sun)

Johnson also promises significant tax cuts for the rich and well-to-do, notably by a big rise in the 40% income tax threshhold to £80,000 and by raising the starting-level of earnings for national insurance contribution (NIC) purposes. On the higher tax threshold, Paul Johnson of the Institute for Fiscal Studies (IFS) says this “costs about £9 billion and benefits the 4 million or so income taxpayers with the highest incomes. Most of the gain goes to those in the top 10% of the income distribution would gain an average of nearly £2,500 a year.” On the NIC issue, he calculates this costs £3 billion for every £1,000 the starting level is raised. All these measures will reduce the immediate tax take for government, probably by £20 to 30 billion per year initially, which is 1-1.5% of GDP.

Messrs Johnson & Hammond, circa 1910

“The provisions, imposed by the United States after World War II, are popular with the public at large, but reviled by nationalists like Abe..”

• Abe Fails To Get Enough Votes To Change Japan’s Pacifist Constitution (AT)

Japanese Prime Minister Shinzo Abe claimed victory Sunday for his ruling coalition in the upper house election, but appeared to fail to secure a “super majority” in the chamber in support of his dream to amend the nation’s pacifist constitution. With the results, the 64-year-old Abe, who is on course to become Japan’s longest-serving prime minister, aims to shore up his mandate ahead of a crucial consumption tax hike later this year, along with trade negotiations with Washington. “The ruling parties were given a majority … as people decided to urge us to firmly push for policies under the stable political base,” Abe told public broadcaster NHK.

“I want to meet their expectations soundly,” he said at the headquarters of his Liberal Democratic Party. Abe’s LDP and its coalition partner Komeito are forecast to take at least 69 of the 124 seats – about half the chamber – up for election on Sunday, with six seats still undecided, according to NHK. The two parties control 70 seats in the half of the 245-seat chamber that is not being contested, putting them on track to maintain their overall majority. [..] Local media did predict that forces in favor of revising the constitution, led by Abe’s LDP, were certain to fail to reach 85 of the seats up for grabs, which would have given them a two-thirds “super majority” in the chamber.

Following the vote, however, Abe said he would continue trying to expand support for the revision even if the pro-revision group eventually misses the target, necessary for proposing a constitutional amendment. Abe has pledged to “clearly stipulate the role of the Self-Defence Forces in the constitution,” which prohibits Japan from waging war and maintaining a military. The provisions, imposed by the United States after World War II, are popular with the public at large, but reviled by nationalists like Abe, who see them as outdated and punitive.

Crazy. But Chinese.

• Armed Mob Violence On Protesters Leaves Hong Kong In Shock (BBC)

Hong Kong has been left in shock after a night of violence on Sunday which saw dozens of masked men storm a train station. The men – dressed in white shirts and suspected to be triad gangsters – assaulted pro-democracy protesters and passers-by in the Yuen Long area. This is the first time this kind of violence has been seen in the ongoing anti-extradition demonstrations. Several lawmakers questioned why police were slow to arrive at the scene. Footage posted on social media showed dozens of men attacking people with batons inside the station. Forty-five people were injured, with one person in critical condition.

Lawmaker Lam Cheuk-ting said police had taken more than an hour to arrive. “Hong Kong has one of the world’s highest cop to population ratio,” said another pro-democracy lawmaker Ray Chan in a tweet. “Where were [they?]” Police on Monday said they had not made any arrests but were still carrying out investigations. The mob attack followed a pro-democracy rally on Sunday in the centre of Hong Kong, where riot police had fired tear gas and rubber bullets at protesters. The masked men stormed Yuen Long MTR station at about 22:30 local time (14:30 GMT), attacking passengers and people making their way back from the protest.

“Protesters gave an ultimatum to the Governor after his address. “You have until 11:59pm to leave. If you refuse, we will make this country unmanageable“

• Puerto Rico’s Week Of Massive Protests, Explained (Vox)

Thousands of protesters demonstrated in the streets of San Juan, Puerto Rico Saturday, marking the eighth straight day of rallies calling for the resignation of the island’s governor. The crowds show no sign of ebbing, and analysts say that the protests are quickly becoming the biggest political demonstration in the US territory’s modern history. The protests arose in response to the leak of Telegram app messages in which Gov. Ricardo Rosselló and his inner circle make light of the casualties caused by Hurricane Maria and disparage political opponents using vulgar, homophobic, and sexist language.

The text message leak came days after another scandal: The FBI arrested two former top officials in Rosselló’s government as part of a corruption probe over their handling of $15.5 million in contracts. The officials, former Education Secretary Julia Keleher and Ángela Ávila-Marrero (former chief of Puerto Rico’s Health Insurance Administration), are accused of funneling the contracts to businesses they had personal ties to, regardless of those companies’ relevant experience or ability. The incidents have galvanized a public that feels neglected and exploited by political and economic elites, and one that has endured great suffering in the wake of Hurricane Maria in 2017 and a seemingly unresolvable debt crisis.

Calls for Rosselló’s resignation were growing following the corruption scandal; they exploded after the group chat scandal. Two cabinet officials have resigned in the wake of the scandals, but so far Rosselló has said that he plans to stay in office. Pressure on the governor is rising, however. The protests have garnered international attention, and a number of Puerto Rican celebrities like singer Ricky Martin (who was mocked in the leaked texts), Hamilton creator Lin-Manuel Miranda, and reggaeton star Bad Bunny have backed the demonstrations. “They mocked our dead, they mocked women, they mocked the LGBT community, they made fun of people with physical and mental disabilities, they made fun of obesity. It’s enough. This cannot be,” Martin said in a video on Twitter.

Many politicians from the US mainland have started to weigh in on the issue as well. President Donald Trump — who has called Puerto Rican officials “incompetent or corrupt” and who has opposed increased Hurricane Maria aid to the territory — was critical of Rosselló on Twitter. “The Governor is under siege, the Mayor of San Juan is a despicable and incompetent person who I wouldn’t trust under any circumstance, and the United States Congress foolishly gave 92 Billion Dollars for hurricane relief, much of which was squandered away or wasted, never to be seen again,” Trump tweeted on Thursday.

Populism as a result of decaying power.

“As European affairs minister in Portugal, I had quickly become used to thinking of Poland as the EU’s fourth power, ahead of Spain and Italy”

• The Secret Sources of Populism (Bruno Maçães)

Populism is a direct result of significant shifts in the global distribution of power. Namely, it is a reaction to the loss of power by a formerly hegemonic West. The populist parties competing for power in many European countries are reminiscent of the nationalist movements of the 1800s and 1900s in developing countries, which won support from people tired of feeling dependent on Europe and the United States. In particular, they sensed that their ancient civilizations had come to abandon their way of life for Western ideas. They lamented that their countries had been so deeply Westernized that only the sense of emptiness remained. “Our country resembles a hospital,” the Turkish writer Kazim Nami wrote in Turkish Country, a journal published between 1911 and 1931, “deprived of medicine, doctors and care.”

In Russia, a Europeanized aristocracy existed in an entirely different world from the peasantry. They spoke French, listened to different music and songs, ate different food, and had a radically different view of religion and the ends of life. It was as two countries rather than as two classes that they looked at each other, plotting a final and decisive struggle over Russia’s soul. Even in France, England, Germany, and the United States, a creeping sense of alienation was slowly developing between the classes, but it was of a different sort. Because these were the world’s ruling nations, elites assumed the responsibility of managing the affairs of foreign countries. Their outlook was more universal in character, although rooted in colonialism, and that created an inevitable distance with their compatriots.

Of course, as long as Western hegemony persisted, the spoils of empire flowed to the lower classes and reconciled them with those in power. But as the balance of power shifted, cosmopolitan elites appeared in a different light. It was implausible for them to dictate to the rest of the world from a position of growing weakness, and some had learned too well to incorporate the interests of the rest of humanity when formulating their positions. Today, many voters in Europe and the United States are starting to regard the elites as profoundly disconnected from what they see as the national interest. Distrust and alienation will keep growing.

Divide and rule. Long read. Here’s one of its stories.

• Latest Secret Government File Reveals UK Middle East Policy (TP)

In April 1941, nationalist army officers known as the Golden Square staged a coup in Iraq, overthrowing the pro-British regime, and signalled they were prepared to work with German and Italian intelligence. In response, the British embarked on a military campaign and eventually crushed the coup leaders two months later. But Suarez discovered in the files that the British were already wanting such a “military occupation of Iraq” by November 1940 – well before the Golden Square coup gave them a pretext for doing so. The reason was that Britain wanted to end “the mufti’s intrigues with the Italians”. One file notes: “We may be able to clip the mufti’s wings when we can get a new government in Iraq. FO [Foreign Office] are working on this.”

Suarez notes that a prominent thread in the British archive is: “How to effect a British coup without further alienating ‘the Arab world’ in the midst of the war, beyond what the empowering of Zionism had already done.” As British troops closed in on Baghdad, a violent anti-Jewish pogrom rocked the city, killing more than 180 Jewish Iraqis and destroying the homes of hundreds of members of the Jewish community who had lived in Iraq for centuries. The Farhud (violent dispossession) has been described as the Iraqi Jews’ Kristallnacht, the brutal pogrom against Jews carried out in Nazi Germany three years earlier.

There have long been claims that these riots were condoned or even orchestrated by the British to blacken the nationalist regime and justify Britain’s return to power in Baghdad and ongoing military occupation of Iraq. Historian Tony Rocca noted: “To Britain’s shame, the army was stood down. Sir Kinahan Cornwallis, Britain’s ambassador in Baghdad, for reasons of his own, held our forces at bay in direct insubordination to express orders from Winston Churchill that they should take the city and secure its safety. Instead, Sir Kinahan went back to his residence, had a candlelight dinner and played a game of bridge.” Could this be the reason that UK government censors want the file to remain secret after all these years? It would neither be the first, nor the last time that British planners used or created pretexts to justify their military interventions.

“Between 1910 and 1997, African-Americans lost about ninety per cent of their farmland. This problem is a major contributor to America’s racial wealth gap; the median wealth among black families is about a tenth that of white families.”

• Kicked Off the Land (New Yorker)

In the spring of 2011, the brothers Melvin Davis and Licurtis Reels were the talk of Carteret County, on the central coast of North Carolina. Some people said that the brothers were righteous; others thought that they had lost their minds. That March, Melvin and Licurtis stood in court and refused to leave the land that they had lived on all their lives, a portion of which had, without their knowledge or consent, been sold to developers years before. The brothers were among dozens of Reels family members who considered the land theirs, but Melvin and Licurtis had a particular stake in it. Melvin, who was sixty-four, with loose black curls combed into a ponytail, ran a club there and lived in an apartment above it. He’d established a career shrimping in the river that bordered the land, and his sense of self was tied to the water. Licurtis, who was fifty-three, had spent years building a house near the river’s edge, just steps from his mother’s.

Their great-grandfather had bought the land a hundred years earlier, when he was a generation removed from slavery. The property—sixty-five marshy acres that ran along Silver Dollar Road, from the woods to the river’s sandy shore—was racked by storms. Some called it the bottom, or the end of the world. Melvin and Licurtis’s grandfather Mitchell Reels was a deacon; he farmed watermelons, beets, and peas, and raised chickens and hogs. Churches held tent revivals on the waterfront, and kids played in the river, a prime spot for catching red-tailed shrimp and crabs bigger than shoes. During the later years of racial-segregation laws, the land was home to the only beach in the county that welcomed black families. “It’s our own little black country club,” Melvin and Licurtis’s sister Mamie liked to say.

In 1970, when Mitchell died, he had one final wish. “Whatever you do,” he told his family on the night that he passed away, “don’t let the white man have the land.” Mitchell didn’t trust the courts, so he didn’t leave a will. Instead, he let the land become heirs’ property, a form of ownership in which descendants inherit an interest, like holding stock in a company. The practice began during Reconstruction, when many African-Americans didn’t have access to the legal system, and it continued through the Jim Crow era, when black communities were suspicious of white Southern courts. In the United States today, seventy-six per cent of African-Americans do not have a will, more than twice the percentage of white Americans.

Many assume that not having a will keeps land in the family. In reality, it jeopardizes ownership. David Dietrich, a former co-chair of the American Bar Association’s Property Preservation Task Force, has called heirs’ property “the worst problem you never heard of.” The U.S. Department of Agriculture has recognized it as “the leading cause of Black involuntary land loss.” Heirs’ property is estimated to make up more than a third of Southern black-owned land—3.5 million acres, worth more than twenty-eight billion dollars. These landowners are vulnerable to laws and loopholes that allow speculators and developers to acquire their property. Black families watch as their land is auctioned on courthouse steps or forced into a sale against their will.

Carter leaves the Southern Baptist Convention after 60 years.

• Losing My Religion For Equality (Jimmy Carter)

I have been a practising Christian all my life and a deacon and Bible teacher for many years. My faith is a source of strength and comfort to me, as religious beliefs are to hundreds of millions of people around the world. So my decision to sever my ties with the Southern Baptist Convention, after six decades, was painful and difficult. It was, however, an unavoidable decision when the convention’s leaders, quoting a few carefully selected Bible verses and claiming that Eve was created second to Adam and was responsible for original sin, ordained that women must be “subservient” to their husbands and prohibited from serving as deacons, pastors or chaplains in the military service.

This view that women are somehow inferior to men is not restricted to one religion or belief. Women are prevented from playing a full and equal role in many faiths. Nor, tragically, does its influence stop at the walls of the church, mosque, synagogue or temple. This discrimination, unjustifiably attributed to a Higher Authority, has provided a reason or excuse for the deprivation of women’s equal rights across the world for centuries. At its most repugnant, the belief that women must be subjugated to the wishes of men excuses slavery, violence, forced prostitution, genital mutilation and national laws that omit rape as a crime. But it also costs many millions of girls and women control over their own bodies and lives, and continues to deny them fair access to education, health, employment and influence within their own communities.

The impact of these religious beliefs touches every aspect of our lives. They help explain why in many countries boys are educated before girls; why girls are told when and whom they must marry; and why many face enormous and unacceptable risks in pregnancy and childbirth because their basic health needs are not met.

Debt Rattle July 2 2019

Jul 022019

July 2, 2019 Posted by Raúl Ilargi Meijer at 9:58 am Finance Tagged with: Assange, Boeing, Chelsea Manning, DMZ, EU, expansion, Hong Kong, Kim Jong Un, Merkel, moon, subsidies, Trump, zero tolerance 14 Responses »

Salvador Dali Apparition of My Cousin Carolinetta on the Beach at Rosas 1934

• Rich Get Richer, Everyone Else Not So Much In Record US Expansion (R.)

• Japan Inc’s Inflation Expectations Stagnate (R.)

• Moon Calls DMZ Meeting End To North Korea-US Hostile Relations (Y.)

• Only Trump Could Go To North Korea (Luongo)

• Chinese State Paper Calls For ‘Zero Tolerance’ Over Hong Kong Protests (R.)

• Southwest Expects Boeing 737 MAX Cancellations Beyond Oct. 1 (R.)

• USTR Proposes $4 Billion In Additional Tariffs Over EU Aircraft Subsidies (R.)

• New York Governor Cuomo Orders Probe Into Facebook’s Advertising Platform (R.)

• How Merkel’s Plan For EU Top Jobs Fell Apart (Pol.eu)

• Chelsea Manning on the 50th Anniversary of Stonewall (M.)

• Academics Publicly Attacking UN Torture Rapporteur (Suzie Dawson)

Richer faster. And poorer faster. This will implode.

• Rich Get Richer, Everyone Else Not So Much In Record US Expansion (R.)

Welcome to the longest U.S. economic expansion in history, one perhaps best characterized by the excesses of extreme wealth and an ever-widening chasm between the unfathomably rich and everyone else. Indeed, as the expansion entered its record-setting 121st month on Monday, signs of a new Gilded Age are all over. Big-money deals are getting bigger, from corporate mergers and acquisitions, to individuals buying luxury penthouses, sports teams, yachts and all-frills pilgrimages to the ends of the earth. And while these deals grab headlines, there is a deeper trend at work. The number of billionaires in the United States has more than doubled in the last decade, from 267 in 2008 to 607 last year, according to UBS.

“The rich have gotten richer and they’ve gotten richer faster,” said John Mathews, Head of Private Wealth Management and Ultra High Net Worth at UBS Global Wealth Management. “The drive or the desire for consumption has just gone upscale.” But there are also signs of struggle and stagnation at lower-income levels. The wealthiest fifth of Americans hold 88% of the country’s wealth, a share that has grown since before the crisis, Federal Reserve data through 2016 shows. Meanwhile, the number of people receiving federal food stamps tops 39 million, below the peak in 2013 but still up 40% from 2008 even though the country’s population has only grown about 8%.

How many decades now? You cannot scare people into spending their savings. Quit trying.

• Japan Inc’s Inflation Expectations Stagnate (R.)

Japanese companies’ expectations for inflation over the next year stagnated, a Bank of Japan survey showed on Tuesday, adding pressure on the central bank to expand stimulus as the bitter U.S.-China trade war clouds economic prospects. Companies expect consumer prices to have risen 0.9% a year from now, unchanged from their projection three months ago and well below the BOJ’s 2% inflation target, according to the central bank’s detailed “tankan” survey for June. Firms expect consumer prices to have risen by an annual 1.0% three years from now, down slightly from 1.1% in the previous survey. Companies also saw inflation at 1.1% five years ahead, unchanged from three months ago.

The survey underscores the challenge of the BOJ’s monetary experiment that aims to boost inflation expectations with heavy money printing, in hope of prodding companies and households to boost spending now rather than save. “Six years have past since the BOJ deployed a radical stimulus and there’s no sign inflation expectations are approaching its 2% price target,” said Yasunari Ueno, chief market economist at Mizuho Securities. “There’s also no change to Japan’s deflationary structure created by a mix of a lack of demand and excess capacity.” The BOJ is maintaining a massive stimulus program to sustain a moderate economic expansion, so that companies will gradually raise wages and help push up inflation to its target.

“More than 100,000 U.S. citizens reside in Seoul alone..”

• Moon Calls DMZ Meeting End To North Korea-US Hostile Relations (Y.)

President Moon Jae-in said Thursday that North Korea and the United States have effectively declared an end to their hostile relations with the symbolic weekend meeting between their leaders at the inter-Korean border. Although they did not sign any document, their action was tantamount to a “de facto declaration of an end to hostile relations and the beginning of a full-fledged peace era,” Moon stressed, speaking at a Cabinet meeting. He was referring to a meeting between U.S. President Donald Trump and North Korean leader Kim Jong-un at the truce village of Panmunjom in the Demilitarized Zone (DMZ) on Sunday.

Trump even stepped over into North Korea, together with Kim, becoming the first sitting American president to set foot in the communist nation. The U.S. and North Korea fought fiercely against each other during the 1950-53 Korean War, which ended in an armistice. The two Koreas remain technically at war, as a formal peace treaty has yet to be signed. Moon had a brief three-way meeting with Kim and Trump at Panmunjom, although he stayed away from their talks, which lasted for nearly an hour. Moon also offered an account of his joint visit with Trump to a DMZ observation post, named Ouellette.

He noted that it marked the first time the presidents of the allies had traveled to the DMZ together. It was also meaningful, Moon added, that he and Trump wore suits, not military uniforms or bulletproof vests. Moon told Trump there that half of the South Korean population of 51 million live in Seoul and nearby Gyeonggi Province, as little as 40 kilometers away from the inter-Korean border. More than 100,000 U.S. citizens reside in Seoul alone, he added.

“Trump presumably had a good meeting with Russian President Vladimir Putin which likely set the stage for his meeting with Chairman Kim Jong-un.”

• Only Trump Could Go To North Korea (Luongo)

Donald Trump did the unthinkable. He went to North Korea. He stepped over the line in the sand demarked by Washington protocol for nearly seventy years. And that Washington establishment, predictably, hates him for it. It can be felt from all sides of the political rotunda. They hate that Trump realizes their position, one of maximum pressure, isn’t working. They despise that Russia and China will benefit from ending this frozen conflict not to mention Koreans on both sides of the DMZ. The cynic in me thinks they are angry that the American people will benefit as well. So this weekend was a good one for peaceniks around the world. Trump and Chinese Premier Xi Jinping agreed to back down on the worst of his trade war demands.

Trump presumably had a good meeting with Russian President Vladimir Putin which likely set the stage for his meeting with Chairman Kim Jong-un. Remember Kim met with Putin earlier this year and designated him as his go-between with Trump after the talks in Hanoi fell apart. This event should not be downplayed. Trump showed great humility and generosity towards Kim at the moment of truth. We should be cheering this regardless of what we think of him personally. Diplomacy is not groveling. It is the acknowledgment of the other person’s basic humanity, a fundamental point lost in the political cesspit that is D.C. Because of his previous mistakes and belligerence, only Trump could have made the walk across the DMZ to meet Kim on his territory.

Only someone as blunt as Trump could cut through the nonsense that North Korea isn’t capable of independent action. And only people so full of bile and despite would not be happy about this. Only people so enthralled with the thought of war and their own political and social ambitions would look at this event and seek to tear it down. These are the people who lost yesterday in Trump’s historic and brilliant bit of diplomacy. And they are complaining bitterly about it today. Everyone else wins.

Scary. Xi can’t afford to lose this much face.

• Chinese State Paper Calls For ‘Zero Tolerance’ Over Hong Kong Protests (R.)

A Chinese state paper on Tuesday called for “zero tolerance” after protestors in Hong Kong stormed and ransacked the city’s legislature following a day of protests against a controversial extradition bill. Tensions over the weeks-long movement against the bill escalated on Monday, and Hong Kong police fired tear gas early on Tuesday to disperse hundreds of defiant protesters who had occupied the city’s legislature on the anniversary of Hong Kong’s 1997 return to Chinese rule. “Out of blind arrogance and rage, protestors showed a complete disregard for law and order,” the Global Times, published by the ruling Communist Party’s People’s Daily, said in an editorial.

“Chinese society is all too aware that a zero-tolerance policy is the only remedy for such destructive behavior witnessed. Otherwise, and without this policy, it would be similar to opening a Pandora’s Box,” it said. Opponents of the extradition bill, which would allow people to be sent to mainland China for trial in courts controlled by the Communist Party, fear it is a threat to Hong Kong’s much-cherished rule of law. In a separate editorial, the state-run China Daily reiterated the principle of “one country, two systems” in Hong Kong — a formula that allows freedoms not enjoyed in mainland China — saying the former British colony is an “inalienable” part of the China, and that Hong Kong affairs concern China.

Keep pushing it forward…

• Southwest Expects Boeing 737 MAX Cancellations Beyond Oct. 1 (R.)

