Sep 132018
 
 September 13, 2018  Posted by at 8:45 am Finance Tagged with: , , , , , , , , , , ,  


Henri Matisse Landscape with a bench 1918

 

This Will Be The Mother Of All Minsky Moments (Mauldin)
Leaderless World Is Sleepwalking Into A Financial Crisis – Gordon Brown (G.)
UK PM May Calls Special Meeting To Discuss ‘No-Deal’ Brexit (CNBC)
EU Can ‘Certainly Not’ Accept Theresa May’s Single Market Plan – Juncker (Ind.)
Juncker Calls On EU To Seize Chance To Become Major Sovereign Power (G.)
Poland Says It Will Block Any EU Sanctions Against Hungary (R.)
Leaked Video Shows Distraught Google Execs Grappling With Hillary’s Loss (ZH)
John Kerry Accused Of Violating Logan Act In Secret Iran Talks (ZH)
US Destroyer Arrives In Mediterranean As Syria Tensions Rise (RT)
No NGO Rescue Boats Currently In Central Mediterranean (G.)
Two More Potential ‘Garbage Patch’ Zones In World’s Oceans Identified (Ind.)
Florence To Slow Down, Hammer Carolinas and Appalachia for Days (Weather.com)

 

 

The mother of all debt loads.

This Will Be The Mother Of All Minsky Moments (Mauldin)

Dr. Hyman Minsky points out that stability leads to instability. The more comfortable we get with a given condition or trend, the longer it will persist. And then when the trend fails, the more dramatic the correction. Long-term stability produces unstable financial arrangements. If we believe that tomorrow will be the same as last week, we are more willing to add debt or postpone savings in favor of current consumption. Thus, says Minsky, the longer the period of stability, the higher the potential risk for even greater instability when market participants must change their behavior.

[..] I think the mother of all Minsky moments is building. It will not be an instant sandpile collapse, but instead take years because we have $500 trillion of debt to work through. Remember, that debt just can’t be pooped away. It is both money somebody owes and an asset on somebody else’s balance sheet. We can’t just take that away without huge consequences to culture and society.

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All these people responsible for the last crisis are now advising on what to do with the next one.

Leaderless World Is Sleepwalking Into A Financial Crisis – Gordon Brown (G.)

“It is very difficult to say what will trigger it [the next crisis] but we are at the latter end of the economic cycle where people take greater risks. There are problems in emerging markets.” Brown said one area of concern should be heavy commercial and industrial lending by lightly or unregulated shadow banks at a time when US interest rates are rising. “It could arise in Asia because of the amount of lending through the shadow banking system.” He added: “In an interconnected world there is an escalation of risks. We have had a decade of stagnation and we are now about to have a decade of vulnerability.”

Recalling the freezing up of the financial markets a decade ago, Brown said governments had sought to compensate for the lack of trust between banks by cooperating more closely. “In the next crisis a breakdown of trust in the financial sector would be mirrored by breakdown in trust between governments. There wouldn’t be the same willingness to cooperate but rather a tendency to blame each other for what’s gone wrong.

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Waking up at last?

UK PM May Calls Special Meeting To Discuss ‘No-Deal’ Brexit (CNBC)

The U.K. government is set to meet Thursday morning for three-hours to discuss the eventuality of a “no-deal” Brexit. The meeting takes place at a time when the government is also releasing more than 20 documents, outlining some more preparations in case the U.K. leaves the European Union in March 2019 without a deal. This is not the first set of papers outlining what will happen in case the U.K. and the EU do not reach a deal. In late August, the U.K. government said that businesses should prepare for higher barriers to trade, more red tape and potentially higher costs too, if Brexit talks collapse.

All these steps are part of a wider attempt to step up works for the worst-case scenario. The EU has also strengthened its preparations in case the U.K. leaves the bloc abruptly. The U.K.’s Brexit chief, Dominic Raab, warned on Wednesday that the U.K. will not pay the so-called divorce bill, if there is no final deal over Brexit. Raab wrote in the Daily Telegraph that the £39 billion ($50.82 billion) the U.K. owes to the EU, due to previous policy agreements, will not be repaid if there is no deal.

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We know.

EU Can ‘Certainly Not’ Accept Theresa May’s Single Market Plan – Juncker (Ind.)

Jean-Claude Juncker has given his clearest signal yet that the EU will not accept Theresa May’s plan to keep Britain in the single market for goods after Brexit. In his annual state of the union address in Strasbourg, the European Commission president said parts of the single market could “certainly not” be jettisoned for countries outside the bloc. But he said the Chequers proposals could be a “starting point” for the future relationship and that Britain would “never be an ordinary” country for the EU. “We respect the British decision to leave our union, even though we continue to regret it deeply,” he told MEPs. “But we also ask the British government to understand that someone who leaves the union cannot be in the same privileged position as a member state.

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Bigger is better?!

Juncker Calls On EU To Seize Chance To Become Major Sovereign Power (G.)

In his state of the union speech, titled The Hour of European Sovereignty, the European commission president appealed to MEPs and heads of government to give the EU the powers and characteristics traditionally restricted to states. Explaining his expansive vision, Juncker said the EU should aim to surpass the dominance of the dollar in the world economy and challenge China in its attempts to become the ascendant influence in Africa. The EU should be “a global player” as well as a “global payer”, Juncker said, with foreign policy decisions made on the basis of a qualified majority vote in which the will of 55% of member states would win the day.

Through trade deals, the EU’s standards and labour conditions were being exported across the world, he said, and it was time for the continent to further use its “clout” to mould the future. “The geopolitical situation makes this Europe’s hour: the time for European sovereignty has come,” Juncker told the European parliament in Strasbourg. “It is time Europe took its destiny into its own hands. It is time Europe developed what I coined Weltpolitikfähigkeit – the capacity to play a role, as a union, in shaping global affairs. Europe has to become a more sovereign actor in international relations.”

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A crumbling fortress.

Poland Says It Will Block Any EU Sanctions Against Hungary (R.)

Poland, the biggest former communist country in the European Union, said it will oppose any sanctions imposed by the bloc on fellow member Hungary, accused of floating EU rules on democracy. “Every country has its sovereign right to make internal reforms it deems appropriate,” Poland’s foreign ministry said in a statement late on Wednesday. “Actions aimed against member states serve only deepening divides in the EU, increasing citizens’ current lack of confidence to European institutions.” The European Parliament voted on Wednesday to sanction Hungary for neglecting norms on democracy, civil rights and corruption in a first bid to launch the punitive process of the EU treaty’s Article 7.

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AI to save their day?

Leaked Video Shows Distraught Google Execs Grappling With Hillary’s Loss (ZH)

Days after Google was exposed trying to help Hillary Clinton win the 2016 election, a leaked “internal only” video published by Breitbart Senior Tech correspondent Allum Bokhari reveals a panel of Google executives who are absolutely beside themselves following Hillary Clinton’s historic loss. The video is a full recording of Google’s first all-hands meeting following the 2016 election (these weekly meetings are known inside the company as “TGIF” or “Thank God It’s Friday” meetings). Sent to Breitbart News by an anonymous source, it features co-founders Larry Page and Sergey Brin, VPs Kent Walker and Eileen Naughton, CFO Ruth Porat, and CEO Sundar Pichai. -Breitbart

In the video, Brin can be heard comparing Trump supporters to fascists and extremists – arguing that like other extremists, Trump voters suffered from “boredom” which has, he claims, historically led to fascism and communism. He then asks his company what they can do to ensure a “better quality of governance and decision-making.” And according to Kent Walker, VP for Global Affairs, those who support populist causes like the MAGA movement are motivated by “fear, xenophobia, hatred and a desire for answers that may or may not be there.” He later says that Google needs to fight to ensure that populist movements around the world are merely a “blip” and a “hiccup” in the arc of history that “bends towards progress.”

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A dark-grey area at best.

John Kerry Accused Of Violating Logan Act In Secret Iran Talks (ZH)

Though he previously denied it when allegations first surfaced last Spring, former Secretary of State John Kerry has now disclosed he’s personally had semi-frequent face to face contact with top Iranian officials to discuss US-Iran relations since Trump entered office. Kerry confirmed and explained in detail his recent meetings with Iranian Former Minister Javad Zarif in an interview with radio host Hugh Hewitt to promote his new memoir, Every Day Is Extra.

During the interview Kerry disclosed that he met with Zarif “three or four times” and discussed political issues and challenges between the United States and Iran in what could constitute a significant and clear violation of the Logan Act. Though it’s almost never been enforced, the 1799 Logan Act states that unauthorized diplomacy with foreign powers by private American citizens is a crime. Notably, two Trump-connected individuals that prominent Liberals and editorials demanded be prosecuted under the Logan Act include former national security advisor Michael Flynn and Trump senior adviser and son-in-law Jared Kushner.

When asked point blank during the radio show about his rumored meetings with top Iran officials, Kerry admitted, “I think I’ve seen him three or four times,” but attempted to claim he was not trying to “coach” Iran on how to navigate President Trump’s pullout of the Iran nuclear deal. Kerry is of course now a private citizen out of government but holds significant clout and influence with the Iran FM as the two hammered out the details of the JCPOA brokered under President Obama in the first place.

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I wouldn’t be too sure Russia will back down again.

US Destroyer Arrives In Mediterranean As Syria Tensions Rise (RT)

With the arrival of another guided missile destroyer to the Mediterranean, the US may have 200 ‘Tomahawks’ ready for a strike on Syria, as Russia warns that jihadist groups in Idlib are planning a fake chemical attack. The USS Bulkeley (DDG-84), an Arleigh Burke-class destroyer, entered the Mediterranean through the Straits of Gibraltar on Wednesday, the Russian news agency Interfax reported citing international maritime monitoring data. A Gibraltar-watcher confirmed the destroyer’s transit on September 12.

With the arrival of the Bulkeley, the US forces in the region have up to 200 ‘Tomahawk’ cruise missiles available to strike targets in Syria if ordered to do so, Interfax reported. Last week, the attack submarine USS Newport News (SSN-750) arrived in the Mediterranean as well. Last week, Russia conducted massive naval maneuvers off the Syrian coast, culminating in marine landing drills and missile launches. The presence of Russian ships in the area was seen as a possible deterrent to further US military action against Syria.

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If a tree falls in a forest…

No NGO Rescue Boats Currently In Central Mediterranean (G.)

Thousands of migrants risk dying at sea because of a clampdown on NGO rescue ships, aid agencies have warned, in what has been their longest period of absence from the central Mediterranean since they began operating in late 2015. Since 26 August, no NGO rescue vessel has operated on the main migration routes between north Africa and southern Europe. Anti-immigration policies by the Maltese and Italian governments, which have closed their ports to the vessels, have driven the sharp decrease in rescue missions. People seeking asylum are still attempting the risky crossing – but without the boats, shipwrecks are likely to rise dramatically.

The last time the Mediterranean was without NGO rescue boats was from 28 June to 8 July 2018, and in those days more than 300 migrants died at sea. The death toll has fallen in the past year, but the number of those drowning as a proportion of arrivals in Italy has risen sharply in the past few months, with the possibility of dying during the crossing now three times higher.

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When we create truly lasting legacies.

Two More Potential ‘Garbage Patch’ Zones In World’s Oceans Identified (Ind.)

Much attention has focus on the plastic floating on the surface, but this accounts for less than 1 per cent of the total plastic thought to be in ocean. To trace the likely fate of the remaining 99 per cent, scientists at Newcastle University used computer models and identified two likely locations for accumulation zones that had previously slipped under the radar. The Gulf of Guinea region and the East Siberian Sea may be hosting large quantities of plastic that cannot be easily viewed from the water surface, as up to 70 per cent of plastic debris is thought to sink and remain on the sea floor.

“There’s a need to find the unaccounted for plastic in the ocean mainly because if we don’t know the extent of the problem, then there’s no way of knowing the potential implications it has,” explained Alethea Mountford, a PhD Student at Newcastle University who led the study. “Once the plastics reach the water column, the greatest impact would be on marine organisms through ingestion and entanglement,” she said.

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A lot of storms. Mangkhut is about to hit the Philippines.

Florence To Slow Down, Hammer Carolinas and Appalachia for Days (Weather.com)

Hurricane Florence continues to expand in size. Hurricane-force winds now extend outward up to 80 miles the center and tropical-storm-force winds extend outward up to 195 miles from the center. This expansion in size only increases the hurricane’s energy and potential for significant storm surge. The National Hurricane Center noted Wednesday evening that while Florence has weakened some, “the wind field of the hurricane continues to grow in size. This evolution will produce storm surges similar to that of a more intense, but smaller, hurricane, and thus the storm surge values seen in the previous advisory are still valid.” Previous large Category 2 hurricanes have done enormous amounts of damage along the U.S. coast.

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Sarah Kendzior tweets:

The best workaround I’ve found to Twitter’s horrible new algorithm is putting this in the search bar:

filter:follows -filter:replies include:nativeretweets

You will get your old chronological timeline back with no “likes” and with retweets from people you actually follow.

Feb 012018
 
 February 1, 2018  Posted by at 11:03 am Finance Tagged with: , , , , , , , , , ,  


Frederic Edwin Church The Parthenon 1871

 

FBI Opposes Memo Release Due To “Inaccurate Information” (ZH)
Alan Greenspan Sees Bubbles in Stocks and Bonds (BBG)
Janet Yellen’s Fed Era Ends With Unanimous Vote of No Rate Hike (BBG)
Two Out Of Three UK Pension Schemes Are In The Red (Yahoo)
Secret Price Fixing Among German Carmakers (Spiegel)
Germany Reaches Limit of Support for Macron’s Europe Plans (BBG)
Hungary Rejects Macron’s ‘Arrogance’ as EU Reform-Fight Looms (BBG)
More Than One Million Greeks Trapped In Tax Payment Scheme Nightmare (K.)
Planting Wildflowers Across Farm Fields Could Cut Pesticide Spraying (G.)
Earth’s Magnetic Field Is Shifting, Poles May Flip (ZH)
‘Super Blue Blood Moon’ Rises Over The Acropolis (K.)
Latest Rhino Poaching Figures Show A Decade Of Bloodshed (Ind.)

 

 

Bad theater. But not releasing the memo is no longer an option.

FBI Opposes Memo Release Due To “Inaccurate Information” (ZH)

Update 1240ET: In what CNN described as a “rate public warning,” the FBI released a statement Wednesday saying it has “grave concerns” over the accuracy of the House Intel Committee’s memo describing purportedly egregious FISA abuses. “With regard to the House Intelligence Committee’s memorandum, the FBI was provided a limited opportunity to review this memo the day before the committee voted to release it. As expressed during our initial review, we have grave concerns about material omissions of fact that fundamentally impact the memo’s accuracy,” the FBI said in a statement.
* * *
Update 1130ET: Bloomberg reports that FBI Director Christopher Wray told the White House he opposes release of a classified Republican memo alleging bias at the FBI and Justice Department because it contains inaccurate information and paints a false narrative, according to a person familiar with the matter. Of course, given the allegedly terrible picture the memo paints of The FBI, it is perhaps not entirely surprising that Wary would oppose its release, however, if this sourced reporting proves correct, it plays very badly for Republicans as it would seem to confirm Rep. Schiff’s accusations.
* * *
As we detailed earlier, just before President Trump headed to the Capitol for last night’s “State of the Union”, the Washington Post reported that top Justice Department officials made a last-ditch plea on Monday to White House Chief of Staff John Kelly about the dangers of publicly releasing the memo. Shortly before the House Intelligence Committee voted to make the document public, Deputy Attorney General Rod J. Rosenstein warned Kelly that the four-page memo prepared by House Republicans could jeopardize classified information and implored the president to reconsider his support for making it public. But those pleas from Rosenstein – who isn’t exactly the West Wing’s favorite lawman, and whose name apparently appears in the memo – have apparently fallen on deaf ears.

Last night, President Trump promised a lawmaker that the memo would “100%” be released now that the House Intel Committee has voted to approve its release. And during a Fox News Radio interview with Brian Kilmeade, Chief of Staff John Kelly added that the memo would be publicly released “pretty quick.” “I’ll let all the experts decide that when it’s released. This president wants everything out so the American people can make up their own minds,” he said.

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He should know, he created them both.

Alan Greenspan Sees Bubbles in Stocks and Bonds (BBG)

The man who made the term “irrational exuberance” famous says investors are at it again. “There are two bubbles: We have a stock market bubble, and we have a bond market bubble,” Alan Greenspan, 91, said Wednesday on Bloomberg Television with Tom Keene and Scarlet Fu. Greenspan, who led the Federal Reserve from 1987 until 2006, memorably used the phrase to describe asset values during the 1990’s dot-com bubble. Greenspan’s comments come as stock indexes remain near record highs, despite selling off in recent days, and as the yields on government notes and bonds hover not far from historic lows. Interest rates are expected to move up in coming years as the Fed continues with a campaign to gradually tighten monetary policy.

“At the end of the day, the bond market bubble will eventually be the critical issue, but for the short term it’s not too bad,” Greenspan said. “But we’re working, obviously, toward a major increase in long-term interest rates, and that has a very important impact, as you know, on the whole structure of the economy.” The Fed on Wednesday opted to leave rates unchanged and markets are pricing in an increase at the central bank’s March meeting. Greenspan sounded an alarm on forecasts that the U.S. government deficit will continue to climb as a share of GDP. He said he was “surprised” that President Donald Trump didn’t specify how he would fund new government initiatives in Tuesday’s State of the Union speech. The president last month signed into law about $1.5 trillion in tax cuts that critics say will further balloon the budget gap.

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The nonsense is deafening. Great solid economy, but no rate hikes.

Janet Yellen’s Fed Era Ends With Unanimous Vote of No Rate Hike (BBG)

Federal Reserve officials, meeting for the last time under Chair Janet Yellen, left borrowing costs unchanged while adding emphasis to their plan for more hikes, setting the stage for an increase in March under her successor Jerome Powell. “The committee expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate,” the policy-setting Federal Open Market Committee said in a statement Wednesday in Washington, adding the word “further” twice to previous language. The changes to the statement, collectively acknowledging stronger growth and more confidence that inflation will rise to their 2% target, may spur speculation that the Fed will pick up the pace of interest-rate increases.

Officials also said inflation “is expected to move up this year and to stabilize” around the goal, in phrasing that marked an upgrade from their statement in December. At the same time, the Fed repeated language saying that “near-term risks to the economic outlook appear roughly balanced.” “It opens the door to four hikes for them, but I don’t think they have walked through it,” said Michael Gapen at Barclays in New York. “It closes the door to two hikes.” Fed officials penciled in three rate moves this year in quarterly forecasts they updated last month, according to their median projection.

With her term ending later this week after President Donald Trump chose to replace her, Yellen is handing the reins to Powell, who has backed her gradual approach and is widely expected to raise interest rates at the FOMC’s next meeting for the sixth time since late 2015. Fed officials are hoping to keep a tight labor market from overheating without raising borrowing costs so fast that it would stifle the economy. “Gains in employment, household spending and business fixed investment have been solid, and the unemployment rate has stayed low,” the Fed said, removing previous references to disruptions from hurricanes. “Market-based measures of inflation compensation have increased in recent months but remain low.”

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People won’t understand their pensions are Ponzis until there are no payments.

Two Out Of Three UK Pension Schemes Are In The Red (Yahoo)

Two out of three pension funds are in the red – to the tune of a combined £210 billion, it has been revealed. Some 3,710 schemes are in deficit according to the Pension Protection Fund watchdog, putting a serious question mark over the retirement plans of millions of workers. The PFF has been called into action on two high profile occasions of late – working with Toys R Us to secure a near £10m injection into its ailing fund to protect the company’s short-term future and also sorting through the debris of the Carillion collapse. The giant contractor folded earlier this month with debts of above £1.3bn, including an estimated £800m hole in its pension fund. The PFF monitors the health of 5,588 pension pots, with some of the biggest names on the FTSE 100 running schemes with major shortfalls.

The biggest include £9.1billion at BT, as well as deficits of £6.9billion at Royal Dutch Shell, £6.7billion at BP and £6.6billion at both Tesco and BAE Systems. Sir Steve Webb, a former pensions minister under the recent coalition government, said Carillion would not be the last big company to fold leaving its pension scheme in jeopardy. “The question isn’t if there will be another Carillion – it’s when,” said Webb, who is now director of policy at pensions group Royal London. “With two-thirds of schemes in deficit it is inevitable there will be more insolvencies and more schemes ending up in the PPF.”

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They had more than 60 active working groups.. And thought it’d remain secret? Anyone going to jail?

Secret Price Fixing Among German Carmakers (Spiegel)

The Federal Cartel Office suspects that major carmakers and a few of their suppliers have been fixing prices for years, and possibly even decades. It’s not the prices at which the companies sell their cars or car parts that is at issue, but rather a significant component of the prices they pay for steel. “The aim of the suspected collusion,” the court ruling that granted the search warrants read, was to “unify the purchasing price for steel in the automobile industry and, by doing so, create a commonality of costs.” The Federal Cartel Office believes that the alleged collusion existed back in the 1990s and that “it existed again from March 2007 until February 2013.” Investigators have also found indications there may have been collusion in 2016.

Collusion of that nature is the antithesis of competition. It means that VW, Daimler and BMW were no longer competing to buy steel cheaper than their rivals and passing their savings down to customers – as is normally the case in a functioning market economy. And steel is one of the most important supplies purchased by carmakers. The nationwide searches didn’t remain secret, with the media quickly reporting on them. But until now, the background and details of the raids have remained largely unknown, the case having been overshadowed by a European Commission investigation into another case that also involves the automobile industry – a case that DER SPIEGEL exposed last summer.

That case was triggered when Daimler and Volkswagen essentially admitted wrongdoing, and since then the Brussels authority has been looking into suspicions that the companies engaged in collusion for several years with BMW, Porsche and Audi, in the form of more than 60 working groups covering areas such as technological development, suppliers and how to deal with environmental protection authorities. The companies had created working groups for almost every part of a vehicle. They existed for “gasoline engines,” “diesel engines,” “car body,” “chassis,” “total vehicle” and many more areas. With five brands involved – Daimler, BMW, Audi, Porsche and VW – the groups were referred to internally as “groups of five.” All together, they met more than 1,000 times in past years.

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Say no more: “Desired ambiguities..”

Germany Reaches Limit of Support for Macron’s Europe Plans (BBG)

French President Emmanuel Macron will be disappointed if he expects Germany’s next government to drum up more goodwill for his European reform plans in this week’s talks, according to four people familiar with the current coalition negotiations. Angela Merkel’s Christian Democratic Union-led bloc and its prospective Social Democratic Party partner are not planning any fundamental changes to their proposals on Europe’s future as set out in a preliminary agreement reached Jan. 12, according to the people, who represent all three parties involved in the talks. All asked not to be named as the negotiations are private and ongoing. Representatives of Merkel’s CDU, its Christian Social Union sister party and Martin Schulz’s Social Democrats met in the Chancellery in Berlin on Wednesday to discuss Europe policy.

While Schulz hailed the outcome as a “fresh start” for Europe, details were in short supply. The negotiators didn’t go much beyond those measures already agreed, one of the people attending the meeting said. These include higher German contributions to the EU budget; expanding the European Stability Fund (ESM) into a European Monetary Fund; and a European framework for minimum wages. The SPD proposed giving the EU its own means to raise revenue, whether by taxes or tolls, prompting Merkel’s bloc to warn against a debate over tax increases. On a visit to Macron in Paris on Jan. 19, Merkel said the coalition’s common Europe plans contained “desired ambiguities,” since any attempt to agree on the final details now would reduce the room to negotiate.

In reality, her CDU/CSU and the SPD, as the Social Democrats are known in German, have different interpretations of the proposals, and these divergent positions are likely to bubble up in the coming months in the debate over euro-area reform.

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Hungary won’t be easy to strong-arm. But Brussels will try. The only people who want more Europe are politicians.