Southwest Airlines expects it will have to remove the grounded Boeing 737 MAX jets from its flying schedule beyond the current Oct. 1 re-entry date following the discovery of a fresh safety issue, Chief Executive Gary Kelly told employees on Monday. Last week, Boeing said that it would take until at least September to solve 737 MAX software issues – later than airlines had been expecting – after U.S. aviation regulators uncovered a new problem during simulator sessions. “I’m sure this will cause us to have to take the MAX out of the schedule beyond Oct. 1,” Kelly said in an internal update, adding that the company would also see “what other modifications we might need to make our plans for this year because it’s obviously extending well beyond what I had hoped.”

Kelly did not elaborate on the possible modifications. So far, the Texas-based airline has tried to substitute its MAX routes with spare aircraft but has still been forced to cancel about 115 daily flights. American Airlines Group and United Airlines Holdings, the other two U.S. carriers that operate the 737 MAX, have removed the jetliner from their flying schedules until early September. The three airlines are expected to provide more details on the financial toll of a prolonged MAX grounding during second quarter results later in July.

Subsidies are not Boeing’s main problem.

• USTR Proposes $4 Billion In Additional Tariffs Over EU Aircraft Subsidies (R.)

Just days after reaching a truce in the U.S.-China trade war, the U.S. government on Monday ratcheted up pressure on Europe in a long-running dispute over aircraft subsidies, threatening tariffs on $4 billion of additional EU goods. The U.S. Trade Representative’s office released a list of additional products – including olives, Italian cheese and Scotch whiskey – that could be hit with tariffs, on top of products worth $21 billion that were announced in April. USTR said it was adding 89 tariff sub-categories to its initial list, including a variety of metals, in response to public comments, but gave no further explanation. Over 40 individuals testified about products included on the initial list at a public hearing on May 15 and 16.

The United States and the EU have threatened to impose billions of dollars of tit-for-tat tariffs on planes, tractors and food in a nearly 15-year dispute at the World Trade Organization over aircraft subsidies given to U.S. planemaker Boeing and its European rival, Airbus. Senior officials from Boeing and a U.S. aerospace trade group urged the U.S. government last month to narrowly tailor any tariffs imposed on the EU over illegal aircraft subsidies to avoid harming American manufacturers.

Blah.

• New York Governor Cuomo Orders Probe Into Facebook’s Advertising Platform (R.)

New York Governor Andrew Cuomo on Monday ordered the U.S. Department of Financial Services to investigate reports that state-regulated advertisers were using Facebook Inc’s advertising platform in a discriminatory manner. This is the second investigation that the state governor has ordered into the social media company this year. In February, Cuomo ordered two state agencies to investigate a report that Facebook may be accessing far more personal information from smartphone users, including health and other sensitive data, than had previously been known.

On Monday, Cuomo cited reports which said the social network allows advertisers to modify or block ads using ZIP code information to exclude consumers based on race, color, national origin, religion, familial status, sex and disability, among other classifications. The company is facing a similar probe at the federal level, in which the Trump administration has accused Facebook of selling targeted advertising that discriminated on the basis of race, in violation of the U.S. Fair Housing Act. The probes have come despite Facebook agreeing in March to overhaul its paid advertising platform, as part of a wide-ranging settlement with U.S. civil rights groups, which had filed five separate lawsuits accusing the company of enabling discrimination in advertising.

The entire union risks falling apart.

• How Merkel’s Plan For EU Top Jobs Fell Apart (Pol.eu)

It was a humiliation, the likes of which Angela Merkel had never experienced in her thirteen and a half years as chancellor of Germany, and as the undisputed supremo of the EU’s dominant political family, the center-right European People’s Party. With EPP leaders, including at least six of the party’s other prime ministers and presidents, arrayed before her at the neoclassical Academy Palace in downtown Brussels on Sunday afternoon, Merkel laid out a plan for filling the EU’s top leadership posts that would install Frans Timmermans, a Social Democrat, as Commission president, the bloc’s top job, instead of the EPP’s own nominee, German MEP Manfred Weber.

What she proposed would amount to a stunning climbdown for the conservative party that has long commanded the leading role on the EU stage and currently holds the presidencies of the European Commission, Council and Parliament. Under Merkel’s plan, which she had agreed with a small group of other leaders on the sidelines of a G20 summit in Osaka, Japan, the EPP would have been left with only the Parliament post and the job of high representative for foreign policy. Party bigwigs, including some of her fellow national leaders, were livid. And they quickly gave voice to their rage at the Sunday EPP meeting ahead of an EU summit — complaining the deal had been thrust upon them with no consultation, and that they would not support it. No one rose to her defense.

“Not a single intervention in favor,” said one senior EPP member. “People were very angry.” Merkel, the senior EPP member said, arrived “thinking that it was a little gathering, and that the Osaka agreement would be agreed.” Instead, “everybody said no … It was impossible.” The official said Merkel had not consulted with her fellow EPP leaders before sealing the deal in Japan. “There was no organization and it was all out of the blue,” the official said, adding “Merkel was highly surprised at the lack of agreement.”

“Our acts of defiance became exhibitions. Our love and rage were commodified turned into something that could be packaged and branded and sold.”

• Chelsea Manning on the 50th Anniversary of Stonewall (M.)

The following is a message from Chelsea Manning, who is currently being jailed for a resisting a grand jury in Alexandria, VA. The statement was relayed by her supporters on June 30th, 2019, during the NYC Queer Liberation March, on the occasion of the 50th anniversary of the Stonewall Uprising: “Friends, I’m deeply saddened that I can not be here with you today. A few months ago, while speaking on the phone from jail with one of my friends out in Brooklyn, I came to a startling realization. I said: “I remember growing up as a kid searching for someone to look up to – someone to lean on for inspiration. I needed a role model. Right then I realized, the thing I needed as a young kid is now available. I said, Wow, look at all these kids and teens and young adults in the queer community – They found each other.

I felt something so profound that I broke down crying, and my friend did too. I finally felt that word that gets thrown around so much I felt PRIDE. I almost yelled into the phone: I m so fucking proud of my community. I m proud of you. I m proud of what we have, of what we ve built together. Despite everything, we as a community face daunting challenges every day. The world feels colder and more alien. Our society constantly reminds us in both obvious and subtle ways of the need for us to meet their standards. To meet their expectations. We somehow always need their approval. Our spaces changed. Our neighborhoods gentrified. Our protests became parades. Our acts of defiance became exhibitions. Our love and rage were commodified turned into something that could be packaged and branded and sold.

Story: 200+ academics sent an Open Letter to UN officials protesting the way Nils Melzer defined “rape” in his op-ed. Now the narrative is not Assange’s torture, but the rape he never committed.

Why, as an academic, would you want to become part of the smear team? Suzie offeres a very personal reaction to it all, and dissects the flawed accusations.

• Academics Publicly Attacking UN Torture Rapporteur (Suzie Dawson)

I am a survivor of rape, gang rape and the abusive police process I was subjected to when I reported it and I am fed up with watching sexual violence being used as a cover for political attacks on Julian Assange, his colleagues and his supporters. I am not alone. Numerous other survivors have reached out to me tonight expressing the same sentiment and we deserve to be heard. Today, members of what is supposedly a women’s advocacy group published an open letter addressed to UN top brass, from the Secretary-General on down, complaining about an article written by UN Special Rapporteur on Torture Nils Melzer and attempting to call into question his suitability for his role.

Melzer has recently transformed the debate around 2019 Nobel Peace Prize Nominee Julian Assange’s situation by formally finding that Assange is a victim of state-sponsored (and publicly perpetuated) psychological torture. The content of the open letter undermining Melzer is founded on a premise of advocating for and protecting the rights of women and of survivors of sexual violence. Yet when I self-identified as a survivor in tweets to the organisers of the open letter and dissented against their opinions, they belittled me and were dismissive of my arguments.

Yes, the very women who should have been most sincere about unpacking the experiences and feelings of a survivor of sexual assault could not muster a single shred of empathy for me, nor did they express even the mildest concern for my wellbeing or safety, despite my clearly having been triggered by the conversation. The very women who complained in their open letter against Melzer, of “insensitivity to victims of sexual assault” and “..a profound lack of understanding…” were themselves apparently incapable of demonstrating any sensitivity or understanding when dealing directly with a survivor.

Debt Rattle June 17 2019

Jun 172019

June 17, 2019 Posted by Raúl Ilargi Meijer at 9:13 am Finance Tagged with: bad bank, Boeing, Brexit, China, Deutsche, Hong Kong, Huawei, Iran, Japan, S400, tankers, Tiananmen, Wall Street 9 Responses »

Pablo Picasso The sculptor and his statue 1933

• The Bleak Mood Of Pre-Brexit UK (O.)

• Boeing May Never Recover From 737 Debacle (Auerback)

• Huawei Prepares For 40%-60% Fall In International Smartphone Shipments (R.)

• Huawei Moves To Russia-China Operating System (Escobar)

• Deutsche Bank To Set Up €50 Billion Bad Bank (R.)

• How Wall Street Got Rich Off The Fresh Market Deal (Cohan)

• Japan Demands More Proof From US That Iran Attacked Tankers (JT)

• The S-400 Is a Formidable Threat to US Arms Industry (Pieraccini)

• While Lam Relents, Hong Kong Calls Massively For Her Ouster (AT)

• Chinese Activists Seek UN Investigation Into Tiananmen Crackdown (R.)

Broken. Completely.

• The Bleak Mood Of Pre-Brexit UK (O.)

The survey by BritainThinks reveals an astonishing lack of faith in the political system among the British people, with less than 6% believing their politicians understand them. Some 75% say that UK politics is not fit for purpose. As the Conservative party focuses on who its new leader should be, and the Brexit impasse continues with no solution in sight, 86% think the UK needs a strong leader more than ever – but only 21% think the next prime minister, whoever it may be, will be up to the job. Some 52% believe the country is heading for a Boris Johnson premiership.

Pollster Deborah Mattinson said she was shocked by the findings. “I have been listening to people in focus groups since the late 1980s and I cannot recall a time when the national mood was more despairing. ‘Broken’, ‘sad’, ‘worried’, ‘angry’– the negatives tumble out, as does the long list of grievances. I’m hearing anxieties voiced in a way that I haven’t heard since the 1990s: a rundown NHS, job insecurity, teacher shortages.” BritainThinks polled more than 2,000 people and hosted several focus groups in London and Leicester to gauge the national mood.

Almost three-quarters of the British public believe the divisions on Brexit between Leavers and Remainers will deepen and get worse within the next year. Two-thirds feel depressed by rising poverty and homelessness. While people say Brexit has made them more politically engaged – 40% are paying more attention since the 2016 referendum, rising to 50% in those aged between 18 and 24 – the polling suggests the bitter political debate over leaving the EU has shattered public trust in the way the nation is governed. Some 83% feel let down by the political establishment and almost three-quarters (73%) believe the country has become an international laughing stock and that British values are in decline.

Ralph Nader says the 737 MAX should never fly again.

• Boeing May Never Recover From 737 Debacle (Auerback)

Many of us are familiar with the acronym “FUBAR.” A recent New York Times article on the Boeing 737 fiasco provides a perfect illustration of the concept. We’re now learning that the company “built deadly assumptions” into its newly designed 737 Max aircraft and, specifically, its Maneuvering Characteristics Augmentation System (MCAS). Even worse, the Times account concludes that the recent air crashes that have resulted in a worldwide grounding of the Boeing Max plane “might have been avoided, if employees and regulators had a better understanding of MCAS” and if the US Federal Aviation Authority (FAA) itself was not operating with outdated data on the software changes (which Boeing failed to provide).

The analysis is excellent as far as it goes. But the most damning fact only briefly hinted at in the article is that the problems were evident as early as 2012, some five years before the newest 737 version was marketed and sold across the globe. “At its core, this was a hardware problem, not a software issue. Even when Boeing was using a relatively “safer” version of the early MCAS software (that was later changed to a more dangerous version), the new 737 still had an engine too large to be accommodated in its traditional spot on the plane, which ultimately distorted “the relationship between the engine’s ‘thrust’ and its center of gravity,” as I’ve written before. The resultant aerodynamic problems could not be solved with a software “solution,” no matter how “safe” the original MCAS version (that was ultimately changed to an even more dangerous version) was purported to be.”

Just don’t expect any blowback from Washington. The whole episode provides yet another sick illustration of how the entire system of governance in the US has degenerated into a fully fledged “predator state.” About the only good thing that might emerge from this whole fiasco is that Boeing will provide future Master of Business Administration students with a textbook example of how not to manage a crisis. Likewise, future historians and political scientists will marvel in incredulity at the magnitude of corruption that enveloped the US during this very dark time in the life of the republic. Assuming, of course, that there still anything left worth studying by that point.

[..] Recall that the genesis of this disaster was a problem of hardware, not just MCAS. The extra lift of the far larger-diameter engines of the 737 Max (placed on a different position on the wing) caused the plane to pitch up whenever it approached stall angles of attack at both high and low speeds. This is a problem that should have become glaringly obvious to the greenest of aerodynamics personnel at Boeing the moment the first wind-tunnel model was tested at angles of attack higher than stall (it may have even been obvious on even earlier fluid-dynamics computer-simulation results).

“.. In order to offset overseas decline, Huawei is aiming to grab up to half of China’s smartphone market in 2019..”

• Huawei Prepares For 40%-60% Fall In International Smartphone Shipments (R.)

Huawei Technologies Co Ltd is preparing for a 40% to 60% decline in international smartphone shipments, Bloomberg reported on Sunday. The Chinese technology company is looking at options that include pulling the latest model of its marquee overseas smartphone, the Honor 20, according to the article, which cited people familiar with the matter. The device will begin selling in parts of Europe, including Britain and France, on June 21, the report said. Executives will be monitoring the launch and may cut off shipments if the sales are poor, it said. Marketing and sales managers at the tech giant are internally expecting a drop in volumes of anywhere between 40 million to 60 million smartphones this year, the report said. In order to offset overseas decline, Huawei is aiming to grab up to half of China’s smartphone market in 2019, Bloomberg said.

Be careful what you wish for. Sanctions made Russia stronger too.

• Huawei Moves To Russia-China Operating System (Escobar)

Google cuts Huawei off Android; so Huawei may migrate to Aurora. Call it mobile Eurasia integration; the evolving Russia-China strategic partnership may be on the verge of spawning its own operating system – and that is not a metaphor. Aurora is a mobile operating system currently developed by Russian Open Mobile Platform, based in Moscow. It is based on the Sailfish operating system, designed by Finnish technology company Jolla, which featured a batch of Russians in the development team. Quite a few top coders at Google and Apple also come from the former USSR – exponents of a brilliant scientific academy tradition.

In 2014, Russian entrepreneur Grigory Berezkin started co-owning Jolla, and from 2016 his Mobile Platform company started developing a Russian version of the operating system. In 2018, Rostelecom, a state company, bought a 75% share in Open Mobile Platform. Ahead of the St Petersburg International Economic Forum last week, Huawei chairman Guo Ping discussed the possibility of adopting Aurora with Russian minister of digital development and communications, Konstantin Noskov. According to Guo, “China is already testing devices with the Aurora pre-installed.” In Moscow, before moving to St Petersburg, Presidents Putin and Xi Jinping discussed multiple possible deals; and these include Huawei-Aurora, as well as where to locate some of Huawei’s production lines in Russia.

Aurora could be regarded as part of Huawei’s fast-evolving Plan B. Huawei is now turbo-charging the development and implementation of its own operating system, HongMeng, a process that started no less than seven years ago. Most of the work on an operating system is writing drivers and APIs (application programming interfaces). Huawei would be able to integrate their code to the Russian system in no time. HongMeng, for its part, is a key project of Huawei 2012 Laboratories, the innovation, research and technological development arm of the Shenzhen colossus. No Google? Who cares? Tencent, Xiaomi, Vivo and Oppo are already testing the HongMeng operating system, as part of a batch of one million devices already distributed.

Mutti is not happy.

• Deutsche Bank To Set Up €50 Billion Bad Bank (R.)

Deutsche Bank is planning to overhaul its trading operations by creating a “bad bank” to hold tens of billions of euros of assets and shrinking or shutting its U.S. equity and trading businesses, the Financial Times reported on Sunday. The bad bank would house or sell assets valued at up to 50 billion euros ($56.06 billion)- after adjusting for risk – and comprise mainly long-dated derivatives, the FT reported, citing four people briefed on the plan. With the creation of the bad bank, Chief Executive Officer Christian Sewing is shifting the German lender away from investment banking and focusing on transaction banking and private wealth management, the newspaper said.

As part of the restructuring, the lender’s equity and rates trading units outside continental Europe will be shrunk or closed entirely, the report said. The bank is planning cuts at its U.S. equities business, including prime brokerage and equity derivatives, to win over shareholders unhappy about its performance, four sources familiar with the matter told Reuters in May. “As we said at the AGM on May 23, Deutsche Bank is working on measures to accelerate its transformation so as to improve its sustainable profitability. We will update all stakeholders if and when required,” Deutsche Bank said in an emailed statement on Sunday in response to the FT report.

Grand theft auto made legal.

• How Wall Street Got Rich Off The Fresh Market Deal (Cohan)

Take the case of the March 2016, $1.36 billion cash buyout of a supermarket chain, Fresh Market, by Apollo Global Management, the firm started by Leon Black nearly 30 years ago that now manages more than $300 billion. In that deal Apollo teamed up with Ray Berry, the company’s founder, and his son, Brett, to buy out the company’s public stockholders. Before the buyout the Berrys owned about 10% of the public Fresh Market. They agreed to roll over that stake into the newly private Fresh Market, giving them about the same ownership in the private company—worth somewhere between $136 million and $930 million, if the alchemy of leveraged buyouts worked out. Apollo would own the remaining 90% of the equity of the private company.

Because the deal was, in effect, a management buyout of the company, Fresh Market set up a special three-member committee of independent directors to evaluate the Apollo proposal, as well as any others that might come in over the transom after the company decided to put itself up for sale shortly after September 1, 2015. As professional referees, the special committee hired JPMorgan Chase as its financial adviser, and Cravath, Swaine & Moore as one of its legal advisers. Their job was to evaluate the various proposals to buy Fresh Market, a collection of 186 stores in 27 states as of March 2016, and to make sure that the one chosen was, in the parlance of Wall Street, “fair” to the public shareholders of the company “from a financial point of view.”

That’s when things got interesting, especially since Apollo was the only final bid the company received. According to a class action shareholder lawsuit that is still wending its way through the Delaware Court of Chancery, Apollo used its long-standing financial ties to JPMorgan Chase and Cravath to co-opt the process for the benefit of itself and the Berrys, allowing them to buy the company on the cheap. In effect, the lawsuit alleges, by teaming up with the Berrys on an exclusive basis, Apollo was able to buy Fresh Market knowing that its competition for the company would be at a severe disadvantage, without being able to count on the Berrys support, and that JPMorgan Chase would likely bless the fairness of the deal.

Japan, Germany, Corbyn…

• Japan Demands More Proof From US That Iran Attacked Tankers (JT)

The Japanese government has been requesting the United States for concrete evidence to back its assertion that Iran is to blame for the attacks on two tankers near the Strait of Hormuz on Thursday, government sources said Sunday. The request came after U.S. Secretary of State Mike Pompeo gave a statement hours after the attacks blaming Iran but without offering proof. The Department of Defense later released a video allegedly showing an Iranian patrol boat removing an unexploded mine attached to the side of the Japanese-operated tanker Kokuka Courageous. But Japanese government officials remain unconvinced, the sources said. “The U.S. explanation has not helped us go beyond speculation,” said one senior government official.

Japan has been seeking more concrete evidence through various channels, including Foreign Minister Taro Kono who is likely to have made the request during a call with his counterpart on Friday, the sources said. Pompeo said in a press conference Thursday that the United States’ assessment was based on their “intelligence, the weapons used, the level of expertise needed to execute the operation, recent similar Iranian attacks on shipping, and the fact that no proxy group operating in the area has the resources and proficiency to act with such a high degree of sophistication.” A source close to Prime Minister Shinzo Abe said, “These are not definite proof that it’s Iran.” “Even if it’s the United States that makes the assertion, we cannot simply say we believe it,” he said.

AI at its best.

• The S-400 Is a Formidable Threat to US Arms Industry (Pieraccini)

The US finds itself faced with a situation it has not found itself in over the last 50 years, namely, an environment where it does not expect to automatically enjoy air superiority. Whatever semblance of an air defense that may have hitherto been able to pose any conceivable threat to Uncle Sam’s war machine was rudely dismissed by a wave of cruise missiles. To give two prime examples that occurred in Syria in 2018, latest-generation missiles were intercepted and shot down by decades-old Russian and Syrian systems. While the S-400 system has never been employed in Syria, it is noteworthy that the Serbian S-125 systems succeeded in identifying and shooting down an American F-117 stealth aircraft during the war in the Balkans.

There is a more secret aspect of the S-400 that is little disclosed, either within Russia itself or without. It concerns the S-400’s ability to collect data through its radar systems. It is worth noting Department of Defense spokesman Eric Pahon’s alarm over Turkey’s planned purchase of the S-400: “We have been clear that purchasing the S-400 would create an unacceptable risk because its radar system could provide the Russian military sensitive information on the F-35. Those concerns cannot be mitigated. The S-400 is a system built in Russia to try to shoot down aircraft like the F-35, and it is inconceivable to imagine.

Certainly, in the event of an armed conflict, the S-400’s ability to shoot down fifth-generation aircraft is a huge concern for the United States and her allies who have invested so heavily in such aircraft. Similarly, a NATO country preferring Russian to American systems is cause for alarm. This is leaving aside the fact that the S-400 is spreading around the world, from China to Belarus, with dozens of countries waiting in line for the ability to seal their skies from the benevolent bombs of freedom. It is an excellent stick with which to keep a prowling Washington at bay.

[..] The ability of the S-400 to collect data on both the F-35 and F-22 – the crown jewels of the US military-industrial complex – is a cause for sleepless nights for US military planners. What in particular causes them nightmares is that, for the S-400 to function in Turkey, it will have to be integrated into Turkey’s current “identification friend or foe” (IFF) systems, which in turn are part of NATO’s military tactical data-link network, known as Link 16.

2 million. Beijing has said it stands behind her.

• While Lam Relents, Hong Kong Calls Massively For Her Ouster (AT)

Hong Kong’s embattled Chief Executive Carrie Lam issued a public apology Sunday evening (June 16) as hundreds of thousands of protestors dressed in black clogged the city’s streets in another massive protest demanding her resignation and the scrapping of a contentious bill that would allow for the extradition of suspects to mainland China. A day after Lam announced a surprise decision to indefinitely postpone the bill in a press conference on Saturday, the city’s leader vowed to “sincerely and humbly accept all criticism and to improve and serve the public” in a statement released at 8:30 pm as chanting crowds stood outside the gates of her office calling for her to step down.

“Carrie Lam’s press conference yesterday just made Hong Kong people angrier. We don’t think she will step down, but we must force her out,” said 27-year-old Chiew minutes before demonstrators began marching from Victoria Park in the scorching afternoon heat with the aim of forcing the government to rescind, rather than postpone, the controversial bill. Gripped by a surge of mass dissent, the Asian financial hub has been thrust into political crisis amid the largest political demonstrations and some of the worst scenes of violence since Hong Kong’s return to Chinese rule in 1997. Organizers from the Civil Human Rights Front said almost two million people took part in Sunday’s march.

Protest organizers said almost two million people took part in a mammoth June 16 protest march. Photo: Nile Bowie

Yeah, that’s going to happen.

• Chinese Activists Seek UN Investigation Into Tiananmen Crackdown (R.)

More than 20 Chinese activists who took part in the Tiananmen Square pro-democracy movement called on Monday on the United Nations’ top human rights body to investigate Beijing’s deadly crackdown 30 years ago. Wang Dan and 21 others, backed by the group Chinese Human Rights Defenders, said they had submitted the complaint to the U.N. Human Rights Council, a Geneva forum which opens a three-week session on June 24. “We request the HRC investigate the gross violations of human rights and fundamental freedoms committed by the Chinese government during its military assault on peaceful protests,” they said in statement.

They also sought action over “the consistent pattern of human rights violations in persecuting Chinese citizens during the past three decades who broke the silence” about the events of June 3-4, 1989. The anniversary remains taboo in China. Beijing has not held a public inquiry nor permitted an independent investigation, the statement said. Beijing enjoys strong support among developing countries at the Human Rights Council, a 47-member state forum that has never adopted a resolution on China since being set up in 2006.

Debt Rattle October 1 2017

Oct 012017

October 1, 2017 Posted by Raúl Ilargi Meijer at 8:41 am Finance Tagged with: Catalonia, credit freeze, fascism, financialization, Fukushima, Hong Kong, Puerto Rico, Trump Comments Off

Edward Hopper Nighthawks 1942

• US Military On Puerto Rico: “The Problem Is Distribution” (HP)

• When Fascism Won’t Die: Why We Need to Support Catalonia (CP)

• David Stockman: Stocks Are Heading For 40-70% Plunge (CNBC)

• The Financialization of America… and Its Discontents

• The US Economy is Failing (Paul Craig Roberts)

• Debt-Slave Industry Frets over Impact of Mass Credit Freezes (WS)

• Hong Kong Economy Most At Risk Of Financial Crisis – Nomura (BBG)

• S&P Says China’s Debt Will Grow 77% by 2021 (BBG)

• China Cuts Reserve Requirements To Boost Lending To Small Firms (R.)

• Fukushima Potentially Leaking Radioactive Water For 5 Months (RT)

An appeal from Puerto Rico via Nicole:

Hurricane Maria destroyed many of Puerto Rico’s local seed and organic food-producing farm crops. Please, if you can, send me seeds. Even fruit seed for the tropics – I can plant them quickly. I will hand them out to those in need – as well as start flats in order to jumpstart their crops. Thank you!

Mara Nieves
PO BOX 9020931
Old San Juan, PR
00901-0931

Just dumping another 10,000 people on the island is not the (whole) answer. Too many people criticize too easily. Time to leave the echo chamber. If HuffPo can do it, so can you.

“As a Puerto Rican, I can tell you that the problem has nothing to do with the U.S. military, FEMA, or the DoD.”

• US Military On Puerto Rico: “The Problem Is Distribution” (HuffPo)

Speaking today exclusively and live from Puerto Rico, is Puerto Rican born and raised, Colonel Michael A. Valle (”Torch”), Commander, 101st Air and Space Operations Group, and Director of the Joint Air Component Coordination Element, 1st Air Force, responsible for Hurricane Maria relief efforts in the U.S. commonwealth with a population of more than 3 million. Since the ‘apocalyptic’ Cat 4 storm tore into the spine of Puerto Rico on September 20, Col. Valle has been both duty and blood bound to help. Col. Valle is a firsthand witness of the U.S. Department of Defense (DoD) response supporting FEMA in Puerto Rico, and as a Puerto Rican himself with family members living in the devastation, his passion for the people is second to none. “It’s just not true,” Col. Valle says of the major disconnect today between the perception of a lack of response from Washington verses what is really going on on the ground.

“I have family here. My parents’ home is here. My uncles, aunts, cousins, are all here. As a Puerto Rican, I can tell you that the problem has nothing to do with the U.S. military, FEMA, or the DoD.” “The aid is getting to Puerto Rico. The problem is distribution. The federal government has sent us a lot of help; moving those supplies, in particular, fuel, is the issue right now,” says Col. Valle. Until power can be restored, generators are critical for hospitals and shelter facilities and more. But, and it’s a big but, they can’t get the fuel to run the generators. They have the generators, water, food, medicine, and fuel on the ground, yet the supplies are not moving across the island as quickly as they’re needed.

“It’s a lack of drivers for the transport trucks, the 18 wheelers. Supplies we have. Trucks we have. There are ships full of supplies, backed up in the ports, waiting to have a vehicle to unload into. However, only 20% of the truck drivers show up to work. These are private citizens in Puerto Rico, paid by companies that are contracted by the government,” says Col. Valle. Put another way, 80% of truck drivers do not show up to work, and yet again, it’s important to understand why. “There should be zero blame on the drivers. They can’t get to work, the infrastructure is destroyed, they can’t get fuel themselves, and they can’t call us for help because there’s no communication. The will of the people of Puerto Rico is off the charts. The truck drivers have families to take care of, many of them have no food or water. They have to take care of their family’s needs before they go off to work, and once they do go, they can’t call home,” explains Col. Valle.

[..] some truck drivers from outside the island have been brought in, and more are coming, however it’s not a fix-all. “We get more and more offers to help, but there is no where to stay, we can’t take any more bodies, there’s no where to put them.” Col. Valle says, adding that their “air mobility” is good, and reiterating that getting more supplies or manpower is not the issue. When asked three times what else Washington can do to help, or anyone for that matter, three times Col. Valle answered, “It’s going to take time.”

The footage this morning from Catalonia is horrifying.

• When Fascism Won’t Die: Why We Need to Support Catalonia (CP)

People in the United States, especially those from the 1980s onward, know little of Spain’s Civil War (1936-1939) and the long dictatorship that followed. This knowledge is helpful in understanding the situation in Spain and Catalonia right now. The judge (Ismael Moreno) who is set to decide on sedition charges against Catalan activists for attempting to hold a democratic referendum on October 1st, for example, has roots that are deeply connected to Francisco Franco (1892-1975), the military leader who initiated the Civil War, won it, and then went on to rule as Head of State and dictator in Spain for almost forty years. Franco is a major figure of twentieth-century fascism in Europe. A purge of Francoist government officials never took place when the dictatorship ended in the 1970s, and this leadership has had a lasting impact on how Spain’s government makes its decisions about Catalonia, a region traumatized during and after the war due to its resistance to Franco’s regime.

The lingering effects of Franco’s legacy are at this point well-documented and need to be a part of the discourse that surrounds what is quickly unraveling in Barcelona. Over the past week, Spain’s military body, the Guardia Civil, has forcibly taken control of the Mossos d’Esquadra, Catalonia’s own police force. It has also detained government officials, closed multiple websites, and ordered seven hundred Catalan mayors to appear in court. Ominously, Spanish police from all over the country have traveled up to Barcelona or are en route to the Catalan capital, holing up in three giant cruise ships, two anchored in the city’s port, one in the port of nearby Tarragona. They are doing this at a time when Spain is on high alert for terrorist attacks, removing their police forces from numerous regions that could be in danger of attack, including Madrid, in preparation to stop Catalan people from putting pieces of paper into voting boxes.

Like the Spanish government, the Spanish police force was never purged of its Francoist ties following the dictatorship. It is a deeply corrupt institution [..] Manuel Fraga Iribarne, one of Franco’s ministers during the dictatorship, founded Prime Minister Mariano Rajoy’s Popular Party. The party is currently enmeshed in a corruption scandal of its own. Spain’s royal family is similarly linked to Franco and has also been brought to trial for its own set of corruption charges. It is impossible to ignore the fascist bedrock upon which modern Spain is founded, or to ignore the reality that this foundation has to do with the way Spain treats Catalonia.

No tax reform, says Stockman.

• David Stockman: Stocks Are Heading For 40-70% Plunge (CNBC)

David Stockman is warning about the Trump administration’s tax overhaul plan, Federal Reserve policy, saying they could play into a severe stock market sell-off. Stockman, the Reagan administration’s director of the Office of Management and Budget, isn’t stepping away from his thesis that the 8 1/2-year-old rally is in serious danger. “There is a correction every seven to eight years, and they tend to be anywhere from 40 to 70%,” Stockman said recently on CNBC’s “Futures Now.” “If you have to work for a living, get out of the casino because it’s a dangerous place.” He’s made similar calls, but they haven’t materialized. In June, Stockman told CNBC the S&P 500 could easily fall to 1,600, which at the time represented a 34% drop. This week, the index was trading at record levels above 2,500. Stockman puts a big portion of the blame on the Federal Reserve, and its ultra-loose monetary policy.

“This is a bubble created by the Fed,” he said. “We’re heading for higher yields. We are heading for a huge reset of pricing in the risk markets that’s been based on ultra-cheap yields that the central banks of the world created that are now going to go away because they’re telling you that they’re done.” At the height of the 2007-2009 financial crisis, the S&P 500 Index plummeted as much as 58%. It happened in March 2009. “This market at 24 times GAAP earnings, 21 times operating earnings, 100 months into a business expansion with the kind of troubles you have in Washington, central banks [are] going to the sidelines,” he said. “There’s very little reward, and there’s a heck of a lot of risk.” Stockman argued that President Donald Trump’s business-friendly tax reform bill, which was unveiled Wednesday, won’t prevent a damaging sell-off.

He previously said Wall Street is “delusional” for believing it will even be passed. “This is a fiscal disaster that when they [Wall Street] begin to look at it, they’ll see it’s not even remotely paid for. This bill will go down for the count,” said Stockman. He said White House economic advisor Gary Cohn and Treasury Secretary Steve Mnuchin “totally failed to provide any detail, any leadership, any plan. Both of them ought to be fired because they let down the president in a major, major way.” And, it’s not just Washington dysfunction and Fed policy that could ultimately make Stockman’s long-held bearish prediction a reality. He says there will be a catalyst, but it’s unknown exactly what it will be. “You get a black swan in the old days, or maybe you get an orange swan now, the one in the Oval Office who can’t seem to stop tweeting and distracting the whole process from accomplishing anything,” Stockman said of President Donald Trump.

Koyaanisqatsi. “..capital and profits flow to the scarcities created by asymmetric access to information, leverage and cheap credit — the engines of financialization.”

• The Financialization of America… and Its Discontents

Labor’s share of the national income is in freefall as a direct result of the optimization of financialization. The Achilles Heel of our socio-economic system is the secular stagnation of earned income, i.e. wages and salaries. Stagnating wages undermine every aspect of our economy: consumption, credit, taxation and perhaps most importantly, the unspoken social contract that the benefits of productivity and increasing wealth will be distributed widely, if not fairly. This chart shows that labor’s declining share of the national income is not a recent problem, but a 45-year trend: despite occasional counter-trend blips, labor (earnings from labor/ employment) has seen its share of the economy plummet regardless of the political or economic environment.

Given the gravity of the consequences of this trend, mainstream economists have been struggling to explain it, as a means of eventually reversing it. The explanations include automation, globalization/offshoring, the high cost of housing, a decline of corporate competition (i.e. the dominance of cartels and quasi-monopolies), a failure of our educational complex to keep pace, stagnating gains in productivity, and so on. Each of these dynamics may well exacerbate the trend, but they all dodge the dominant driver of wage stagnation and rise income-wealth inequality: our economy is optimized for financialization, not labor/earned income. What does our economy is optimized for financialization mean? It means that capital and profits flow to the scarcities created by asymmetric access to information, leverage and cheap credit — the engines of financialization.

Financialization funnels the economy’s rewards to those with access to opaque financial processes and information flows, cheap central bank credit and private banking leverage. Together, these enable financiers and corporations to get the borrowed capital needed to acquire and consolidate the productive assets of the economy, and commoditize those productive assets, i.e. turn them into financial instruments that can be bought and sold on the global marketplace. Labor’s share of the national income is in freefall as a direct result of the optimization of financialization. Meanwhile, the official policy goal of the Federal Reserve and other central banks is to generate 3% inflation annually. Put another way: the central banks want to lower the purchasing power of their currencies by 33% every decade.

In other words, those with fixed incomes that don’t keep pace with inflation will have lost a third of their income after a decade of central bank-engineered inflation. But in an economy in which wages for 95% of households are stagnant for structural reasons, pushing inflation higher is destabilizing. There is a core structural problem with engineering 3% annual inflation. Those whose income doesn’t keep pace are gradually impoverished, while those who can notch gains above 3% gradually garner the lion’s share of the national income and wealth.

“Unless Robots pay payroll taxes, the financing for Social Security and Medicare will collapse. And it goes on down from there.”

• The US Economy is Failing (Paul Craig Roberts)

Americans carry on by accumulating debt and becoming debt slaves. Many can only make the minimum payment on their credit card and thus accumulate debt. The Federal Reserve’s policy has exploded the prices of financial assets. The result is that the bulk of the population lacks discretionary income, and those with financial assets are wealthy until values adjust to reality. As an economist I cannot identify in history any economy whose affairs have been so badly managed and prospects so severely damaged as the economy of the United States of America. In the short/intermediate run policies that damage the prospects for the American work force benefit what is called the One Percent as jobs offshoring reduces corporate costs and financialization transfers remaining discretionary income in interest and fees to the financial sector.

But as consumer discretionary incomes disappear and debt burdens rise, aggregate demand falters, and there is nothing left to drive the economy. What we are witnessing in the United States is the first country to reverse the development process and to go backward by giving up industry, manufacturing, and tradable professional skill jobs. The labor force is becoming Third World with lowly paid domestic service jobs taking the place of high-productivity, high-value added jobs. The initial response was to put wives and mothers into the work force, but now even many two-earner families experience stagnant or falling material living standards. New university graduates are faced with substantial debts without jobs capable of producing sufficient income to pay off the debts.

Now the US is on a course of travelling backward at a faster rate. Robots are to take over more and more jobs, displacing more people. Robots don’t buy houses, furniture, appliances, cars, clothes, food, entertainment, medical services, etc. Unless Robots pay payroll taxes, the financing for Social Security and Medicare will collapse. And it goes on down from there. Consumer spending simply dries up, so who purcheses the goods and services supplied by robots? To find such important considerations absent in public debate suggests that the United States will continue on the country’s de-industrialization, de-manufacturing trajectory.

Tricks to keep credit flowing.

• Debt-Slave Industry Frets over Impact of Mass Credit Freezes (WS)

“Let’s face it, 143 million frauds won’t be perpetrated right away; it will take some time to filter through,” Steve Bowman, chief credit and risk officer at GM Financial, the auto-lending subsidiary of General Motors, told Reuters. He was talking about the consequences of the Equifax hack during which the most crucial personal data, including Social Security numbers, of 143 million American consumers along with equivalent data of Canadian and British consumers, had been stolen. These consumers have all at once become very vulnerable to all kinds of fraud, including identity theft – where a fraudster borrows money in their name. The day Equifax disclosed the hack, I urged affected consumers to put a credit freeze on their credit data at the three major credit bureaus — Equifax, TransUnion, and Experian — to protect themselves against these frauds.

Soon, the largest media outlets and state attorneys general urged consumers to do the same thing. Financial advisors are recommending it. Even Wells Fargo jumped on the credit freeze bandwagon. As a result, consumers have flooded the websites of the three credit bureaus to request credit freezes in such numbers that the sites slowed down, timed out, or went down entirely for periods of time. This credit freeze frenzy is scaring the credit industry – not just the credit bureaus, but also lenders and companies that rely on easy credit to sell their wares, such as automakers and department stores with instant credit cards. With a credit freeze in place, those consumers cannot be approved for new credit until they lift the credit freeze, which can take up to three business days. The time and extra hoops to jump through before applying for a new loan might deter consumers from buying that car at the spur of the moment.

No one knows how this is going to turn out – and how it will impact the debt-based consumer economy. But fears are mounting. If just 10% of 324 million folks in the US put a credit freeze on their data, the credit industry will feel the impact painfully. Hence the efforts to contain the fallout. On Wednesday, an apology by the interim CEO of Equifax, Paulino do Rego Barros Jr. – he succeeded CEO Richard Smith, who’d been sacked – concluded with tidbits of a service Equifax is hoping to roll out by January 31. It would allow “all consumers the option of controlling access to their personal credit data.” It would allow them to “easily lock and unlock access to their Equifax credit files.” This is going to be “simple,” and “free for life.”

This “credit lock” or whatever Equifax wants to call it is not a “credit freeze.” TransUnion is offering a similar service. Credit freezes are covered by state law, and credit bureaus have to conform to state law. With these “credit locks” credit bureaus can do whatever they want to, and consumers will have to read the fine print to figure out what that is and how well a “credit lock” will protect them. But those credit locks offer the credit industry a huge advantage over a credit freeze: They can be designed to be lifted instantly. And this is a sign of how frazzled the credit industry, including the lenders, are becoming, about the credit freezes.

Interesting methodology.

• Hong Kong Economy Most At Risk Of Financial Crisis – Nomura (BBG)

Hong Kong is the economy most at risk of suffering a financial crisis, with China the second most vulnerable, according to the latest update of an early warning system devised by Nomura. The findings don’t mean there will be a crisis. “It’s not a purely scientific approach that is very precise,” Singapore-based analyst Rob Subbaraman said by phone on Friday. “It doesn’t mean that indicators are always accurate or that because they have worked in the past they will work in the future.” Subbaraman developed the system along with fellow analyst Michael Loo using data going back to the early 1990s. The findings show that emerging markets are more prone than developed markets, and that Asia ex-Japan is the region that is most at risk.

The analysts selected five indicators that flash a signal of a financial crisis happening in the next 12 quarters when they breach set thresholds:
* Corporate and household credit to GDP
* The corporate and household debt-service ratio
* The real effective exchange rate
* Real — or adjusted for inflation — property prices
* Real equity prices

The latest update covers the 12 quarters up to and including the first three months of this year. As there are five indicators, each of the countries studied can have a maximum of 60 signals. Hong Kong has the most signals, 52 — higher than during the 1997 Asian financial crisis. China’s total fell to 40 from 41 in the previous update that covered the period up to the fourth quarter of 2016. “Hong Kong looks to be well in the danger zone,” Subbaraman and Loo wrote in the note. They described the decline in China’s total — the first drop since its number of flashing indicators started a steep ascent from zero in the first quarter of 2013 — as encouraging. “Nonetheless, China is still in the danger zone and without further efforts to drain its credit and property excesses, it will be difficult to arrest the trend slowdown in growth.”

Chinese reality. Shadow banks and local government financing vehicles.

• S&P Says China’s Debt Will Grow 77% by 2021 (BBG)

China’s total debt could rise 77% to $46 trillion by 2021, and its push to rein in heavy corporate borrowing has had “only tentative results so far,” S&P Global Ratings said. While the pace of debt expansion is slowing, it still exceeds economic growth, implying that high credit risks could still “incrementally increase,” the rating company said in a report Friday. “Recent intensification of government efforts to rein in corporate leverage could stabilize the trend of financial risks over the next few years,” credit analyst Christopher Lee wrote. “But we still foresee that credit growth will remain at levels that will gradually increase financial stress.” S&P last week cut China’s sovereign credit rating for the first time since 1999, citing the risks from soaring debt, and revised its outlook to stable from negative.

The Finance Ministry responded that the analysis ignores the country’s sound economic fundamentals and that the government is fully capable of maintaining financial stability. In a separate report Friday, S&P said China’s push to rein in corporate borrowing likely hasn’t produced lasting results because it lacks specific targets and time frames for cuts. Corporate debt, including local government financing vehicles, rose 5% last year to $14.5 trillion and is the highest among large economies at 134% of GDP, S&P said. State-owned enterprises are the heaviest borrowers, S&P said, adding that a focus on maintaining stability contributes to cautious policy making and a bias toward a status quo that prioritizes economic growth.

SOEs produce a fifth of economic output while taking out 40% of the bank loans, and they’re less profitable than private counterparts with double the overall debt leverage ratio, S&P said. “Without bold actions, China’s corporate deleveraging aims won’t be met in the next one to two years,” Lee wrote. “China allows moral hazards to persist by providing implicit or even direct support to highly indebted SOEs.

Caution to the wind!

• China Cuts Reserve Requirements To Boost Lending To Small Firms (R.)

China’s central bank on Saturday cut the amount of cash that some banks must hold as reserves for the first time since February 2016 in a bid to encourage more lending to struggling smaller firms and energize its lackluster private sector. The People’s Bank of China (PBOC) said on its website that it would cut the reserve requirement ratio (RRR) for some banks that meet certain requirements for lending to small business and the agricultural sector. The PBOC said the move was made to support the development of “inclusive” financial services. The reserve requirement rate will be cut a further 50 bps to 150 bps from the benchmark RRR rate for banks that meet certain requirements for lending to the targeted sectors, the PBOC said. China’s cabinet had in late September flagged a possible move, saying the government will take a number of measures, including tax exemptions and targeted reserve requirement ratio cuts to encourage banks to support small businesses.

Slow death.

• Fukushima Potentially Leaking Radioactive Water For 5 Months (RT)

The Fukushima nuclear power plant may have been leaking radioactive water since April, its owner has admitted. Tokyo Electric Power Company said on Thursday that a problem with monitoring equipment means it can’t be sure if radiation-contaminated water leaked from the reactor buildings damaged in the 2011 nuclear disaster which was sparked by an earthquake and tsunami, the Japan Times reports. The company said there were errors on the settings of six indicators monitoring groundwater levels of wells around reactor buildings 1-4 at the Fukushima Daiichi Nuclear power station. The indicators weren’t showing accurate water levels, and the actual levels were about 70 centimeters lower than that which the equipment showed. In May, groundwater at one of the wells sank below the contaminated water inside, NHK reports, which possibly caused the radioactive water to leak into the soil.