Hungary Rejects Macron’s ‘Arrogance’ as EU Reform-Fight Looms (BBG)

French President Emmanuel Macron’s plan to bring to heel renegade European Union nations as part of a drive to reform the bloc smacks of arrogance and will fail, a senior Hungarian ruling party official said. Unanimity is required both to change the EU constitution and approve a multi-year, post-2020 EU budget. That means proposed sanctions on countries like Hungary and Poland for alleged rule-of-law violations won’t gain traction, according to Gergely Gulyas, parliamentary leader of Hungarian Prime Minister Viktor Orban’s Fidesz party. Governments are drawing battle lines as the EU mulls plans to re-invent itself, with some members saying the euro crisis, Brexit, the biggest refugee influx since World War II and ex-communist members ditching the bloc’s liberal values have necessitated a revamp.

Macron has presented the most ambitious proposals, with a plan to deepen integration in everything from defense to the economy. He has also called for sanctions against member states seen as backsliding on democracy. “If we’re going to play the game that western European countries want to launch rule-of-law procedures against eastern European countries because of differences over values, then that’s not going to work,” said Gulyas, 36. “That would destroy the Union.” Hungary received 3.6 billion euros ($4.5 billion) in net EU funding in 2016. That made it the fourth-biggest beneficiary in the 28-member bloc after Poland, Romania and Greece and underscores the risk to its economy if Macron can make good on his pledge. Gulyas dismissed proposals aimed at punishing Hungary and Poland, arguing that France has for years failed to meet EU spending limits yet has escaped penalties for fiscal offenders.

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Under an alleged left-wing government.

More Than One Million Greeks Trapped In Tax Payment Scheme Nightmare (K.)

More than 1 million Greeks are now trapped in programs to pay off their tax and social security dues in installments, a situation likely to continue for years to come. On Wednesday the Finance Ministry announced taxpayers can apply for a 12- or 24-installment payment scheme, which under certain circumstances can include non-expired dues, on the website of the Independent Authority for Public Revenue. Citizens are resorting to various payment programs offered by the ministries of Finance and Labor because they would otherwise be unable to meet their obligations. In many cases taxpayers are forced to pay additional installments in order not to default on their plans.

The million-plus taxpayers and businesses that are trapped in the various schemes they have entered to pay off the tax authorities and the social security funds have no other choice but to keep paying, otherwise they will have their assets confiscated. The payment schemes are the outcome of the growth in taxation and of social security contributions in recent years. Worse, as of this year, if anyone delays the payment of an installment by more than 24 hours, the debt will be classified as overdue and the process of the monitoring mechanism will be triggered for the state to safeguard its interests. Particularly in the case of the 100-payment program for dues to the tax authorities, missing a deadline means the entire amount due is classified as expired and becomes immediately payable along with fines and penalties.

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You mean, monoculture is not the greatest thing ever?!

Planting Wildflowers Across Farm Fields To Cut Pesticide Spraying (G.)

Long strips of bright wildflowers are being planted through crop fields to boost the natural predators of pests and potentially cut pesticide spraying. The strips were planted on 15 large arable farms in central and eastern England last autumn and will be monitored for five years, as part of a trial run by the Centre for Ecology and Hydrology (CEH). Concern over the environmental damage caused by pesticides has grown rapidly in recent years. Using wildflower margins to support insects including hoverflies, parasitic wasps and ground beetles has been shown to slash pest numbers in crops and even increase yields. But until now wildflower strips were only planted around fields, meaning the natural predators are unable to reach the centre of large crop fields.

“If you imagine the size of a [ground beetle], it’s a bloody long walk to the middle of a field,” said Prof Richard Pywell, at CEH. GPS-guided harvesters can now precisely reap crops, meaning strips of wildflowers planted through crop fields can be avoided and left as refuges all year round. Pywell’s initial tests show that planting strips 100m apart means the predators are able to attack aphids and other pests throughout the field. The flowers planted include oxeye daisy, red clover, common knapweed and wild carrot. In the new field trials, the strips are six metres wide and take up just 2% of the total field area. They will be monitored through a full rotation cycle from winter wheat to oil seed rape to spring barley.

“It’s a real acid test – we scientists are having to come up with real practical solutions,” said Pywell, who led a landmark study published in 2017 showing that neonicotinoids insecticides damage bee populations, not just individual insects. In the new trials, the researchers will be looking out for any sign that drawing the wild insects into the centre of fields, and therefore closer to where pesticides are sprayed, does more harm than good.

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Old threat. But a real one.

Earth’s Magnetic Field Is Shifting, Poles May Flip (ZH)

[..] scientists from the University of Colorado in Boulder are sounding the alarm that the Earth’s magnetic poles are showing signs of reversing. Although the pole reversal, in and of itself, isn’t unprecedented, the solar winds that would take out the power grid and make parts of the globe uninhabitable could cause widespread disasters. The Earth has a fierce molten core that generates a magnetic field capable of defending our planet against devastating solar winds. This magnetic field is vital to life on Earth and has weakened by 15 percent over the last 200 years. This protective field acts as a shield against harmful solar radiation and extends thousands of miles into space and its magnetism affects everything from global communication to power grids.

Historically, Earth’s North and South magnetic poles have flipped every 200,000 or 300,000 years. However, the last flip was about 780,000 years ago, meaning our planet is well overdue. The latest satellite data, from the European Space Agency’s Swarm trio which monitors the Earth’s magnetic field, suggest a pole flip may be imminent. The satellites allow researchers to study changes building at the Earth’s core, where the magnetic field is generated. Their observations suggest molten iron and nickel are draining the energy out of the Earth’s core near where the magnetic field is generated. While scientists aren’t sure why exactly this happens, they describe it as a “restless activity” that suggests the magnetic field is preparing to flip.

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A lot more timeless than most other pics of this.

‘Super Blue Blood Moon’ Rises Over The Acropolis (K.)

A ‘super blue blood moon’ rises behind the 2,500-year-old Parthenon temple on the Acropolis hill in Athens on Wednesday evening, when thousands of city residents took to the streets and balconies to witness the rare spectacle. People in many parts of the world caught a glimpse of the moon as a giant reddish globe thanks to a rare lunar phenomenon that combines a total eclipse with a blue moon and super moon. The spectacle – the first in 152 years – has been coined a ‘super blue blood moon’ by NASA. [Petros Giannakouris/AP]

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Just refuse to do any trade with any country that imports the horns. For starters.

Latest Rhino Poaching Figures Show A Decade Of Bloodshed (Ind.)

Dr Ian Player, the veteran South African game ranger and doyen of global rhino conservation, would be turning in his grave today were he to discover that another 1,000 rhinos had been slaughtered in the last calendar year. The African-wildlife warrior died just over three years ago aged 87, at a point when poaching had just exploded to record levels in South Africa – with nearly three rhinos gunned down daily. Annual government statistics announced last week complete the picture of 7,130 rhino carcasses piled up in South Africa over the last decade. Shortly before his death, I visited Player at his home in the KwaZulu-Natal Midlands to ask him about his thoughts on the poaching crisis and the future of one of the “big five” (lion, leopard, rhinoceros, elephant and Cape buffalo) species he devoted most of his life to protecting.

Frail and dispirited, he had reached a point in life where he should have been taking things easy, after more than six decades of service to nature conservation. Instead, his cellphone rang incessantly as colleagues from all corners of the country reported the discovery of yet another rhino butchered for its horns. Having worked so hard to save rhinos from extinction once before, there was no way Player could hang up his conservation boots amidst this new crisis. He also told me about a dream that haunted him. “My dream was about a young white rhino which came to lie down next to me and then gently placed its head on my shoulder. That does not need too much interpretation – the rhinos still need our help more than ever before,” he explained.

Player first came across a rhino in Imfolozi Game Reserve in the early 1950s when he joined the Natal Parks Board as a learner game ranger. A disciple of Carl Jung and Sir Laurens van der Post, Player went on to spearhead a global operation to safeguard the world’s second-largest land animal from extinction. Less than a decade ago, poaching deaths were limited to roughly 20 rhinos per year in South Africa, the country that provides sanctuary to 93% of Africa’s white rhinos and nearly 40% of the continent’s black rhinos. In 2007, only 13 rhinos were poached in South Africa. But in 2008 that tally rose steeply to 80 deaths; to 333 in 2010 and then to a record level of 1,205 during 2014. Last year the death toll topped the 1,000 mark for the fifth year in a row.

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Oct 022016
 
 October 2, 2016  Posted by at 10:25 am Finance Tagged with: , , , , , , , , ,  


DPC Belle Isle Park Aquarium, Detroit 1905

Some Comments On The NYT Story About Donald Trump’s Tax Returns (Hempton)
US Government Deficit Numbers are a BIG Lie (WS)
Six (Ex-)Deutsche Bank Executives Charged in Monte dei Paschi Probe (BBG)
‘Merkel Cannot Afford To Bail Out Deutsche Bank’ (R.)
Theresa May To Propose ‘Great Repeal’ Bill To Unwind EU Laws (G.)
Stupefied: How Organisations Enshrine Collective Stupidity (Aeon)
How Brussels Is Obstructing The Prosecution Of Corruption Cases In Greece (IE)
Erdogan Says Turkey In ‘Endgame’ Over EU Membership (AFP)
Erdogan Slams US Congress Over Saudi 9/11 Law (AFP)
Hungary Votes On Government’s Rejection Of EU Refugee Quotas (AP)
Czech President Calls For Deportation Of Economic Migrants (Pol.)
Germany Interior Minister Urges Athens To Implement Dublin Rules (Kath.)

 

 

John Hempton doesn’t leave much of the NYT story standing.

Some Comments On The NYT Story About Donald Trump’s Tax Returns (Hempton)

The New York Times has published a story (including extracts) about Donald Trump’s tax returns over two decades ago. The money-quote is this: “Donald J. Trump declared a $916 million loss on his 1995 income tax returns, a tax deduction so substantial it could have allowed him to legally avoid paying any federal income taxes for up to 18 years…” According to the NYT the losses came … through mismanagement of three Atlantic City casinos, his ill-fated foray into the airline business and his ill-timed purchase of the Plaza Hotel in Manhattan. There is an issue here. Donald Trump did not repay all the debt associated with those investments.

Either the loss is a real loss and the Donald was really was out of pocket by $916 million (in which case he has legitimate NOLs) or the loss was passed on to someone else by The Donald defaulting on debt – in which case Donald Trump should be assessed for income from debt forgiveness. After all if the debt is forgiven it is not Donald Trump’s loss. The loss is borne by the person who lent Donald money and did not get it back. That – clearly stated by example – is why most income tax systems assess debt forgiveness as income. I do not know whether Donald Trump had the wherewithal in 1995 to bear $916 million of losses personally. But I doubt it. (If he did his financial career is different from what is popularly accepted.)

So the alternative is the debt was forgiven in some way. But then the story the New York Times is running is wrong – because the $916 million of losses would not have survived the debt forgiveness and hence would have wiped out his NOLs and thus he would not be allowed to shelter his income for the next 18 years. Unless that is there is an avoidance scheme the New York Times has not worked out. Those schemes go by the name of “debt parking”. Here is how debt parking works. Suppose the debtor (in this case The Donald) is going to get his debt cancelled for (say) 1c in the dollar. When he gets the debt wiped out the debtor (ie The Donald) will have to report assessable income equal to the debt wiped out (in this case 99% of $916 million).

The alternative though is for the debtor to set up a dummy party. The dummy party might be his wife or children or some company or trust set up by them or more likely some completely opaque offshore trust. And that dummy party goes and buys the debt for say 1.1 cents in the dollar. Then they just sit there. They don’t force the debtor (ie The Donald) to repay. They don’t make a profit or loss on the debt. And because the debtor never has his debt forgiven he never gets the assessment on debt forgiveness and he gets to keep his NOLs even though the losses did not come out of his pocket. Every tax system worth its salt has some rules on “effective debt forgiveness” to prevent debt parking. And – from my experience which is now over twenty years old – none of them work entirely.

Now if Donald really has all those tax losses its pretty clear that the debt must be parked somewhere. There is a vehicle out there (say an offshore trust or other undisclosed related party effectively controlled by Donald Trump) – which owns over $900 million in debt and is not bothering to collect it. I do not have the time or energy to find that vehicle. But it is there. Now that this blog has gone public journalists are going to look for it. There is a Pulitzer prize for whoever finds it. Just give me a nod at the acceptance ceremony.

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“What happened to the $4 trillion that the government borrowed but never officially spent since 2013? Where did this money go?”

US Government Deficit Numbers are a BIG Lie (WS)

Remember when the US government had “surpluses” in the years 1998-2001? Well, yes, according to the Office of Management and Budget, those four years produced a combined $559 billion in “surpluses”: So did the debt fall by that amount? Nope. The debt continued to rise each year, as the government continued to borrow more and more money though it had a “surplus”: over the four years of “surpluses,” the government added $394 billion to its debt, as the scary chart below shows. But that was then and this is now. Now, the hole through which money disappears has gotten a lot bigger. In Fiscal 2016, the government ran a deficit of $590 billion, per the latest estimate of the Office of Management and Budget. Last year, the deficit was $438 billion. So combined over $1.0 trillion.

But it borrowed an additional $1.7 trillion to pay for $1.0 trillion in deficit spending. What happened to the $700 billion that it borrowed and that were not officially spent? It disappeared. Is it just a timing difference that averages out over the years? Nope. Since 2003, the government deficits published by the Office of Management and Budget amounted to $9.26 trillion. So the Treasury should have had to borrow that much to make up the difference. But over the same period, the national debt rose by $13.3 trillion. Meaning, $4.04 trillion had gone up in smoke. This chart shows the official deficits (red columns) and the increase in outstanding debt (blue columns) each year:

The $4 trillion was borrowed and the bonds were issued and the amounts are still outstanding, but the proceeds from the bond sales went out the door, off the books! We’ve all heard the stories of how the Pentagon’s books are sordid fiction [..] But that’s a different – and additional – matter. [..] With the missing $4 trillion, I’m talking about money that the government borrowed but never spent officially, that it never acknowledged even existed. This $4 trillion is on top of all the internal shenanigans at various departments, including the Department of Defense. What happened to the $700 billion in real money that the government borrowed over the past two fiscal years but never officially spent? What happened to the $4 trillion that the government borrowed but never officially spent since 2013? Where did this money go?

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6 out of the 13 charged were/are Deutsche execs. And yes, it’s derivatives again, i.e. attempts to hide losses from the books. Same practice, and same time period, as Goldman’s dealings with the then Greek government.

Six (Ex-)Deutsche Bank Executives Charged in Monte dei Paschi Probe (BBG)

Six current and former managers of Deutsche Bank – including ex-asset and wealth management head Michele Faissola – along with former executives at Nomura Holdings and Banca Monte dei Paschi di Siena were charged in Milan for colluding to falsify the accounts of Italy’s third-biggest bank and manipulate the market. A judge in Milan approved a request by prosecutors to try 13 bankers on charges over separate derivative transactions Paschi arranged with the securities firms, said a lawyer involved in the case, who attended the closed-door hearing Saturday, where the decision was announced.

The charges deal another blow to Deutsche Bank, which is seeking to reassure investors and clients that it will be able to withstand pending U.S. penalties over the bank’s sale of mortgage-backed securities and its dealings with some Russian clients. Monte Paschi, the world’s oldest bank, restated its accounts and has been forced to tap investors twice to replenish capital amid a surge in bad loans and losses on derivatives. It’s now attempting to convince investors to buy billions of soured debt before a fresh stock sale. Deutsche Bank’s shares have slumped 49% in Frankfurt this year, swinging wildly last week on news that hedge-fund clients withdrew some funds. Monte Paschi has dropped 84% this year amid concern it will struggle to restore profitability and strengthen its finances.

The charges culminate a three-year investigation by prosecutors that showed Monte Paschi used the transactions to hide losses, leading to a misrepresentation of its accounts between 2008 and 2012. The deals came to light in January 2013, when Bloomberg News reported that Monte Paschi used derivatives struck with Deutsche Bank to mask losses from an earlier derivative contract dubbed Santorini.

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Between refugees and banks, Merkel has sure screwed up.

‘Merkel Cannot Afford To Bail Out Deutsche Bank’ (R.)

German Chancellor Angela Merkel cannot afford to bail out Deutsche Bank given the hard line Berlin has taken against state aid in other European nations and the risk of a political backlash at home, German media wrote on Saturday. The government denied a newspaper report on Wednesday that it was working on a rescue plan for Germany’s biggest bank, as its shares went into a tailspin fueled by a demand for up to $14 billion from U.S. authorities for misselling mortgage-backed securities before the financial crisis. Germany, which has insisted Italy and others accept tough conditions in tackling their problem lenders, can ill afford to be seen to go soft on its flagship bank, the Frankfurter Allgemeine wrote. “Of course Chancellor Merkel doesn’t want to give Deutsche Bank any state aid,” it wrote in a front-page editorial.

“She cannot afford it from the point of view of foreign policy because Berlin is taking a hard line in the Italian bank rescue.” The Sueddeutsche Zeitung wrote that Merkel would be breaking a promise to taxpayers if she were to bail the bank out, which could spell disaster for her re-election bid next year as the anti-immigration AfD party gains ground. The AfD is already benefiting from a backlash against Merkel’s open-door refugee policy, making huge gains in two regional elections last month and hitting an all-time high of 16% support in an opinion poll last week. “A state aid package would drive voters into the arms of the AfD,” the Sueddeutsche wrote in an editorial. “Domestic political considerations make it unlikely that Berlin would play this joker. Even more unlikely is that the European Commission would agree. The political risk would be simply too high.”

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Before the end of March 2017, she said this morning.

Theresa May To Propose ‘Great Repeal’ Bill To Unwind EU Laws (G.)

Theresa May will set Brexit in motion on Sunday , unveiling plans for a ‘great repeal bill’ to enshrine all EU regulations in UK law as soon as Brexit takes effect. In opening speeches at Conservative party conference in Birmingham, May and the Brexit secretary, David Davis, will announce the government’s plan to repeal the 1972 European Communities Act, the law that binds EU law to the British statute book, and new legislation to transpose EU legislation into British law, in its entirety, That law will only come into force on the day Britain leaves the EU, with future governments then able to unpick those laws as desired. The bill is set to be brought forward in the next parliamentary session, but will not take effect until after the formal two-year process of leaving the EU, which begins when the government triggers article 50.

In an interview in which the prime minister repeated her decision not to hold a general election before 2020, May told the Sunday Times: “We will introduce, in the next Queen’s speech, a ‘great repeal’ bill that will remove the European Communities Act from the statute book. “This marks the first stage in the UK becoming a sovereign and independent country once again. It will return power and authority to the elected institutions of our country. It means that the authority of EU law in Britain will end.” The prime minister has rejected calls from some Eurosceptic quarters to immediately repeal the 1972 act, saying the country needed “maximum security, stability and certainty for workers, consumers, and businesses, as well as for our international allies”.

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A nice read, but it misses out entirely on the fact that stupefication starts in universities -if not before-, not afterwards.

Stupefied: How Organisations Enshrine Collective Stupidity (Aeon)

Each summer, thousands of the best and brightest graduates join the workforce. Their well-above-average raw intelligence will have been carefully crafted through years at the world’s best universities. After emerging from their selective undergraduate programmes and competitive graduate schools, these new recruits hope that their jobs will give them ample opportunity to put their intellectual gifts to work. But they are in for an unpleasant surprise. Smart young things joining the workforce soon discover that, although they have been selected for their intelligence, they are not expected to use it. They will be assigned routine tasks that they will consider stupid. If they happen to make the mistake of actually using their intelligence, they will be met with pained groans from colleagues and polite warnings from their bosses.

After a few years of experience, they will find that the people who get ahead are the stellar practitioners of corporate mindlessness. One well-known firm that Mats Alvesson and I studied for our book The Stupidity Paradox (2016) said it employed only the best and the brightest. When these smart new recruits arrived in the office, they expected great intellectual challenges. However, they quickly found themselves working long hours on ‘boring’ and ‘pointless’ routine work. After a few years of dull tasks, they hoped that they’d move on to more interesting things. But this did not happen. As they rose through the ranks, these ambitious young consultants realised that what was most important was not coming up with a well-thought-through solution. It was keeping clients happy with impressive PowerPoint shows.

Those who did insist on carefully thinking through their client’s problems often found their ideas unwelcome. If they persisted in using their brains, they were often politely told that the office might not be the place for them. [..] For more than a decade, we’ve been studying dozens of organisations such as this management consultancy, employing people with high IQs and impressive educations. We have spoken with hundreds of people working for engineering firms, government departments, universities, banks, the media and pharmaceutical companies. We started out thinking it is likely to be the smartest who got ahead. But we discovered this wasn’t the case.

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To repeat once again: the EU is a criminal organization.

How Brussels Is Obstructing The Prosecution Of Corruption Cases In Greece (IE)

For a good eight years now, politicians, pundits and ordinary citizens have been quarreling over the merits (or lack thereof) of economic policies imposed on Greece by its lenders, notably the EU Commission. Was austerity beneficial or catastrophic? Did “reforms” help or hamper employment and growth? But while such issues are inherently contentious, the third and latest bailout agreement also provides for far less controversial policies. “Upgrade the fight against corruption”! “Strengthen the independence of institutions”! “De-politicise” the state! Insulate “financial crime and corruption investigations from political intervention”! All these are straight quotes from the third bailout agreement. Who would object to any of that?

Well, the EU, via its main institutions, does. Even the author of the bailout agreement, the EU Commission, seems to be quite allergic to all of the above, at least when it involves its own people. From the Commission’s spokespersons to the president of Eurogroup himself, a crowd of EU officials have been, at least twice in the recent months, actively and proactively doing their best to stop Greek judges from delivering on their job description: prosecuting corruption cases and financial crime. In August 2016, EU Commission spokesman Margaritis Schinas reiterated the need for Greece “to depoliticise” its administration. Schinas was referring to the controversial prosecution of the former head of the Greek statistics authority Andreas Georgiou.

In a yet new twist in the “Greek Statistics” saga, Greece’s Supreme Court had reopened a criminal case against Georgiou for allegedly inflating the government’s budget data between 2010 and 2015 and thus overstretching the need for additional austerity measures. Mr. Georgiou had been appointed head of ELSTAT, the statistical authority, in 2010 in an attempt by the government and the country’s lenders to restore credibility to Greek statistics. The revelation in late 2009 that the fiscal deficit had been grossly underestimated had largely triggered the start of the euro crisis. Since Georgiou took over, the quality of Greece’s reported data was hailed by the country’s lenders and Eurostat as “reliable” and “accurately reported”, but contested by other ELSTAT board members, including academics and statisticians.

This led to a nasty and lengthy spat between the two sides and to the eventual prosecution of Mr. Georgiou despite huge political pressure (by Greek and international political actors) to dismiss the case. The case’s reopening provoked the immediate and angry reaction of Brussels. In an interview with Bloomberg TV, Jeroen Dijsselbloem said that the prosecution of Mr. Georgiou was “a big mistake”. Head of Eurostat, Marianne Thyssen, told reporters that Georgiou effectively had no case to answer. Brussels retaliated by threatening Greece to postpone the reimbursement of the next installment

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Turley will never be an EU member. And if Merkel tries to push through visa-free travel, she’ll blow up the EU AND her own country.

Erdogan Says Turkey In ‘Endgame’ Over EU Membership (AFP)

President Recep Tayyip Erdogan on Saturday warned that Turkey had reached the “end of the game” over its decades-long EU membership bid, saying it was time for Brussels once and for all to make clear if it wanted Ankara as a member. In a hard-hitting speech marking the opening session of parliament, Erdogan also told Brussels it needed to allow Turks visa-free travel to the bloc by October, as per a previous agreement to decrease migrant flows. Relations between the EU and Turkey have strained in the wake of the July 15 failed coup, with EU officials among the most vocal critics of the relentless crackdown against the alleged plotters and supporters “If the EU is going to make Turkey a full member, we are ready. But they should know that we have came to the end of the game,” Erdogan said in a televised speech in Ankara.

“There is no need to beat around the bush or engage in diplomatic acrobatics. “It’s their (the EU’s) choice to continue the path with or without Turkey. They should not hold us responsible,” he added. Erdogan said that October would be an important month in Turkey’s relations with the European Union and that “it is necessary” that visa-free travel for Turks to the Schengen Area comes into force this month. Under a March deal, Turks were to gain visa-free travel in exchange for Ankara helping reduce the flow of migrants to Europe. However the visa plan as stumbled over Turkey’s anti-terror laws. Turkey’s bid to join the EU dates back to the 1960s with formal talks starting in 2005. So far, only 16 chapters of the 35 chapter accession process have been opened for Turkey.

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Afraid he himself will be sued. But then, so are many Americans.

Erdogan Slams US Congress Over Saudi 9/11 Law (AFP)

Turkish President Recep Tayyip Erdogan condemned Saturday a US Congress vote to override Barack Obama’s veto of a bill allowing 9/11 victims to sue Saudi Arabia, saying he expected the move to be reversed as soon as possible. Relations between Ankara and Riyadh have tightened considerably in the past months as they pursue joint interests in Syria. Erdogan had just the day earlier hosted Saudi Crown Prince Mohammed bin Nayef for talks at his palace. “The allowing by the US Congress of lawsuits to be opened against Saudi Arabia over the 9/11 attacks is unfortunate,” Erdogan said in a speech for the opening of parliament.

“It’s against the principle of individual criminal responsibility for crimes. We expect this false step to be reversed as soon as possible,” he added. Families of 9/11 victims have campaigned for the law, convinced the Saudi government had a hand in the attacks that killed almost 3,000 people. Fifteen of the 19 hijackers were Saudi citizens, but no link to the government has been proven. The Saudi government denies any ties to the plotters. Obama called the vote a “dangerous precedent” while Saudi Arabia warned it risked having “disastrous consequences”.

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Western Europe has utterly failed to see how different eastern European, formerly Soviet-block, nations are from them.

Hungary Votes On Government’s Rejection Of EU Refugee Quotas (AP)

Hungarians were voting Sunday in a referendum called by Prime Minister Viktor Orban’s government to seek support for its opposition to any future, mandatory EU quotas for accepting relocated asylum seekers. The government’s position is expected to find wide support among voters, though there was uncertainty whether turnout would exceed the 50% plus-one-vote threshold needed for the referendum to be valid. The referendum asks: “Do you want the European Union to be able to prescribe the mandatory settlement of non-Hungarian citizens in Hungary even without the consent of Parliament?” Orban has argued that “No” votes favor Hungary’s sovereignty and independence. If that position secures a majority of ballots, Hungary’s parliament would pass legislation to bolster the referendum’s goal whether or not turnout was sufficient for a valid election, he said.

Orban also said he would resign if the “Yes” votes won, but the vow was seen mostly as a ploy to boost turnout by drawing his critics to the polls. “The most important issue next week is for me to go to Brussels, hold negotiations and try with the help of this result — if the result if appropriate— achieve for it not to be mandatory to take in the kind of people in Hungary we don’t want to,” Orban said after casting his vote in an elementary school in the Buda hills. Orban, who wants individual EU member nations to have more power in the bloc’s decision-making process, said he hopes the anti-quota referendums would be held in other countries. “We are proud that we are the first” he said. “Unfortunately, we are the only ones in the European Union who managed to have a (referendum) on the migrant issue. I would be happy to see other countries to follow.”

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“..Greece has plenty of uninhabited islands, and big foreign debt. So if you have ‘hotspots’ in Greek islands, this would be a sort of payment of foreign debt..”

Czech President Calls For Deportation Of Economic Migrants (Pol.)

Czech President Milos Zeman has called for economic migrants arriving in Europe to be deported to “empty places” in North Africa or “uninhabited Greek islands.” “I am for deportation of all economic migrants,” Zeman said. “Of course I respect the cruelty of civil war in Syria, Iraq, and so on. But we do not speak about those people, we speak about economic migrants.” “We are in Greece, and Greece has plenty of uninhabited islands, and big foreign debt. So if you have ‘hotspots’ in Greek islands, this would be a sort of payment of foreign debt,” Zeman told the FT in an interview published on Sunday. He added that he is “sure there is a strong connection between the wave of migrants and the wave of jihadis … And those people who deny this connection are wrong.” The Czech president has been condemned for making Islamophobic remarks in the past.

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It was Germany that last year declared Dublin null and void. They will say that was only temporaray, but regulations like this are not light switches that selected parties can flick on and off when it suits them.

Greece is already little more than a greatly impoverished holding pen for the unwanted, and it threatens to fall much deeper into the trap. That’s why the Automatic Earth effort to support the poorest people is not just still needed, but more now than ever. We will soon start a new campaign to that end. In the meantime, please do continue to donate through our Paypal widget in amounts ending in $.99 or $.37.

Germany Interior Minister Urges Athens To Implement Dublin Rules (Kath.)

Germany Interior Minister Thomas de Maiziere has repeated his call for Greece to implement the so-called Dublin regulations, which state that migrants must seek asylum in the EU member-state they first arrived in. Due to deficiencies in Greece’s asylum processing system and the large number of migrants and refugees arriving in the country, Berlin has suspended deportations back to Greece since 2011. “The EU has since then provided financial and other support for Greek efforts, and given a lot of money to improve these conditions,” de Maiziere told Kathimerini. “That is why I would like to see the Dublin Convention implemented again,” he said. The German minister said Berlin recognized the burden shouldered by Greece in recent years. “But we still need a strategy to restore the legal situation,” he said, adding that the issue would be discussed at a meeting of interior ministers in October.

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Sep 052016
 
 September 5, 2016  Posted by at 9:44 am Finance Tagged with: , , , , , , , , ,  Comments Off on Debt Rattle September 5 2016


DPC Sternwheeler Mary H. Miller in Mississippi River floating dry dock, Vicksburg 1905

China, US Commit To Refrain From Currency Wars (R.)
China’s $3.9 Trillion Wealth-Management Product Boom Seen Cooling (BBG)
China Banks Play Catch Up With Capital Raising As Bad Loans Soar (BBG)
Stiglitz: “Cost Of Keeping Euro Probably Exceeds Cost Of Breaking It Up” (LSE)
Hanjin Shipping Shares Drop 30% As It Seeks Stay Orders In 43 Countries (BBG)
Japan’s Long-Term Bonds Add To Worst Rout Since 2013 (BBG)
BOJ’s Kuroda Says Room For More Easing, Including New Ideas (R.)
EU Finds Volkswagen Broke Consumer Laws In 20 Countries (R.)
The Greater Depression (Quinn)
The Ultimate 21st Century Choice: OBOR Or War (Escobar)
EU Will Not Release More Bailout Money For Greece This Month (R.)
Hungary Police Recruit ‘Border-Hunters’ To Keep Migrants Out (BBC)
Overnight Clashes At Lesvos Refugee Center (Kath.)
9,000-Year-Old Stone Houses Found On Australian Island (G.)
World’s Largest Gorillas ‘One Step From Going Extinct’ (AFP)

 

 

Sure. We believe you.

China, US Commit To Refrain From Currency Wars (R.)

China and the United States on Sunday committed anew to refrain from competitive currency devaluations, and China said it would continue an orderly transition to a market-oriented exchange rate for the yuan. A joint “fact sheet”, issued a day after U.S. President Barack Obama and his Chinese counterpart Xi Jinping held talks, also said the two countries had committed “not to unnecessarily limit or prevent commercial sales opportunities for foreign suppliers of ICT (information and communications technology) products or services”. While China and the United States cooperate closely on a range of global issues, including North Korea’s disputed nuclear program and climate change, the two countries have deep disagreements in other areas, like cyberhacking and human rights.

Both countries said they would “refrain from competitive devaluations and not target exchange rates for competitive purposes”, the fact sheet said. Meanwhile, China would “continue an orderly transition to a market-determined exchange rate, enhancing two-way flexibility. China stresses that there is no basis for a sustained depreciation of the RMB (yuan). Both sides recognize the importance of clear policy communication.” China shocked global markets by devaluing the yuan in August 2015 and allowing it to slip sharply again early this year. Though it has stepped in to temper losses in recent weeks, the currency is still hovering near six-year lows against the dollar.

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Only when Beijing can locate another bubble to blow.

China’s $3.9 Trillion Wealth-Management Product Boom Seen Cooling (BBG)

China’s multi-trillion dollar boom in wealth-management products, under scrutiny around the world because of potential threats to financial stability, is set to cool as yields fall on tighter regulation, according to China Merchants Securities analyst Ma Kunpeng. Ma cited a “significant slowdown” in the products’ growth in the first half and said that WMPs may shrink in the future, with money flowing elsewhere. Banks have started to lower yields on WMPs in preparation for requirements for funds to be held in third-party custody, the analyst said, adding that such a change may be implemented over six months to a year. Currently, lenders can use newly invested money to pay off maturing products. The Chinese government and agencies including the IMF are focused on potential risks from WMPs that rose to a record 26.3 trillion yuan ($3.9 trillion) as of June 30.

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Have investors, who are mostly domestic, buy your banks’ bad debt. This is just shifting the rotten fish from the right pocket to the left.

China Banks Play Catch Up With Capital Raising As Bad Loans Soar (BBG)

China’s banks, which dialed down fundraising efforts this year even as bad debts swelled, are making up for lost time. Both lenders and the companies set up to acquire their delinquent assets are bolstering their finances. China Citic Bank last month announced plans to raise as much as 40 billion yuan ($6 billion), while Agricultural Bank of China, Industrial Bank and China Zheshang Bank are also boosting capital. China Cinda Asset Management and China Huarong Asset Management are poised to tap investors. “Chinese banks are preemptively raising capital while pricing remains favorable in order to tackle higher loan impairments,” said Nicholas Yap at Mitsubishi UFJ Securities in Hong Kong.

“Additionally, the mid- and small-sized lenders also need to boost their capital levels as they have been growing their asset bases rapidly, largely through their investment receivables portfolios.” Chinese banks have strained their finances with the busiest first-half lending spree on record, despite having the highest amount of bad debt in 11 years. Still, completed offerings of hybrid capital declined 38% after two consecutive years of record fundraising. A rule change in April that requires lenders to make full provisions for loan rights they have transferred is also encouraging the fundraising. BNP Paribas said Chinese lenders may be assessing the right time to approach investors.

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You have to specify who’s going to pay that cost, Joe.

Stiglitz: “Cost Of Keeping Euro Probably Exceeds Cost Of Breaking It Up” (LSE)

Can the euro be saved? In an interview with Artemis Photiadou and EUROPP’s editor Stuart Brown, Nobel Prize-winning economist and bestselling author Joseph Stiglitz discusses the structural problems at the heart of the Eurozone, why an amicable divorce may be preferable to maintaining the single currency, and how European leaders should respond to the UK’s vote to leave the EU. Your new book, The Euro: And its Threat to Europe, outlines the problems at the heart of the euro and their effects on European economies. Can the euro be saved?

The fundamental thesis of the book is that it is the structure of the Eurozone itself, not the actions of individual countries, which is at the root of the problem. All countries make mistakes, but the real problem is the structure of the Eurozone. A lot of people say there were policy mistakes – and there have been a lot of policy mistakes – but even the best economic minds in the world would have been incapable of making the euro work. It’s fundamentally a structural problem with the Eurozone. So are there reforms that could make the euro work? Yes, I think there are and in my book I talk about what these reforms would be. They are not that complicated economically, after all the United States is made up of 50 diverse states and they all use the same currency so we know that you can make a currency union work. But the question is, is there political will and is there enough solidarity to make it work?

There is an argument that even if the euro was a mistake, the costs of breaking it up may be so severe that it is worth pushing for a reformed euro rather than pursuing what you call an ‘amicable divorce’. Are the benefits of a properly functioning euro worth the costs to get there? You are right. The question of whether you should form the union is different from whether you should break it up: history matters. I think it’s pretty clear now that it was a mistake to start the euro at that time, with those institutions. There will be a cost to breaking it up, but whichever way you look at it, over the last 8 years the euro has generated enormous costs for Europe. And I think that one could manage the cost of breaking it up and that under the current course, the cost of keeping the Eurozone together probably exceeds the cost of breaking it up.

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Chapter 11.

Hanjin Shipping Shares Drop 30% As It Seeks Stay Orders In 43 Countries (BBG)

South Korea’s financial regulator said Hanjin Shipping will seek stay orders in 43 countries to protect its vessels from being seized, after its court receivership filing last week roiled companies’ supply chain before the year-end shopping season. Applications in 10 countries will be made this week and the remainder soon, the Financial Supervisory Commission said in a statement Monday. Hanjin Group, owner of the shipping line, should also take more action to account for the “chaos” caused to the shipping industry, FSC Chairman Yim Jong Yong said. Vessels of Hanjin – the world’s 7th-largest container carrier with a 2.9% market share – are getting stranded at sea and ports after the box carrier sought protection, hurting the supply of LG televisions and other consumer goods ahead of the holiday season.

Hanjin Shipping shares resumed trading Monday limit down 30% and later erased losses to rally as much as 18%. Any optimism may be misplaced, said Park Moo Hyun Hana Financial Investment in Seoul. “Retail investors are hoping for the best on false hopes,” Park said. “They think that government measures to help resolve the supply-chain disruptions could mean it’s also supporting Hanjin Shipping. They don’t seem to realize that that’s the wrong conclusion.” The commission said 79 of Hanjin’s vessels, including 61 container ships, have had their operations disrupted. Hanjin Group Chairman Cho Yang Ho and Korean Air Lines, the shipping company’s largest shareholder, should take steps to ease the disruptions, Yim said.

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Keep digging!

Japan’s Long-Term Bonds Add To Worst Rout Since 2013 (BBG)

Japanese long-term bonds fell, with 30-year debt adding to its biggest weekly loss in almost 2 1/2 years, as investors prepared to bid at an auction of the securities Tuesday. The rout is being driven by speculation the Bank of Japan will reduce its bond-buying program at its next policy meeting Sept. 20-21 now that it owns a third of the nation’s government debt. BOJ Governor Haruhiko Kuroda said Monday he doesn’t share the view there’s a limit to monetary easing. PIMCO said last month the central bank has pushed monetary policy as far as it can. “Unless Governor Kuroda directly rules out scaling back bond purchases, the market will continue to hold that as a possibility,” said Shuichi Ohsaki, the chief rates strategist at Bank of America’s Merrill Lynch unit in Tokyo. “Selling of longer-dated debt is likely ahead of tomorrow’s 30-year auction.”

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The whole notion that you’re going to try out ‘New Ideas’ kills off confidence, the one thing you know is needed.

BOJ’s Kuroda Says Room For More Easing, Including New Ideas (R.)

Bank of Japan Governor Haruhiko Kuroda signaled his readiness to ease monetary policy further using existing or new tools, shrugging off growing market concerns that the bank is reaching its limits after an already massive stimulus program. He also stressed the BOJ’s comprehensive assessment of its policies later this month won’t lead to a withdrawal of easing. But Kuroda acknowledged that the BOJ’s negative interest rate policy may impair financial intermediation and hurt public confidence in Japan’s banking system, a sign the central bank is becoming more mindful of the rising cost of its stimulus.

“Even within the current framework, there is ample room for further monetary easing … and other new ideas should not be off the table,” Kuroda told a seminar on Monday. “There may be a situation where drastic measures are warranted even though they could entail costs,” he said, adding that the BOJ should “always prepare policy options.” Under its current framework that combines negative rates with hefty buying of government bonds and some riskier assets, the BOJ has gobbled up a third of Japan’s bond market and faced criticism from banks for squeezing already thin profit margins.

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Slap that wrist!

EU Finds Volkswagen Broke Consumer Laws In 20 Countries (R.)

The European Commission has found that Volkswagen broke consumer laws in 20 European Union countries by cheating on emissions tests, German daily Die Welt reported, citing Commission sources. Among them are the Consumer Sales and Guarantees Directive – which prohibits companies from touting exaggerated environmental claims in their sales pitches – and the Unfair Commercial Practises Directive, both of which apply across the EU, the paper said. The European Commission said Industry Commissioner Elzbieta Bienkowska has repeatedly invited Volkswagen to consider compensating consumers voluntarily, without an encouraging response, and that it was for national courts to determine whether consumers were legally entitled to compensation.

To ensure consumers are treated fairly, a Commission spokeswoman said, Consumer Commissioner Vera Jourova had written to consumer associations across the EU to collect information. “She will meet relevant representatives in Brussels this week,” the spokeswoman wrote in an emailed response. Jourova has been working with consumer groups to pressure Volkswagen to compensate clients in Europe as it has in the United States over the diesel emissions scandal. Volkswagen has pledged billions of euros to compensate owners of VW diesel-powered cars, but has so far rejected calls for similar payments for the 8.5 million affected vehicles in Europe, where different legal rules weaken the chances of winning a pay out.

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Jim makes a good point: today’s food lines have turned digital.

The Greater Depression (Quinn)

It’s the black and white photographs of disheartened men and hungry children from the 1930’s that define the Great Depression for present day generations. Of course after years of government run social engineering disguised as education, most people couldn’t even define when or what constituted the Great Depression. These heart wrenching portraits of average Americans suffering and in despair capture the zeitgeist of the last Fourth Turning crisis. Apologists for the status quo contend the last eight years couldn’t possibly be classified as a depression. The narrative of economic recovery has been peddled by corporate media mouthpieces, feckless politicians, Too Big To Trust Wall Street bankers, Federal Reserve puppets, and government apparatchiks flogging manipulated data as proof of economic advancement. They point to the lack of soup lines as proof we couldn’t be experiencing a depression.

First of all, if there were soup lines, the corporate media would just ignore them. If they don’t report it, then it isn’t happening. Secondly, the soup lines are electronic, as the government downloads the “soup” onto EBT cards so JP Morgan can reap billions in fees to run the SNAP program. Just because there are no pictures of starving downtrodden Americans in shabby clothes waiting in soup lines, doesn’t mean the majority of Americans aren’t experiencing a depression. If the country has actually been experiencing an economic recovery for the last seven years, why would 14% to 15% of all Americans be dependent on food stamps to survive? When the economy is actually growing and employment is really below 5%, the%age of Americans on food stamps is below 8%.

If the government economic data was truthful, there would not be 43.5 million people living in 21.4 households (17% of all households) dependent on food stamps. More than 100 million Americans are now dependent on some form of federal welfare (not including Social Security or Medicare). If the economy came out of recession in the second half of 2009, why would 6 million more Americans need to go on welfare over the next two years?

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I don’t know, it’s an ambitious dream and all, but… Reading that $40 billion has been pledged for a $1.4 trillion project doesn’t help, I guess.

The Ultimate 21st Century Choice: OBOR Or War (Escobar)

The G20 meets in tech hub Hangzhou, China, at an extremely tense geopolitical juncture. China has invested immense political/economic capital to prepare this summit. The debates will revolve around the main theme of seeking solutions “towards an innovative, invigorated, interconnected and inclusive world economy.” G20 Trade Ministers have already agreed to lay down nine core principles for global investment. At the summit, China will keep pressing for emerging markets to have a bigger say in the Bretton Woods system. But most of all China will seek greater G20 backing for the New Silk Roads – or One Belt, One Road (OBOR), as they are officially known – as well as the new Asian Infrastructure Investment Bank (AIIB).

So at the heart of the G20 we will have the two projects which are competing head on to geopolitically shape the young 21st century. China has proposed OBOR; a pan-Eurasian connectivity spectacular designed to configure a hypermarket at least 10 times the size of the US market within the next two decades. The US hyperpower – not the Atlanticist West, because Europe is mired in fear and stagnation — “proposes” the current neocon/neoliberalcon status quo; the usual Divide and Rule tactics; and the primacy of fear, enshrined in the Pentagon array of “threats” that must be fought, from Russia and China to Iran. The geopolitical rumble in the background high-tech jungle is all about the “containment” of top G20 members Russia and China.

Shuttling between the West and Asia, one can glimpse, in myriad forms, the graphic contrast between paralysis and paranoia and an immensely ambitious $1.4 trillion project potentially touching 64 nations, no less than 4.4 billion people and around 40 per cent of the global economy which will, among other features, create new “innovative, invigorated, interconnected and inclusive” trade horizons and arguably install a post-geopolitics win-win era. An array of financial mechanisms is already in place. The AIIB (which will fund way beyond the initial commitment of $100 billion); the Silk Road Fund ($40 billion already committed); the BRICS’s New Development Bank (NDB), initially committing $100 billion; plus assorted players such as the China Development Bank and the Hong Kong-based China Merchants Holdings International.

Chinese state companies and funds are relentlessly buying up ports and tech companies in Western Europe – from Greece to the UK. Cargo trains are now plying the route from Zhejiang to Tehran in 14 days, through Kazakhstan and Turkmenistan; soon this will be all part of a trans-Eurasia high-speed rail network, including a high-speed Transiberian. The $46 billion China-Pakistan Economic Corridor (CPEC) has the potential to unblock vast swathes of South Asia, with Gwadar, operated by China Overseas Port Holdings, slated to become a key naval hub of the New Silk Roads. Deep-sea ports will be built in Kyaukphyu in Myanmar, Sonadia island in Bangladesh, Hambantota in Sri Lanka. Add to them the China-Belarus Industrial Park and 33 deals in Kazakhstan covering everything from mining and engineering to oil and gas.

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Greece gets punished for not inflicting more misery on its people fast enough.

EU Will Not Release More Bailout Money For Greece This Month (R.)

The euro zone will not release additional bailout money for Greece at a meeting in Bratislava this month, Germany’s Handelsblatt Global reported on Sunday, citing European Union diplomats. The online edition of the German business daily quoted the diplomats as saying that Athens had only implemented two of 15 political reforms that are conditions for the bailout money. Above all, they said, Greece had been slow to privatize state assets. Under a deal signed last year with the Troika, the ESM will provide financial assistance of up to €86 billion to Greece by 2018 in return for the agreed reforms.

The debt relief is due to be granted in tranches, including short-term measures to extend Greece’s debt, with a further reduction due after 2018 including interest deferrals and interest rate caps. Handelsblatt Global said the Eurogroup had approved a tranche of €10.3 billion for Greece in May from the overall package. An initial €7.5 billion of that sum had been transferred to Athens with the rest scheduled to arrive in the fall. The diplomats said the Eurogroup will only discuss a progress report on Greece at the Bratislava meeting. The comments came just days after the head of the euro zone’s bailout fund, the European Stability Mechanism (ESM) on Saturday said Greece could secure short-term debt relief measures “very soon” if it implements remaining reforms agreed under its bailout program.

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Civilized Europe.

Hungary Police Recruit ‘Border-Hunters’ To Keep Migrants Out (BBC)

The Hungarian police are advertising for 3,000 “border-hunters”, who will reinforce up to 10,000 police and soldiers patrolling a razor-wire fence built to keep migrants out. The new recruits, like existing officers, will carry pistols with live ammunition, and have pepper spray, batons, handcuffs and protective kit. The number of migrants reaching Hungary’s southern border with Serbia has stagnated, at fewer than 200 daily. The new guards will start work in May.\ The recruits will have six months’ training, they must be over 18, physically fit and must pass a psychological test, police officer Zsolt Pozsgai told Hungarian state television. Monthly pay will be 150,000 forint ($542) for the first two months, then 220,300 forint.

Hungary is in the grip of a massive publicity campaign, launched by Prime Minister Viktor Orban’s right-wing government ahead of a 2 October referendum. Voters will be asked to oppose a European Commission proposal to relocate 160,000 refugees more fairly across the 28-nation EU. Under the EU scheme, Hungary has been asked to take 1,300 refugees. The relocation programme is for refugees from Syria, Iraq and Eritrea. Currently 30 migrants are allowed into Hungary each day through official “transit zones”.

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Inevitable when far too many people are forced into far too few places, over prolonged periods of absolute uncertainty about their fate. Though children assaulting children is a new depth. Our friend Kostas says these things originate almost always in a lack of food. The solution is simple: EU countries should live up to their promises regarding refugee relocation.

Overnight Clashes At Lesvos Refugee Center (Kath.)