The company said it is investigating, and that no abnormal increase of radioactivity has shown up in samples. The problem with the six wells in question was discovered this week when the company was preparing another well nearby. The 2011 Fukushima nuclear disaster occurred when three of the plant’s reactors experienced fuel meltdowns and three units were damaged by hydrogen explosions as a result of the earthquake and subsequent tsunami. TEPCO has kept groundwater levels in wells higher than the contaminated water levels inside the plant, usually a meter higher. It also installed water-level indicators, which have now been revealed to be inaccurate. Last week, the company was ordered to pay damages of 376 million yen ($3.36 million) to 42 plaintiffs for the nuclear disaster in the second case a court has which has seen rulings against the company.

The suit, one of about 30 class actions brought against the plant, was brought by residents forced to flee their homes when three reactor cores melted, knocking off the cooling systems and sending radioactive material into the air. The case examined whether the government and TEPCO could have foreseen the tsunami. A government earthquake assessment made public in 2002 predicted a 20% chance of a magnitude 8 earthquake affecting the area within 30 years. The 2011 quake was a magnitude 9. The case argued that the disaster was preventable as emergency generators could have been placed at a location higher than the plant, which stands 10 meters above sea level. The court found the state wasn’t liable, but another case in March found both TEPCO and the government liable.

Debt Rattle September 22 2017

Sep 222017

September 22, 2017 Posted by Raúl Ilargi Meijer at 9:15 am Finance Tagged with: AAA, BoE, Catalonia, China, Dimon, downgrade, Hong Kong, lifespan, QE, QT, schizophrenia 3 Responses »

Harry Callahan Chicago 1947

• Albert Edwards: The Bank Of England’s ‘Monetary Schizophrenia’ (CW)

• 4-Warnings For The Bull Market (Roberts)

• QT1 Will Lead to QE4 Rickards)

• S&P Strips Hong Kong of AAA Rating A Day After China Downgrade (BBG)

• China Hits Back At S&P’s ‘Mistaken’ Credit Downgrade (AFP)

• Jamie Dimon Faces Market Abuse Claim Over Bitcoin Comments (ZH)

• Spain’s Attack On Catalonia Spills Over To 100,000 Domain Names (IN)

• Spain Hires Cruise Liner to House Police in Rebel Catalonia (BBG)

• Greece Will Remain Under Strict Supervision For Years, EWG Chief Says (K.)

• Life Unlikely Beyond 115 Year Mark Despite Medical Advances (DT)

“At the same time it is warning of a consumer credit bubble, the BoE has just increased its programme of lending to banks at preferential rates to increase bank lending in things like, yes you’ve guessed it, consumer credit!”

• Albert Edwards: The Bank Of England’s ‘Monetary Schizophrenia’ (CW)

After last month admitting he was becoming tired of central bank bashing – a feeling many of his readers may relate to – Albert Edwards has launched another scathing attack. The Bank of England (BoE) was in the line of fire this time, with the SocGen strategist claiming Mark Carney’s team was leading the way when it comes to ‘monetary schizophrenia’. Edwards finds it remarkable how similar the US and UK macro situations often are. ‘This was most evident in the run-up to the 2008 global financial crisis with both the Federal Reserve and Bank of England (BoE) asleep at the wheel, building a most precarious pyramid of prosperity upon the shifting sands of rampant credit growth and illusory housing wealth,’ he said. ‘These of all the major central banks were the most culpable in their incompetence and most prepared with disingenuous excuses. And 10 years on, not much has changed.

‘The Fed and BoE are once again presiding over a credit bubble, with the BoE in particular suffering a painful episode of cognitive dissonance in an effort to shift the blame elsewhere. The credit bubble is everyone’s fault but theirs.’ Edwards sees unsecured credit at the heart of the problem, where growth has shot up by more than 10% in both the UK and US. Edwards accepts the debt time-bomb is specific to the UK. ‘We are in a QE, zero interest rate world, where central banks are effectively force-feeding debt down borrowers’ throats. They did it in 2003-2007 and they are doing it again,’ he highlights. ‘Most of the liquidity merely swirls around financial markets, but there is certainly compelling evidence now of a consumer credit bubble in both the UK and US (as well as a corporate credit bubble in the US).’

However, he finds the reaction of the BoE most ‘bizarre’, with Carney darkly warning banks of lessons of the past while recently increasing bank capital requirements on consumer loans. The perplexed Edwards points out: ‘At the same time it is warning of a consumer credit bubble, the BoE has just increased its programme of lending to banks at preferential rates to increase bank lending in things like, yes you’ve guessed it, consumer credit!

“It may not ‘feel’ like the mania of the late 1990s to early 2000, but in terms of actually measurable data, the overall bullish consensus seems to be even greater than it was back then.”

• 4-Warnings For The Bull Market (Roberts)

As I have discussed many times previously, the stock market rise has NOT lifted all boats equally. More importantly, the surge in confidence is a coincident indicator and more suggestive, historically, of market peaks as opposed to further advances. As David Rosenberg, the chief economist at Gluskin Sheff noted: ‘For an investment community that typically lives in the moment and extrapolates the most recent experience into the future, it would only fall on deaf ears to suggest that peak confidence like this and peak market pricing tend to coincide with each other.” He is absolutely correct. As shown below in the consumer composite confidence index (an average of the Census Bureau and University Of Michigan surveys), previous peaks in confidence have been generally associated with peaks in the market.

For those of you unfamiliar with Texas sayings, “all hat, no cattle” means that someone is acting the part without having the “stuff” to back it up. Just wearing a “cowboy hat,” doesn’t make you a “cowboy.” I agree with the premise that leverage alone is not a problem for stocks in the short-term. In fact, it is the increase in leverage which pushes stock prices higher. As shown in the chart below, there is a direct correlation between stock price and margin debt growth. But, margin debt is NOT a benign contributor. As I discussed previously in “The Passive Indexing Trap:” “At some point, that reversion process will take hold. It is then investor ‘psychology’ will collide with ‘margin debt’ and ETF liquidity. It will be the equivalent of striking a match, lighting a stick of dynamite and throwing it into a tanker full of gasoline.”

Not surprisingly, the expansion of leverage to record levels coincides with the drop in investor cash levels to record lows. As noted by Pater Tenebrarum via Acting-Man blog: “Sentiment has become even more lopsided lately, with the general public joining the party. It may not ‘feel’ like the mania of the late 1990s to early 2000, but in terms of actually measurable data, the overall bullish consensus seems to be even greater than it was back then. Along similar lines, here is a recent chart that aggregates the relative cash reserves of several groups of market participants (including individual investors, mutual fund managers, fund timers, pension fund managers, institutional portfolio managers, retail mom-and-pop type investors). It shows that there is simply no fear of a downturn:”

So much for the “cash on the sidelines” theory. When investors believe the market can’t possibly go down, it is generally time to start worrying. As Pater concludes: “As a rule, such extremes in complacency precede crashes and major bear markets, but they cannot tell us when precisely the denouement will begin.”

“The Fed has essentially trapped itself into a state of perpetual manipulation.” All major central banks have.

• QT1 Will Lead to QE4 Rickards)

There are only three members of the Board of Governors who matter: Janet Yellen, Stan Fischer and Lael Brainard. There is only one Regional Reserve Bank President who matters: Bill Dudley of New York. Yellen, Fischer, Brainard and Dudley are the “Big Four.” They are the only ones worth listening to. They call the shots. The don’t like dots. Everything else is noise. Here’s the model the Big Four actually use: 1. Raise rates 0.25% every March, June, September and December until rates reach 3.0% in late 2019. 2. Take a “pause” on rate hikes if one of three pause factors apply: disorderly asset price declines, jobs growth below 75,000 per month, or persistent disinflation. 3. Put balance sheet normalization on auto-pilot and let it run “on background.” Don’t use it as a policy tool.

[..] Here’s what the Fed wants you to believe… The Fed wants you to think that QT will not have any impact. Fed leadership speaks in code and has a word for this which you’ll hear called “background.” The Fed wants this to run on background. Think of running on background like someone using a computer to access email while downloading something on background. This is complete nonsense. They’ve spent eight years saying that quantitative easing was stimulative. Now they want the public to believe that a change to quantitative tightening is not going to slow the economy. They continue to push that conditions are sustainable when printing money, but when they make money disappear, it will not have any impact. This approach falls down on its face — and it will have a big impact.

Markets continue to not be fully discounted because they don’t have enough information. Contradictions coming from the Fed’s happy talk wants us to believe that QT is not a contractionary policy, but it is. My estimate is that every $500 billion of quantitative tightening could be equivalent to one .25 basis point rate hike. The Fed is about to embark on a policy to let the balance sheet run down. The plan is to reduce the balance sheet $30 billion in the fourth quarter of 2017, then increase the quarterly tempo by an additional $30 billion per quarter until hitting a level of $150 billion per quarter by October 1, 2018. Under that estimate, the balance sheet reduction would be about $600 billion by the end of 2018, and another $600 billion by the end of 2019. That would be the equivalent of half a .25 basis point rate hike in each of the next two years in addition to any actual rate hikes.

While they might attempt to say that this method is just going to “run on background,” don’t believe it. The decision by the Fed to not purchase new bonds will be just as detrimental to the growth of the economy as raising interest rates. The Fed’s QT policy that aims to tighten monetary conditions, reduce the money supply and increase interest rates will cause the economy to hit a wall, if it hasn’t already. The economy is slowing. Even without any action, retail sales, real incomes, auto sales and even labor force participation are all declining. Every important economic indicator shows that the U.S. economy is slowing right now. When you add in QT, we may very well be in a recession very soon. Because they’re getting ready for a potential recession where they’ll have to cut rates yet again. Then it’s back to QE. You could call that QE4 or QE1 part 2. The Fed has essentially trapped itself into a state of perpetual manipulation.

Hong Kong dollar is pegged to USD.

• S&P Strips Hong Kong of AAA Rating A Day After China Downgrade (BBG)

S&P Global Ratings cut Hong Kong’s credit rating a day after it downgraded China for the first time since 1999, a move that reflects the “strong institutional and political linkages” between the special administrative region and the mainland, the ratings firm said. The financial hub’s long-term issuer credit rating was lowered to AA+ from AAA, S&P said in a statement Friday. The agency lowered China’s sovereign rating Thursday to A+ from AA-, citing the risks from soaring debt, and revised its outlook to stable from negative. “We are lowering the rating on Hong Kong to reflect potential spillover risks to the SAR should deleveraging in China prove to be more disruptive than we currently expect,” S&P said in a statement, referring to the Hong Kong special administrative region.

It’s the second time this year Hong Kong’s rating has been cut in response to a China downgrade. Moody’s Investors Service in May lowered the finance hub’s rating and changed the outlook to stable from negative after it cut China for the first time since 1989. “Downgrading Hong Kong after China is a natural step,” said Mark McFarland, chief Asia economist at Union Bancaire Privee. “It has been widely anticipated that S&P would eventually follow the others and that Hong Kong would be dropped a notch too.” While S&P said Hong Kong’s credit metrics remain “very strong” based on the strength of the central government in Beijing, it faces a slew of challenges from surging property prices to the Federal Reserve’s plans to raise interest rates. Because the former British colony’s currency is pegged to the dollar, it effectively imports U.S. monetary policy.

The only thing they can do. But claiming that China is ‘so different’ from developed nations is not terribly encouraging.

• China Hits Back At S&P’s ‘Mistaken’ Credit Downgrade (AFP)

China on Friday lashed out at the decision by Standard & Poor’s to downgrade the country’s credit rating, calling the warning against ballooning debt “mistaken” and based on “cliches” about its economy. The agency slashed China from AA-minus to A-plus on Thursday, a move that followed a similar decision in May by Moody’s stemming from concerns that the world’s second largest economy is increasingly overleveraged. “Standard & Poor’s downgrade of China’s sovereign credit rating is a mistaken decision,” the finance ministry said in a statement, adding that the move was “perplexing.” It went on to scold the company for making a decision based on “cliches” about China’s economy. The rating “ignores the unique characteristics of the capital raising structure of China’s financial markets”, it said.

“Most unfortunately, this is inertial thinking that international ratings agencies have held for a long time and is a misreading of China’s economy based on the experiences of developed countries,” the ministry said. “This misreading also overlooks the good fundamentals and development potential of China’s economy.” S&P followed the move on Friday by cutting the top-notch credit rating of Hong Kong citing the city’s close links the the mainland economy. Debt-fuelled investment in infrastructure and property has underpinned China’s rapid growth, but there are widespread concerns that years of freewheeling credit could lead to a financial crisis with global implications. Beijing has been clamping down on bank lending and property purchases, but those efforts are complicated by the government’s determination to meet its full-year growth target of around 6.5%. That compares with last year’s pace of 6.7%, which was the slowest in more than a quarter of a century.

JPMorgan trading in what its CEO calls a fraud demands some answers.

• Jamie Dimon Faces Market Abuse Claim Over Bitcoin Comments (ZH)

A week after Jamie Dimon made headlines by proclaiming Bitcoin a “fraud” and anyone who owns it as “stupid,” the JPMorgan CEO faces a market abuse claim for “spreading false and misleading information” about bitcoin. Unless you have been living under a rock for the past week, you will be well aware of JPMorgan CEO Jamie Dimon’s panicked outburst with regard the ‘fraud’ that Bitcoin’s ‘tulip-like’ bubble is. To paraphrase: “It’s a fraud. It’s making stupid people, such as my daughter, feel like they’re geniuses. It’s going to get somebody killed. I’ll fire anyone who touches it.” One week later, an algorithmic liquidity provider called Blockswater has filed a market abuse report against Jamie Dimon for “spreading false and misleading information” about bitcoin. The firm filed the report with the Swedish Financial Supervisory Authority against JPMorgan Chase and Dimon, the company’s chief executive.

Blockswater said Dimon violated Article 12 of the EU Market Abuse Regulation (MAR) by declaring that cryptocurrency bitcoin was “a fraud”. The complaint said Dimon’s statement negatively impacted “the cryptocurrency’s price and reputation”. It also said Dimon “knew, or ought to have known, that the information he disseminated was false and misleading”. “Jamie Dimon’s public assertions did not only affect the reputation of bitcoin, they harmed the interests of some of his own clients and many young businesses that are working hard to create a better financial system,” said Florian Schweitzer, managing partner at Blockswater. Blockswater said JPMorgan traded bitcoin derivatives for their clients on Stockholm-based exchange Nasdaq Nordic before and after Dimon’s statements, which Schweitzer said “smells like market manipulation”.

Democracy 2017.

• Spain’s Attack On Catalonia Spills Over To 100,000 Domain Names (IN)

The offices of the .cat registry were raided by Spanish police this morning. The Guardia Civil officers entered the .cat registry’s offices around 9am local time this morning and have seized all computers in the domain registry’s offices in downtown Barcelona. The move comes a couple of days after a Spanish court ordered the domain registry to take down all .cat domain names being used by the upcoming Catalan referendum. The .cat domain registry currently has over 100 thousand active domain names and in light of the actions taken by the Spanish government it’s unclear how the registry will continue to operate if their offices are effectively shutdown by the Spanish authorities. The seizure won’t impact live domain names or general day to day operations by registrars, as the registry backend is run by CORE and leverages global DNS infrastructure. However it is deeply worrying that the Spanish government’s actions would spill over onto an entire namespace.

Why do you think the Catalans want out? Spain is answering that.

• Spain Hires Cruise Liner to House Police in Rebel Catalonia (BBG)

Spain has discreetly hired ferries to be moored in the Port of Barcelona as temporary housing for possibly thousands of police specially deployed to keep order in rebel Catalonia and help suppress an illegal independence referendum. The country’s interior ministry asked Catalan port authorities to provide a berth for one ship until Oct. 3 – two days after the planned vote – saying it was a matter of state, a spokeswoman for the port said by phone Wednesday. The vessel, known as “Rhapsody,” docked in the city about 9:30 a.m. Thursday, she said. The aim is to amass more than 16,000 riot police and other security officers by the Oct. 1 referendum, El Correo newspaper reported on its website. That would exceed the number of Catalan police, the Mossos d’Esquadra, who serve both the Catalan and central governments.

Spain is putting more boots on the ground in the northeastern region as it arrests local officials, raids regional-government offices and takes control of payroll administration in the run-up to the referendum. The ballot initiative, passed by the Catalan Parliament and declared illegal by the country’s highest court, has escalated a years-long stand-off between pro-independence campaigners and Spain’s central administration in Madrid. As well as the “Rhapsody,” with capacity for 2,448 people, the ministry also hired another vessel to dock in Barcelona with a third headed for the port of Tarragona, 100 kilometers (60 miles) west along the coast, El Confidencial website reported. The “Rhapsody” is operated by the Italian shipping company Grandi Navi Veloci SpA, the port spokeswoman said.

Without debt relief all streets are dead ends.

• Greece Will Remain Under Strict Supervision For Years, EWG Chief Says (K.)

The Greek economy will remain under close supervision for years after the completion of the third bailout deal, the president of the Euro Working Group (EWG), Thomas Wieser told insider.gr in an interview published on Wednesday. Even though he is confident the cash-strapped country will be able to recover, Wieser says that a lot of work needs to be done first, starting with the timely completion of the third bailout review. He also suggests that additional measures may be needed in 2019 and 2020 depending on the course of the budget next year. Asked whether he believes this will be Greece’s last memorandum, the Austrian-American economist says “three programs have already been implemented in the space of eight years and the political desire for yet another is zero. The rest of the eurozone also wants the third program to be the last one.”

Wieser adds that Greece’s ability to tap international lending markets by the end of the program in August 2018 will be a “decisive factor for the Greek government to push ahead with reforms.” “In other words, knowing that the program is ending in a few months is a huge incentive to get the reforms done,” he says, adding that a successful completion of the program is within reach given the government’s limited fiscal obligations. Wieser appears confident that Greece will successfully wrap up the upcoming review within the fall even though the government needs to push through 95 so-called prior actions, saying the majority has already been legislated. However, he adds, Greece may need additional measures after August 2018 depending on whose scenario plays out: the IMF’s pessimistic outlook, or the upbeat projects of the European institutions and the Greek government.

Greece will also remain under supervision – as have Spain, Ireland, Portugal and Cyprus – until 75% of its debts are paid off, and this will be much stricter “in the first few years at least, than, say, it was for Ireland,” Wieser adds. Regarding debt relief, Wieser tells insider.gr that “an analysis will be conducted in the summer of 2018 and a decision taken upon the completion of the program.”

Freedom exists because there are limits and boundaries. Living forever is not freedom.

• Life Unlikely Beyond 115 Year Mark Despite Medical Advances (DT)

Researchers claim to have discovered the maximum age ‘ceiling’ for human lifespan. Despite growing life expectancy because of better nutrition, living conditions and medical care, Dutch scientists say our longevity cannot keep extending forever. Women can only live to a maximum of 115.7 years, they said, while men can only hope for 114.1 years at the most. The research by statisticians at Tilburg and Rotterdam’s Erasmus universities said, however, there were still some people who had bent the norm. The research by statisticians at Tilburg and Rotterdam’s Erasmus universities said women could live to a maximum of 115.7 years, while men could only hope for 114.1 years at the most. However, they did concede that there were exceptions, like Jeanne Calment, the French woman who died in 1997 at the age of 122 years and 164 days old – the longest life ever recorded.

Lifespan is the term used to describe how long an individual lives, while life expectancy is the average duration of life that individuals in an age group can expect to have – a measure of societal wellbeing. The team mined data over 30 years from some 75,000 Dutch people whose exact ages were recorded at the time of death. “On average, people live longer, but the very oldest among us have not gotten older over the last thirty years,” Prof John Einmahl said. “There is certainly some kind of a wall here. Of course the average life expectancy has increased,” he said, pointing out the number of people turning 95 in the Netherlands had almost tripled. “Nevertheless, the maximum ceiling itself hasn’t changed,” he said.

The Dutch findings, to be published next month, come in the wake of those by US-based researchers who last year claimed a similar age ceiling. However, that study by Albert Einstein College of Medicine in New York found that exceptionally long-lived individuals were not getting as old as before. Einmahl and his researchers disputed that, saying their conclusions deduced by using a statistical brand called ‘Extreme Value Theory’, showed almost no fluctuation in maximum lifespan.

Debt Rattle July 2 2017

Jul 022017

July 2, 2017 Posted by Raúl Ilargi Meijer at 9:54 am Finance Tagged with: BoE, clean coal, collapse, credit, Greece, Hersh, Hong Kong, propaganda, Qatar, Schaeuble, Syria 3 Responses »

JMW Turner Lake Llanberis and Snowdon Color Study c.1800

• Can The Bank of England Get Britain To Kick Its Cheap Credit Habit? (G.)

• Britain ‘Is On The Brink Of The Worst House Price Collapse Since 1990s’ (DM)

• China Tears Up Promises To UK And Shows The World Who Is In Charge (O.)

• Court Ruling Sends Illinois Into Financial Abyss (ZH)

• New Jersey Governor Chris Christie Orders Government Shutdown (CBS)

• Only 2% of US Politicians Actually Want to Stop Arming Terrorists (Salles)

• After Hersh Investigation, Media Connive in Propaganda War on Syria (CP)

• How Do We Know that What Hersh Was Told Was True? (PCR)

• ‘Clean Coal’ Will Always Be a Fantasy (BBG)

• Qatar Rejects Deadline Demands, Saying It Does Not Fear Military Action (G.)

• Debt-Stricken Greece Gets Record Number Of Visitors (G.)

• ECB To Inspect Greek Banks’ Progress On Cutting Bad Loans (R.)

• Schaeuble Says Greek Governments To Blame For Pension Cuts (K.)

The BoE promoted, incited, cheap credit and the housing bubble by lowering rates. And now it has to kill off what it promoted? Who believes that? The role of central banks is truly poorly understood.

• Can The Bank of England Get Britain To Kick Its Cheap Credit Habit? (G.)

One thing sure to upset Bank of England officials is any suggestion that the Old Lady of Threadneedle Street has gone soft on the banking industry and turns a blind eye to reckless lending. It brings back disturbing memories of the 2008 credit crunch, the chaos it brought to the economy and the damage it caused the institution’s reputation. Last week, the Bank of England, which has become the overarching regulator of the banking system, made a point of being tough on the banks following the publication of its latest financial stability report. It slapped a demand for more than £11bn of extra reserves on the major lenders – just in case the current economic slowdown should trigger a rise in defaults.

Governor Mark Carney also warned the lending industry that it should expect tougher rules on how it sells mortgages, car loans and credit cards should the current rise in borrowing rocket any further. But one question remains: can Carney and his troops tame the British consumer’s dependence on debt? The most recent figures would say the answer is no. Last week the Bank’s own figures showed that consumer credit grew by £1.7bn in May, the biggest increase since last November, and higher than the six-month average of £1.5bn. The annual rate at which UK consumers are loading up on their already heaving debt pile remained at 10.3% in the year to May. A look at the total stock of UK consumer credit shows that it reached £198bn in April.