Authorities say clashes have broken out between rival ethnic groups of refugees and other migrants at a detention camp on the eastern Aegean Sea island of Lesvos. The trouble at the Moria hot spot started shortly after midnight in a wing of the camp where minors are held and then spread, authorities said, adding that child refugees from Syria had been assaulted by a group of Afghan children. An unspecified number of children were injured while about 40 of them escaped into nearby fields. Order was restored around 4 a.m. after intervention by riot police. Authorities were trying to locate the missing children. Nearly 5,000 migrants and refugees are currently sheltered on the islands of Lesvos. Local authorities are demanding immediate government action to decongest overcrowded migrant facilities.

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Australia’s ancient civilizations were way ahead of anyone else.

9,000-Year-Old Stone Houses Found On Australian Island (G.)

Archeologists working on the Dampier archipelago off Australia’s north-west coast have found evidence of stone houses dating back 9,000 years – to the end of the last ice age – building the case for the area to get a world heritage listing. Circular stone foundations were discovered in a cave floor on Rosemary Island, the outermost of 42 islands that make up the archipelago. The islands and the nearby Burrup peninsula are known as Murujuga – a word meaning “hip bones sticking out” – in the language of the Ngarluma people. Prof Jo Mcdonald, director of the Centre for Rock Art Research and Management at the University of Western Australia, said the excavations showed occupation was maintained throughout the ice age and the period of rapid sea level rise that followed.

“Around 8,000 years ago, it would have been on the coast,” McDonald told Guardian Australia. “This is the time that the islands were starting to be cut off and it’s a time when people were starting to rearrange themselves.” The sea level on Australia’s north-west coast rose 130 metres after the end of the ice age, at a rate of about a metre every five to 10 years. “In people’s lifetimes they would have seen loss of territory and would have had to renegotiate – a bit like Miami these days,” McDonald said. The placement of the stone structures indicated how that sudden space restriction was managed, she said. “The development of housing is really significant in terms of understanding how people actually divided up their space and lived in close proximity to each other in times of environmental stress.”

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“..we are wiping out some of our closest relatives..”

World’s Largest Gorillas ‘One Step From Going Extinct’ (AFP)

The world’s largest gorillas have been pushed to the brink of extinction by a surge of illegal hunting in the Democratic Republic of Congo, and are now critically endangered, officials said Sunday. With just 5,000 Eastern gorillas (Gorilla beringei) left on Earth, the majestic species now faces the risk of disappearing completely, officials said at the International Union for Conservation of Nature’s global conference in Honolulu. Four out of six of the Earth’s great apes are now critically endangered, “only one step away from going extinct,” including the Eastern Gorilla, Western Gorilla, Bornean Orangutan and Sumatran Orangutan, said the IUCN in an update to its Red List, the world’s most comprehensive inventory of plant and animal species. Chimpanzees and bonobos are listed as endangered.

“Today is a sad day because the IUCN Red List shows we are wiping out some of our closest relatives,” Inger Andersen, IUCN director general, told reporters. War, hunting and loss of land to refugees in the past 20 years have led to a “devastating population decline of more than 70%,” for the Eastern gorilla, said the IUCN’s update. One of the two subspecies of Eastern gorilla, known as Grauer’s gorilla (G. b. graueri), has drastically declined since 1994 when there were 16,900 individuals, to just 3,800 in 2015. Even though killing these apes is against the law, hunting is their greatest threat, experts said. The second subspecies of Eastern gorilla – the Mountain gorilla (G. b. beringei) – has seen a small rebound in its numbers, and totals around 880 individuals.

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 September 23, 2015  Posted by at 8:54 am Finance Tagged with: , , , , , , , , , ,  


Arthur Rothstein President Roosevelt tours drought area near Bismarck, ND 1936

Signs Point To Deepening China Distress (FT)
Shadow Finance Expansion by Chinese Banks Deepens Credit Mystery (Bloomberg)
China Flash PMI Falls To Lowest Since May 2009 (CNBC)
China’s Workers Stumble as Factories Stall (WSJ)
Xi Jinping Defends China Stock Market Interventions On First US Visit (Guardian)
China Has A Message Markets Don’t Understand (CNBC)
VW Scandal Caused Nearly 1 Million Tonnes Of Extra Pollution (Guardian)
California Tests To Include Larger Diesel Engines From Audi, Porsche (Reuters)
VW Emissions Fallout Spreads To Asia (FT)
VW Emissions Investigations To Widen to Entire Auto Industry (WSJ)
VW Emissions Cheating Affects 11 Million Cars Worldwide (WaPo)
Europe Stumbles Towards A Migrant Plan (BBC)
EU’s East-West Rift Exposed In Refugee-Sharing Plan (Reuters)
Hungary Mobilizes Troops, Prisoners, Jobless To Fence Out Refugees (Reuters)
Hollande Wrongfooted on Refugee Surge, Fearing Le Pen’s Rise (Bloomberg)
The Fed Just Made A Gigantic Mess (CNBC)
Economic Policy Often Seems To Have Little To Do With Economists. Why? (Ind.)
English Farmland Prices Double In Five Years (Guardian)
Alaska Fossil Find Points To New ‘Lost World Of Dinosaurs’ (Guardian)

“Suddenly, the debate in China has shifted from a perception of too much money sloshing round and too many reserves earning meagre returns, to a concern about the adequacy of reserves given the extent of debt — much of it hidden.”

Signs Point To Deepening China Distress

China’s foreign exchange reserves fell alarmingly in August, anywhere from $94bn to as much as $150bn according to various calculations. That was just another in a series of dramatic data points that are leading to an increasing sense both within the Middle Kingdom and without that all is not well. For a long time now many hedge funds have been short Macau, once the main beneficiary of both the Chinese propensity to gamble and the rise of China as a market for luxury goods. Then the anti-corruption campaign put a big chill on the junkets to the former Portuguese enclave, as it did on sales of everything from Rolex watches to shark fin soup and abalone in top restaurants. But now there is another strand to the story.

Macau has long been one of the more porous parts of the wall meant to keep capital flows in and out of China under strict control. For example, those who wanted to get significant amounts of money out of China would purchase a dozen watches, using their renminbi credit cards, only to return the time pieces instantly and receive cash refunds, with a discount for the jeweller’s trouble. The currency would then be converted and go straight into bank accounts and investments abroad. Today, the thesis of hedge fund managers putting on the Macau trade is that regulators will tighten up on such practices, causing further damage to Macau’s wounded economy. Suddenly, the debate in China has shifted from a perception of too much money sloshing round and too many reserves earning meagre returns, to a concern about the adequacy of reserves given the extent of debt — much of it hidden.

After all, the downdraft in the stock market was all about the use of borrowed money, invisible to regulators and almost everyone else. Meanwhile, the capital flows out of China continue. It is difficult to calculate what is prudent diversification and what is capital flight. At the same time, more alarmingly, the signs of distress in the real economy are deepening, with ripple effects far beyond the mainland. Greek shipyards, for example, report that the yards in China are desperately discounting the containers they construct. The Chinese shipbuilders have to discount to compensate for the fact they are competing against builders whose currencies have fallen dramatically against the renminbi.

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Assessing China without including the shadows is of no use at all.

Shadow Finance Expansion by Chinese Banks Deepens Credit Mystery (Bloomberg)

China’s riskier banks are investing more customer funds in financing that is kept off their loan books, making it harder for rating companies to gauge their asset quality. There has been a surge in a balance-sheet item known as receivables, which often includes shadow funding such as trusts and wealth products, said Moody’s Investors Service. Fitch Ratings said it is hard to analyze this escalation in activity. Listed banks excluding the Big Four saw short-term investments and other assets – which include receivables – jump 25% in the first half, compared with total asset growth of 12%, data compiled by Bloomberg show. Slower growth in the world’s second-largest economy coupled with “still significant” credit expansion prompted Standard & Poor’s to cut its view of the banking industry’s economic risk to negative from stable this week.

Shadow-finance assets, estimated at 41 trillion yuan ($6.4 trillion) by Moody’s at the end of 2014, have become more attractive as five interest-rate cuts by the central bank since November curbed profits from lending. “Our concern with some of these investment positions is banks are using them as a way to bypass lending restrictions,” said Grace Wu at Fitch in Hong Kong. “Unlike bank loans, they don’t get reported into loan provisions, so it’s more difficult for us to ascertain the asset quality.” The opacity of Chinese banks’ credit exposure helps explain why they are priced as if investors are expecting a nonperforming loan ratio of 10 to 12% next year, which would mark a “sizeable credit crisis” in other countries, according to Wei Hou at Sanford C. Bernstein.

The reported ratio is 1.5%, according to the China Banking Regulatory Commission. The nation’s shadow-banking industry emerged as a way for creditors to circumvent lending restrictions and for savers to attain yields higher than the legally capped deposit rate. It includes trusts, asset-management plans and wealth-management products, which package loans into products for buyers.

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As long as Xi is in the US, the homefront will keep things smooth and quiet. But this number points to contraction, even as Xi just reiterated growth is at 7%.

China Flash PMI Falls To Lowest Since May 2009 (CNBC)

The preliminary Caixin China manufacturing purchasing managers’ index (PMI) fell to a six-and-a-half-year low of 47.0 in September, below the 47.5 forecast in a Reuters poll. This compares with a final reading of 47.3 in August, the lowest since March 2009. A print above 50 indicates an expansion in activity while one below points to a contraction. The closely-watched gauge of nationwide manufacturing activity focuses on smaller and medium-sized companies, filling a niche that isn’t covered by the official data. The decline in the flash PMI was mainly led by the new orders and new export orders sub-indexes, suggesting weak domestic and external demand. The new orders sub-index fell 0.6 percentage points to 46.0 in September, while the new export orders sub-index slipped 0.8percentage points to 45.8.

Wednesday’s data weighed on investor sentiment in Asia, with stock indices in Sydney and Seoul widening losses to more than 1% each in the morning trading session. China stocks, however, trimmed losses to 0.9%, from an over 1% decline at the open. “The principle reason for the weakening of manufacturing is tied to previous changes in factors related to external demand and prices,” said He Fan at Caixin Insight Group. “Fiscal expenditures surged in August, pointing to stronger government efforts on the fiscal policy front. Patience may be needed for policies designed to promote stabilization to demonstrate their effectiveness,” he added. A recent run of disappointing data has raised concerns around the health of China’s economy, leading several banks and international institutions to pare growth forecasts for the country.

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“..roughly 55% of China’s 1.37 billion people now live in cities, compared with just under 18% in 1978…”

China’s Workers Stumble as Factories Stall (WSJ)

For decades, an army of migrant workers drove China’s boom times, flocking to its cities to sew T-shirts, assemble iPhones, or build apartment blocks and Olympic stadiums. The arrangement helped millions of poor, rural Chinese join a new consumer class, though many also paid a heavy price. Now, many migrant workers struggle to find their footing in a downshifting economy. As factories run out of money and construction projects turn idle across China, there has been a rise in the last thing Beijing wants to see: unrest. In Xiguozhuang, a village among cornfields some 155 miles south of Beijing, it had been rare to see working-age men for much of the year. This year, however, many of the men are at home, sidelined by a fading property boom.

“Times are tough now,” said Wang Hongxing, a 39-year-old father of three who has worked at building sites across China’s northeast since his teens, but who has spent the past two months tending his farmland plot. “There are too many workers and wages are dropping.” But for other migrants, especially those of a younger generation who took jobs in factories along China’s coast, a return to farming isn’t an option. Nor do they necessarily want to join the service sector China sees as a cornerstone in its shift to a new economic model. Wang Chao dropped out of school when he was 15 and left his home in Anhui province. After a series of jobs up and down China’s east coast, he felt he had struck gold with a job in a textile factory near his hometown.

The factory closed in July. Mr. Wang, now 19, and other workers gathered recently outside the factory premises to demand back wages. He says he is owed two months’ pay, or about 2,000 yuan, or $320. The owner of the factory, which produces cheap trousers, told workers he is in deep debt and can’t afford to pay them. He couldn’t be reached to comment. Mr. Wang hopes he can find another factory job. In Shanghai, he worked in a restaurant but doesn’t want to do that again. “Factory work is so much more comfortable in comparison, and better paid,” he said. As a result of a rural-to-urban flow that many scholars say is likely the largest in history, roughly 55% of China’s 1.37 billion people now live in cities, compared with just under 18% in 1978.

The migrant workforce now numbers some 274 million but the pace of its expansion has slowed, and many economists believe China now faces a shortage of unskilled labor in urban areas. A mismatch of workers’ skills and aspirations with actual labor demand has exacerbated the problem. “There’s a broad structural imbalance in China’s labor market—a shortage of low-end labor and surfeit of high-end workers,” said Peng Xizhe, professor of population and development at Fudan University in Shanghai. “In China’s job market today, we see university graduates struggling to find work, while employers are finding it hard to fill traditional blue-collar positions.”

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“Xi peppered his speech with US cultural references from Sleepless in Seattle and House of Cards to Henry David Thoreau, Walt Whitman, Ernest Hemingway..”

Xi Jinping Defends China Stock Market Interventions On First US Visit (Guardian)

China’s president, Xi Jinping, has sought to reassure global concern about the world’s second-largest economy, defending his government’s actions in the stock market and saying growth will be maintained. “China’s economy will stay on a steady course with fairly fast growth. It’s still operating in a proper range with a growth rate of 7% … Our economy is under pressure but that is part of the path on the way toward growth,” the Chinese president said in a speech in Seattle on Tuesday, the first day of his state visit to the US. The president defended his government’s intervention into the country’s stock market saying the “recent abnormal ups and downs” in the market had now reached “a phase of self-recovery”.

Xi also reiterated there was no basis for continuing depreciation of the renminbi, saying Beijing was opposed to currency wars and would not devalue yuan to boost exports. World markets experienced more than a month of volatility after China devalued its currency, fuelling concerns about the state of the world’s No 2 economy. Intervention from authorities into the country’s bourses also added to worries Beijing had lost control over the economy. But just minutes after the speech, fresh data showed renewed signs of weakness in the Chinese economy with the Caixin China manufacturing flash PMI coming in at 47, the lowest since March 2009. [..]

Xi peppered his speech with US cultural references from Sleepless in Seattle and House of Cards to Henry David Thoreau, Walt Whitman, Ernest Hemingway – saying he once ordered a Mojito at El Floridita in Havana to better understand Hemingway and Cuba. Dismissing speculation that his sweeping anti-corruption campaign was about factional infighting, Xi said “We have punished tigers and flies. It has nothing to do with power struggles. In this case there is no House of Cards.”

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Or they understand it all too well.

China Has A Message Markets Don’t Understand (CNBC)

China may be compounding its own problems by the way its leaders talk about them. With the country’s growth a concern for global markets, investors are trying to fathom the depth of China’s economic issues and understand what authorities are doing. Analysts say it is difficult to discern what’s really going on there and that the economy has always been difficult to measure. Ahead of his U.S. visit that kicked off Tuesday, Chinese President Xi Jinping said in an interview with The Wall Street Journal that recent intervention in capital markets was necessary or normal and that China is still on track to transform its economy. “I think they are mostly nothing new and simply a repeat of what other officials have said,” Ilya Feygin, managing director at WallachBeth Capital, said of Xi’s comments.

Sticking to policy lines casts doubt for many on whether Chinese leaders have a grip on maneuvering the country’s economic transition in a way that doesn’t shock global markets more than it already has. “I think it’s a combination of missteps that add up to a lot of worries, capacity of the Chinese government to manage its economy through a very challenging environment and not making it worse,” said Scott Kennedy of the Center for Strategic and International Studies. “It begins with their intervention to push up their stock market last year.” Rapid-fire policy changes in the last few months have befuddled outsiders on Chinese leaders’ intentions, which raise real concern on whether the world’s second-largest economy can make a timely transition from a manufacturing hub to a consumer-oriented system.

“The point is to recognize there’s a structural transition going on,” said Arthur Kroeber, head of research at Gavekal Dragonomics. “And the problem we have is the data we have on the bad part of the economy is actually pretty developed. The data on services (is) much better but fuzzier.” Most of the economic reports still focus on manufacturing-related aspects of the economy, such as electricity use and the producer price index. Data such as the Caixin nonmanufacturing PMI provide some light on services, which continued to hold above the 50 expansion/contraction line in August. Manufacturing PMI fell below that line.

Growth in the services sector has outpaced that of the manufacturing sector in the last year and a half, according to the latest National Bureau of Statistics of China data compiled by Wind information. Amid the transition, questions also surround the accuracy of China’s reports on headline GDP growth. The official figure is 7%, the slowest in more than two decades In a report Tuesday, the Asian Development Bank lowered its forecast for Chinese growth in 2015 to 6.8% from 7.2% previously. Other analyst estimates range from 2 to 4 percentage points lower.

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“..roughly the same as the UK’s combined emissions for all power stations, vehicles, industry and agriculture..”

VW Scandal Caused Nearly 1 Million Tonnes Of Extra Pollution (Guardian)

Volkswagen’s rigging of emissions tests for 11m cars means they may be responsible for nearly 1m tonnes of air pollution every year, roughly the same as the UK’s combined emissions for all power stations, vehicles, industry and agriculture, a Guardian analysis suggests. The potential scale of the scandal puts further pressure on Volkswagen’s board and its chief executive, Martin Winterkorn. The company’s executive committee plans to meet on Wednesday to discuss the affair and to agree the agenda of a full board meeting scheduled for Friday, amid reports that Winterkorn could be replaced. The carmaker has recalled 482,000 VW and Audi brand cars in the US after the Environmental Protection Agency (EPA) found models with Type EA 189 engines had been fitted with a device designed to reduce emissions of nitrous oxides (NOx) under testing conditions.

A Guardian analysis found those US vehicles would have spewed between 10,392 and 41,571 tonnes of toxic gas into the air each year, if they had covered the average annual US mileage. If they had complied with EPA standards, they would have emitted just 1,039 tonnes of NOx each year in total. The company admitted the device may have been fitted to 11m of its vehicles worldwide. If that proves correct, VW’s defective vehicles could be responsible for between 237,161 and 948,691 tonnes of NOx emissions each year, 10 to 40 times the pollution standard for new models in the US. Western Europe’s biggest power station, Drax in the UK, emits 39,000 tonnes of NOx each year. [..] For years, UK air pollution measurements have failed to show improvements in air quality, even as standards have tightened.

“Since 2003 scientists have been saying things are not right. It’s not just the VW story, this is part of something much bigger,” said Dr Gary Fuller of King’s College. “It has a serious public health impact.” Last week, a report from NGO Transport & Environment found that Europe’s testing regime was allowing nine out of every 10 new diesel vehicles to breach EU limits. Testing regimes in the EU are known to fail to pick up “real world” emissions because cars are not driven in the same way in the laboratory as on the road. Some studies suggest the discrepancy may be up to seven times the legal limit. Williams said being able to mask their NOx emissions would also enable carmakers to pass carbon emissions tests more easily as there was a trade-off between NOx and CO2 in diesel engines.

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Bets are open on this one.

California Tests To Include Larger Diesel Engines From Audi, Porsche (Reuters)

The California Air Resources Board will broaden its testing of Volkswagen cars with diesel engines to include those with 3.0-liter V6 engines sold by two subsidiaries, a spokesman for the state regulator said on Tuesday. The latest models to be examined are the Porsche Cayenne and the Audi A6, Stanley Young, communications director for the Air Resources Board, told Reuters. Volkswagen said on Tuesday that engine software connected with a scandal over falsified U.S. vehicle emission tests could affect 11 million of its cars worldwide as investigations of its diesel models multiplied. The California Air Resources Board’s testing uncovered software in several Volkswagen models that allowed the company to cheat state and federal emissions requirements by switching performance levels between testing and real-world conditions.

“That investigation looked at two-liter four-cylinder engines,” said Young. “Now we’re going to start looking at six-cylinder, three-liter diesel engines.” Young said VW engineers acknowledged the use of a so-called defeat device – in fact, a software algorithm – to circumvent state and federal emissions standards during a Sept. 3 meeting in the board’s El Monte, California testing headquarters, attended by senior engineering executives of the regulator and the car company. It was the 10th meeting between the two sides, called by CARB to resolve the discrepancy between pollution levels measured on the road and those obtained under controlled testing conditions. “They literally ran out of excuses,” Young said, describing the meeting in which the car manufacturer “admitted there was a defeat device.”

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It’ll have to be worldwide. Wouldn’t it be funny if test results vary greatly?

VW Emissions Fallout Spreads To Asia (FT)

South Korea’s environment ministry said it would investigate the emissions compliance of Volkswagen’s diesel cars, as the fallout for the German carmaker after its admission that it rigged US emissions tests spread to Asia. The announcement on Tuesday came a day after Germany called for a probe into the matter, confirming fears Volkswagen’s trouble was unlikely to be confined to the US and that breaches could have occurred in other regions. The US Environmental Protection Agency on Friday ordered the world’s second-biggest carmaker to recall nearly 500,000 cars in the US after it admitted that it had fitted “defeat devices” to bypass environmental standards.

In the first public appearance by a senior executive since the scandal emerged, Michael Horn, VW’s US chief executive, said at an event in New York on Monday that the carmaker had “screwed up”, vowing to fix the vehicles involved and ensure no repetition. Seoul’s environment ministry said it would conduct emissions tests on 4,000-5,000 of VW’s Jetta and Golf models and the Audi A3 sedan that were imported into South Korea since 2014. “We will review if the three car models sold here show the same problems as those in the US, although the carmaker says its cars here have no such problems,” said Park Pan-kyu, the ministry’s deputy director. “We plan to complete the investigation within two months and will come up with punitive measures if any problems are found.

“If South Korean authorities find problems in VW diesel cars, the probe could be expanded to all German diesel cars,” he said. If the cars are found to have breached air pollution standards, the ministry could issue a recall order for vehicles already sold in the country, or order the German carmaker to stop domestic sales of problematic models. It could also impose a maximum Won1bn ($850,000) fine on each model. The ministry said any punitive measures would be levied in consultation with the German government, in keeping with the Korea-EU trade agreement.Volkswagen is one of the best-selling foreign brands in South Korea. VW and Audi accounted for nearly 30% of all foreign cars sold in the country in the first eight months of this year, and more than 90% of the roughly 25,000 vehicles VW sold were diesel models.

Shares in South Korean carmakers Hyundai Motor and affiliate Kia Motors rose more than 3% on Tuesday, on the view that Asian competitors could benefit at VW’s expense. “Volkswagen’s brand value is expected be hit by this issue as its strong diesel engine technology has been the backbone of its brand recognition,” said Yim Eun-young, analyst at Samsung Securities. “This could lead to gains for Hyundai and Kia, which are competing with Volkswagen in the sedan segment.”

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As I said yesterday, if VW couldn’t even come close to required emissions, what are the odds others could?

VW Emissions Investigations To Widen to Entire Auto Industry (WSJ)

Investigations into Volkswagen’s alleged manipulation of U.S. emissions tests should widen to include the entire auto industry, German and French officials said Tuesday, as regulators begin to ponder whether such deception is widespread. Calls for a broader probe came as Italy opened an investigation into the issue and a spokesman for the European Union said its regulators would soon meet with national authorities to discuss how to address the Volkswagen crisis. Concerns that the scandal could lead to broader damage for the industry hit the shares of car companies across Europe on Tuesday and those losses accelerated after Volkswagen warned that 11 million vehicles could be affected.

Shares in Volkswagen dived as much as 23% while those of Daimler AG dropped 5.5% and BMW AG slumped 5.4%. In France, Renault SA dropped 6.3% and PSA Peugeot Citroën was down 8.6%. The state of Lower Saxony, a major Volkswagen shareholder with 20% of the car maker’s voting stock, said the emissions allegations raised doubts about tailpipe data published by all car makers. The French government also called for a broader probe, suggesting a European-wide examination of the auto industry. “We need to do it at the European level,” French Finance Minister Michel Sapin said Tuesday.