That might seem small compared with the total amount of outstanding mortgage debt, which is around seven times larger, at £1.3trillion, but for banks, consumer credit accounts for a much higher proportion of losses. “Since 2007, UK banks’ total write-offs on UK consumer credit have been 10 times higher than on mortgages,” the BoE says. And all this rising debt comes at a time of extraordinary falls in the savings rate. The most recent GDP figures showed that households were putting aside rainy day money at the lowest rate on record. It is a situation that worries experts of all stripes – from Jane Tully, a senior director at the Money Advice Trust, the charity that runs National Debtline, to former Bank of England official Kate Barker, who was a member of the Bank’s interest rate-setting committee during the last crash.

Tully said: “We have already seen an 8% rise in the number of people helped by National Debtline by telephone this year, and all the signs are that demand for debt advice will continue to increase. The higher borrowing levels rise, the more households will be exposed to the risk of financial difficulty in the event of a downturn.” Barker is concerned that eight years of ultra-low interest rates are fuelling a dependence on cheap borrowing, without any end in sight. She says that the growth of car finance plans appears to be a side-effect of the clampdown in other areas of credit, in particular the tighter regulation of mortgages. “There is obviously an incentive to borrow, so as one area is clamped down on, the problem pops up in another,” she says.

A 40% fall in prices sounds reasonable.

• Britain ‘Is On The Brink Of The Worst House Price Collapse Since 1990s’ (DM)

House prices are teetering on the brink of a crash that could be as bad as the bust of the early 1990s, a leading expert has warned. There are already warning signs that prices are heading towards a near 40% plunge, warns Paul Cheshire, Professor of Economic Geography at the London School of Economics. It raises the alarming spectre of the return of ‘negative equity’ – when a house falls so far in value it is worth less than the mortgage – which hit one million people at the worst point in the 1990s. Speaking exclusively to The Mail on Sunday, Prof Cheshire, a former Government housing adviser, said: ‘We are due a significant correction in house prices. I think we are beginning to see signs that correction may be starting. ‘Historically, trends seem always to start in London and then move out across the rest of the country. In the capital, you are already seeing house prices rising less rapidly than in other parts of Britain.’

Such a shift could push many thousands of recent buyers into trouble. From 1989, the price boom fell apart over the next six years, with prices plunging by 37%. In its most recent figures, The National Association of Estate Agents reported the number of homes sold in May for less than the asking price rose to 77%. According to Prof Cheshire, the fall in real incomes – when wages fail to keep up with inflation – is likely to be the spark for a fall in house prices. Inflation hit 2.9% last month, while incomes only grew by 2.1%. Property experts and estate agents say the housing market in wealthier pockets of the country has been further hit by stamp duty hikes. Prof Christian Hilber of the LSE also warned: ‘If Brexit leads to a recession and/or sluggish growth for extended periods, then an extended and severe downturn is more likely than a short-lived and mild one.’ The Council of Mortgage Lenders said earlier this month that the housing market had ‘stalled’

From bad to worse. The hubris boomerang.

• China Tears Up Promises To UK And Shows The World Who Is In Charge (O.)

Xi Jinping’s tough talk in Hong Kong reflects growing self-confidence in China’s ability to shape world events and browbeat or ignore less powerful countries such as Britain. The Chinese president could have thrown a bone to the pro-democracy movement. He could have offered a sop on civil liberties and political rights to western opinion. Instead, he told Hong Kong who’s boss. Xi the hard man laid down the law according to Beijing. His message: fall into line, or else. His message to Britain was blunt, too, bordering on disdainful. China would not brook outside “interference” in the former colony. Forget about those guarantees of a free, open society painstakingly negotiated before the 1997 handover. “Any attempt to endanger China’s sovereignty and challenge the power of the central government is absolutely impermissible,” Xi said.

Under Xi’s bastardised version of the Basic Law, any criticism is henceforth forbidden, on pain of serious consequences. Boris Johnson received a stinging lesson in the new balance of power earlier in the week. “As we look to the future, Britain hopes that Hong Kong will make more progress toward a fully democratic and accountable system of government,” the foreign secretary intoned with uncharacteristic meekness. Johnson’s statement was shamefully deferential. He could, and should, have been more forceful about Beijing’s responsibilities and its own egregious, sometimes illegal meddling. But China took umbrage all the same. Liu Xiaoming, China’s ambassador in London, set Johnson straight: Hong Kong issues must henceforth be “handled properly” or overall ties would suffer.

Worse was to follow. On Friday, China’s foreign ministry formally renounced the 1984 Sino-British joint declaration, the basis on which Britain agreed to relinquish control of the colony. The two sides had agreed the treaty would remain in force for 50 years. “The Sino-British joint declaration, as a historical document, no longer has any practical significance, and it is not at all binding for the central government’s management over Hong Kong,” the spokesman Lu Kang declared. The Foreign Office swiftly rejected the demarche. But in his present bullish mood, Xi is not listening.

Keeping up appearances is getting harder.

• Court Ruling Sends Illinois Into Financial Abyss (ZH)

[..] the state remains without a spending plan, its tax receipts and outlays mostly on “autopilot”, leaving it with a record $15 billion of unpaid bills as it spent over $6 billion more than it brought in over the past year, and with $800 million in interest on the unpaid bills alone. The impasse has devastated social-service providers, shuttering services for the homeless, disabled and poor. The lack of state aid has wrecked havoc on universities, putting their accreditation at risk. However, in a “shocking” development, just hours remaining before the midnight deadline to pass the Illinois budget, and Illinois’ imminent loss of its investment grade rating, federal judge Joan Lefkow in Chicago ordered Illinois to come up with hundreds of millions of dollars it owes in Medicaid payments that state officials say the government doesn’t have, the Chicago Tribune reported.

Judge Lefkow ordered the state to make $586 million in monthly payments (from the current $160 million) as well as another $2 billion toward a $3 billion backlog of payments – a $167 million increase in monthly outlays – the state owes to managed care organizations that process payments to providers. While it is no secret that as part of its collapse into the financial abyss, Illinois has accumulated $15 billion in unpaid bills, the state’s Medicaid recipients had had enough, and went to court asking a judge to order the state to speed up its payments. On Friday, the court ruled in their favor. The problem, of course, is that Illinois can no more afford to pay the outstanding Medicaid bills, than it can to pay any of its $14,711,351,943.90 in overdue bills as of June 30. The backlog of unpaid claims the state owes to managed-care companies directly, as well as to the doctors, hospitals, clinics and other organizations “is crippling these providers and thereby dramatically reducing the Medicaid recipients’ access to health care,” Lefkow said in her ruling.

Friday’s court ruling, which meant that the near-insolvent state must pay an additional $593 million per month, may have been the straw that finally broke the Illinois camel’s back. “Friday’s ruling by the U.S. District Court takes the state’s finances from horrific to catastrophic,” Comptroller Susana Mendoza, a Democrat, said in an emailed statement after the ruling. [..] “A comprehensive budget plan must be passed immediately.” Realizing where all this is headed, she said that payments to bond holders won’t be interrupted. [..] As a result of the court decision, “payments to the state’s pension funds; state payroll including legislator pay; General State Aid to schools and payments to local governments – in some combination – will likely have to be cut.”

ME, CT, IL and NJ. Who’s next, please?

• New Jersey Governor Chris Christie Orders Government Shutdown (CBS)

New Jersey Gov. Chris Christie and the Democrat-led Legislature are returning to work to try to resolve the state’s first government shutdown since 2006 and the first under Christie. The Republican governor and the Democrat-led Legislature failed to reach an agreement on a new budget by the deadline at midnight Friday, CBS New York reports. In a news conference Saturday morning, Christie blamed Democratic State Assembly Speaker Vincent Prieto for causing the shutdown. “If there’s not a resolution to this today, everyone will be back tomorrow,” Christie said, calling the shutdown “embarrassing and pointless.” He also repeatedly referred to the government closure as “the speaker’s shutdown.” Christie later announced that he would address the full legislature later at the statehouse on Saturday.

Prieto remained steadfast in his opposition, reiterating that he won’t consider the plan as part of the budget process but would consider it once a budget is signed. Referring to the shutdown as “Gov. Christie’s Hostage Crisis Day One,” Prieto said he has made compromises that led to the budget now before the Legislature. “I am also ready to consider reasonable alternatives that protect ratepayers, but others must come to the table ready to be equally reasonable,” Prieto said. “Gov. Christie and the legislators who won’t vote ‘yes’ on the budget are responsible for this unacceptable shutdown. I compromised. I put up a budget bill for a vote. Others now must now do their part and fulfill their responsibilities.” Christie ordered nonessential services to close beginning Saturday. New Jerseyans were feeling the impact as the shutdown took effect, shuttering state parks and disrupting ferry service to Liberty and Ellis islands.

Where the real power resides.

• Only 2% of US Politicians Actually Want to Stop Arming Terrorists (Salles)

One of the few elected Democratic lawmakers with an extensive anti-war record, Rep. Tulsi Gabbard (D-Hawaii), has combined forces with Sen. Rand Paul (R-Kentucky) to push legislation through both the House and the Senate that would bar federal agencies from using taxpayer-backed funds to provide weapons, training, intelligence, or any other type of support to terrorist cells such as al-Qaeda, ISIS, or any other group that is associated with them in any way. The Stop Arming Terrorists Act is so unique that it’s also the only bill of its kind that would also bar the government from funneling money and weapons through other countries that support (directly or indirectly) terrorists such as Saudi Arabia. To our surprise – or should we say shame? – only 13 other lawmakers out of hundreds have co-sponsored Gabbard’s House bill. Paul’s Senate version of the bill, on the other hand, has zero co-sponsors.

While both pieces of legislation were introduced in early 2017, no real action has been taken as of yet. This proves that Washington refuses to support bills that would actually provoke positive chain reactions not only abroad but also at home. Why? Well, let’s look at the groups that would lose a great deal in case this bill is signed into law. With trillions of tax dollars flowing to companies such as Boeing, Lockheed Martin, and even IBM, among others, companies that invest heavily in weapons, cyber security systems, and other technologies that are widely used in times of war would stand to lose a lot – if not everything – if all of a sudden, the United States chose to become a nation that stands for peace and free market principles. For one, these companies have a heavy lobbying presence, ensuring that lawmakers sympathetic to their plight are elected every two years.

When the possibility of a new conflict appears on the horizon, these companies are the first to lobby heavily for action. But this dynamic isn’t a secret. We all know that the crony capitalist system that thrives in Washington, D.C., is the very bread and butter of politics in America. After all, President Dwight D. Eisenhower warned the nation in his farewell address in 1961 that “an immense military establishment and a large arms industry” were becoming the great powers behind U.S. politics, and that if we weren’t weary of this influence, we would risk living in a perpetual state of war. Still, we allowed it to take over. And there isn’t one industry powerful enough to counter this destructive authority. With the support of an army of well-established and connected millionaire lobbyists, the war machine operating in Washington is so powerful that anything can be turned into an existential threat.

Obviously, if only 2% of US politicians are willing to stop the machine, it will march on. Ike may as well have said nothing.

• After Hersh Investigation, Media Connive in Propaganda War on Syria (CP)

So what did Hersh’s investigation reveal? His sources in the US intelligence establishment – people who have helped him break some of the most important stories of the past few decades, from the Mai Lai massacre by American soldiers during the Vietnam war to US abuse of Iraqi prisoners at Abu Ghraib in 2004 – told him the official narrative that Syria’s Bashar Assad had dropped deadly sarin gas on the town of Khan Sheikhoun on April 4 was incorrect. Instead, they said, a Syrian plane dropped a bomb on a meeting of jihadi fighters that triggered secondary explosions in a storage depot, releasing a toxic cloud of chemicals that killed civilians nearby. It is an alternative narrative of these events that one might have assumed would be of intense interest to the media, given that Donald Trump approved a military strike on Syria based on the official narrative.

Hersh’s version suggests that Trump acted against the intelligence advice he received from his own officials, in a highly dangerous move that not only grossly violated international law but might have dragged Assad’s main ally, Russia, into the fray. The Syrian arena has the potential to trigger a serious confrontation between the world’s two major nuclear powers. But, in fact, the western media were supremely uninterested in the story. Hersh, once considered the journalist’s journalist, went hawking his investigation around the US and UK media to no avail. In the end, he could find a home for his revelations only in Germany, in the publication Welt am Sonntag. There are a couple of possible, even if highly improbable, reasons all English-language publications ignored Hersh’s story. Maybe they had evidence that his inside intelligence was wrong.

If so, they have yet to provide it. A rebuttal would require acknowledging Hersh’s story, and none seem willing to do that. Or maybe the media thought it was old news and would no longer interest their readers. It would be difficult to sustain such an interpretation, but at least it has an air of plausibility – except for everything that has happened since Hersh published last Sunday. His story has spawned two clear “spoiler” responses from those desperate to uphold the official narrative. Hersh’s revelations may have been entirely uninteresting to the western media, but strangely they have sent Washington into crisis mode. Of course, no US official has addressed Hersh’s investigation directly, which might have drawn attention to it and forced western media to reference it. Instead Washington has sought to deflect attention from Hersh’s alternative narrative and shore up the official one through misdirection.

That alone should raise the alarm that we are being manipulated, not informed. The first spoiler, made in the immediate wake of Hersh’s story, were statements from the Pentagon and White House warning that the US had evidence Assad was planning yet another chemical attack on his people and that Washington would respond extremely harshly if he did so. Here is how the Guardian reported the US threats: “The US said on Tuesday that it had observed preparations for a possible chemical weapons attack at a Syrian air base allegedly involved in a sarin attack in April following a warning from the White House that the Syrian regime would ‘pay a heavy price’ for further use of the weapons.”

And then on Friday, the second spoiler emerged. Two unnamed diplomats “confirmed” that a report by the Organisation for the Prohibition of Chemical Weapons (OPCW) had found that some of the victims from Khan Sheikhoun showed signs of poisoning by sarin or sarin-like substances.

“How clear does an orchestration have to be before people are capable of recognizing the orchestration?”

• How Do We Know that What Hersh Was Told Was True? (PCR)

If national security advisers gave Trump such excellent information about the alleged sarin gas attack, completely disproving any such attack, why was he given such bad advice about shooting down a Syrian war plane, or was it done outside of channels? The effect of the shootdown is to raise the chance of a confrontation with Russia, because Russia’s response apparently has been to declare a no-fly zone over the area of Russian and Syrian operations. How do we know that what Hersh was told was true? What if Trump was encouraged to order the Tomahawk strike as a way of interjecting the US directly into the conflict? Both the US and Israel have powerful reasons for wanting to overthrow Assad. However, ISIS, sent to do the job, has been defeated by Russia and Syria. Unless Washington can somehow get directly involved, the war is over.

The story Hersh was given also serves to damn Trump while absolving the intelligence services. Trump takes the hit for injecting the US directly into the conflict. Hersh’s story reads well, but it easily could be a false story planted on him. I am not saying that the story is false, but unless we learn more, it could be. What we do know is that the story given to Hersh by national security officials is inconsistent with the June 26 White House announcement that the US has “identified potential preparations for another chemical attack by the Assad regime.” The White House does not have the capability to conduct its own foreign intelligence gathering. The White House is informed by the national security and intelligence agencies. In the story given to Hersh, these officials are emphatic that not only were chemical weapons removed from Syria, but also that Assad would not use them or be permitted by the Russians to use them even if he had them.

Moreover, Hersh reports that he was told that Russia fully informed the US of the Syrian attack on ISIS in advance. The weapon was a guided bomb that Russia had supplied to Syria. Therefore, it could not have been a chemical weapon. As US national security officials made it clear to Hersh that they do not believe Syria did or would use any chemical weapons, what is the source for the White House’s announcement that preparations for another chemical attack by the Assad regime have been identified? Who lined up UN ambassador Nikki Haley and the UK Defence Minister Michael Fallon to be ready with statements in support of the White House announcement? Haley says: “Any further attacks done to the people of Syria will be blamed on Assad, but also on Russia & Iran who support him killing his own people.” Fallon says: “we will support” future US action in response to the use of chemical weapons in Syria.

How clear does an orchestration have to be before people are capable of recognizing the orchestration?

Yeah, we really need Bloomberg editors’ opinions on matters they know nothing about. Mind you, carbon capture is an empty slogan.

• ‘Clean Coal’ Will Always Be a Fantasy (BBG)

“Clean coal,” always dubious as a concept and never proved as a reality, has now failed as business proposition. Southern Co. has decided to stop work on a process that would have captured carbon dioxide emissions from a coal plant in Mississippi. Giving up on the project, which was nearly $5 billion over budget and three years behind schedule, makes sense for Southern’s customers and shareholders. And giving up on carbon capture makes sense for the energy industry. The technology is too expensive and complicated to be deployed quickly or widely enough to appreciably protect the climate. The better way to cut back on carbon-dioxide emissions is far simpler: Use less coal. Luckily, that change is already under way. (Michael R. Bloomberg supports the Sierra Club’s Beyond Coal campaign, an effort to replace coal power with cleaner forms of energy.)

Carbon capture once seemed promising – even as recently as a decade ago, when coal fueled almost half of U.S. electricity generation. Back then, continued dependence on the dirty fuel looked inevitable, and a strategy to deal with its prodigious greenhouse-gas emissions seemed essential. Hence, utilities embarked on model coal plants that would capture the carbon dioxide before it could enter the atmosphere. Only a couple have been built, in addition to Southern’s in Kemper County, Mississippi, and none has established an economic case for carbon capture. The Petra Nova facility, in Texas, was reportedly finished on time and on budget, but its construction required a $190 million federal grant, and the carbon-capture unit requires a separate gas-fired power plant.

Canada’s Boundary Dam carbon-capture unit, meanwhile, has operated much less efficiently than expected, suffering multiple breakdowns and requiring expensive repairs. Unfortunately, such costs and complexities are unlikely to diminish very much, and few such facilities are likely to be built worldwide in the next 20 years. A new report issued by the Global Warming Policy Foundation concludes that carbon capture for coal-fired power has “no plausible economic future.”

Is it time to cut the House of Saud down to size?

• Qatar Rejects Deadline Demands, Saying It Does Not Fear Military Action (G.)

Qatar said on Saturday it does not fear any military retaliation for refusing to meet a Monday deadline to comply with a list of demands from four Arab states that have imposed a de-facto blockade on the Gulf nation. During a visit to Rome, foreign minister Sheikh Mohammed bin Abdulrahman Al Thani again rejected the demands as an infringement on Qatar’s sovereignty. He said any country is free to raise grievances with Qatar, provided they have proof, but said any such conflicts should be worked out through negotiation, not by imposing ultimatums. “We believe that the world is governed by international laws, that don’t allow big countries to bully small countries,” he told a press conference in Italy. “No one has the right to issue to a sovereign country an ultimatum.” Saudi Arabia, Egypt, Bahrain and the United Arab Emirates cut diplomatic ties with Qatar last month and shut down land, sea and air links.

They issued a 13-point list of demands, including curbing diplomatic ties to Iran, severing ties with the Muslim Brotherhood and shuttering the Al-Jazeera news network. They accuse Qatar of supporting regional terror groups, a charge Qatar denies. Al Thani rejected the demands and said they were never meant to be accepted. “There is no fear from whatever action would be taken; Qatar is prepared to face whatever consequences,” he said. “But as I have mentioned … there is an international law that should not be violated and there is a border that should not be crossed.” While in Rome, Al Thani met with Italian foreign minister Angelino Alfano, who backed the Kuwait-led mediation effort and urged the countries involved in the standoff to “abstain from further actions that could aggravate the situation”. He added that he hoped Italian companies could further consolidate their presence in Qatar.

I read these things and think I must be missing something: “..Greece is braced for a record-breaking 30m holidaymakers this year..” and “For every extra 30 holidaymakers a job is created”.

That sounds like a lot of jobs. But seriously, a country that depends too much on tourism is not a healthy country. Not enough stability or resilience. The longer the US and EU wait, the more unstable Greece will become.

• Debt-Stricken Greece Gets Record Number Of Visitors (G.)

Up high, above the hills of Arcadia, historic Dimitsana is on a roll. Its hotels are brimming, its cafes are full, and its footpaths and monasteries lure busloads of tourists decanted daily from other parts of the Peloponnese. Either side of the main road that splits the mountain village – in a world far removed from talk of emergency bailout funds, international stewardship and gruelling austerity – Greeks are hard at work, running boutique guesthouses, eateries and bars in the stone mansions that line Dimitsana’s cobbled streets. “Business is very good,” says Labis Baxevanos, the village’s deputy mayor, who owns a patisserie along the strip. “So good that a lot of younger couples have come to work here since the country’s economic crisis began.”

Debt-stricken Greece is braced for a record-breaking 30m holidaymakers this year, almost three times its population. Addressing the Panhellenic Exporters Association last week, the tourism minister Elena Kountoura said that between January and May there had been a noticeable increase in arrivals, revenues and occupancy rates with summer bookings in some areas rising by as much as 70%. Travel receipts grew by 2.4% or €23m (£20m). After eight years of grinding austerity, the influx is a tangible gift, on a par with the €8.5bn financial lifeline thrown Greece earlier this month to once again avert default. Dimitsana – once famous for the gunpowder mills that produced the firepower in the nation’s 1821 war of independence against Ottoman rule – is emblematic of the entrepreneurial spirit taking root as a result of the boom.

“Tourism is our lifejacket,” says Theonimfi Koraki, who opened a boutique hotel in the village last summer. “The aim now is diversity and drawing out the season all year round. Here in Arcadia the creation of the 75km-long Menalon [walking] trail has been hugely successful for example with foreign tourists. It has greatly helped the development of the region.” With the exception of shipping, tourism is Greece’s biggest foreign earner, the mainstay of an economy that has otherwise contracted by 27% since late 2009 when the country’s debt crisis began. The industry accounted for eight out of 10 new jobs in 2016, vital for a nation hit by crippling levels of unemployment. Bank of Greece figures show around 23.5 million tourists visited in 2015, generating €14.2bn of revenues, or 24% of gross domestic product. Last year, the country’s tourism confederation, SETE, announced arrivals of 27.5 million, an all-time high.

Increasingly, the sector has helped boost much-needed job creation, according to data released by the labour ministry. Recently, the prime minister, Alexis Tsipras, said April and May had been record months for tackling the problem with 92,000 and 89,500 jobs created respectively. For every extra 30 holidaymakers a job is created, say officials. They have been at pains to make the point as striking municipal waste workers not only unnerved tour operators this week but highlighted how important tourism is for the economy.

Translation: the Troika is not done with Greece yet. The bad loans issue will be used to throw more Greeks out of their homes etc.

• ECB To Inspect Greek Banks’ Progress On Cutting Bad Loans (R.)

The European Central Bank plans to inspect Greek banks this year to monitor their progress in working off their huge pile of unpaid loans, ECB director Sabine Lautenschlaeger said on Friday. Greek banks have been cutting their share of non-performing loans (NPL) to companies and households, which account for slightly more than half of their books as a result of a severe economic crisis, to meet targets set by the ECB. The ECB supervises Greece’s four largest banks, or significant institutions (SIs), and is one of the three bodies responsible for the country’s bailout, along with the European Commission and the IMF.

“The ECB will perform on-site missions at the Greek SIs during the second half of 2017, a period in which the main operational measures to address NPLs … have to be already implemented,” Lautenschlaeger said in a letter to IMF chief Christine Lagarde. She was responding to an IMF request for information on the ECB’s supervisory work in Greece in the context of a possible IMF program for the country. Greece secured a credit lifeline from euro zone governments earlier this month. The IMF offered Athens a standby arrangement but said it won’t disburse any money until it obtains greater detail on debt relief for the country.

The best for last today. Schaeuble suggests that Greece could have cut elsewhere and still meet Troika demands. Like kill all health care and education, presumably.

• Schaeuble Says Greek Governments To Blame For Pension Cuts (K.)

German Finance Minister Wolfgang Schaeuble has insisted in an interview that successive Greek governments were to blame for the pension cuts that have been enforced in Greece. The German minister stressed in an interview with Ta Nea newspaper on Saturday that the Greek governments are the ones that decided the mix of policies needed to achieve the country’s targets. He also said that the IMF will never be involved again in a program to rescue a European country. Referring to his Greek counterpart Euclid Tsakalotos, he said they communicate frequently, while he dismissed his flamboyant predecessor Yianis Varoufakis as someone he no longer can “take seriously.”

Debt Rattle July 27 2016

Jul 272016

July 27, 2016 Posted by Raúl Ilargi Meijer at 9:12 am Finance Tagged with: Abe, bees, Brexit, Deutsche, DNC, Hillary, Hong Kong, LUCA, neocons, nyet, oil, shadow banks, WMP 5 Responses »

John Vachon Five o’clock crowds, Chicago 1941

• Japan PM Unveils More Than $266 Billion Stimulus (AFP)

• Deutsche Bank’s Q2 Net Income Plunges Nearly 100% Year-On-Year (CNBC)

• China’s Debt Problem May Be Worse Than Expected, Moody’s Warns (CNBC)

• China Stocks Tumble on Report of Wealth Management Product Curbs (BBG)

• Hong Kong Imports/Exports Plunge in Line with Japan and China (R.)

• A Refinery-Driven Correction Is Upon Us’ (BBG)

• Cameron Was Right, Britain Is Broken (G.)

• Kremlin Says Idea It Hacked Democratic Party Emails Absurd (R.)

• Assange: “A Lot More Material” Will Be Released (ZH)

• The Neocons Are Backing Hillary Clinton (Intercept)

• The Odious Versus the Tedious (Kunstler)

• Auckland House Prices Must Deliberately Be Reduced By 50% – NZ Greens (RNZ)

• Catalonia Tells Spain It Will Push For Secession With Or Without Assent (G.)

• We Love To Talk Of Terror (Robert Fisk)

• The Power of “Nyet” (Dmitry Orlov)

• Leading Insecticide Cuts Bee Sperm By 40%, Lifespan By A Third (G.)

• LUCA: The Ancestor Of All Living Things On Earth (IBT)

Abenomics must end in full-blown madness.

• Japan PM Unveils More Than $266 Billion Stimulus (AFP)

Japan on Wednesday announced a whopping economic stimulus package worth more than 28 trillion yen ($266 billion), media reported, to boost the stumbling economy. Prime Minister Shinzo Abe announced the package in a speech in southwestern Japan, giving few details except to say it would include about 13 trillion yen in government spending, according to Jiji Press news agency.

“..scrapping dividend payments to shareholders, thousands of job cuts and asset sales…”

• Deutsche Bank’s Q2 Net Income Plunges Nearly 100% Year-On-Year (CNBC)

Deutsche Bank, the German bank which is an important part of the global financial system, announced revenue and income falls Wednesday which could add further concerns for investors made jittery by a combination of Brexit and previous issues at the bank. Its second-quarter net income was down 98% from the same period in the previous year, to 20 million euros ($22 million), as it exited parts of its business while revenues were down 20% to 7.4 billion euro. Further cuts may be needed, John Cryan, chief executive of Deutsche Bank, warned. “If the current weak economic environment persists, we will need to be yet more ambitious in the timing and intensity of our restructuring,” he said in a statement.

Deutsche’s CET1 ratio – a key measure of financial strength – improved slightly to 10.8%. The bank, one of Germany’s largest lenders, has lost around 40% of its market value this year as concerns mount about its capital position and $14 billion in fines over past misconduct. John Cryan, the bank’s co-chief executive who was appointed in July last year, has embarked on a drastic plan to meet its capital targets, including scrapping dividend payments to shareholders, thousands of job cuts and asset sales. Raising new capital is likely to be difficult because of the bank’s holdings of debt for some of the worse off euro zone countries.

As I’ve said 100 times: “China’s “shadow banking” system is masking the rise in indebtedness..”

• China’s Debt Problem May Be Worse Than Expected, Moody’s Warns (CNBC)

China’s “shadow banking” system is masking the rise in indebtedness in China, Moody’s Investors Service said in a report Wednesday. The rating agency said overall leverage in China’s economy continued to rise with credit growth outpacing the rise in nominal GDP. “The growth in overall leverage may be understated, because some of the fastest growing components of shadow banking are not included in TSF (total social financing),” said Michael Taylor, Moody’s chief credit officer for Asia Pacific. The credit growth was measured using TSF, an economic barometer of total fundraising by Chinese non-state entities, including individuals. It didn’t, however, include all shadow banking activities, which have grown in recent years.

“We estimate the potential understatement to be significant, amounting to at least RMB16 trillion ($2.4 trillion) or 23% of GDP at end-2015, equivalent to around one-third of shadow banking,” Taylor added. Moody’s said TSF flows were being sustained by formal bank credit flows supported by accommodative monetary policy. The increasing leverage was worrying. “The rise in overall leverage and further expansion of shadow banking activity are pushing up financial risks,” said Stephen Schwartz, a Moody’s senior vice president.

Shadow banks and their ‘wealth’ products.

• China Stocks Tumble on Report of Wealth Management Product Curbs (BBG)

Chinese stocks slumped the most in six weeks amid concern regulators are moving to limit equity investments by some wealth-management products. The Shanghai Composite Index fell 1.6% at the mid-day break, reversing a gain of as much as 0.2%. The Shenzhen Composite Index lost 3%, while the ChiNext Index of small-company shares sank 4%, the most since June 13. China’s banking regulator is considering tightening curbs on the nation’s $3.6 trillion market for WMPs, the 21st Century Business Herald reported, citing people it didn’t identify. Authorities may set a limit on how much WMPs can invest in equities and “non-standard assets” such as loans, the report said.

“There’s an obvious trend that the regulators want to strengthen market monitoring and lower the use of leverage in financial markets to control risks,” said Dai Ming at Hengsheng Asset Management. “Under such circumstances, Chinext is especially vulnerable, given its high valuations and the recent gains.” The China Banking Regulatory Commission met with some banks this month on the rule revision and a final version hasn’t been drafted, the 21st Century Business Herald report said. China’s watchdogs have signaled they’re paying closer attention to the fund managers and brokerages who funnel the nation’s household savings into investments from stocks to bonds and derivatives.

The China Securities Regulatory Commission this month issued guidelines curbing the use of leverage by structured asset management plans. Li Chao, vice chairman of the regulator, told a gathering of firms in the northeastern city of Harbin last week to do better due diligence on prospective clients when arranging initial public offerings, secondary share sales and bond issues, people familiar with the matter said.

Hong Kong=Japan=China. Exact same pattern. World trade collapsing. If Hong Kong weren’t so dependent on imports, those would fall much more than 5.6%. “Domestic exports to the United Kingdom [..] plunged 48.2% in June.”

• Hong Kong Imports/Exports Plunge in Line with Japan and China (R.)

Hong Kong’s total exports in June fell for the 14th straight month, dampened by a slowdown in China, with the city’s factories bracing for more pain in coming months from the impact of Brexit. Open and trade-dependent economies in Asia such as Hong Kong are expected to be among the most vulnerable to a slowdown in global trade from Britain’s shock vote to leave the European Union as the effects filter through factory supply chains, analysts say. Hong Kong’s total exports in June fell 1% from a year earlier to HK$296.5 billion ($38.2 billion), government data showed on Tuesday. Total imports fell 0.9%, in its 17th straight month of decline, to HK$342.1 billion. In May, annual exports slipped 0.1% while imports dropped 4.3%.

For the first half of 2016, total exports value dropped 3.9%, while imports fell 5.6%. The city recorded a visible trade deficit of HK$199.6 billion for the first half period, equivalent to 10.8% of the value of imports. “Looking ahead, the external trading environment remains challenging given the uncertainties associated with the outcome of the UK referendum in favor of leaving the EU, slow recovery in the advanced markets, monetary policy divergence among major central banks and heightened geopolitical tensions in various regions,” the government said, adding it will monitor the situation closely. Domestic exports to the United Kingdom, which accounted for 2.2% of the total, plunged 48.2% in June.

Well, not really, it’s all just about demand.

• A Refinery-Driven Correction Is Upon Us’ (BBG)

Gear up for a fall in oil prices. The global oil market is “severely oversupplied” with gasoline — with stocks at a five-year high — serving as a blow to crude prices from next month, reckon Morgan Stanley analysts led by Adam Longson. In a report published on Sunday, the analysts foresee “worrisome trends” for oil supply and demand, led by refineries generating too much gasoline in recent months. Faced with the need to cut back on capacity utilization to protect profit margins, these refineries are set to crimp crude oil purchases and drag prices lower, the analysts say. “Crude oil demand is trending below refined product demand for the first time in three years,” they write.

“Refineries are the true consumer of crude oil, and crude oil demand is ultimately more important than aggregate refined product demand for oil balances. Given the oversupply in the refined product markets, fading refinery margins, and economic run cuts, we expect crude oil demand to deteriorate further over the coming months.” A glut of gasoline could weigh significantly on oil prices, which have been lifted in recent weeks by supply disruptions and healthy petrol demand in emerging markets. Excess gasoline also means that refiners may close their doors sooner and for longer than usual during their traditional summer production shutdown, taking further demand out of the market.

Reading through a piece like this, it becomes even more surprising that Brexit was a surprise to so many Brits.

• Cameron Was Right, Britain Is Broken (G.)

In opposition, David Cameron battered Gordon Brown with two words: Broken Britain. It was his Murdoch-inspired catchphrase for hoodies scrapping in gangs, Neets necking alcopops, teenagers ending up pregnant. It set the framework for Iain Duncan Smith’s welfare reforms. Broken Britain summed up the dark side of the New Labour era: a busted social contract and a class wantonly sponging off the rest of society. It always struck me as the right phrase for the wrong target. The real Broken Britain is the one revealed over the past four days in two reports from MPs. It is workers urinating into bottles at the “Victorian workhouse” of Sports Direct, because their toilet breaks are restricted. It is women being offered permanent jobs in return for sexual favours.

It is BHS, a high-street chain nearly as old as the Queen, effectively killed by two “plundering” owners. It is 10,000 shop workers who will shortly be out on the streets, and 20,000 pension-scheme members who must now worry over how much they’ll have to live on in their old age. The riots of 2011 were taken by Cameron as proof he’d been right all along: “Irresponsibility. Selfishness. Behaving as if your choices have no consequences … Reward without effort. Crime without punishment. Rights without responsibilities.” This is Philip Green and Mike Ashley summed up – along with all the well-heeled consultants, directors and credulous politicians (including Cameron) who applauded and subsidised them on their way, bought off with fat fees and cheap photo-ops.

The rioting kids who stole bottles of water and robbed tellies from their local Argos were given prison sentences worth a total of 1,200 years. By contrast, Green and Ashley weren’t even going to bother facing MPs. Only after five months of back and forth did Sports Direct’s Ashley get in the chauffeured car down to Westminster. Green went one better, demanding that Frank Field resign from the BHS inquiry – then rocking up to parliament and telling MPs to stop looking at him. Such prickliness from a multibillionaire would have been funny had it not been for the thousands of families whose lives he’d just ruined.

Wow. I found a few sentences at Reuters that sound somewhat sensible on the topic. “If the Russians hadn’t hacked us (for which we have no proof), Americans would have never found out about what we did.” Dumb f**ks!

• Kremlin Says Idea It Hacked Democratic Party Emails Absurd (R.)

“We are again seeing these maniacal attempts to exploit the Russian theme in the U.S. election campaign,” Kremlin spokesman Dmitry Peskov told reporters when asked about the leaked emails. “This is not breaking new ground, this is an old trick which is being played again. This is not good for our bilateral relations, but we understand that we simply have to get through this unpleasant period.” U.S. Secretary of State John Kerry said earlier on Tuesday he had raised the hacking issue at a meeting in Laos with Russian Foreign Minister Sergei Lavrov. “I don’t want to use four-letter words,” was Lavrov’s only response to reporters when asked whether Russia was responsible for the email hack.

Earlier this month, Carter Page, a foreign policy adviser to Trump, visited Moscow, where he gave a lecture complaining that Western governments had often had a hypocritical focus on democratization in the post-Soviet world. Analysts say the Kremlin would welcome a Trump win because the billionaire U.S. businessman has repeatedly praised Putin, spoken of wanting to get along with Russia, and has said he would consider an alliance with Moscow against Islamic State. Trump’s suggestion he might abandon NATO’s pledge to automatically defend all alliance members is also likely to have gone down well in Moscow, where the military alliance is cast as an outdated Cold War relic.

“Assange told CNN that Democratic Party officials were using the specter of Russian involvement to distract from the content of the emails..”

• Assange: “A Lot More Material” Will Be Released (ZH)

One month ago, when Wikileaks’ Julian Assange told ITV’s Richard Peston that he would publish “enough evidence” to indict Hillary Clinton, few took him seriously. And while Hillary has not been indicted – yet – last Friday’s leak has already managed to wreak havoc and has led to revelations of cronyism and collusion within the Democratic party and the media, the resignation of the DNC Chair Debbie Wasserman Schultz, as well as chaos on the first day of the Democratic convention. Hence, why we believe Assange will be taken more seriously this time. Earlier today, Assange told CNN that Wikileaks might release “a lot more material” relevant to the US electoral campaign. Assange spoke to CNN following the release of nearly 20,000 hacked Democratic National Committee emails.

The topic then turned to the topic du jour: “did Putin do it”? Assange refused to confirm or deny a Russian origin for the mass email leak, saying Wikileaks tries to create ambiguity to protect all its sources. “Perhaps one day the source or sources will step forward and that might be an interesting moment some people may have egg on their faces. But to exclude certain actors is to make it easier to find out who our sources are,” Assange told CNN. The Kremlin has rejected allegations its behind the hacking, calling suggestions it ordered the release of the emails to influence US politics the “usual fun and games” of the US election campaigns, while the Russian foreign minister had an even simpler reaction to the same question: “I don’t want to use four-letter words.”

Dmitry Peskov, the Kremlin spokesman, added, “This is not really good for bilateral relations.” All of this now appears to be irrelevant, and as we speculated earlier, the “anti-Russia” narrative is now in motion and moments ago Obama said that it’s ‘possible’ Putin is trying to sway vote for Trump. Which brings us to the next point: speaking from the Ecuadorian embassy in London, where he faces extradition over sexual assault allegations, Assange told CNN that Democratic Party officials were using the specter of Russian involvement to distract from the content of the emails, which have had tumultuous affect on the party at the start of its national convention [..]

And you think Trump is the danger? These are the people who shed blood around the globe. These are the people responsible for the terrorist attacks against the west.

• The Neocons Are Backing Hillary Clinton (Intercept)

As Hillary Clinton puts together what she hopes will be a winning coalition in November, many progressives remain wary — but she has the war-hawks firmly behind her. “I would say all Republican foreign policy professionals are anti-Trump,” leading neoconservative Robert Kagan told a group gathered around him, groupie-style, at a “foreign policy professionals for Hillary” fundraiser I attended last week. “I would say that a majority of people in my circle will vote for Hillary.” As the co-founder of the neoconservative think tank Project for the New American Century, Kagan played a leading role in pushing for America’s unilateral invasion of Iraq, and insisted for years afterwards that it had turned out great.

Despite the catastrophic effects of that war, Kagan insisted at last week’s fundraiser that U.S. foreign policy over the last 25 years has been “an extraordinary success.” Republican presidential nominee Donald Trump’s know-nothing isolationism has led many neocons to flee the Republican ticket. And some, like Kagan, are actively helping Clinton, whose hawkishness in many ways resembles their own. The event raised $25,000 for Clinton. Two rising stars in the Democratic foreign policy establishment, Amanda Sloat and Julianne Smith, also spoke.

The way they described Clinton’s foreign policy vision suggested that if elected president in November, she will escalate tensions with Russia, double down on military belligerence in the Middle East and generally ignore the American public’s growing hostility to intervention. Sloat, the former deputy assistant secretary of state in the Bureau of European and Eurasian Affairs, boasted that Clinton will be “more interventionist and forward-leaning than Obama’s been” in Syria. She also applauded Clinton for doing intervention the right way, through coalitions instead of the unilateral aggression that defined the Bush years.

“What higher service to democracy than to expose the anti-democratic workings of the party that affects to call itself Democratic? ”

• The Odious Versus the Tedious (Kunstler)

You thought the Republican convention was a ghastly spectacle of royal Trumpery (and Iago-style backstabbing featuring the arch-asshole Ted Cruz)? Now comes the Democratic Annunciation of I’m-With-Her-It’s-My-Turn, the incarnation of crony corruption in our late-state Republic of Racketeering. Remember that old movie, The Exorcist, with its demonic spewage of projectile vomit. Expect something like that on the grand scale in Philadelphia this week as the Exalted-Breaker-of-Glass-Ceilings steps forth to accept her victory tiara.

The New York Times is blaming the Ruskies for releasing those thousands of new emails disclosing the perfidy of the Democratic National Committee staff in pimping for Hillary against Bernie and trafficking with the major network news operations to manage and spin things Her way — and especially to rig the electoral machinery against Sanders. How much will his supporters Feel the Bern this week in Philly as the party attempts to put on an appearance of unity (Ha!) behind HRC? How can it conceivably be possible now for Bernie to stand by her side for the crucial unity photo op? I suspect he’d rather chew his right arm off.

For my money, the Ruskies should get the Nobel Peace Prize if they were behind the email release. What higher service to democracy than to expose the anti-democratic workings of the party that affects to call itself Democratic? The sudden appearance of 20,000 smoking guns made party chairperson Debbie Wasserman-Schultz vamoose faster than you can say Debbie Wasserman Schultz, though her replacement, Donna Brazile is every inch just another blatant HRC foot-soldier. Perhaps she’ll have to orchestrate the proceedings with smoke signals or invisible ink instead of emails.

As the conventions rolled out, the aggregate miasma we call the news industry resorted to that tired trope of Optimism Versus Pessimism. Translation: you can’t handle the truth so somebody please bring out the rainbow-leaping unicorns. The American zeitgeist is a tattered garment worn by a three hundred pound tranny in a diabetic coma. It’s probably beyond salvation at this point. Somebody please put it out of its misery. Hence: Trump Versus Hillary, the odious versus the tedious, the election to end all elections.

This makes too much sense.

• Auckland House Prices Must Deliberately Be Reduced By 50% – NZ Greens (RNZ)

Auckland house prices should be deliberately reduced by up to 50% over a period of time to make the market affordable again, Greens co-leader Metiria Turei says. The average house price in Auckland has risen to nearly $1 million, or 10 times the median household income. Ms Turei said the only way to reverse that was to slowly bring prices back down to three or four times the median household income. She told Morning Report the Green Party was considering what timeframe would work without crashing the market and hurting people who already owned homes. “The only way to prevent a bust, and to protect families in the short and long term is to lay out a comprehensive plan, which means using every comprehensive tool that we’ve got so that we can slowly bring down house prices so that they’re reasonable.”

The Auckland Council’s chief economist had suggested bringing prices down to five times the median household income by 2030, she said. Labour leader Andrew Little said Ms Turei’s declaration that Auckland house prices should be deliberately reduced was irresponsible. There was no way a Labour-led government would consider the idea, he said. “We have a very clear plan. It’s not about crashing house prices. It’s about stabilising prices. “We don’t want to cause undue economic harm to those who – in good faith – have bought homes, entered into mortgages. That’s not a responsible approach.”

“Last month, Spain’s interior minister, Jorge Fernández Díaz, and the head of Catalonia’s anti-fraud office, Daniel de Alfonso, were apparently recorded discussing possible investigations that could be launched against pro-independence politicians in the region.”

• Catalonia Tells Spain It Will Push For Secession With Or Without Assent (G.)

The Catalan government has intensified its war of words with Spain by vowing to use its democratic mandate to forge a separate Catalan state with or without the approval of Madrid. Catalonia is preparing to defy Spain’s constitutional court this week by debating the conclusions of a working group on sovereignty, nine months after the Catalan parliament put forward a resolution calling for the “beginning of a process of the creation of an independent Catalan state”. Carme Forcadell, the president of the parliament, and Raül Romeva, the minister of foreign affairs, told the Guardian enduring hostility from Madrid had left Catalonia with no choice but to press ahead with the independence agenda.

“The [Spanish state] has left us feeling that we just don’t have an alternative,” Romeva said. “We have always said that we would have preferred a Scottish-type scenario, where we could negotiate with the state and hold a coordinated and democratic referendum. We keep talking to Madrid, but all we get back from them is an echo.” Forcadell pointed to a recent scandal as evidence of the Spanish government’s attitude towards Catalonia. Last month, Spain’s interior minister, Jorge Fernández Díaz, and the head of Catalonia’s anti-fraud office, Daniel de Alfonso, were apparently recorded discussing possible investigations that could be launched against pro-independence politicians in the region.

Forcadell said she was incredulous at the idea that the acting Spanish government, led by Mariano Rajoy, could simply brush aside the alleged incident and say nothing was going on. “How can they say that when the interior minister, who’s meant to defend the interests of all citizens, is caught conspiring to find evidence against citizens solely because they think differently? How can absolutely nothing come of that? We don’t understand it,” she said.

The power of words.