In Germany, Olaf Lies, Lower Saxony’s economy minister and a member of the Volkswagen’s supervisory board, called for a wider probe and said investigations into the scandal would have consequences for any executives found guilty of deliberate manipulation. “I am convince that everyone is going to become intensely interested in knowing whether the emissions values that have been measured are the real emissions levels,” he said. “This question will not only affect Volkswagen, but the entire public debate and will certainly play a role at other companies.”

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“The only way to change auto company behavior is to put the responsible executives in jail..”

VW Emissions Cheating Affects 11 Million Cars Worldwide (WaPo)

The deception perpetrated by Volkswagen in the United States reaches around the globe, with about 11 million cars worldwide equipped with software designed to cheat emissions tests, the company said Tuesday. The automaker said it will set aside $7.3 billion to cover fixes and other efforts to win back the trust of our customers. That amount is likely to fall many times short of the actual costs, including car repairs, lawsuits and government penalties around the world. Exactly what alterations are necessary on all of those cars is unknown, and independent engineers said it could be extremely difficult to repair the emissions systems without harming engine efficiency and performance. None could offer what they deemed a reliable estimate of the cost of a potential repair.

“In my German words, we have totally screwed up”, Volkswagen s U.S. chief, Michael Horn, said at an event in Brooklyn late Monday night. The broad scale of the deception suggests that knowledge of the emissions cheating was widespread, and Justice Department investigators are focusing on the actions of executives, according to two people familiar with the inquiry. German news outlets reported Tuesday that the firing of chief executive Martin Winterkorn is imminent, citing unidentified members of the company s board. Also Tuesday, new details of the cat-and-mouse interactions between suspicious regulators and the German car giant showed how far the company was willing to go to assure the government that, contrary to the best evidence, nothing was amiss in its diesel cars.

Last year, Volkswagen informed regulators that it was initiating a 500,000-car recall in the US that would fix the problem. The recall was either a technical failure or, as some U.S. officials said, a ruse. Whether those involved in the emissions cheating software will face more severe penalties is unknown, but anger among customers, who are stuck with cars that violate pollution standards, and dealers, who are left with unsold inventory, has become increasingly evident. Their appeals have been heard in Washington. “It is an outrage that VW would take advantage of its consumers by purposely deceiving them on their mileage on diesel vehicles …There ought to be some prosecutions, and corporate executives that knew this and have done it ought to be going to jail”, Sen. Bill Nelson (D-Fla.) said in a speech on the Senate floor Tuesday, citing the repeated failures of automakers.

“And I lay this not only on the corporate culture, I lay it at the feet of the U.S. regulatory agencies who ought to be doing their job, ought to be doing it in a forceful way”. Noting that Volkswagen had been accused of similar tactics in the United States in the early 1970s, when the company paid fines of $120,000, Clarence Ditlow, director of the Center for Auto Safety, argued that financial penalties are not enough to keep the company honest. “The only way to change auto company behavior is to put the responsible executives in jail,” he said.

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In firm denial.

Europe Stumbles Towards A Migrant Plan (BBC)

There was a sense of grim determination about the crowd of cold and tired refugees and other migrants we met crossing the border one damp and windy night this week from Hungary into Austria. No euphoria. No desperation, such as we’ve seen at so many European borders over the last months, but more a sense of quiet purpose. The young men and families we spoke to were passing through what has become a relatively efficient people’s pipeline established on the ground from southern, into central and onto northern Europe. EU leaders may be in disarray over what to do next but in the meantime – for now – chaos on the ground has given way to an orderly means of transporting migrants from country to country.

One 19-year-old told us it had taken him five days to get from Turkey to Austria, passing through Greece, Macedonia, Serbia, Croatia and Hungary along the way. He still hoped to reach Germany, to join the Syrian community there, which is growing larger by the day. But this is no long-term solution to Europe’s migration conundrum. Europe’s prime ministers and heads of state will discuss that at their emergency meeting in Brussels on Wednesday. A quick or easy fix will be impossible to find and the meeting is likely to be fiery but leaders know they have to stumble towards some sort of plan or risk the unravelling of the EU itself. Look at the anger of Slovakia, Hungary, Romania and the Czech Republic forced on Tuesday at a meeting of European interior ministers to accept their share of 120,000 asylum seekers who will be re-located across the continent. [..]

EU leaders will discuss how to tighten the control of European borders. They’ll also debate a workable EU asylum policy, the more efficient deportation of economic migrants, defining who is a refugee, an asylum seeker or economic migrant, the better integration of refugees and their families already here and sending significant aid abroad to improve living conditions closer to people’s home countries so they shouldn’t be tempted to come to Europe in the first place. Decisions and debates tomorrow and in the months to come will affect all of our lives. Endre Sik is the director of the Centre for Refugee and Migration Studies in Budapest. He told me in 10 years’ time, we will look back and see this as a moment that changed Europe – its general landscape, its politics and its economics. There’s no turning back now from mass migration Europe, he says. This is an unprecedented social phenomenon.

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“We would have preferred a consensus but we could not reach that, and it is not for want of trying..”

EU’s East-West Rift Exposed In Refugee-Sharing Plan (Reuters)

The European Union approved a plan on Tuesday to share out 120,000 refugees across its 28 states, overriding vehement opposition from four ex-communist eastern nations. The European Commission, the EU executive, had proposed the scheme with the backing of Germany and other big powers in order to tackle the continent’s worst refugee crisis since World War Two. But the rift it has caused between older and newer members was glaringly evident as the interior ministers of the Czech Republic, Slovakia, Romania and Hungary voted against the plan at a meeting in Brussels, with Finland abstaining. “We would have preferred a consensus but we could not reach that, and it is not for want of trying,” Luxembourg Interior Minister Jean Asselborn, whose country holds the rotating presidency of the EU, told a news conference.

Slovak Prime Minister Robert Fico said pushing through the quota system had “nonsensically” caused a deep rift over a highly sensitive issue and that, “as long as I am prime minister”, Slovakia would not implement a quota. And Czech Interior Minister Milan Chovanec tweeted: “We will soon realize that the emperor has no clothes. Common sense lost today.” This year’s influx of nearly half a million people fleeing war and poverty in the Middle East, Asia and Africa has already sparked unseemly disputes over border controls as well as bitter recriminations over how to share out responsibility. Refugees and migrants arriving in Greece and Italy have been streaming north to reach more affluent nations such as Germany, prompting countries in central and eastern Europe alternately to try to block the flow or shunt it on to their neighbors.

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How is this Europe? How can Germany and France continue in a Union with Hungary?

Hungary Mobilizes Troops, Prisoners, Jobless To Fence Out Refugees (Reuters)

Built in a matter of weeks by soldiers, prison laborers and cadres of the unemployed, a vast new wall along Balkan frontiers is a monument to the ruthless efficiency with which Prime Minister Viktor Orban has mobilized Hungary against migrants. Orban describes the arrival of hundreds of thousands of refugees and other migrants in Europe this year from Asia, Africa and the Middle East as an attack on the continent’s Christian welfare model. Until last week, most trekked through Hungary, the main overland entry route into the EU’s border-free Schengen zone from the Balkan peninsula, which they cross after arriving by dinghy in Greece.

While Europe dithered over a collective response, Hungary took matters into its own hands, shutting off the route with a new fence along its entire 175 km (110 mile) border with Serbia, topped with razor wire and guarded by helmeted riot police. It was erected at a cost of 22 billion forints (about $80 million), a rare example of efficiency in a country which built its last underground metro line ten years behind schedule at triple the projected cost. The government says it put the military in charge of the construction so that it could act more quickly. By swiftly mobilizing state resources, the authorities also managed to turn the fence into a national project, immensely popular at home even as it is denounced by European partners.

“It took a while but the government’s campaign to rouse public opinion against the refugees is bearing fruit, and having brought much of the media under control is paying dividends,” said Richard Szentpeteri Nagy, an analysts at Centre for Fair Political Analysis. “By properly filtering the message through public television, what viewers at home see is that this is a mob, throwing stones and attacking police.” In just days since it shut the Serbian frontier, Hungary has already moved even faster to shut the border with Croatia, which is inside the European Union but outside the Schengen zone. A 41-kilometre temporary fence was thrown up within four days. Work is already underway on a permanent barrier, with machines clearing the land, fence posts driven into the ground and razor wire rolled out.

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Hollande’s a dunce and a coward. Full stop.

Hollande Wrongfooted on Refugee Surge, Fearing Le Pen’s Rise (Bloomberg)

As Europe searches for a solution to the migrant crisis, French President Francois Hollande is in his customary position: stuck in the middle and pleasing few. The Socialist leader finds himself playing second fiddle to German Chancellor Angela Merkel in the unfolding drama as European Union leaders meet Wednesday to seek a way out of their impasse on how to cope with thousands of migrants knocking on the region’s gates. France’s acceptance of migrants has been overshadowed by greater generosity shown next door by Germany. “The government is fearful of doing anything that would benefit the anti-immigration right,” said Francois Gemenne , researcher at Sciences Po University.

“At the same time, they have intellectuals in the press and much of their base saying that France, the nation of human rights, looks ridiculous next to Germany. The government doesn’t know what foot to dance on. They’ve ended up with a policy that satisfies no one.” That mirrors much of what Hollande has done in his three years in office. On the economy, his socialist base feels he has sold out by recent moves to liberalize labor markers and ease rules for business, while conservative parties pillory him for raising taxes. Hollande’s approval rating fell one point to 24% in September, according to the most recent Ifop poll. Hollande and Merkel on Sept. 4 jointly urged the EU to agree on a redistribution plan for refugees and to speed up processing in countries where they arrive.

Under a formula proposed by the European Commission, France and Germany agreed to take 30,000 and 44,000 refugees respectively, out of the 160,000 who had made their way to Italy, Greece and Hungary. Those pledges have been overtaken by events as thousands of Syrians a day cross to Greek islands from Turkey, and then try to reach northern Europe. The Organisation for Economic Cooperation and Development said Tuesday that 700,000 refugees have sought asylum in Europe so far this year and that it’ll be 1 million by year end, a record. That has led Hollande’s opponents to say he’s doing too much or too little.

Marine Le Pen, leader of the anti-immigration National Front and by some measures the most popular presidential candidate in France, has compared the influx of refugees to the barbarian invasions that destroyed the Roman empire. Former President Nicolas Sarkozy said France should reinstall border controls, has blamed Hollande’s handling of the Syrian crisis for the influx, and has called into question automatic citizenship for children born in France. “There are differences of tone between Le Pen and Sarkozy on this issue, but they are basically on the same page,” said Smain Laacher, a sociology professor at the University of Strasbourg.

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Damned if you do, doomed if you don’t.

The Fed Just Made A Gigantic Mess (CNBC)

The Federal Reserve is creating a negative-feedback loop with its mixed messages on interest rates — and it’s messing with the markets. In explaining why the Fed opted to hold rates steady, Fed Chair Janet Yellen said that policy makers remain concerned about slowing economic growth — especially in China — and the impact on global markets and inflation. But then, she added that the Fed could still raise rates in before the year was out — as early as October. What? If slowing global growth and market turbulence was a reason to pause, how likely was it, then, that all of that would be resolved by October? Since Chair Yellen spoke, a number of Fed officials have spoken, reiterating that a rate hike in 2015 remains likely. This is cognitive dissonance at its worst. Investors are now simultaneously worried about incompatible outcomes.

If growth is weak, and inflation continues to fall, the Fed should NOT, and would NOT, raise rates. If this global problem is truly transitory (a word most Fed officials need to look up in the dictionary), then a rate hike should have already occurred. This is a problem of the Fed’s own making. By insisting that interest rate normalization is imminent, the Fed is creating the very problem it is combatting by delaying that very same process. From my vantage point, the Fed more clearly needs to define what it takes to meet its dual mandate — inflation and employment. Clearly, the Fed has reached many of its goals on the employment front, although wage inflation is not accelerating to the point where a rate hike would be justified to cool an overheating economy.

Low inflation, while “transitory,” has persisted for nearly six years and is being pushed even lower by the huge drop in oil prices; the crash in other commodities; slowing growth in China and Japan and Asian emerging markets; recessions in Russia and Brazil and uneven growth in Europe. If the world is not normal, why normalize policy at all? The world affects the U.S. As we have seen in innumerable instances in the past, global instability has altered the course of domestic monetary policy for decades. Factoring that in, does not mean that the Fed has a “third mandate” as some Fed bashers claim. It simply means that the Fed has an obligation to consider how all variables affect its mandate. With an economy only “half-normal,” the normalization of interest rates can wait. But if the Fed continues to convey confusing messages about the timing of normalization, in an abnormal world, it will only serve to exacerbate the very trends it is hoping will abate.

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Economics is just politics in disguise.

Economic Policy Often Seems To Have Little To Do With Economists. Why? (Ind.)

With Jeremy Corbyn as leader of the Labour Party we will hear a great deal from his opponents that his economic policies are not “credible”. At the moment we do not have a clear idea of what these policies will be, but it is worth asking beforehand what exactly a credible economic policy is. A natural way to define a credible economic policy is one that accords with what most economists think. If this was true, you might expect it would be difficult to win an election based on a macroeconomic policy that most economists regard as mistaken. Unfortunately, the last General Election provides a clear counter-example. In that election George Osborne proposed eliminating the overall budget deficit within five years. That contradicted what most economists believe is a sensible fiscal policy, for at least two reasons.

First, it precluded any significant increase in public investment, on things like building schools and flood defences. Every economist I know agrees that now is an excellent time to increase infrastructure investment, because labour is cheap and interest rates are low. Second, another round of austerity is very risky when interest rates are so low. Osborne says we must reduce government borrowing quickly to prepare for the next crisis. That makes little economic or business sense. Firms that cut back on investment when borrowing is cheap and the economy is expanding generally fail. The more significant risk is that the world economy takes a turn for the worse in the next year or two because of events in China or elsewhere. If interest rates are already low because they are having to offset the impact of austerity, the Bank of England has little room to counter these global shocks.

So the prudent policy while interest rates are low is to avoid austerity. The fiscal policy platform on which the Conservatives won was not credible to most academic macroeconomists. The problem is that most people in politics and the media do not get their notion of credibility from this source. So where does their idea of economic credibility come from? Discussion of economic policy in the media is dominated by political rather than economic journalists. They routinely provide comment after major economic policy announcements and interview politicians. They spend most of their time talking to politicians, so the Westminster bubble defines what the media sees as a credible economic policy.

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How to turn farmers into serfs.

English Farmland Prices Double In Five Years (Guardian)

The price of good quality English farmland has doubled over the past five years, making it the most expensive in the world and offering a better return than prime London property, the FTSE 100 or gold. According to agents Knight Frank demand from wealthy private individuals as well as pension funds, has driven up the average price for an acre of “investment grade” English farmland (large plots with economies of scale) to £12,500, up 100% since 2010. In comparison, the price of luxury London homes has risen 42% over the same period, the FTSE 100 has increased 33%, while gold has dropped 10%. Many recent buyers of prime farmland arelifestyle buyers, often London financiers, for whom farming can be more of a hobby than about making the land pay its way.

Even what Knight Frank describes as some of the best land in the world – the pampa west of Buenos Aires in Argentina – sells for just a third of the average price investors are paying for farmland in England. An acre of investment grade land in Argentina sells for £4,510, while in France it fetches about £4,490. On the vast wheat-producing prairies of Canada, quality land fetches just £800 an acre, only 7% of the price achieved in England. Australian farmland values, blighted by drought, have largely flatlined in recent years.

The inflation in English land values is taking place despite a crisis among farmers struggling with falling global prices, particularly for wheat. After peaking at about £214 a tonne in December 2012, feed wheat values have since fallen by more than 50%. Global demand for wheat was 679m tonnes in 2012/13, but only 657m tonnes was produced, pushing prices up sharply. But the situation has now reversed, with global production forecast to hit about 725m tonnes this year but consumption at about 715m tonnes, sending prices spiralling down on commodity markets. UK farm gate milk prices are down by a third since 2013, prompting a wave of closures among English dairy farmers.

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And now dinosaurs are literally cool.

Alaska Fossil Find Points To New ‘Lost World Of Dinosaurs’ (Guardian)

Fossils from a unique plant eating dinosaur found in the high Arctic of Alaska may change how scientists view dinosaur physiology, Alaska and Florida university researchers have said. A paper published on Tuesday concluded that fossilized bones found along Alaska’s Colville river were from a distinct species of hadrosaur, a duck-billed dinosaur not connected to hadrosaurs previously identified in Canada and the Lower 48 states. It’s the fourth species unique to northern Alaska. It supports a theory of Arctic-adapted dinosaurs that lived 69m years ago in temperatures far cooler than the tropical or equatorial temperatures most people associate with dinosaurs, said Gregory Erickson, professor of biological science at Florida State university. “Basically a lost world of dinosaurs that we didn’t realise existed,” he said.

The northern hadrosaurs would have endured months of winter darkness and probably snow. “It was certainly not like the Arctic today up there – probably in the 40s (five to nine degrees ) was the mean annual temperature,” Erickson said. “Probably a good analogy is thinking about British Columbia.” The next step in the research program will be to try to figure out how they survived, he said. Mark Norell, curator of paleontology at the American Museum of Natural History in New York, said by email that it was plausible the animals lived in the high Arctic year-round, just like musk oxen and caribou do now. It’s hard to imagine, he said, that the small, juvenile dinosaurs were physically capable of long-distance seasonal migration. “Furthermore, the climate was much less harsh in the Late Cretaceous than it is today, making sustainability easier,” he said.

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Sep 162015
 
 September 16, 2015  Posted by at 11:27 am Finance Tagged with: , , , , , , , , ,  


‘Daly’ Somewhere in the South, possibly Miami 1941

Why the Fed Should Raise Rates Now (Brad Brooks)
Volatility Seen Lingering No Matter What The Fed Does (Reuters)
Kyle Bass: China’s Real Problem Is Its Banking Sector (CNBC)
China Braces for Second Onshore Bond Default by State Firm (Bloomberg)
Chinese Retreat From Australian Property As Capital Controls Bite (AFR)
1,300 Hedge Funds Liquidate Amid China’s $5 Trillion Stocks Selloff (Bloomberg)
Chief Of Biggest China Brokerage Swept Up In Stock-Rout Probe (Bloomberg)
West ‘Ignored Russian Offer In 2012 To Have Syria’s Assad Step Down’ (Guardian)
Hungary Locks Down EU Border, Taking Migrant Crisis Into Its Own Hands (Reuters)
Spanish ‘Safe Cities’ Hope To Offer A Haven For Refugees (Le Monde)
Refugees May Become Trapped In Greece, Minister Fears (Reuters)
Europe’s Frontex Gears Up To Thwart Unwanted Migrants (Reuters)
ECB Says Quantitative Easing Relatively Small So Far (Reuters)
Ukraine On Brink Of Debt Deal That Greece Can Only Dream Of (Ind.)
Tuna And Mackerel Populations Suffer Catastrophic 74% Decline (Guardian)
Land Degradation Costs World $10.6 Trillion A Year, 17% of World GDP (Guardian)
Indigenous Australia Storytelling Accurate on Sea Level Rises 7000 Years Ago (G.)

Plenty reasons. Plenty for the other side too.

Why the Fed Should Raise Rates Now (Brad Brooks)

Now that U.S. stock markets have experienced their first 10% correction since 2011, investors are again looking to the Federal Reserve to bail them out. Although the Fed hasn’t raised interest rates in almost 10 years, sympathetic pundits say it’s still too soon to raise them now. The economist Larry Summers, runner-up for the top spot at the Fed a few years ago, says raising rates would risk “tipping some parts of the financial system into crisis.” How did our financial system weaken to the point where a quarter of a % increase in rates is more than it can handle? The process started a dozen years ago, when Alan Greenspan – then chairman of the Fed – decided to lower rates to 1% after the country had emerged from the mild recession that followed the popping of the tech bubble.

Then, when the Fed began to tighten policy, it did so with agonizing slowness – raising rates just a quarter of a % at a time, so as not to upset the financial markets. This set the table for the subprime housing debt mess in a way that neither Greenspan nor his successor, Ben Bernanke, could foresee. Everyone assumed real estate was too diverse an asset class to ever be in a bubble. Despite credible warnings about the potential problems starting in 2005, the Fed and Treasury were still blindsided in 2008 by the enormous losses at Bear Stearns, Lehman and AIG. Suddenly, the emergency 0% overnight lending rate was required and, almost seven years later, it’s still deemed necessary. Meanwhile, three rounds of quantitative easing have added roughly $3.5 trillion in purchases to the Fed’s balance sheet.

What we have to show for this is a more concentrated financial system, in which the top five banks control nearly half of all U.S. financial assets. Even more troubling is evidence that, this time around, asset bubbles have formed in multiple arenas. Earlier this year, the economist Robert Shiller, who predicted the tech and real estate bubbles, warned that the U.S. now faces a potential bubble in the bond market. The high-end housing and art markets also seem to be in bubbly territory, but before they can cause too much trouble we’re likely to see a serious correction in the U.S. equity market.

The trigger is likely to be the hundreds of billions of dollars worth of bad debt in the energy sector – loans that were made to finance the fracking frenzy. Even when the price of oil was twice what it is today, many of the borrowers involved were not cash-flow positive, and few adequately hedged their exposure. While the experts like to talk about how quickly the price of oil rebounded after the financial crisis, the current oversupply makes today’s situation more akin to what happened in the 1980s. That took years to correct, as desperate companies and governments kept producing more crude.

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If volatility stays no matter what they do, they might as well…

Volatility Seen Lingering No Matter What The Fed Does (Reuters)

While investors, traders and forecasters may be on the fence as to whether the Fed pulls the trigger this week on the first U.S. interest rate hike in nearly a decade, Wall Street’s “smart money” is decisive on one thing: market volatility will linger. Heading into Thursday’s potentially momentous decision on interest rates from the Federal Open Market Committee, the Federal Reserve’s monetary policy-setting panel, speculative positions in CBOE VIX index futures are the most net long on record. To this crowd of hedge funds and other big speculators, it really doesn’t matter what the Fed does. Raising rates for the first time since 2006 would almost certainly send waves through equity markets, and not moving will keep the guessing game – and accompanying market gyrations – alive for weeks to come.

“There is a general consensus in the market that the Fed meeting will continue the volatility, and if they don’t do anything it may sustain the volatility at least for six more weeks till their next meeting,” said J.J. Kinahan, chief strategist at TD Ameritrade in Chicago. The most recent weekly Commitments of Traders data from the Commodity Futures Trading Commission shows speculative net long positions in VIX futures stood at 37,925 contracts as of Sept. 13. Not only is that a record high, it is more than two standard deviations from the norm.

Since VIX futures, a forward-looking gauge of market risk, were introduced in 2004, speculative positions have been skewed toward lower volatility far more often than not. Long VIX futures positions benefit from increased volatility and can be used to protect equity portfolios. Moreover, positioning in VIX futures has flipped like never before over the last month as the Fed guessing game has been compounded by worries over the health of China’s economy and its wobbly stock market. In contrast to the latest positioning, speculators in early August were net short by 64,445 contracts – a reversal of more than 100,000 in five weeks – highlighting the strong conviction of hedge funds and other large speculators that market gyrations are far from over.

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“..Chinese bank assets rose about 400% since 2007, and are now about $31 trillion against an economy with a GDP of $10 trillion.” “..a “likely” 10% asset loss in that banking sector would amount to $3 trillion.”

Kyle Bass: China’s Real Problem Is Its Banking Sector (CNBC)

While many are watching its stock market, China’s real problem may lie with its banking system, according to one hedge fund manager. Kyle Bass, Hayman Capital Management founder and managing partner, told CNBC’s “Squawk on the Street” on Tuesday that Chinese banks will likely experience losses that may affect the country as a whole. “Those that are watching whether Chinese stocks go up or down aren’t paying attention, in my opinion, to what the real problem is,” Bass said. “And the real problem is the loans in this banking sector.” The hedge fund manager said that Chinese bank assets rose about 400% since 2007, and are now about $31 trillion against an economy with a GDP of $10 trillion.

“When you run a bank expansion that aggressively, that quickly, you’re going to have some losses,” he said, adding that “the scary thing about that” is a “likely” 10% asset loss in that banking sector would amount to $3 trillion. Such losses would force China to use much of its foreign exchange reserves (which stand at about $3.6 trillion) and sell bonds to recapitalize the banking system, he said. Bass said these issues are mirrored in many emerging markets—especially those in Asia—and could therefore ultimately affect global GDP.

While the ripples of an emerging market downturn could draw U.S. GDP lower than estimated, countries like South Africa could be seriously impacted. Bass said his investment group is closing watching nations that run twin deficits, and those that may have to devalue their currency “in order to come back to some level of competitiveness with the rest of the world.” As the loan cycle forces emerging market banks to see steep losses, “the next two years are going to be tough,” he said. “We talk about this race to the bottom and this currency war. Well it’s happening as we speak,” he said. “China literally just started with its devaluation process—wait until you see where that goes.”

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When the state can’t keep its own companies alive, who’s going to trust it to save stocks?

China Braces for Second Onshore Bond Default by State Firm (Bloomberg)

China National Erzhong Group may miss an interest payment later this month after one of its creditors filed a restructuring request, putting it at risk of becoming the second state-owned company to default in the nation’s onshore bond market. The smelting-equipment maker might not be able to pay a coupon that’s due Sept. 28 on its 1 billion yuan ($157 million) of 5.65% 2017 notes if a local court accepts the creditor’s restructuring application before that date, according to a statement posted on Chinamoney.com.cn. China National Erzhong, based in China’s western Sichuan province, issued the five-year securities in 2012 at par and the debentures are currently trading at 67.72% of that.

Uncertainty over the payment comes as deflation risks, overcapacity and spiraling corporate debt cloud the outlook for China’s economy, forecast to expand at the slowest pace since 1990 this year. Baoding Tianwei Group failed to pay interest of 85.5 million yuan on one of its bonds in April, becoming the first state-owned enterprise to default in the onshore market. “Because Erzhong is a state-owned company, if it defaults it may arouse investors’ concern about companies’ credit risks,” said Qu Qing, a bond analyst at Huachuang Securities Co. in Beijing.

Five interest rate cuts by the People’s Bank of China since November and rules to relax yuan bond issuance onshore mean Chinese companies are becoming less reliant on dollar funding and more reliant on the nation’s domestic market. Local corporate bond sales have jumped 77% to 7.85 trillion yuan in 2015 from the same period last year, according to data compiled by Bloomberg. The extra spread investors demand to own five-year AA- rated bonds over government debt has narrowed 69.5 basis points since Dec. 31 to 214 basis points Tuesday, according to data compiled by ChinaBond. China National Erzhong is a wholly owned subsidiary of state-owned China National Machinery, according to a China International Capital Corp. report in April.

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And New Zealand, and Canada, and…

Chinese Retreat From Australian Property As Capital Controls Bite (AFR)

Chinese purchases of Australian property have dropped significantly in the past month, according to agents, as buyers struggle to shift money out of the country following Beijing’s move to tighten capital controls. One Chinese agent said the latest efforts by the central government to avoid large capital outflows were having a “significant impact” on his business. “It has affected 70 to 80% of current transactions and some have already been suspended,” said the agent who asked not to be named. The tighter foreign exchange rules are also set to impact the federal government’s relaunched Significant Investor Visa (SIV), which provides fast-tracked residency for those investing at least $5 million into Australia.

“I think it will be big, big trouble for the SIV program because the amount of money is just too large,” said one Shanghai-based adviser, who sells Australian property and advises wealthy clients on their migration plans. Only seven SIV applications have been submitted since the new rules were introduced on July 1, which require investors to put their money into riskier assets such as venture capital and emerging companies. China has previously tolerated significant capital outflows via so called “grey channels”, but has tightened up enforcement in recent weeks as the economy slows and fears over capital flight put downward pressure on the currency.

The crackdown from Beijing has seen Chinese banks setting up watch lists for unusual transactions, according to one bank manager, who asked not to be named as he was not authorised to speak about the policy. He said the operation was aimed at cracking down on a practice whereby family and friends of those wanting to purchase a property overseas all transfer US$50,000 into an overseas account. That’s the limit each Chinese individual is allowed to move out of the country each year. The purchaser then pays back his friends and family in China and uses the money from the overseas account to put down a deposit on the property.

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Relatively small, but of course crazily leveraged.

1,300 Hedge Funds Liquidate Amid China’s $5 Trillion Stocks Selloff (Bloomberg)

It’s about to get even uglier for China’s hedge funds. The newfangled industry, short on expertise and ways to protect itself from market declines, has seen almost 1,300 funds liquidate amid China’s $5 trillion stocks selloff, and a similar number may be at risk, according to Howbuy Investment Management Co. Now, a government crackdown on short selling and other hedging strategies have made prospering in a bear market difficult. It’s an inglorious turn for China’s on-again, off-again love affair with stocks, which saw the number of hedge-fund-like vehicles explode in past years as the government made it easier to register funds and introduced new financial instruments. The market rout – and the regulatory response to it – has revealed cracks in the industry that suggest it may need years to recover.

In the most devastating blow to domestic hedge funds, China has imposed new restrictions on trading in stock-index futures, a key investment strategy to dampen volatility and avoid big losses. “It spells the end, at least temporarily, for China domestic hedge funds,” Hao Hong at BOCOM International said in an interview. China’s hedge-fund industry has grown rapidly as the nation’s stock market jumped and wealthy individuals and smaller institutions sought to profit from that surge. The number of private placement securities funds, the Chinese equivalent of hedge funds, more than doubled from the beginning of the year, peaking at 11,159 as of Aug. 31, managing 1.62 trillion yuan (about $254 billion) in assets, according to the China Securities Regulatory Commission. Individual investors are required to have at least 5 million yuan in assets to invest in hedge funds, while institutions must have at least 10 million yuan.

While these vehicles in China are broadly categorized as hedge funds, there is one key difference with counterparts in the U.S., Europe and Hong Kong. Most of them are long-only, meaning they bet solely on rising markets. Even before government restrictions on practices such as short-selling, many limited hedging so they maximize benefits from a market that had advanced almost 50% in the two years through 2014 and rallied another 60% through mid-June. Most China-based managers rarely wager against individual securities because the practice is expensive and many new managers lack the expertise for complex strategies, Alexis He at Z-Ben Advisors said.

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If you don’t let people sell anything, you don’t have a market.

Chief Of Biggest China Brokerage Swept Up In Stock-Rout Probe (Bloomberg)

The president of China’s biggest brokerage has been swept up in a widening campaign to root out financial wrongdoing and assign blame for the nation’s US$5 trillion stock rout. The probe of Citic Securities Co. president Cheng Boming comes after the state-run Xinhua News Agency reported last month that four executives at Citic had admitted to so-called insider trading. The firm is part of Citic Group, the nation’s first state-owned investment corporation, which was set up in 1979 as part of paramount leader Deng Xiaoping’s push to modernize the country. Since the market crash, China’s targets have ranged from so-called “malicious” short sellers to a journalist from business magazine Caijing whose report was alleged to have caused market panic. Authorities say they want to “purify” the market.

“There does seem to be a bit of a witch hunt for a scapegoat at the moment, but I think this is mostly signaling by the authorities that they will not tolerate what they perceive as ‘unhelpful’ selling in the market,” said Tony Hann, a London-based money manager at Blackfriars Asset Management, which oversees about US$350 million. Citic confirmed the police investigation of Cheng in a statement to Shanghai’s stock exchange. Shares of the company fell 1.2% in Shanghai to 13.36 yuan, the lowest intraday level since Nov. 7, as of 9:38 am local time. The stock has slumped 58% since June amid a rout in Chinese equities that dragged down the benchmark index from a more than seven-year high. Citic Securities is one of the brokerages whose booming margin lending had helped fuel the stock-market’s prior rally.

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Just think of all the money made by the weapons industry in the intervening years…

West ‘Ignored Russian Offer In 2012 To Have Syria’s Assad Step Down’ (Guardian)

Russia proposed more than three years ago that Syria’s president, Bashar al-Assad, could step down as part of a peace deal, according to a senior negotiator involved in back-channel discussions at the time. Former Finnish president and Nobel peace prize laureate Martti Ahtisaari said western powers failed to seize on the proposal. Since it was made, in 2012, tens of thousands of people have been killed and millions uprooted, causing the world’s gravest refugee crisis since the second world war. Ahtisaari held talks with envoys from the five permanent members of the UN security council in February 2012. He said that during those discussions, the Russian ambassador, Vitaly Churkin, laid out a three-point plan, which included a proposal for Assad to cede power at some point after peace talks had started between the regime and the opposition.

But he said that the US, Britain and France were so convinced that the Syrian dictator was about to fall, they ignored the proposal. “It was an opportunity lost in 2012,” Ahtisaari said in an interview. Officially, Russia has staunchly backed Assad through the four-and-half-year Syrian war, insisting that his removal cannot be part of any peace settlement. Assad has said that Russia will never abandon him. Moscow has recently begun sending troops, tanks and aircraft in an effort to stabilise the Assad regime and fight Islamic State extremists. Ahtisaari won the Nobel prize in 2008 “for his efforts on several continents and over more than three decades, to resolve international conflicts”, including in Namibia, Aceh in Indonesia, Kosovo and Iraq.

On 22 February 2012 he was sent to meet the missions of the permanent five nations (the US, Russia, UK, France and China) at UN headquarters in New York by The Elders, a group of former world leaders advocating peace and human rights that has included Nelson Mandela, Jimmy Carter, and former UN secretary general Kofi Annan. “The most intriguing was the meeting I had with Vitaly Churkin because I know this guy,” Ahtisaari recalled. “We don’t necessarily agree on many issues but we can talk candidly. I explained what I was doing there and he said: ‘Martti, sit down and I’ll tell you what we should do.’

“He said three things: One – we should not give arms to the opposition. Two – we should get a dialogue going between the opposition and Assad straight away. Three – we should find an elegant way for Assad to step aside.” Churkin declined to comment on what he said had been a “private conversation” with Ahtisaari. The Finnish former president, however, was adamant about the nature of the discussion. “There was no question because I went back and asked him a second time,” he said, noting that Churkin had just returned from a trip to Moscow and there seemed little doubt he was raising the proposal on behalf of the Kremlin.

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And others will follow that. Watch Croatia and Slovenia. Europe will need to close all entrances. And even then refugess will still keep coming.

Hungary Locks Down EU Border, Taking Migrant Crisis Into Its Own Hands (Reuters)

Hungary’s right-wing government shut the main land route for migrants into the EU on Tuesday, taking matters into its own hands to halt Europe’s influx of refugees. An emergency effort led by Germany to force European Union member states to accept mandatory quotas of refugees collapsed in discord. Berlin called for financial penalties against countries that refused to accommodate their share of migrants, drawing a furious response from central Europe. A Czech official accused Berlin of making empty threats while Slovakia said such penalties would bring the “end of the EU”. Under new rules that took effect from midnight, Hungary said anyone seeking asylum at its border with Serbia, the EU’s external frontier, would automatically be turned back.

Anyone trying to sneak through would face jail. In scenes with echoes of the Cold War, families with small children sat in fields beneath the former communist country’s new 3.5-metre (10 foot) high fence, which runs almost the length of the border, topped with razor wire. [..] Eastern European countries argue that a more welcoming stance encourages more people to make dangerous voyages, and risks attracting an uncontrolled influx that would overwhelm social welfare systems and dilute national cultures. Under its new rules, Hungary said it will now automatically turn back refugees who arrive by land over the main route from Serbia, a country it has declared “safe”. Asylum claims would be processed within eight days and those at the Serbian border should be rejected within hours.

“If someone is a refugee, we will ask them whether they have submitted an asylum request in Serbia. If they had not done so, given that Serbia is a safe country, they will be rejected,” Orban was quoted as telling private broadcaster TV2 on Monday. “We will start a new era,” government spokesman Zoltan Kovacs said shortly after midnight on the border. “We will stop the inflow of illegal migrants over our green borders.” Serbia called the new Hungarian rules “unacceptable”. The United Nations disputed the definition of Serbia as safe, saying the poor ex-Yugoslav state lacked capacity to house thousands of refugees turned back at Europe’s gates.

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Poorer countries have more decency.

Spanish ‘Safe Cities’ Hope To Offer A Haven For Refugees (Le Monde)

The Spanish government, led by Mariano Rajoy, may have dragged its feet in response to pressure from Brussels to take Syrian refugees, but Barcelona, Madrid and several other cities governed by councils with roots in the indignado movement took the initiative with a network of “safe cities” to assist some of those arriving in Europe. Ada Colau, the mayor of Barcelona, started the ball rolling when she announced the launch of a register of families willing to open their home to refugees or simply help them. It proved an immediate success. Thousands of Catalans emailed their details to the list. A dozen cities have signed up to the scheme. Madrid mayor Manuela Carmena has been looking at “ways of alleviating the distress”.

Valencia plans to open emergency accommodation for refugees and is allocating 110 social workers specifically to look after children. Several councils have asked banks to release housing stock that has been vacant since the property market tumbled. Other cities involved include Pamplona, Zaragoza, La Coruña and Malaga. Colau said the predicament of people fleeing war and persecution was “shameful, condemning Europe for dodging the issue and criticising the “ridiculous” figure initially proposed by the Rajoy government to cope with the crisis. The Spanish government has since agreed it would accept its share of migrants under the European commission’s proposed new quota system, according to AFP.

Spain agreed to take in another 14,931 refugees as proposed by the commission, in addition to the 2,379 it had initially said it would accept. The government had initially announced that it would only be accepting 2,379 refugees, as part of EU efforts to solve the crisis, whereas Brussels had initially wanted it to take 5,849.

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Maybe Europe likes it that way.

Refugees May Become Trapped In Greece, Minister Fears (Reuters)

Greece may find it increasingly hard to cope with refugees entering the country as unilateral decisions by other European nations cause bottlenecks and worsening weather fails to deter new arrivals, its interim maritime minister said. Greece has this year become the main gateway for hundreds of thousands of refugees flowing into Europe, many fleeing conflict in Syria and Afghanistan, in the continent’s biggest migration crisis since World War Two. “We cannot carry this load alone,” Christos Zois told Reuters in an interview on Tuesday from his office overlooking the busy port of Piraeus, where thousands of refugees and migrants arrive from the country’s eastern islands every day.

“This is not Greece’s problem alone. We’re not guarding Greece’s borders, we’re guarding the European Union’s borders. We need support – economic and moral support.” Its economy already crippled by years of recession and bailout-driven austerity, Greece has repeatedly called for European Union funds to help it weather the refugee crisis. Of the record 430,000 refugees and migrants that have made the journey across the Mediterranean to Europe so far this year, 309,000 have arrived via Greece, according to the International Organization for Migration. In July and August alone, Greece saw 150,000 arrivals, Zois said.

So far the vast majority have used the country only as a transit point along a route taking them north to richer states. But decisions by Hungary to fence off that route and by Germany to reimpose border controls have increased the risk that Greece will be unable to move the migrants on, possibly tipping its economy back into recession. Asked if he was concerned that refugees might become trapped in Greece, the minister said: “I’m not optimistic because I see that everyone is buying time which, meanwhile… is running out.” His unease is shared by the IOM, a United Nations partner agency. “The expectation is that the refugees and migrants …will just build up … and add enormous pressure on the Greek authorities,” IOM spokesman Leonard Doyle told a briefing in Geneva.

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Another vile institution in the EU: “..could imagine Frontex one day having forces of its own to deploy.”

Europe’s Frontex Gears Up To Thwart Unwanted Migrants (Reuters)

Europe’s border agency Frontex is preparing to speed up identification of illegal migrants and help deport them in large numbers as irregular arrivals this year topped a record half a million. “When you have up to 40% of migrants coming from a third country not granted refugee status and if nothing happens, if they are not returned, what message does the EU convey to potential migrants?” Frontex head Fabrice Leggeri told Reuters a day after EU ministers agreed to grant the agency more powers and resources. EU data show just under half of asylum claims were granted last year but less than half of those rejected were deported. Frenchman Leggeri, who took over the coordinating agency for the EU’s external borders in January, warned that more migrants may have to be detained and forcibly sent home.

But he voiced concern that national governments have cut back on border guards during the recession, limiting the numbers of trained personnel available for secondment by Frontex to crisis zones. After a call last week by EU chief executive Jean-Claude Juncker for a dedicated EU border guard and coastguard service, Leggeri said he was keen to extend typical periods of secondment for staff to a year or more from as little as a month and could imagine Frontex one day having forces of its own to deploy. Funding and staff are still being worked out, Leggeri said, but Frontex is now working on ways to speed fingerprinting and registration of people claiming asylum, notably to filter those fleeing for their lives from those simply seeking a better life.

With Europe opening its doors to Syrians, Frontex operations in Greece had revealed high levels of “nationality swapping” – of people initially claiming to be Syrian, 13% were not. “Those 13% are very likely irregular migrants, some are from North Africa,” he said. “They must be returned.”

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Clueless in Frankfurt: “China can still stabilize its situation and to keep growth above 6% is achievable in the short term.”

ECB Says Quantitative Easing Relatively Small So Far (Reuters)

The European Central Bank has scope to buy more assets as its quantitative easing has been small compared to similar schemes elsewhere, ECB Vice President Vitor Constancio said, adding that Europe also needs the US and Chinese economies to motor ahead. The asset buys, started in March to lift the bloc out of deflation, helped Europe to weather the Greek and Chinese turmoil but euro area inflation could turn negative again in the coming months so the bank stands ready to increase the size, composition and duration of the scheme, if necessary, Constancio said. Drawing a comparison with other major central banks around the globe, Constancio said the European scheme is dwarfed by past asset buys, particularly by the US Federal Reserve and the Bank of Japan.

“The total amount that we have purchased represents 5.3% of the GDP (gross domestic product) of the euro area, whereas what the Fed has done represents almost 25% of the US GDP, what the Bank of Japan has done represents 64% of the Japanese GDP and what the UK has done 21% of the UK’s GDP,” Constancio told Reuters in an interview. “So we are very far from what the major central banks have done,” Constancio, 71, said. “This is not a benchmark …(but) there is scope, if the necessity is there.” But Constancio also dismissed criticism from some that quantitative easing was not working, pointing to improved inflation expectations, growth in bank lending and a drop in borrowing costs despite the anxiety in financial markets.

He also said that the bank needs to look through volatility even if market turbulence is now more prevalent than in the past. “Monetary policy is not about fine tuning volatility in financial markets,” he said. “Central banks should be independent from financial markets and not follow all their fluctuations.” The ECB’s 1 trillion-euro plus asset-buying program is set to run for another year but the majority of analysts polled by Reuters expect the scheme to be expanded as sharply lower commodity prices dampen long term price expectations and as inflation, now at 0.2%, takes years to pick up. Indeed, one of the ECB’s top measures of long-term inflation expectations, the five-year, five-year euro zone breakeven forward has fallen to below 1.7%, short of the ECB’s inflation target of just under 2%.

Pointing to uncertainties, Constancio said much depended on the United States and China. “We need a strong recovery in the US,” Constancio said. “China can still stabilize its situation and to keep growth above 6% is achievable in the short term.”

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More equal.

Ukraine On Brink Of Debt Deal That Greece Can Only Dream Of (Ind.)

In a rare piece of European economic good news, Ukraine’s major creditors look set to write off 20% of the embattled country’s foreign debt. Prime Minister Arseniy Yatsenyuk, speaking at an economic conference on the weekend, said he expects parliament to approve the measures in the next few days. The deal will effectively restructure £11.7bn of Ukraine’s total foreign loans, thus helping the country avoid the drawn-out negotiations suffered by Greece in recent months. It also unlocks support from the IMF and halts principal payments for the next four years to help the country get back on its feet. Ukraine is currently in the grip of a deep recession following mismanagement by previous governments as well as dealing with ongoing skirmishes with pro-Russia rebels in the east of the country.

Ukraine’s finance minister Natalie Jaresko told The New York Times that the deal showed that creditors can work with debt-burdened countries and not end up on “opposite sides of the table”: It’s a benchmark for emerging markets [that could serve as a template]. It is every sovereign’s dream. I would hope that it shows that you don’t need to rush into a default, even having the willingness to use a moratorium if needed. The deal has been praised in many corners, but it’s not clear what will happen if Russia, a major creditor not present at the talks, decides not to participate. The domineering neighbour is unlikely to view the deal favourably given that the Ukrainian finance ministry released a statement saying the deal will allow more money to be channelled into fighting pro-Russia separatists.

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We’re going to wreck it all.

Tuna And Mackerel Populations Suffer Catastrophic 74% Decline (Guardian)

Tuna and mackerel populations have suffered a “catastrophic” decline of nearly three quarters in the last 40 years, according to new research. WWF and the Zoological Society of London found that numbers of the scombridae family of fish, which also includes bonito, fell by 74% between 1970 and 2012, outstripping a decline of 49% for 1,234 ocean species over the same period. The conservation charity warned that we face losing species critical to human food security, unless drastic action is taken to halt overfishing and other threats to marine life. Louise Heaps, chief advisor on marine policy at WWF UK, said: “This is catastrophic. We are destroying vital food sources, and the ecology of our oceans.”

Attention in recent years has focused on species such as bluefin tuna, now on the verge of extinction, but other close relatives commonly found on restaurant menus or in tins, such as yellowtail tuna and albacore, are now also becoming increasingly scarce. Only skipjack, also often tinned, is showing “a surprising degree of resilience”, according to Heaps, one of the authors of the Living Blue Planet report, published on Wednesday. Other species suffering major declines include sea cucumbers, a luxury food in Asia, which have fallen 98% in number in the Galapagos and 94% in in the Egyptian Red Sea. Populations of endangered leatherback turtles, which can be seen in UK waters, have plummeted. Overfishing is not the only culprit behind a halving of marine species since 1970.

Pollution, including plastic detritus which can build up in the digestive systems of fish; the loss of key habitats such as coastal mangrove swamps; and climate change are also taking a heavy toll, with the oceans becoming more acidic as a result of the carbon dioxide we are pouring into the atmosphere. “I am terrified about acidification,” Heaps told the Guardian. “That situation is looking very bleak. We were taught in the 1980s that the solution to pollution is dilution, but that suggests the oceans have an infinite capacity to absorb our pollution. That is not true, and we have reached the capacity now.” She predicts that all of the world’s coral reefs could be effectively lost by 2050, if current trends are allowed to continue unchecked, and said that evidence of the effects of acidification – which damages tiny marine animals that rely on calcium to make their shells and other organs – could be found from the Antarctic to the US west coast.

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Externalities. Bills to pay later.

Land Degradation Costs World $10.6 Trillion A Year, 17% of World GDP (Guardian)

Land degradation is costing the world as much as $10.6tn every year, equivalent to 17% of global GDP, a report has warned. More than half of the world’s arable land is moderately or severely degraded, according to a report published on Tuesday by the Economics of Land Degradation (ELD) Initiative (pdf). The report estimates the cost of this environmental destruction, not only from lost agricultural production and diminished livelihoods, but also from the lost value of ecosystem services formerly provided by the land, including water filtration, erosion prevention, nutrient cycling and the provision of clean air. Land degradation – decreased vegetation cover and increased soil erosion – also means that land is less able to store carbon, contributing to climate change.

Land use changes represent the second biggest source of greenhouse gas emissions after fossil fuel combustion, the study says. “Burgeoning populations with shifting demographics and distributions are increasing the demands on land to produce food, energy, water, resources and livelihoods,” the report says. Desertification, the result of climate change, is having a profound effect on migration. Karmenu Vella, European commissioner for Environment, Maritime Affairs and Fisheries, said that land degradation and desertification is forcing hundreds of thousands to move from their homes. A study by the UN’s Convention to Combat Desertification (UNCCD), which was cited by the authors of the ELD report, found that the process may drive an estimated 50 million people from their homes in the next 10 years.

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An awfully underestimated civilization.