• We Love To Talk Of Terror (Robert Fisk)

The frightful and bloody hours of Friday night and Saturday morning in Munich and Kabul – despite the 3,000 miles that separate the two cities – provided a highly instructive lesson in the semantics of horror and hypocrisy. I despair of that generic old hate-word, “terror”. It long ago became the punctuation mark and signature tune of every facile politician, policeman, journalist and think tank crank in the world. Terror, terror, terror, terror, terror. Or terrorist, terrorist, terrorist, terrorist, terrorist. But from time to time, we trip up on this killer cliché, just as we did at the weekend. Here’s how it went. When first we heard that three armed men had gone on a “shooting spree” in Munich, the German cops and the lads and lassies of the BBC, CNN and Fox News fingered the “terror” lever.

The Munich constabulary, we were informed, feared this was a “terrorist act”. The local police, the BBC told us, were engaged in an “anti-terror manhunt”. And we knew what that meant: the three men were believed to be Muslims and therefore “terrorists”, and thus suspected of being members of (or at least inspired by) Isis. Then it turned out that the three men were in fact only one man – a man who was obsessed with mass killing. He was born in Germany (albeit partly Iranian in origin). And all of a sudden, in every British media and on CNN, the “anti-terror manhunt” became a hunt for a lone “shooter”. One UK newspaper used the word “shooter” 14 times in a few paragraphs.

Somehow, “shooter” doesn’t sound as dangerous as “terrorist”, though the effect of his actions was most assuredly the same. “Shooter” is a code word. It meant: this particular mass killer is not a Muslim. [..] It all comes down to the same thing in the end. If Muslims attack us, they are terrorists. If non-Muslims attack us, they are shooters. If Muslims attack other Muslims, they are attackers. Scissor out this paragraph and keep it beside you when the killers next let loose – and you’ll be able to work out who the bad guys are before the cops tell you.

More power of words.

• The Power of “Nyet” (Dmitry Orlov)

The way things are supposed to work on this planet is like this: in the United States, the power structures (public and private) decide what they want the rest of the world to do. They communicate their wishes through official and unofficial channels, expecting automatic cooperation. If cooperation is not immediately forthcoming, they apply political, financial and economic pressure. If that still doesn’t produce the intended effect, they attempt regime change through a color revolution or a military coup, or organize and finance an insurgency leading to terrorist attacks and civil war in the recalcitrant nation. If that still doesn’t work, they bomb the country back to the stone age. This is the way it worked in the 1990s and the 2000s, but as of late a new dynamic has emerged.

In the beginning it was centered on Russia, but the phenomenon has since spread around the world and is about to engulf the United States itself. It works like this: the United States decides what it wants Russia to do and communicates its wishes, expecting automatic cooperation. Russia says “Nyet.” The United States then runs through all of the above steps up to but not including the bombing campaign, from which it is deterred by Russia’s nuclear deterrent. The answer remains “Nyet.” One could perhaps imagine that some smart person within the US power structure would pipe up and say: “Based on the evidence before us, dictating our terms to Russia doesn’t work; let’s try negotiating with Russia in good faith as equals.”

And then everybody else would slap their heads and say, “Wow! That’s brilliant! Why didn’t we think of that?” But instead that person would be fired that very same day because, you see, American global hegemony is nonnegotiable. And so what happens instead is that the Americans act baffled, regroup and try again, making for quite an amusing spectacle.

But it’s a billion-dollar industry!

• Leading Insecticide Cuts Bee Sperm By 40%, Lifespan By A Third (G.)

The world’s most widely used insecticide is an inadvertent contraceptive for bees, cutting live sperm in males by almost 40%, according to research. The study also showed the neonicotinoid pesticides cut the lifespan of the drones by a third. The scientists say the discovery provides one possible explanation for the increasing deaths of honeybees in recent years, as well as for the general decline of wild insect pollinators throughout the northern hemisphere. Bees and other insects are vital for pollinating three-quarters of the world’s food crops but have been in significant decline, due to the loss of flower-rich habitats, disease and pests and the use of pesticides.

Neonicotinoids were banned from use on flowering crops in the EU in 2013. The UK opposed the ban and allowed a limited “emergency” lifting of the ban in 2015, but has refused further suspensions this year. There is clear scientific evidence that neonicotinoids harm bees, but there is only a little research showing the pesticides harm the overall performance of colonies. Previous work has shown that neonicotinoids reduce the number of bumblebee queens produced and severely cuts the survival and reproduction of honeybee queens. But the new research, led by Lars Straub at the University of Bern, Switzerland and published in the journal Proceedings of the Royal Society B, is the first to test how neonicotinoids affect male bee fertility.

We’re really killing off our own family.

• LUCA: The Ancestor Of All Living Things On Earth (IBT)

The planet we live on is home to an estimated 10 million species of living organisms. Hard as it may be to fathom, the immense diversity of life we see around us today – from the bacteria living in the garden soil to the majestic blue whale inhabiting the deep blue seas – all evolved from one single-celled ancestor that lived, and died, billions of years ago. In a paper published Monday in the journal Nature Microbiology, researchers have described, in unprecedented detail, this Last Universal Common Ancestor, or LUCA, which was only “half alive.” This ancestor – a single-cell, bacterium-like organism – is believed to have existed roughly four billion years ago, when Earth was just over 500 million years old. LUCA, the researchers say, was the common point of origin for three great domains of life — bacteria, archaea, which are bacteria-like single-cell prokaryotes, and the eukaryotes, a domain that includes all plants and animals.

Phylogeny for LUCA’s genes: In the two-domain tree of life, eukaryotes stem from prokaryotes, so the last universal common ancestor, LUCA, is the ancestor of archaea and bacteria.

“We are seeing something for which there was previously no evidence,” co-author William Martin from the Heinrich Heine University in Düsseldorf, Germany, told the Washington Post. “Just by asking the right questions of genome data, we were able to obtain some very interesting answers that also mesh well with what we know from geochemistry.” In order to get a clear picture of what LUCA was like, the researchers examined over six million protein-coding genes found in the present-day bacteria and archaea. After analyzing the DNA sequence of each gene and determining whether these genes were present in both bacteria and archaea, the researchers identified 355 gene “clusters” that were probably present in LUCA. “It was flabbergasting to us that we found as many as we did,” Martin told New Scientist.

Debt Rattle February 2 2016

Feb 022016

February 2, 2016 Posted by Raúl Ilargi Meijer at 9:41 am Finance Tagged with: BP, China, crash, Greece, Hong Kong, Iceland, oil, refugees, Saudi 1 Response »

NPC Minker Motor Co, 14th Street NW, Washington, DC 1922

• The Citi Market-Crash Clock Says It’s 5 Minutes To Midnight (BI)

• Time Running Out For China On Capital Flight, Warns Bank Chief (AEP)

• China Announces 400,000 Steelworker Job Cuts, 3 Million More Expected (WSWS)

• Hong Kong Property Sales Slump To 25 Year Low (BBG)

• Hong Kong Short Sellers Could Find The Weak Link In Real Estate (MW)

• Oil-Price Poker: Why the Saudis Won’t Fold ‘Em (WSJ)

• BP Reports 91% Decline In Fourth-Quarter Earnings (BBG)

• BP Posts Biggest Loss In 20 Years, Axes 7000 Jobs, Shares Lose 5% (Guardian)

• Flood Of Oil Asset Writedowns Across Asia (BBG)

• Iceland Central Bank Preparing New Weapons To Fight Capital Rush (Reuters)

• World Index Of Economic Freedom Tells Us That EU Should Be Broken Up (AEP)

• Ground Control to Captain Zhou Xiaochuan (Jim Kunstler)

• Progress On Migration Could ‘Facilitate’ Greece’s Bailout Review (Kath.)

• Europe’s Refugee Story Has Hardly Begun (Paul Mason)

• Where Are Our Principles? (Boukalas)

Nice concept.

• The Citi Market-Crash Clock Says It’s 5 Minutes To Midnight (BI)

Citi published a scary update to its market clock chart at the end of last month. According to Citi’s analysis, the economy has moved into Phase 4 of the economic cycle, the point at which both credit and equities move into recessionary downward cycles. The US is further along in the clock rotation than the eurozone is. But both are heading into the dreaded Phase 4.

The last time Business Insider looked at the Citi clock, in August 2014, it was still in Phase 3. Here is how the clock works, according to Citi global strategy analyst Robert Buckland:

• Phase 1: This begins at the end of a recession, when interest rates have fallen, money is cheap, but stocks are still battered.

• Phase 2: A bull market sets in during phase 2, when stocks start to rise as easy credit lubricates the economy.

• Phase 3: This is the tricky part. Stocks are still flying high, but credits spreads are widening as investors become increasingly unwilling to finance further risk. Corporate CEOs have now experienced a lengthy period of gains and become risk-happy. (And we’d note that central banks are already talking about tightening credit by raising interest rates.) Bubbles can form in Phase 3, as the high-flying stock market ignores the early warning signs of the deteriorating credit market. Hello, tech startup IPOs!

• Phase 4: Stocks react to the lack of available credit by collapsing, and we see the kinds of things you get in a recession: “This is the classic bear market, when equity and credit prices fall together. It is usually associated with collapsing profits and worsening balance sheets,” Buckland said last year.

“At the moment they won’t impose losses on anybody..”

• Time Running Out For China On Capital Flight, Warns Bank Chief (AEP)

China is rapidly losing the confidence of global lenders and capital outflows risk turning virulent if the current policy paralysis continues, the world’s top banking body has warned. “There is a perception that the renminbi could weaken drastically,” said Charles Collyns, the managing-director of the Institute of International Finance in Washington. Mr Collyns said the authorities have so far failed to articulate a coherent strategy, and there are serious worries that outflows of capital could accelerate, broadening into a flood beyond Beijing’s control. “The Chinese have not been rigorous and they have not been very convincing,” he told The Telegraph. Mr Collyns said China has already allowed the renminbi (yuan) to weaken against the country’s new trade-weighted basket of currencies, stoking suspicions that the recent shift from a crawling dollar-peg to a more opaque foreign-exchange regime is really a cover for devaluation.

The IIF, the chief global body for the banking industry, calculates that capital outflows from China reached $676bn last year. The central bank has been burning through foreign exchange reserves to offset the bleeding and shore up the currency, culminating in intervention of $140bn in December, by some estimates. A big drop in the yuan would send a deflationary shockwave through a fragile world economy already on the cusp of a debt-deflation trap, and do so at a time when the eurozone and Japan are actively driving down their currencies. It would risk a pan-Asian currency storm along the lines of 1998, but on a much bigger scale. China is not just another country. Its fixed capital investment has been running at $5 trillion a year, matching the combined total of North America and Europe.

This has led to excess capacity across swathes of industry that casts a shadow over the entire global system. Chinese officials insist solemnly that the new basket rate is the “decided policy of China” and will be upheld come what may, but concerns are mounting that they may be overwhelmed by market forces. The crucial question is whether the exodus of money is chiefly a one-off move by Chinese companies and investors to pay off dollar debt – and to unwind “carry trade” positions in dollars – as the US Federal Reserve raises interest rates and drains liquidity. If so, the outflows are largely benign and should make the world’s financial system safer. Mark Tinker, head of equities for AXA Framlington in Asia, said the bulk of the outflows are to pay off liabilities. “Chinese corporates are issuing corporate bonds in record quantities and using the capital to restructure their balance sheets, both onshore and offshore. This is not capital flight, it is asset liability matching, both duration and currency. It is a good thing being presented as a bad thing,” he said.

The IIF’s Mr Collyns, a former assistant US Treasury Secretary, is less sanguine. He calculates that total dollar debt in China peaked at roughly $1.5 trillion in late 2014, if all forms of exposure are included. “We think they have paid off a third of this. Half of the outflows are to repay dollar debt,” he said. “What is worrying is that there could be a broadening of the outflows. There has been a surge in ‘errors and emissions’ and this is ominous. A lot of this is a capital outflow below board through inflated trade invoices and other forms of subterfuge, and some of it is ending up in the London property market,” he said.

Mr Collyns said there is no guarantee that the outflows will slow even if all the dollar debt is paid off since Chinese companies may start taking out “long” dollar positions (short renminbi) in the currency markets if they fear that Beijing is losing control. “The Chinese have to restore confidence by pushing through reforms. There must be greater transparency in fiscal and monetary policy, and they must tackle excess industrial capacity. At the moment they won’t impose losses on anybody,” he said.

“..it is estimated that for every job lost in steel, another 3 jobs are lost in related and supporting industries.”

• China Announces 400,000 Steelworker Job Cuts, 3 Million More Expected (WSWS)

An estimated 400,000 steelworkers in China will lose their jobs, in line with plans to slash crude steel production capacity by between 100 million and 150 million tons. The announcement was posted Sunday on government web sites, and reports a decision made by the State Council on January 22 to cut steel, coal and other basic industrial production in response to the global slump and declining growth in China. Li Xinchuang, head of the China Metallurgical Industry Planning and Research Institute, said that the cuts in production would translate into 400,000 steelworkers losing their jobs. “Large-scale redundancies in the steel sector could threaten social stability,” Li Xinchuang told the official Xinhua News Agency Monday.

The State Council did not say when the cuts would be made, but China, which produces half of the world’s steel, has already cut capacity by 90 million tons in response to the growing slowdown in the Chinese and world economy, and is under enormous pressure to do more. Along with the cuts already made, the new cuts will amount to about a 20% reduction in steelmaking capacity. The reductions will have an enormous impact on Chinese workers. In addition to those directly employed in steel making, it is estimated that for every job lost in steel, another 3 jobs are lost in related and supporting industries. Three million workers in the steel, coal, cement, aluminum and glass industries are expected to lose their jobs in the next few years as these industries seek to cut production by 30%.

Many of these employees are first-generation workers who migrated from impoverished rural villages with hopes of a better life. Often their families are dependent upon money these workers are able to send home. As in the United States and every other country, investors responded to the announced job cuts with joy. The stock price of China’s largest steelmaker, Hebei Iron & Steel, rose 4.3% on the news, and the second-biggest, Baoshan Iron & Steel, rose by 5.3%. The stock prices of China’s coal producers also rose on the news of the layoffs. According to the World Steel Association, China’s steel production in 2014 amounted to 822.7 million tons, or 49.4% of the world output of steel. Japan is the second largest steel producer, at 110.7 million tons, followed by the United States at 88.2 million tons and India at 86.5.

Square peg in a round trap.

• Hong Kong Property Sales Slump To 25 Year Low (BBG)

In a city that saw demand propel property prices to a record last year, the estimate that transactions reached a 25 year-low in Hong Kong shows how quickly sentiment has turned. Home prices have slumped almost 10% since September and monthly sales in January fell to the lowest since at least 1991, according to Centaline Property. Amid a spike in flexible mortgage rates this month and anemic demand for new developments, the low transactions volume for January is the latest evidence that prices have further to fall. “The danger is that when sentiment turns negative, it’s very hard to turn things around,” Michael Spencer, Deutsche Bank’s Hong Kong-based Asian chief economist, said in a telephone interview. “Developers realize they missed the best opportunity to sell.”

Hong Kong’s property market has been showing signs of weakening amid a rising supply of homes, higher short-term interest rates and slowing growth in China. Developers have been slow to make outright price cuts to move real estate while would-be buyers are delaying purchases in anticipation of further price declines, creating a standoff that could put more pressure on prices and drag down the city’s economy. Falling property prices may create a negative wealth effect on consumption by prompting buyers to cut back on their purchases, Deutsche Bank’s Spencer said. That could deal a huge blow to an already vulnerable economy where half the population owns homes and consumption accounts for nearly two-thirds of gross domestic product.

Based on housing and economic growth data going back to 2000, Spencer said that consumption growth declined on average by one percentage point for every 10% decline in housing prices. That suggests economic growth in Hong Kong could be halved to 1.1% this year assuming a 20% drop this year, he said. [..] Housing prices are down 9.5% since their September peak, according to the Centaline Property Centa-City Leading Index and may fall another 20% in 2016, according to some estimates. Centaline estimates that transactions reached 3,000 units last month. The previous low was 3,786 units in November 2008, according to a Jan. 31 release.

How can Beijing stop this one?

• Hong Kong Short Sellers Could Find The Weak Link In Real Estate (MW)

Hong Kong’s monetary chief warned Monday that speculators are wasting their time trying to short the Hong Kong dollar. But could Hong Kong’s property market be the government’s weak spot as more hedge funds line up to short China? The Hong Kong dollar has recently come into the spotlight amid reports that U.S. hedge funds are stepping up bets against the Chinese yuan. This comes after capital outflows have extended from China to Hong Kong in recent weeks as investors’ lack of confidence spreads. Since last week, Beijing’s job to hold the line on the yuan became even more difficult,thanks to the Bank of Japan’s surprise move to negative interest rates on a portion of bank reserves, which sent the yen on a renewed downward trend.

The move by the world’s third-largest economy to effectively target its exchange rate came only hours after Premier Li Keqiang pledged that China would not engage in a trade war by depreciating its currency. This is inconvenient as the market already views the yuan as overvalued as shown by accelerating foreign currency outflows. The latest move to weaken the yen just adds to the yuan’s perceived overvaluation. As well as unhelpful currency moves, confidence in the yuan is unlikely to be helped by renewed signs that China’s extended debt binge will be followed by a messy hangover.

New reports have emerged of multiple arrests after the discovery of a 50 billion yuan ponzi scheme, which may have seen 900,000 people lose money in a people-to-people lending scam. This comes on the heels of a 3.9 billion yuan loss at Agricultural Bank of China after staff reportedly devised a scam where bills of exchange were illegally funneled into the stock market before it crashed. The concern is that this is just the tip of the iceberg and that authorities will have a sizable cleanup bill as they deal with the aftermath of the stock market bubble and the loosely regulated shadow-banking sector. Still, for those with a bear view on China’s economy and currency, this is only likely to strengthen the conviction that the yuan will need to go lower.

It’s not tactics, it’s sheer desperation.

• Oil-Price Poker: Why the Saudis Won’t Fold ‘Em (WSJ)

The game being played in the global oil market today bears more than a passing resemblance to poker. Nobody wants to quit while they’re losing. That is important for investors to keep in mind as they ponder what have become almost daily spikes and drops in the price of crude. So, too, is the role of Saudi Arabia in the game. It remains within Saudi Arabia’s ability to foster at least a partial recovery in crude prices on its own. A sharp rally in prices last Thursday morning was based on comments from Russia’s energy minister that the Saudis might get the ball rolling on 5% output cuts. That was quickly refuted and oil gave up much of the gains. All major producers are suffering financially at today’s low prices—while oil has bounced from its sub-$30 nadir of January, it is still down nearly 7% in 2016 and nearly 70% from its 2014 peak.

And Saudi Arabia hasn’t forfeited only a couple of hundred billion dollars and counting in forgone revenue, but also market share. That has mainly been to a relative newcomer, U.S. shale producers. But going forward it may be to an old adversary: Iran. The Shiite powerhouse is ramping up production following the lifting of nuclear sanctions. And its export surge is occurring against the backdrop of ongoing proxy wars in Syria and Yemen. Those make it difficult for Sunni champion Saudi Arabia to take the lead with output cuts. Russia, meanwhile, is pumping the most crude ever, hitting a post-Soviet Union peak. But it may have difficulty maintaining today’s pace given a lack of investment in its aging Siberian fields. The chief executive of Russian oil giant Lukoil predicted that Russian output would drop in 2016 for the first time in several years.

Nervous boardrooms.

• BP Reports 91% Decline In Fourth-Quarter Earnings (BBG)

BP reported a 91% decline in fourth-quarter earnings after average crude oil prices dropped to the lowest in more than a decade. Profit adjusted for one-time items and inventory changes totaled $196 million, the London-based company said Tuesday in a statement. That missed the $814.7 million average estimate of 10 analysts surveyed by Bloomberg, and compares with year-earlier profit of $2.24 billion. Crude’s collapse has driven BP’s market value below $100 billion for the first time since the Gulf of Mexico oil spill in 2010. CEO Bob Dudley has cut billions of dollars of spending, removed thousands of jobs and deferred projects in an attempt to protect the balance sheet. Dudley was one of the first of his peers to start preparing for a prolonged slump and that puts BP in a better position, according to Barclays.

Profit has been lower year-on-year for six consecutive quarters as oil prices tumbled. The average price of benchmark Brent crude slumped 42% in the fourth quarter from a year earlier to $44.69 a barrel, the lowest since 2004. PetroChina said last week it expects 2015 profit to fall at least 60%. Chevron Corp. on Friday reported its first quarterly loss since 2002, while Royal Dutch Shell said last month that fourth-quarter profit is likely to drop at least 42%. The European oil major is scheduled to report full earnings on Thursday. BP started cutting costs and selling assets following the 2010 oil spill. In October, it lowered its 2015 capital-spending forecast to about $19 billion after investing about $23 billion in 2014. The company said then it expects to spend $17 billion to $19 billion a year through 2017.

But: “We’re making good progress in managing and lowering our costs and capital spending, while maintaining safe and reliable operations..”

• BP Posts Biggest Loss In 20 Years, Axes 7000 Jobs, Shares Lose 5% (Guardian)

BP is to cut another 3,000 jobs after reporting a loss of $6.5bn, its worst annual loss in at least 20 years. The latest job cuts are in addition to the 4,000 job cuts already announced. The group also said it has set aside a further $440m (£305m) over the last three months for liabilities associated with the Deepwater Horizon disaster, bringing the total bill so far to $55bn. The latest financial blow from the US Gulf accident nearly six years ago helped to drag BP into a fourth quarter loss of $2.2bn and an annual loss of $6.5bn.. Shares in the group fell by more than 5% as the results underlined the impact of falling oil prices. Despite this, Bob Dudley, BP’s chief executive, blamed low oil prices for the losses but gave an upbeat message saying the company was continuing to move rapidly to “adapt and rebalance” to cope with a changing environment.

“We’re making good progress in managing and lowering our costs and capital spending, while maintaining safe and reliable operations and continuing disciplined investment into the future of our portfolio.” The underlying profit for the last three months, not counting the Gulf and other factors, was down from $2.2bn last time to $196m, much worse than analysts had expected. A consensus among 17 analysts ahead of the results predicted that underlying profits would fall in the final three months to $730m down almost 70% on the same period a year earlier. The biggest problem for BP has come from low crude prices with Brent averaging $44 a barrel across the fourth quarter compared with $77 for the same period 12 months earlier. Brent is now down to just above $33, 42% less than a year ago.

Deflation.

• Flood Of Oil Asset Writedowns Across Asia (BBG)

Investors in Asian oil and gas companies should prepare for a wave of writedowns after a collapse in crude prices. CNOOC, Santos and Inpex are among explorers and producers that may report full-year net losses because of writedowns that may be equal to as much as 10% of book value, analysts at Sanford C. Bernstein in Hong Kong wrote in a report Tuesday. “The future value of oil and gas properties has been significantly reduced,” according to the Bernstein analysts, including Neil Beveridge. “The impairment loss will likely be larger than earnings for the year for some companies, pushing several E&P’s in the region into a loss.” Oil prices have tumbled almost 70% in the past two years, weighing on earnings and forcing explorers to cut spending.