Indigenous Australia Storytelling Accurate on Sea Level Rises 7000 Years Ago (G.)

Indigenous stories of dramatic sea level rises across Australia date back more than 7000 years in a continuous oral tradition without parallel anywhere in the world, according to new research. Sunshine Coast University marine geographer Patrick Nunn and University of New England linguist Nicholas Reid believe that 21 Indigenous stories from across the continent faithfully record events between 18,000 and 7000 years ago, when the sea rose 120m. Reid said a key feature of Indigenous storytelling culture – a distinctive “cross-generational cross-checking” process – might explain the remarkable consistency in accounts passed down by preliterate people which researchers previously believed could not persist for more than 800 years.

“The idea that 300 generations could faithfully tell a story that didn’t degenerate into Chinese whispers, that was passing on factual information that we know happened from independent chronology, that just seems too good to be true, right?” Reid told Guardian Australia. “It’s an extraordinary thing. We don’t find this in other places around the world. The sea being 120 metres lower and then coming up over the continental shelf, that happened in Africa, America, Asia and everywhere else. But it’s only in Australia that we’re finding this large canon of stories that are all faithfully telling the same thing.” Scholars of oral traditions have previously been sceptical of how accurately they reflect real events.

However, Nunn and Reid’s paper, “Aboriginal memories of inundation of the Australian coast dating from more than 7000 years ago”, published in Australian Geographer, argues the stories provide empirical corroboration of a postglacial sea level rise documented by marine geographers. Some of the stories are straight factual accounts, such as those around Port Phillip Bay near Melbourne, which tell of the loss of kangaroo hunting grounds. Others, especially older stories such as those from around Spencer Gulf in South Australia, are allegorical: an ancestral being angered by the misbehaviour of a clan punishes them by taking their country, gouging a groove with a magical kangaroo bone for the sea to swallow up the land.

“Our sense originally is that the sea level must have been creeping up very slowly and not been noticeable in an individual’s lifetime,” Reid said. “But we’ve come to realise through conducting this research that Australia must in fact have been abuzz with news about this. “There must have been constant inland movement, reestablishing relationships with country, negotiating with inland neighbours about encroaching onto their territory,” Reid said. “There would have been massive ramifications of this.” The fortunes of those faced with the decision to retreat as camps, tracks and dreaming places were slowly swallowed up – especially on islands – were mixed.

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Sep 122015
 
 September 12, 2015  Posted by at 9:23 am Finance Tagged with: , , , , , , , , ,  


DPC The Mammoth Oak at Pass Christian, Mississippi 1900

UN Warns Of Millions More Refugees Coming To Europe (Reuters)
Migrant Crisis Could Be ‘Biggest Challenge’ In EU History: Germany (AFP)
EU Refugee Quota Plan Rebuffed By At Least 4 European Nations (AP)
Hungary Wants European Military Forces At Greek Borders (DW)
Welcoming the Refugees: Has Germany Really Changed? (Juan Moreno)
Germany’s Asylum System Struggles to Cope (Spiegel)
China Is Dumping US Debt (CNN)
Citi’s Chief Economist Says China Is ‘Financially Out of Control’ (Bloomberg)
Goldman’s Next 11 Markets Are Sinking Even Faster Than the BRICs (Bloomberg)
Poland Versus Greece (Paul Krugman)
Greece at the Cross-Roads: A Test Case of Austerity (Pollack)
A Plan B in Europe (Mélenchon, Fassina, Konstantopoulou, Lafontaine, Varoufakis)
1.5 Million People Take Part In Catalan Independence March (RTE)
Canadian Household Debt Hits New Record, Fuelled By Low Mortgage Rates (Star)
$15 Minimum Wage for NY State: Ford Paid Workers That 100 Years Ago (Intercept)
Russia Calls On World Powers To Arm Syrian Military (AP)
Dairy Farmers at the Barricades (Bloomberg)
Global Food Prices Hit Lowest Level In Over 6 Years (CNBC)

There should have been highest level emergency meetings for a long time now. Is Merkel afraid her Teflon may wear off?

UN Warns Of Millions More Refugees Coming To Europe (Reuters)

[..] More than 170,000 migrants have crossed into Hungary from non-EU Serbia so far this year. Many try to avoid being registered in Hungary for fear of being stranded there or returned to the country later in their journey across Europe. In Geneva, the U.N. High Commissioner for Refugees (UNHCR) said it was sending pre-fabricated housing units to provide temporary overnight shelter for 300 families in Hungary but also expressed concern over Budapest’s tough approach, including the possible deployment of troops to tackle the crisis. “Obviously we expect authorities to respect rights of refugees whether they are the police or army,” said UNHCR spokesman William Spindler.

Syria’s four-year civil war has so far displaced almost eight million people, said Peter Salama of UNICEF, the U.N. childrens’ agency, adding: “There could be millions and millions more refugees leaving Syria and ultimately (going) to the European Union and beyond.” So far this year, a record 433,000 refugees and migrants have crossed the Mediterranean to Europe, more than double the total for all of 2014, the International Organization for Migration (IOM) said on Friday. The EC, backed by Germany and France, wants EU member states to accept mandatory quotas to share out some 160,000 refugees but the plan faces stiff resistance in some capitals. On Friday the UNHCR said the number of people requiring relocation had now risen to 200,000.

Speaking in Prague, Steinmeier said Germany was expecting about 40,000 refugees this weekend alone, adding the EU needed a “fair mechanism of redistribution of migrants (still coming)”. “This challenge cannot be borne by one country. We have to invoke European solidarity,” he told a joint news conference with the foreign ministers of the Czech Republic, Slovakia, Hungary and Poland – countries opposed to the EU’s proposal for mandatory quotas. Germany has come under fire from Orban and other east European leaders for opening its door to Syrian asylum seekers, saying such generosity will only encourage many more to come. Denmark, which like Britain has opted out of EU rules on justice and home affairs, said on Friday it would not take part in the Commission’s relocation scheme.

Earlier this week, Denmark shut off some traffic with Germany to curb refugees trying to reach Sweden, which remains much more welcoming than other Scandinavian countries, but later allowed them to travel through. Finland said it would accept its 2% share of asylum seekers under the Commission plan but said it remained opposed to mandatory quotas and would cut benefits for refugees. EU interior ministers are due to discuss the Commission proposals on Monday. If they fail to reach a deal on tackling the crisis, European Council chief Donald Tusk said on Friday he would call an extraordinary summit of EU leaders this month.

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No doubt there.

Migrant Crisis Could Be ‘Biggest Challenge’ In EU History: Germany (AFP)

The unprecedented influx of refugees and migrants flooding into the EU could be the bloc’s greatest-ever challenge, Germany’s foreign minister said Friday, adding Berlin expects 40,000 new migrants to arrive this weekend. Europe’s largest refugee crisis since the end of World War II could be “the biggest challenge for the EU in its history,” said Frank-Walter Steinmeier, calling for solidarity at Prague crisis talks with eastern EU members who have ruled out binding migrant quotas proposed by the European commission. “If we are united in describing the situation as such, we should be united that such a challenge is not manageable for a single country,” he said, adding “we need European solidarity.”

“Germany expects 40,000 new migrants from the south at the weekend, despite the willingness of German people our possibilities are smaller and smaller,” Steinmeier told counterparts from the Czech Republic, Hungary, Slovakia and Poland. Record numbers of people, many of them fleeing war and conflict in Syria and Iraq, continued to pour into Europe, with around 7,600 entering Macedonia in the last 12 hours.

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This is going to be a fight.

EU Refugee Quota Plan Rebuffed By At Least 4 European Nations (AP)

At least four countries Friday firmly rejected a European Union plan to impose refugee quotas to ease a worsening migrant crisis that Germany’s foreign minister said was “probably the biggest challenge” in the history of the 28-nation bloc. Hungary, which along with the Czech Republic, Slovakia and Poland said it would not support the proposal, threatened instead to crack down on the thousands of people streaming across its borders daily as they flee war and persecution. The stance by those Central European countries reflected a hardening front against distributing at least some of the refugees among them and was a stinging rebuff to German Foreign Minister Frank-Walter Steinmeier, who traveled to Prague to try to persuade them to reconsider.

While the Czechs, Slovaks and Poles have been relatively unaffected by the influx, Hungary has faced growing criticism about its stance toward the asylum seekers. Other EU leaders and human rights groups accuse the government of gross mismanagement or serious negligence in housing, feeding and processing the migrants traveling from the Balkans and through Hungary to Western Europe. Peter Bouckaert of Human Rights Watch asserted Hungary was keeping migrants and refugees “in pens like animals, out in the sun without food and water.” A video that the rights group said was from inside a holding facility at the border town of Roszke showed metal fences surrounding clusters of tents and dividing migrants into groups. Guards were depicted throwing food into the air for desperate people to grab.

Erno Simon, a spokesman in Hungary for the U.N. refugee agency, said the housing situation in Roszke with nighttime temperatures falling to near freezing “is really very, very alarming.” Unfazed, Hungarian Prime Minister Viktor Orban threatened an even harder line, saying his country intended to catch, convict and imprison people who continue to penetrate its new border barriers as part of get-tough border security measures scheduled to begin Tuesday. “If they don’t cross into Hungary territory legally, we will consider it a crime,” Orban said, saying the “illegal immigrants” had no one to blame but themselves for any hardships suffered. “They don’t cooperate. They are not willing to go to the places where they receive provisions: food, water, shelter, health care. They have risen up against Hungary’s legal order,” he told a Budapest news conference.

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How long till we see refugees get shot to death?

Hungary Wants European Military Forces At Greek Borders (DW)

Beginning on September 15, “Hungarian authorities cannot be forgiving of illegal border-crossing,” Orban said on Friday after meeting with Manfred Weber, the chairman of the conservative European People’s Party in the EU Parliament. “We will not courteously accompany them as until now.” Stricter immigration laws are set to take place next week to block the flow of migrants passing through the country on their way to northern European countries. Many are trying to avoid registering in Hungary out of fear of being stranded or returned to the country later. Over 170,000 people have entered Hungary this year, with the UN expecting another 42,000 to arrive next week. Orban also accused refugees of “rebelling against Hungarian legal order” after numerous camp breakouts and standoffs at the Budapest train station.

“They have seized railway stations, refused to give fingerprints, failed to cooperate, and are unwilling to go to places where they would get food, water, accommodation and medical care,” he said. The prime minister also blamed Greece for Hungary’s current refugee crisis. “If Greece is not capable of protecting its borders, we need to mobilize European forces to the Greek borders so that they can achieve the goals of European law instead of the Greek authorities. That is one of the foremost goals,” Orban said. His statements come at the end of an uneasy week which saw increasing tensions at the Serbian-Hungarian border. The country’s decision to build a fence along its border with Serbia, as well as a recent video of refugees being fed “like animals in a pen” at a border reception center drew international criticism on Friday.

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Juan Moreno, child of Spanish immigrants to Germany, tries to find out for Der Spiegel if the country’s really changed.

Welcoming the Refugees: Has Germany Really Changed? (Juan Moreno)

I continue my journey to Leipzig, to the next person who is an expert on foreigners. Oliver Decker is a psychologist, sociologist and philosopher. He received his PhD, became a professor and has focused his academic attentions for the last 13 years on right-wing extremism and xenophobia. Last year, he published his latest study, which was widely quoted in the press. The conclusion: Germans have become less xenophobic. Whereas 9.7% of Germans still had a right-wing extremist weltbild 13 years ago, only 5.4% do today. Anti-Semitism, sympathy for National Socialism, support for a dictatorship: all of that, Decker wrote, is on the wane. That seemed to be the answer to my question. Right down to the decimal point.

Decker is a calm man with a penchant for holding forth in long and complicated sentences. I meet him in a café not far from Leipzig University, where he works. We order something to eat, but before our food comes, Decker makes it clear to me that Laschet is wrong. “There is only an ostensive reduction in xenophobia,” Decker says, explaining that the rejection of certain groups has become more acute. Sinti, Roma and Muslims, for example, are more disapproved of than they used to be, he says. According to Decker, many Germans feel there are two types of foreigners: the useful and the useless. “The Italians brought us their cuisine, so they can stay,” Decker says with ironic bitterness. Americans, Britons, French and Spaniards all integrate well, find work and pay taxes.

But if people believe that newcomers don’t contribute, they are rejected even more than before. Someone once called it “Usefulness-racism.” Decker says that the German identity is deeply bound up with the economy. “Even the poor are proud of the fact that the world envies us for our economy. If that is threatened by immigration, acceptance begins to fall,” he says. So is it all just a big misunderstanding, this new German tolerance of foreigners? Decker smiles. “Germany is currently experiencing a period of economic sunshine, which has led to a reduction in xenophobia. I will be interested to see what studies find a few years from now.”

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German reality beyond the initial euphoria: pretty soon, dramatic scenes will start to unfold.

Germany’s Asylum System Struggles to Cope (Spiegel)

Hannelore Kraft, the Social Democratic (SPD) governor of North Rhine-Westphalia, Germany’s most populous state, made clear at the beginning of the week that the number of refugees to be expected this year will likely rise from the 800,000 the federal government forecast in August. She also made clear that the effort needed to deal with the influx will be much greater than previously thought. Just how great that effort might be became clear on Thursday morning during a conference call of all state interior ministries in addition to the federal Interior Ministry in Berlin. As part of the meeting, states indicated how much shelter capacity they possessed, and the results, according to the phone conference’s protocol, were not particularly promising.

Seven states – including Baden-Württemberg, Hesse and Rhineland-Palatinate – reported that they had no remaining capacity whatsoever. Bavaria complained of “uncontrolled access pathways.” And Schleswig-Holstein lamented the “uncoordinated influx into the reception facilities.” The Interior Ministry in Berlin also had an alarm bell to sound: Austria, through which refugees must travel on their way from Hungary to Germany, is beginning to diverge from the joint approach. The conference call provides a small insight into the immense challenges facing Germany this year and in the years to come. Indeed, the effects are likely to remain with the country for decades to come — and will have consequences for Germany’s identity, its prosperity and for its self-image. Against that backdrop, the question arises: Can we handle the crisis? Or will the crisis handle us?

Either is possible. It could be that Germany, with its gleeful welcoming party, is currently sowing the seeds for problems that the country will face in 2040. It could be that the foreigners will remain foreign, that they will create a new, parallel underclass. Simultaneously, it could also be that Germany is currently solving those problems that would, without immigration, face the country in 2040: Labor market problems, pension fund problems and old-age care problems. It will take many years before it becomes clear in which direction the pendulum is swinging. But if Germany wants the opportunities to win out over the dangers, then that state will have to confront the chaos and do all it can to integrate the newcomers, the majority of whom are likely to stay. And that project will have to begin soon, even if the state is currently having difficulties accelerating asylum procedures, providing therapy to traumatized children and training adults for the labor market.

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“Capital outflows have skyrocketed in China and the yuan is under intense selling pressure..”

China Is Dumping US Debt (CNN)

It’s no secret that China is the largest holder of U.S. debt. So should Americans be concerned that China has started dumping some of its Treasury holdings? After all, it raises serious questions about whether China will keep lending Washington money to help finance the federal deficit in the future. But right now, China is selling because it’s in dire need of cash. Recently, it unleashed multiple moves to support its markets and prevent its currency from a freefall, while at the same time trying to stimulate the economy. China owned $1.3 trillion of U.S. Treasuries as of June, making it the biggest holder of U.S. debt. But China’s foreign-exchange reserves plunged by a record $94 billion in August, according to the country’s central bank, leaving it with a war chest of $3.6 trillion.

Analysts say it’s very safe to believe a big chunk of that decline occurred due to a reduction in U.S. Treasury holdings. The selling and the potential that China will not be buying U.S. debt in the near future raises questions on its potential to increase America’s borrowing costs. Some of this might already be happening, at least at a small scale. When stock markets are turbulent, investors usually rush to the safety of U.S. Treasurys and yields fall. However, despite August’s extreme stock volatility, rates on Treasurys actually rose slightly in late August. Part of that move is likely due to Wall Street betting the Federal Reserve may raise interest rates next week. But market participants also suspect the unusual action in the bond market was driven by China dumping Treasuries.

This time, Beijing is cutting its Treasury holdings out of a weakened position as it tries to stave off more declines in its currency. China is also propping up its stock market, which lost half its value in the span of just a few months this summer. “Capital outflows have skyrocketed in China and the yuan is under intense selling pressure. The only thing they could do is sell Treasuries to buy their own currency,” said Walter Zimmerman, chief technical analyst at United-ICAP.

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The 55% chance is a loony number and Buiter’s ‘solutions’ make zero sense, but his headline may well be correct for once. Coming from America’s biggest bank, this should have Beijing in a nervous state.

Citi’s Chief Economist Says China Is ‘Financially Out of Control’ (Bloomberg)

Willem Buiter, Citigroup chief economist, sees a storm brewing in China. This week, he estimated that there is a 55% chance of a made-in-China global recession in the not too distant future, which he defines as a period of sub-2% global growth. Without a massive, consumer-focused stimulus plan, he argues, Chinese growth will slip below 4%. This would constitute a recession for the world’s second-largest economy, according to Buiter, and the rest of the world wouldn’t be insulated from the slowdown. Buiter appeared on BloombergTV to discuss his headline-grabbing call.

The cause of his consternation is the immense debt that Chinese non-financial companies have racked up in a short period of time. Over the past decade, the indebtedness of China’s private sector has exploded and exceeded that of the U.S., which Buiter pointed out has a much more advanced economy and sophisticated financial system: “I think things are financially out of control in China and we are waiting for the regulators and supervisors to bring things back under control and to do for the financial system the kind of things – recapitalizing banks and other systemically important financial institutions – that would give you the underpinning for continued growth,” he said.

The economist isn’t too optimistic about the prospects for the powers in Beijing to resolve their bloated credit situation. Chinese policymakers are playing a game of “extend and pretend,” said Buiter, drawing a parallel to the EU’s penchant for reaching short-term solutions to the crisis in Greece. “Until the problems in the banking sector, the financial sector generally, and in the corporate sector – the excessive debt burden – is tackled by the government, the only entity that can do it, I think the prospects for resumption of healthy growth in China are dim,” he concluded.

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It’s called deflation. Global stock markets have lost $12.5 trillion.

Goldman’s Next 11 Markets Are Sinking Even Faster Than the BRICs (Bloomberg)

This time last year, it looked like Goldman Sachs’s selection of emerging market up-and-comers was ready to fill the void left by shrinking investment returns in Brazil, Russia, India and China. Share prices in these “Next 11” countries – places like the Philippines, Turkey and Mexico – were trading at all-time highs as foreign investors flooded their markets with cash. Inflows into Goldman Sachs’s U.S.-domiciled Next 11 equity fund sent assets under management to twice the level of the firm’s BRICs counterpart. Now, though, the Next 11 countries are looking even worse for investors than the larger markets they were supposed to supplant. MSCI’s Next 11 equity gauge has tumbled 19% this year, versus a 14% slump for the BRIC index. Foreign capital is rushing out, with the Goldman Sachs fund shrinking by almost half as losses deepened to 11% since its inception four years ago.

The turnaround shows how young populations and a rising middle class – characteristics that first lured Goldman Sachs to the Next 11 economies a decade ago – have failed to safeguard stock-market returns in a world facing higher U.S. interest rates, tumbling commodity prices and a Chinese economic slowdown. For John-Paul Smith, one of the few strategists to accurately predict the losses in emerging markets, it also illustrates the dangers of grouping so many disparate countries into a single investment theme. Money managers “are increasingly moving away from acronym-based investment,” said Smith, the former Deutsche Bank AG strategist who founded Ecstrat, a London-based research firm, last year. “Within emerging markets, it is difficult to think of a market that has a combination of attractive valuations and constructive policy developments.”

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It’s the euro.

Poland Versus Greece (Paul Krugman)

Yannis Ioannides and Christopher Pissarides, in a new Brookings Paper, talk about the ways lack of structural reform hurts Greek productivity and competitiveness. I have no reason to doubt that there are big things that should change, and that Greece would be much better off if it could somehow break the political barriers to making these changes. But I would argue that it’s very, very wrong to point to factors limiting Greek productivity and claim that these factors are the “cause” of the Greek crisis. Low productivity exacts a price from any economy; it does not normally, or need not, create financial crisis and a huge deflationary depression. Consider, in particular, a comparison that should be made — between Greece and Poland. Poland, like Greece, is a country on Europe’s periphery, closely linked to the rest of the European economy.

It’s also a country with relatively low productivity by northwestern European standards, indeed lower productivity than Greece by standard international measures. But Poland has not had a Greek-style crisis, or indeed any crisis at all. Instead, it has powered through the turmoil of recent years. What’s the difference? The main answer, surely, is the euro: by adopting the euro Greece first brought on massive capital inflows, then found itself in a trap, unable to achieve the needed real devaluation without incredibly costly deflation. Every time someone asserts that the Greek problem is really on the supply side, you should ask, not whether it has supply-side problems — it does — but why this should lead to collapse. Greece seems to have about 60% of Germany’s productivity, which means that it should have real wages only about 60% as high as Germany’s. It should not have 25% unemployment.

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Interesting critique of Varoufakis.

Greece at the Cross-Roads: A Test Case of Austerity (Pollack)

Austerity entails sacrifice. It suggests an ascetic mental cast and, perhaps secondarily, enforced or extreme economy (Webster’s). Speaking personally, I have always favored an ascetic cast of mind as the ultimate negation of conspicuous consumption, and beyond, a dependence on consumerism as a principal mode of class identity, and a gut-addiction to luxury, as diversion from the real world of living. The ascetic cast is absolutely essential to a gracious view of Nature and respect for the environment. And it also rules out militarism as incompatible with a nation’s servicing of the basic needs of its people. Asceticism promotes sharing and conserving of scarce resources and, be it said, a spiritual cleanliness not cluttered with status needs and consideration. So much on the positive side.

But what happens when what I take to be a moral category of human belief and conduct has become politicized to favor exactly the opposite societal results. For austerity has been the tool of upper groups to fasten poverty on the remainder, a bone-dry social system devoid of everything from progressive taxation and enforced business regulation to a vibrant social safety net—all in the vacuous name of balanced budgets. Austerity is the battering ram of plutocracy to enhance its own wealth and subjugate working people and the poor to unfulfilled lives often coming down to human social misery. It is a class weapon of power, a means, thoroughly respectable at that, of promoting class differentiation and wealth concentration.

Not unexpectedly, it is the method of choice of the IMF, World Bank, EU, and, standing behind all three, the US (though meant to apply to others more than to itself). It is legitimation in its nastiest form, meant to seal a hierarchical order in place at the expense of its most deprived members. Within the EU, Greece became the designated victim, 1.e., sacrificial lamb, to justify a malicious economic policy-construct pointing the way to where capitalist development was heading: greater inequality through enforced strict ground rules that favor corporatist goals of financial-business hegemony over governments and peoples.

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“..an international summit on a plan B for Europe..” If they can make that work, it would be a positive development. Somewhat surprised to see Zoe be part of this little group.

A Plan B in Europe (Mélenchon, Fassina, Konstantopoulou, Lafontaine, Varoufakis)

This is our plan A: We shall work in each of our countries, and all together throughout Europe, towards a complete renegotiation of the European Treaties. We commit to engage with the struggle of Europeans everywhere in a campaign of Civil European disobedience toward arbitrary European practices and irrational “rules” until that renegotiation is achieved. Our first task is to end the unaccountability of the Eurogroup. The second task is to end the pretence that the ECB is “apolitical” and “independent”, when it is highly political (of the most toxic form), fully dependent on bankrupt bankers and their political agents, and ready to end democracy at the touch of a button.

The majority of governments representing Europe’s oligarchy, and hiding behind Berlin and Frankfurt, also have a plan A: Not to yield to the European people’s demand for democracy and to use brutality to end their resistance. We’ve seen this in Greece last July. Why did they manage to strangle Greece’s democratically elected government? Because they also had a plan B: To eject Greece from the Eurozone in the worst conditions possible by destroying its banking system and putting to death its economy. Facing this blackmail, we also need a plan B of our own to deter the plan B of Europe’s most reactionary and anti-democratic forces. To reinforce our position in the face of their brutal commitment to policies that sacrifice the majority to the interests of a tiny minority.