Writedowns at Santos, the Adelaide-based energy company that built the $18.5 billion Gladstone liquefied natural gas project in Australia, may exceed A$3.4 billion ($2.4 billion), according to UBS. Companies including PTT Exploration & Production that have been active in mergers and acquisitions over the past five years also are expected to write down the value of assets, the analysts wrote. Writedowns at Chevron last week pushed the company to its first quarterly loss in 13 years. “Investors should look through impairment losses at the underlying earnings or cash flow for each company,” according to the Bernstein analysts, who expect a recovery in oil in the second half of the year. “Assuming an oil price of greater than $50 a barrel, we see value in the sector.”

Iceland remains a unique and interesting story.

• Iceland Central Bank Preparing New Weapons To Fight Capital Rush (Reuters)

Iceland is drawing up plans to tax foreigners who buy its bonds or to remove certain interest privileges to keep from being overwhelmed by a flood of money drawn by the highest interest rates in western Europe. The country is about to start the tricky process of removing the capital controls that have been in place since what the central bank governor, Mar Gudmundsson, calls “the third biggest bankruptcy in the history of mankind”. With its economy recovering and interest rates at 5.75% compared with virtually zero in the rest of Europe, concern is growing about a destabilizing rush of cash coming in. “The conditions are good for lifting capital controls – they have never been better,” Gudmundsson said in an interview with Reuters. “A current account surplus, high level of reserves, a fiscal surplus and, hopefully, inflation that is still not too high.”

He expects the first stage of that process to come in the next few months, which is to remove restrictions on foreigners’ ‘offshore crown’ funds, which are worth around 14% of Iceland’s annual economic output. Once that it is done, the bank has said, it will use some of its foreign exchange reserves to prevent any bad reaction, before taking the more uncertain step of lifting controls for the wider population. “Possibly in the Autumn or hopefully at least before the end of the year” controls on domestic residents can be lifted, Gudmundsson said. With interest rates higher in Iceland than in virtually every other developed economy in the world, Gudmundsson said, it was unlikely locals would be rushing to take their money out of their bank accounts. It was more likely foreign investors will put more in.

Foreign cash flowing into the country’s banks was one reason Iceland got into so much trouble in the first place. It has introduced a raft of measures to prevent those kind of problems. But now has a different one: so many people are buying its government bonds that interest rate increases are losing their effect. As a result, it is drawing up some counter measures. “We are working on designing certain tools that hopefully we do not need to use often but are there on the shelf if capital inflows into the bond market are making it very difficult for us to run our own monetary policy,” Gudmundsson said. “Theoretically we can do it through a tax, so instead of having an interest rate of say 6%, you are getting an interest rate of 3 or 4% in effective terms.

“The message is that a country can keep most of its economic freedoms within the EU (provided it does not join the euro)..”

• World Index Of Economic Freedom Tells Us That EU Should Be Broken Up (AEP)

Britain has overtaken the United States in the global index of economic freedom, jumping three points to 10th place. What is striking about the 2016 index released today by the Heritage Foundation is the shockingly “unfree” state of the European Union. “Greece has dropped to 138 because it has lost control over its economic levers and monetary policy” What you have is a northern free-zone clustered around the UK, Ireland (7), the Netherlands (16), and the Nordic-Baltic region of the old Hanseatic League, with Switzerland (4) as ever near the top, and safely beyond the clutches of Brussels and regulatory asphyxiation. Or put another way, it is the Protestant alliance that battled reactionary Habsburg absolutism in the late 16th and early 17th Centuries – with Germany split within, torn in both directions.

This Northern grouping is roughly that which would emerge as a closely linked area of prosperity if Britain left the EU. In my view most of these states would also pull out within 10 to 15 years – de facto, if not jure – once Britain had set the ball rolling. Germany would be left trying to manage two deeply troubled blocs with demographic crises: a poor sphere to the East where a fragile rule of law is breaking down in one country after another; and a heavily indebted bloc in the South that is trapped in deflation and labour hysteresis, and has yet to claw back its lost competitiveness within the structure of monetary union. The index shows that EU countries are on average less free than other countries with a comparable per capita income and level of development, an indictment that should give cause for thought. Several of them are disasters.

Greece is ranked “mostly unfree” and is deteriorating five years after it crashed into the arms of the Troika, which claimed to be pushing through reforms to make the country more efficient, transparent, modern and competitive – but was in reality collecting debts for northern creditors under false guise. Greece has dropped to 138 – sandwiched between Bangladesh and Mozambique – precisely because it has lost control over its economic levers and monetary policy. Capital controls have been relaxed somewhat since the banking crisis last summer, yet Greeks are still limited to ATM withdrawals of €420 a week. Italy is only “moderately free” at 86. Heritage says it is plagued by high taxes and rigid labour laws. It has yet to sell off the rump of state-owned industries. Court procedures are “extremely slow”. State contracts are tainted by “high-level corruption scandals” and the “involvement of local organized crime.”

“..this sucker could go down so much further than they imagined, that whatever fortunes they gain from its descent will be foiled by the destruction of the very economic system needed for them to enjoy their gains.”

• Ground Control to Captain Zhou Xiaochuan (Jim Kunstler)

Why would anybody suppose that the Peoples Bank of China might want to tell the truth about anything that was within their power to lie about? Especially the soundness of any loan portfolio vested unto the grasp of its tentacles? Of course, most of what China has done in speeding toward the wall of financial crack-up, it learned from watching US bankers slime their way into Too Big To Fail nirvana — most particularly the array of swindles, dodges, and frauds constructed in the half-light of shadow banking to hedge the sudden, catastrophic appearance of reality-based price discovery. When so many loans end up networked as collateral in some kind of bet against previous bets against other previous bets, you can be sure that cascading contagion will follow.

And so that is exactly what’s happening as China’s rocket ride into Modernity falls back to earth. Like most historical fiascos, it seemed like a good idea at the time: take a nation of about a billion people living in the equivalent of the Twelfth Century, introduce the magic of money printing, spend a gazillion of it on CAT and Kubota earth-moving machines, build the biggest cement industry the world has ever seen, purchase whole factory set-ups, and flood the rest of the world with stuff. Then the trouble starts when you try to defeat the business cycles associated with over-production and saturated markets. Poor China and poor us. Escape velocity has failed. Which raises the question: escape from what, exactly? Answer: the implacable limits of life on earth.

The metaphor for all this, of course, is the old journey-into-space idea, which still persists in the salesmanship of Elon Musk, the ragged remnants of NASA, and even the nightmares of Stephen Hawking. Get off this messed-up home planet and light out of the territories, say Mars. Of course, this is a vain and stupid idea, since we already have a planet engineered to perfection for all the life systems associated with the human project. We just can’t respect its limits. So now, that dynamic duo, Nature and Reality, the actual owners of the planet, have showed up to read the riot act to the renters throwing a wild party.

The fourth and perhaps ultimate financial crisis of the last twenty years begins to express itself in terms that only the raptors and vultures can see from on high. George Soros, Kyle Bass, and the other flocking shadow banking scavengers prepare to short the living shit out of the old Middle Kingdom. The immortal words of G.W. Bush ring in their ears: “This sucker is going down,” and they are sure to win big by betting on the obvious. Trouble is, this sucker could go down so much further than they imagined, that whatever fortunes they gain from its descent will be foiled by the destruction of the very economic system needed for them to enjoy their gains.

Refugees are back on sale.

• Progress On Migration Could ‘Facilitate’ Greece’s Bailout Review (Kath.)

Greek authorities are scrambling to set up screening centers for migrants and refugees as soon as possible as German officials have made it clear to Athens that more efficient management of the refugee crisis could help along creditors’ review of the country’s third bailout, Kathimerini understands. According to sources, German Chancellor Angela Merkel has indicated to Prime Minister Alexis Tsipras that success in tackling the migration crisis could boost the country’s prospects for progress with the review, which Athens hopes could ease the way for debt talks. Combined with a burgeoning debate about Greece’s future in the passport-free Schengen area, the message from Berlin is said to have encouraged action by Greek officials.

A source close to Tsipras who participated in a meeting of government officials on the refugee crisis over the weekend told Kathimerini that the prospect of a “European solution” to the migration crisis and Schengen issue was “becoming increasingly remote” as EU governments face a backlash from their own people about rising migrant arrivals. Tsipras is expected to meet Merkel on the sidelines of a Syria donors’ conference in London on Thursday where Greece’s response to the refugee crisis is likely to be the key topic of conversation. A broader meeting including Turkish Prime Minister Ahmet Davutoglu and key officials from other European countries, among them Austria and the Netherlands, is also probable, sources indicated.

On Monday Tsipras met in Athens with visiting European Home and Migration Commissioner Dimitris Avramopoulos and reassured him that the Defense Ministry, despite initial objections, would actively participate in finding a solution for accommodating thousands of migrants and refugees arriving in Greece. He insisted, however, that others must also share the burden, indicating other European states.

Nice try, but Mason drops the ball somewhere.

• Europe’s Refugee Story Has Hardly Begun (Paul Mason)

The refugee story has hardly begun. There will be, on conservative estimates, another million arriving via Turkey this year and maybe more. The distribution quotas proposed by Germany, and resisted by many states in eastern Europe, are already a fiction and will fade into insignificance as the next wave comes. Germany itself will face critical choices: if you’re suddenly running a budget deficit to meet the needs of asylum seekers, how do you justify not spending on the infrastructure that s supposed to serve German citizens, which has crumbled through underinvestment in the Angela Merkel era? But these problems are sideshows compared with the big, existential issues that a second summer of uncontrolled migration into Greece would bring.

[..] Greece is not going to push back or sink inflatables containing refugees. However many compromises Alexis Tsipras s government made over austerity, it is full of human rights lawyers, criminology professors and people who spent their lives fighting fascism. There is outrage at Europe s demands inside the Greek political establishment, ranging well beyond the radical-left party Syriza and its small nationalist coalition partner. Eastern Europe is, by and large, going to let the refugees go to hell. There is very little compassion in the media coverage of the refugees east of the former Iron Curtain. Poland, Hungary and Slovakia have swung towards populist nationalism. While there are tens of millions of liberal-minded, largely young people who are prepared to show compassion and adhere to international obligations, they do not control east Europe’s governments.

As for Turkey, it has, to date, taken no visibly stronger measures to keep Syrian refugees inside its own borders and prevent the deadly traffic across the sea to Greece. For a state that can arrest its own newspaper editors at will and bomb its own cities, that demonstrates a clear set of priorities. So there are only two variables: what the EU does next and what the European peoples do. If Germany has given up trying to organise the orderly distribution of refugees inside the EU, then free movement itself is on borrowed time. Everybody understands this, except the political and media classes who have to maintain the fiction that everything is fine. Germany had, by December, registered just over half the 900,000 asylum claims it is facing. The hard-right AfD party has sprung from sixth to third in the polls. Angela Merkel seems frozen in the headlights of the oncoming train.

Which leaves the people. Quietly, and without rhetoric, one of the most spectacular, cross-border solidarity movements ever formed has emerged to help the refugees. Churches, NGOs, communities, police forces and social services – plus ordinary people with no big agenda – just got on and saved people, moved them along, gave them water, food and clothing, and are right now helping them to settle in.

Solid.

• Where Are Our Principles? (Boukalas)

When neo-Nazis are seen heading out in force on a new kind of safari, hunting down and assaulting refugees and migrants, preferably young Africans, in Sweden, a country regarded as a paradigm of prosperity and openness, Europe has a duty to have a good think about what it represents – all of Europe, together, honestly and methodically, not alone, hypocritically and intermittently. When in Germany, which has seen successive neo-Nazi attacks against refugee camps, the head of the anti-immigration Alternative for Germany party – polling at 13% – demands that refugees be stopped from entering the country by use of force if necessary, we should all be afraid. We should be afraid that not enough people in Europe would mind if Greece were to allow migrant boats to sink, as some of the harder cynics have suggested with a hint of blackmail, even though their problem would not be solved by 244 drowned in January alone.

When European states and regions are caught up in competing over who will further reduce the amount of money refugees are allowed to keep on them (from what wasn’t lost to the extortionate greed of people smugglers and thieves en route) and seize what’s left over so that the beleaguered Asians and African don’t get too comfortable, then “something is rotten in the state of Denmark.” Denmark here extends to various parts of Europe: to Denmark proper, where the maximum “fortune” a refugee is allowed has been set at €1,340, to Switzerland, where it’s €915, Bavaria, €750, and Baden-Wurttemberg, where it’s just €350. Many already regard this as too much. When in Italy noble merchants are selling “boy and girl refugee costumes” for the Carnival, then every European, not just the Italians, ought to wonder how much longer we will allow our masks to present us as sympathetic champions of a culture that is about solidarity and hospitality.

When countries of the European Union intervene in a non-member state (our neighbor the Former Yugoslav Republic of Macedonia) wielding a whip in one hand and a carrot of monetary reward and diplomatic support in the other in order to force it to control the flow of migrants and refugees to Northern Europe at the pace the north sees fit, then many of the principles touted as being inviolate in the EU are exposed as a myth: solidarity between partners and avoidance of unilateral decisions and intervention in third countries. What solidarity is there to talk about when instead of admitting that the refugee crisis is a huge added weight on the exhausted shoulders of Greece and, looking for ways to ease the burden, many Europeans are using it as another opportunity to blackmail the country? Even if Greece has delayed in setting up “hot spots,” who gave the tough guys of Europe the moral authority to threaten it with drowning?

Square Holes and Currency Pegs

Jan 222016

January 22, 2016 Posted by Raúl Ilargi Meijer at 6:55 pm Finance Tagged with: Bowie, caps, China, currencies, deflation, Hong Kong, oil, pegs, Saudi, stocks, velocity 6 Responses »

Berenice Abbott Murray Hill Hotel, New York 1937

When David Bowie died, everybody, in what they wrote and said, seemed to feel they owned him, and owned his death, even if they hadn’t thought about him, or listened to him, for years. In the same vein, though the Automatic Earth has been talking about deflation (for 8 years, it’s our anniversary today) and the looming China Ponzi disaster for a long time, now that these things actually play out, everybody talks as if they own the story, and present it as new (because, for one thing, well, after all for them it is new…).

And that’s alright, it’s how people live, and function, they always have, and no-one’s going to change that. It’s just that for me, I’ve been wondering a little about what to write lately, because I’ve already written the deflation and China stories, many times, before most others tuned into them. But still, it’s strange to now, as markets start plunging, read things like ‘Deflation is Here’, as if deflation is something new on the block.

Deflation has been playing out for years. Central bank largesse has largely kept it at bay in the public eye, but that now seems over. Debt deflation is inevitable when -debt- bubbles burst, and when these bubbles are large enough, there’s nothing that can stop the process, not even miracle growth. But you’re not going to understand this if and when you look only at falling prices as the main sign of deflation; they’re merely a small part of the process, and a lagging one at that.

A much better indicator of deflation is the velocity of money, the speed at which ‘consumers’ spend money. And velocity has been going down for years. That’s where and how you notice deflation, when combined with the money and credit supply. Which have soared in most places, but were no match for a much faster declining velocity. People have much less money to spend. Which shouldn’t be a surprise if, just to name an example, new US jobs pay 23% less than the ones they’re -supposedly- replacing.

As I said a few weeks ago, it’s probably only fitting, given its pivotal role in our economies and societies, that it’s oil that’s leading the way down. Other commodities are not far behind, because demand for -and spending on- them has been plummeting too, as overproduction and overinvestment, especially in China, do the rest.

However you look at present global debt, percentage wise, or in absolute numbers, you name it, there’s never been anything like it. We outdid ourselves by so much we don’t have the rational or probably even subconscious ability to oversee what we’ve done. We live in the world’s biggest bubble ever by a margin of god only knows how much. And that bubble will deflate. It is already doing just that.

The next steps in the debt deflation process will of necessity be chaotic. A substantial part of that chaos is bound to emerge from denial, and the reluctance to accept reality. Which often rise from a poor understanding of the processes taking place. It certainly looks as if there’s lots of that in China, where both the working principles of financial markets and the grip authorities -can- have on them, seem to be met with a huge dose of incomprehension.

Mind you, given the levels of comprehension vs outright ‘theoretical religion’ among leading western politicians and economists, the ones who most often rise to decision-making positions in governments and financial institutions, we have nothing on China when it comes to truth and denial.

From all that follows what will be the next leg down in the ‘magnificent slump’: the awfully messy demise of currency pegs.

In a short explainer for the uninitiated, allow me to steal a few words from Investopedia: “There are two types of currency exchange rates—floating and fixed, still in existence. Major currencies, such as the Japanese yen, euro, and the US dollar, are floating currencies—their values change according to how the currency is being traded on forex markets. Fixed currencies, on the other hand, derive value by being fixed (or pegged) to another currency.”

While there are more currency pegs in the world today than we should care to mention -there are dozens-, it seems fair to say that in today’s deflationary environment, practically all are under siege. Most African currencies are pegged to the euro, and they do have to wonder how smart that is going forward. Still, the main, and immediate, problems seem to arise in pegs to the US dollar (with one interesting exception: the Swiss franc – more in a bit).

Most oil producing Gulf nations are pegged to the greenback. So is Hong Kong. And, for all intents and purposes, so is China, though you have to wonder what a peg truly is if you change it on a daily basis. China is on its way to a peg vs a basket of currencies, but that seriously interferes with its stated intention to become a reserve currency -of sorts-. If your currency can’t stand on its own two feet, i.e. float, you’re per definition weak.

China’s vice president Li Yuanchao said this week in Davos that Beijing has no plans to devalue the yuan, i.e. to cut the peg to the dollar. Then again, he also stated that “central command” would ‘look after’ stock market investors. Put the two statements together and you have to wonder what the one on the yuan (couldn’t help myself there) is worth.

The first “link in the chain” that appears vulnerable is the Hong Kong dollar, which is stuck between China and the US, and unlike the yuan still has a solid dollar peg, but, obviously, also has a strong link to the yuan. The issue is that if China continues on its current course of daily small yuan devaluations, the difference with the HKD will grow so large that ever more investments and savings will move to Hong Kong, despite a maze of laws designed to keep just that from happening.

And that is the overall danger to currency pegs as they still exist in today’s rapidly changing global financial world: all economies are falling, but some are falling -much- faster than others.

Not so long ago, the World Bank called on Saudi Arabia to defend its USD peg with its FX reserves. It even looked as if they meant it. But Saudi Arabia has no choice but to deplete those reserves to prevent other nasty things from happening that are much more important than a currency peg. Like social chaos.

It’s somewhat wonderfully ironic that the main most recent experience with abandoning a peg comes from a source that faced -and now feels- the exact opposite of what nations like Saudi Arabia and China do. That is, it became too costly and risky for Switzerland to keep its franc pegged (or ‘capped’, to be precise) to the euro any longer a year ago, because of upward, not downward pressure.

Since then, the euro went from 1.20 franc to 1.09 or thereabouts, which perhaps doesn’t look all that crazy, and many ‘experts’ seek to downplay the effects of the move, but it’s still estimated to have cost the Swiss some $25 billion. For comparison, the US has 40 times as many people as Switzerland’s 8 million, so the per capita bill would be close to $1 trillion stateside. That wouldn’t have added to Yellen’s popularity. Currency pegs and caps can be expensive hobbies.

And that’s why the Saudis and Chinese are so anxious about letting go of their pegs. That and pride. In their cases, their respective currencies wouldn’t, like the franc, rise versus the one they’re pegged to, they would instead lose a lot of value. And in the fake markets we live in today, where price discovery has long since been left behind, there’s no telling how much. Well, unless they seek to keep control, but then it would be just a matter of time until they need to rinse and repeat.

Even if it seems obvious to make a particular move, and if everybody knows you really should, showing what can be perceived as real weakness could be a killer when everything else around you is manipulated to the bone.

Still, neither Beijing nor Riyadh stand a chance in a frozen-over hell, to ultimately NOT sharply devalue their currencies or just simply let go of their pegs. Simply because China’s economy is falling to pieces, and the Saudi’s dependence on oil prices is dragging it into a financial gutter. Just look at what falling prices had done to the riyal vs non-pegged oil producer currencies by October 2015, when Brent was still at $45:

The Saudis could have been paid for their oil in a currency worth perhaps twice as much as their own, the one their domestic economy runs on. That’s overly simplistic, because the Saudi tie to the USD runs far and deep, but that doesn’t make it untrue.

What will bring down the Chinese and Saudi pegs, along with a long list of other pegs, is, how appropriately, the very same markets they’ve been relying on to NOT function. The bets against Hong Kong’s ability to maintain its USD peg have already started, and China is next, along with the House of Saud (the latter two just take more fire-power). Which of course is exactly why they speak their soothing ‘confident’ words. Words that are today interpreted as the very sign of weakness they’re meant to circumvent.

What worked for George Soros in his bet vs the Bank of England and the pound sterling in 1992, will work again unless these countries are ahead of the game and swallow their pride and -ultimately- smaller losses.

Granted, so much will have to be recalibrated if the yuan devalues by 50% or so, and the riyal does something similar (it’s very hard to see either not happening), that it will take some serious time before everyone knows where they -and others- stand. And since volatility tends to feed on itself once there’s enough of it, it seems to make sense that governments would seek control. But that doesn’t mean they -can- actually have any.

Today’s major currency pegs are remnants of a land of long ago lore; they have no place in this world, they are financial misfits. Who’ve been allowed to persist only because central banks and governments have been able to distort markets for as long as they have. But that ability is not infinite, and it’s in nobody’s longer term interest that it would be.

Not even those that now seem to profit most from it. We will end up with societies that function no better for the ridiculous Davos elites than they do for the bottom rung. But no elite will ever see that, let alone admit it voluntarily.

Deflation and foreign exchange chaos. There’s your future. As for stocks and oil, who’s left to buy any? Not the consumer who’s 70% of US and perhaps 60% of EU GDP, they’re maxed out on private debt. So why would investors put their money in either? And if they don’t, where do you see prices go?

Even more importantly, deflation makes a lot of money, and even much more virtual money, vanish into overnight thin air. That’s what everyone is running into when all these currencies, China, Saudi, Gulf states et al, are forced to recalibrate. $17 trillion disappeared from global equities markets in the past 6 months.

How much vanished from the value of ‘official’ oil reserves? How much from iron ore and aluminum? How much do all the world’s behemoth corporations and banks and commodity-exporting countries have their resource ‘wealth’ on their books for in their sunny creative accounting models? And how much of that is just thin hot air too?

We’re about to find out.

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