But also to re-assert the simple principle that Europe is about Europeans and that currencies are tools for promoting shared prosperity, not instruments of torture or weapons by which to murder democracy. If the euro cannot be democratised, if they insist on using it to strangle the people, we will rise up, look at them in the eye, and tell them: Do your worst! Your threats don’t scare us. We shall find a way of ensuring that Europeans have a monetary system that works with them, not at their expense. Our Plan A for a democratic Europe, backed with a Plan B which shows the powers-that-be that they cannot terrorise us into submission, is inclusive and aims at appealing to the majority of Europeans. This demands a high level of preparation. Debate will strengthen its technical elements.

Many ideas are already on the table: the introduction of parallel payment systems, parallel currencies, digitization of euro transactions, community based exchange systems, the euro exit and transformation of the euro into a common currency. No European nation can work towards its liberation in isolation. Our vision is internationalist. In anticipation of what may happen in Spain, Ireland – and potentially again in Greece, depending on how the political situation evolves – and in France in 2017, we need to work together concretely towards a plan B, taking into account the different characteristics of each country.

We therefore propose the convening of an international summit on a plan B for Europe, open to willing citizens, organisations and intellectuals. This conference could take place as early as November 2015. We shall begin the process on Saturday the 12th of September during the Fête de l’Humanité in Paris. Do join us !

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Europe’s next black swan?!

1.5 Million People Take Part In Catalan Independence March (RTE)

Some 1.4 million people have joined a march demanding independence for the Catalonia region from Spain, Barcelona city police said. Officials published the figure on Twitter after the demonstration, which marked the start of campaigning for a 27 September regional election billed by Catalan leaders as an indirect vote on independence. The city police force, which is controlled by city hall, estimated turnout at 1.4 million. Spanish government officials say half a million people are taking part in the march. Waving red and yellow Catalan flags, they marched down a major road into the city, yelling “Independence!” while some formed human pyramids – a Catalan folk tradition. The show of force on Catalan national day came at a time of high political tensions, some three months ahead of a general election in Spain, the eurozone’s fourth-biggest economy.

State officials and other authorities did not immediately release their own estimates for turnout in Barcelona, capital of this region which counts 7.5m inhabitants. Before the rally, organisers had said 500,000 people had signed up to take part. At last year’s Catalan national day demo, Spanish state officials and local authorities gave wildly different turnout figures for the politically-sensitive rally. Polls this week showed pro-secession candidates could win a majority of seats in the Catalan parliament during this month’s vote. If they win, Catalan president Artur Mas has vowed to push through an 18-month roadmap to secession for the region, which accounts for a fifth of Spain’s economy.

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Blind into the abyss: “..for every $1 of after-tax income Canadians earned, they owed nearly $1.65 in credit market debt..”

Canadian Household Debt Hits New Record, Fuelled By Low Mortgage Rates (Star)

A key indicator of household debt hit a record high in the second quarter of 2015 as lower mortgage rates drove increased borrowing, Statistics Canada figures show. The ratio of debt to disposable income reached 164.6% as debt loads grew faster than incomes, the federal agency noted in its quarterly National Balance Sheet Accounts. That means for every $1 of after-tax income Canadians earned, they owed nearly $1.65 in credit market debt, which includes mortgages, credit cards and other kinds of consumer loans. The ratio was 163% in the previous three-month period, Statistics Canada said. The increase “came as no surprise,” TD Bank economist Jonathan Bendiner wrote in a commentary.

Rising mortgage debt drove most of the growth as interest rate cuts by the Bank of Canada earlier in the year spurred borrowing, especially in the hot housing markets in British Columbia and Ontario, Bendiner noted. The report comes two days after the Bank of Canada held its trendsetting overnight interest rate at 0.5%, citing strength in exports and consumer spending. In the past, Bank governor Stephen Poloz has raised concerns about growing household debt loads as a risk to future economic stability. But that concern was pushed onto the back burner as plunging oil prices sent the Canadian economy into a mild recession in the first half of the year. A credit counselling agency said consumers need to be cautious about taking on debt levels they may not be able to carry if interest rise from their current very low levels.

“Household debt levels are continuing their upward trend, and this puts Canadian consumers in a precarious situation,” said Scott Hannah, the president and chief executive officer of the Credit Counselling Society, a non-profit agency in British Columbia. “If they’re struggling to manage their increasing debt obligations now, a sudden change in external factors — like a rise in interest rates or the loss of a job — will leave many Canadians in greater financial difficulty.” Overall, Canadian households held $1.874 trillion in credit market debt at the end of the quarter, Statistics Canada said.

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“According to the Wall Street Journal, Ford had “committed economic blunders, if not crimes” that would “get riddance to Henry Ford of his burdensome millions..”

$15 Minimum Wage for NY State: Ford Paid Workers That 100 Years Ago (Intercept)

This Thursday in Manhattan, New York Gov. Andrew Cuomo called for the state to raise its minimum wage to $15 an hour for all workers. Cuomo can’t just do this by edict — as he essentially could using an industry-specific wage board when he raised the minimum pay for New York fast food workers to $15 an hour by 2021 — so any raise for everyone will have to pass the state legislature. Still, simply getting the endorsement of the governor of the third-biggest U.S. state is a huge victory for a national movement of low-wage workers. What will come next is a series of hysterical warnings from conservative pundits that New York can’t meddle with the almighty power of supply and demand, and that this will cause massive unemployment and destroy the very people it’s supposed to help, etc.

So here’s some historical context: Adjusted for inflation, $15 an hour is exactly what Henry Ford paid his workers over 100 years ago. Ford famously decided in 1914 to raise his workers’ wages to $5 a day while cutting the workday from nine hours to eight. Five dollars in 1914 has the same buying power as $119.32 in 2015. Divided by eight, that’s $14.92 an hour. When Ford made his announcement, the New York Times proclaimed that “The theory of the management at Ford Motor Company is distinctly Utopian and runs dead against all experience.” According to the Wall Street Journal, Ford had “committed economic blunders, if not crimes” that would “get riddance to Henry Ford of his burdensome millions” and “may return to plague him and the industry he represents, as well as organized society.”

Instead, Ford had kicked off the age of mass consumption, a huge century-long economic expansion, and the creation of the first real middle class in world history. As Ford later wrote: “We increased the buying power of our own people, and they increased the buying power of other people, and so on and on. It is this thought of enlarging buying power by paying high wages and selling at low prices which is behind the prosperity of this country.” (Interestingly, someone making $5 dollars a day at Ford would have had to work a little more than 100 days to afford a Model T – and if New York workers get a raise to $15 an hour, they’ll have to work about the same period of time to afford a Ford Fiesta.)

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Russia’s fed up with US chaos theories.

Russia Calls On World Powers To Arm Syrian Military (AP)

Sergei Lavrov, Russia’s foreign minister, has called on world powers to help arm the Syrian army, saying it was the most efficient force against Islamic State. The US and Nato have raised concerns over Russia’s military buildup in Syria since they see the president, Bashar al-Assad, as the cause of the Syrian crisis, which has claimed more than 250,000 lives over four years. Moscow, meanwhile, has sought to cast arms supplies to Assad’s government as part of international efforts to combat Isis militants. The increased Russian activity reflects Moscow’s concern that its longtime ally is on the brink of collapse, as well as hopes by the president, Vladimir Putin, that a common battle against Isis can improve Russia’s ties with the west, which have been strained over Ukraine.

Lavrov said in Moscow that Russia would continue to supply Assad with weapons and called on other countries to help the Syrian government and its ground troops. “You cannot defeat Islamic State with airstrikes only,” Lavrov said. “It’s necessary to cooperate with ground troops and the Syrian army is the most efficient and powerful ground force to fight the Islamic State.” Lavrov insisted that by sending weapons to Syria, Russia was not propping up Assad but was contributing to defeating Isis fighters. “I can only say once again that our servicemen and military experts are there to service Russian military hardware, to assist the Syrian army in using this hardware,” he said at a news conference in Moscow. “And we will continue to supply it to the Syrian government in order to ensure its proper combat readiness in its fight against terrorism.”

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“The world is awash in milk..”

Dairy Farmers at the Barricades (Bloomberg)

Talk to dairy farmers in Britain, the U.S., New Zealand, Canada, Argentina, and countries worldwide, and you ll hear the same thing: Times are tough. Russia’s ban on European Union milk and the EU’s removal of production quotas have driven local prices down 20% in the past 12 months. That s why 6,000 farmers and 2,000 tractors converged on Brussels on Sept. 7 to protest EU farm policies. Audrey Le Bivic, a dairy farmer from France s Brittany region, was grim: “I cannot pay my bills. If tomorrow I can no longer buy food for my cows, they will not produce any more milk, and I cannot let my cows starve”. “The world is awash in milk, with global trade in whole milk powder at its lowest since 2011”, the U.S. Department of Agriculture says.

For the first seven months of 2015, American dairy exports were down 28%, compared with the same period in 2014, says the U.S. Dairy Export Council; the USDA expects purchases of whole milk powder by China, the world s biggest dairy importer, to drop 40% this year. The former No. 2 importer, Russia, has banned imports from not only the EU, but also the U.S. and Australia in retaliation for sanctions imposed to protest Russian intervention in Ukraine. “We don’t see any major recovery in sight”, says Pekka Pesonen, secretary general of Copa-Cogeca, a farm lobby in Brussels. The Brussels demonstrations were the culmination of a summer of unrest in the countryside. French farmers blockaded highways; their Lithuanian counterparts dumped 30 tons of milk to highlight their plight.

In the U.K. angry farmers raided supermarkets and emptied shelves of milk to pressure retailers including Wal-Mart Stores to commit to higher prices. Dairy farmers have been losing huge amounts of money, says Rob Harrison, an English farmer. China and Russia aren’t the only culprits. Record prices last year primed farmers to bolster output in the U.S., where milk production in 2015 will reach 208.7 billion pounds, the fifth consecutive record-setting year. In April the EU, seeking to liberalize trade, removed quotas that had been in place for the past 30 years, leading to increased production from Ireland, the Netherlands, and the U.K. China is producing more milk thanks to investments such as a $140 million, 20,000-cow facility that China Modern Dairy Holdings, partly owned by private equity firm KKR, unveiled in 2013. The Chinese are also consuming stockpiled milk powder and importing less. Global milk supply grew 3.7% last year, almost triple the growth rate of 2013, the USDA says.

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Food must be a local trade, not an international one.

Global Food Prices Hit Lowest Level In Over 6 Years (CNBC)

Global oversupply and concerns over China’s economic slowdown have knocked food commodity prices to the lowest level in over six years, the UN’s food body said on Thursday. The Food and Agriculture Organization of the UN’s trade-weighted food price index posted its steepest monthly drop in August since December 2008, falling to 155.7 points, its lowest level since April 2009. “In addition to ample supplies, a number of other factors contributed to the decrease, including the slump in energy prices and concerns about China’s economic slowdown and its negative consequences on the global economy and financial markets,” the organization said in an statement on Thursday. The index is a measure of the monthly change in international prices of a basket of five food commodities cereal, vegetable oil, dairy, meat and sugar.

Cereal prices were at their lowest level since June 2010 and the prices of milk powders, cheese and butter “dropped substantially.” Vegetable oil prices hit a March 2009 trough and sugar prices also fell on the previous month, hit by a falling Brazilian real and expectations that India will become a net exporter of the commodity. The only food commodity that didn’t see a fall was the price of meat, which remained virtually unchanged from the previous month. “International prices of ovine (sheep) meat moved up somewhat, while those for other types of meat were stable,” the UN said. “Nevertheless, compared to the index’s historic peak in August 2014, overall prices were down by 18%, with pig and ovine meat the most affected, although poultry and bovine meat quotations also slid markedly over the period.”

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Sep 072015
 
 September 7, 2015  Posted by at 9:29 am Finance Tagged with: , , , , , , , , ,  


Dorothea Lange Saturday afternoon, Pittsboro, North Carolina Jul 1939

Father Of The Euro Fears EU Superstate By The Back Door (AEP)
UN Agencies ‘Broke And Failing’ In Face Of Ever-Growing Refugee Crisis (Guardian)
Europe Debates Migrant Quota Buyout Plan (FT)
Get Ready For A Real Lousy Month In The Stock Market (MarketWatch)
Forex Reserves Unwind Could Reverse Global Bond Supercycle (Reuters)
Capital Flight Now The Big Concern For Slowing China (FT)
China Freezes Outbound Investment Quotas as Outflows Hurt Yuan (Bloomberg)
China Revises Down 2014 GDP To 7.3% From 7.4% (CNBC, Reuters)
As Europe Grasps for Answers, More Migrants Flood Its Borders (NY Times)
Pope Francis Calls On European Parishes To House Up To 500,000 Refugees (WaPo)
‘If This Is Your Idea Of Europe, You Can Keep It’ (CNBC)
The Refugee Crisis Isn’t a ‘European Problem’ (Michael Ignatieff)
Refugee Flow Linked To Turkish Policy Shift (Kath.)
Hungarian Official Admits Campaign To Generate Hate Against Migrants (EurActiv)
Merkel Seeks $6.7 Billion for Refugees NEXT YEAR! (Bloomberg)
Greece Asks EU For Humanitarian Aid To Cope With Refugee Crisis (Reuters)
Statement By The President Of SYRIZA On The Refugees (Alexis Tsipras)
Tsipras Vows Battle To Improve Bailout After Greek Election (Reuters)
On The State Of The European Union (Yanis Varoufakis)
Greek Crisis Prompts A Rethink On Food Waste (AFP)

No doubt the plans are being laid out in secret.

Father Of The Euro Fears EU Superstate By The Back Door (AEP)

The euro’s founding father has warned that Europe’s latest plan for an EMU-wide finance ministry is a dangerous attempt to smuggle through political union, and breaches the basic tenets of modern democracy. Professor Otmar Issing, the chief architect of monetary union through its early years, said it would be “dangerous” to transfer control over tax and spending to the EU federal level before full political union has been established first on democratic foundations. Such a quantum leap in the constitutional structure of Europe – effectively the creation of an EU superstate, with a parliament comparable in power to the US Congress – is unthinkable in the current political atmosphere. It would require referenda across Europe, and a two-thirds majority in both houses of the German parliament.

“The chances of political union are close to zero,” he said, speaking at the Ambrosetti forum of world policymakers on Lake Como. If Europe were to jump the gun and force the pace of integration, this would lead to a rogue plenipotentiary with unbridled powers over sensitive issues of national life. “It is hard to see how it could be given democratic accountability,” he said. Prof Issing, a towering figure in the pre-EMU Bundesbank and the ECB’s first chief economist, said control of budgets must for now be left to national government and sovereign parliaments that are genuinely answerable to their own peoples. “Political union cannot be obtained in the European Union by the back door. It is a violation of the principle of no taxation without representation, and represents a wrong and dangerous approach,” he said.

Prof Issing was making a clear allusion to the American Revolution and the events that led up to the English Civil War in the 1640s, two great struggles triggered by a monarchical assault on the parliamentary power of the purse. The early democracies of Europe were all rooted in legislative control over spending. The proposals for an EMU finance ministry emerged in a paper by the heads of the Commission, Council, Parliament, Eurogroup, and ECB in June, a document known as the “Five Presidents Report”. It will start with an advisory European fiscal board and a strategic investment fund with enhanced powers, clearly a finance ministry in embryo. It will graduate towards a “euro area Treasury” from 2017 onwards, anchored in the EU treaties.

The report says that the new machinery will be established on a “lasting, fair and democratically legitimate basis”, and is in many ways a soul-searching admission that the EMU project has gone badly wrong, leading to bitter divisions. Yet critics warn that the EU is once again putting the cart before the horse. They point to the same fundamental errors that have led to perma-crisis in monetary union and spawned populist revolts across much of the EU. Prof Issing has always been open to an authentic United States of Europe similar to the US federal democracy. What he objects to is a deformed halfway house where supra-national bodies take decisions behind closed doors. The euro may survive “for a period” under its current structure, but it will break apart if the principles of monetary union are permanently violated. “Pacta sunt servanda (Agreements must be kept),” said Prof Issing.

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Something tells me it’s going to take many meetings. And the outcome will be a huge disappointment. Perhaps we passed peak humanity a while ago and didn’t notice.

UN Agencies ‘Broke And Failing’ In Face Of Ever-Growing Refugee Crisis (Guardian)

The UN’s humanitarian agencies are on the verge of bankruptcy and unable to meet the basic needs of millions of people because of the size of the refugee crisis in the Middle East, Africa and Europe, senior figures within the UN have told the Guardian. The deteriorating conditions in Lebanon and Jordan, particularly the lack of food and healthcare, have become intolerable for many of the 4 million people who have fled Syria, driving fresh waves of refugees north-west towards Europe and aggravating the current crisis. Speaking to the Guardian, the UN high commissioner for refugees, António Guterres, said: “If you look at those displaced by conflict per day, in 2010 it was 11,000; last year there were 42,000.

This means a dramatic increase in need, from shelter to water and sanitation, food, medical assistance, education. “The budgets cannot be compared with the growth in need. Our income in 2015 will be around 10% less than in 2014. The global humanitarian community is not broken – as a whole they are more effective than ever before. But we are financially broke.” Recent months have seen severe cuts to food rations for Syrian refugees in Lebanon and Jordan as well as for Somali and Sudanese refugees in Kenya. Darfuris living in camps in Chad have been warned that their rations may end completely at the end of the year. UN-run healthcare services have also been closed across a large part of Iraq, leaving millions of internally displaced people without access to healthcare.

Guterres warned that the damage being done by these cuts would be impossible to reverse. “We know that we are not doing enough, we are failing the basic needs of people. “The situation is beyond irreparable. If you look at the number of children who will see their lives so dramatically impacted by malnutrition and lack of psychosocial support, you will see this is already happening.”

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Commodities trading.

Europe Debates Migrant Quota Buyout Plan (FT)

European Commission officials are debating a proposal that would allow some EU countries to pay money in order to opt out of a mandatory quota system for accepting refugees, in a plan that could ease a stand-off between eastern and western members over how to relieve Europe’s migrant crisis. Some eastern states have balked at being forced to accept mandatory numbers, under a plan to divide 160,000 migrants across the region to be announced on Wednesday by commission president Jean-Claude Juncker. They argue that voluntary targets allow member states to provide better care to people looking to settle in Europe. “We are ready to share the burden and take responsibility, but only if we have control over the situation,” said Poland’s minister for Europe, Rafal Trzaskowski.

Over the summer a harrowing exodus of people from the Middle East, Africa and Afghanistan has leapt to the top of Europe’s political agenda, and led to a quadrupling of the EU’s resettlement target from 40,000 people in July. Commission officials and eastern diplomats stressed that the plan would only allow countries to take temporary “time-outs” from any expanded quota regime, in exchange for payments to a fund supporting refugees. “It creates an opportunity for voluntary decision making,” said an eastern EU official. “If they do it with penalties, then that is a bad idea. But if there is a system where you contribute financially to helping the problem in a different way, then that is much more palatable.”EU officials stressed that any opt-out would also have to be justified by “objective reasons” — for example Poland’s desire to have contingency plans in place to accept large numbers of refugees from Ukraine if the conflict there worsens.

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Month, year, decade, you name it.

Get Ready For A Real Lousy Month In The Stock Market (MarketWatch)

Investor sentiment has suffered with the recent correction and is not likely to improve in the short term, setting stocks up for a volatile September as international concerns overshadow domestic ones. Stocks took a big hit last week with the Dow Jones dropping 3.3%, the S&P 500 shedding 3.4%, and the Nasdaq falling 3%. International factors are feeding market volatility more than any other domestic factor, according to Brad McMillan, chief investment officer at Commonwealth Financial. McMillan said that Germany’s weak manufacturing orders report likely had more to do with Friday’s selloff than the jobs report’s effect on a September rate increase from the Federal Reserve.

What could affect the Fed’s decision is a continued stock market selloff. McMillan said if investors come back from the Labor Day holiday and decide to take risk off the table, the S&P 500 could break down through 1,870 as low as 1,790. If that happens, then the likelihood for a September rate increase falls below 50%, he said. “We’ve got another month or so before confidence bounces back,” McMillan said. “A lot of damage has been done to sentiment.” Others believe the correction still has a ways to go, with one indicator showing that investor sentiment has fallen to “panic” levels. Citi Research’s Tobias Levkovich said his Panic/Euphoria model, which brings together such indicators as short-interest ratios, margin debt, compiled bullishness data, and put/call ratios, broke into “panic” territory for the first time since late 2012.

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“..the dollar value of foreign currency reserves held by all developing nations ballooned by almost $7 trillion in just one decade to a peak of some $8.05 trillion by the middle of last year.” It was $1.05 trillion 10 years ago….

Forex Reserves Unwind Could Reverse Global Bond Supercycle (Reuters)

China’s summer shock may mark the end of an era of globalization that helped define world markets for more than a decade. Investor anxiety about the consequences is well-founded. Beijing’s integration into the global economy since 2002 reshaped the financial as well as economic landscape – mainly by the way China itself and the economies it supercharged with outsize demand for raw materials banked the hard cash windfalls they earned over the following 12 years. According to the IMF, the dollar value of foreign currency reserves held by all developing nations ballooned by almost $7 trillion in just one decade to a peak of some $8.05 trillion by the middle of last year.

While China was the main driver, accounting for about half of that increase, its economic boom created a commodity supercycle that flooded the coffers of resource-rich nations from across Asia to Russia, Brazil and the Gulf. As the vast bulk of this hard cash was banked in U.S. Treasury and other low risk, rich-country bonds, they were at least one critical factor in the halving of U.S. Treasury and other Group of Seven government borrowing costs over the same period. Alongside the disinflationary impact of China’s low cost labor on western goods imports and wages, this reserve stash helped extend what has now been a 20-year bull market in bonds.

What’s more, the drop in yields, by skewing relative returns between stocks and bonds and also the relative cost of capital for companies, also at least partly underwrote a post-credit crisis surge in equity prices to successive records. Reverse that bond buying, even at the margin, and world asset markets may have a major problem. That’s especially so at a time when the big other marginal bid for bonds, the U.S. Federal Reserve’s quantitative easing program, has ended and when western recoveries are pressuring the Fed and others to normalize near zero interest rates.

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How much longer can China keep up the pretense?

Capital Flight Now The Big Concern For Slowing China (FT)

Last month, Dalian Wanda, one of the most outward facing corporates in China, bought the organiser of the Ironman triathlons from a US private equity firm for $650 million. Meanwhile, Anbang Insurance, another company with similar global aspirations, looked less likely to succeed in its courtship of the Portuguese authorities in the hope of purchasing the remnants of a troubled financial conglomerate in Lisbon — precisely because the Chinese already have purchased so many assets there. At the same time, Chinese tourists continue to flood destinations like Japan, purchasing luxury goods which have become ever more inexpensive as a result of the steady appreciation of the Chinese currency, with the intention to sell them back home for a tidy profit.

It is hard to know what represents prudent diversification and what constitutes capital flight on the part of Chinese groups and wealthy travellers. But for those who track capital outflows from China, the distinction does not much matter. In the four quarters to the end of June, such outflows, (which do not include debt repayment) have totalled more than $500 billion according to data from Citigroup. China’s mountain of foreign reserves, once around $4 trillion, are now down to less than $3.7 trillion and are expected to drop further to $3.3 trillion by the end of the year, Citi calculates. Not long ago, it seems that the world was awash in cheap dollars. Many of those cheap dollars could be traced to the generous monetary policies of the Federal Reserve.

But many of them also came from the mainland as Chinese recycled their dollar earnings from the sale of exports abroad. Chinese capital flowed into everything from farms in Africa to ports in Sri Lanka and Pakistan, to dairies in New Zealand, energy firms in Canada and Treasuries in the US. More recently China started undertaking massive new, and expensive initiatives including the Asian Infrastructure Investment Bank, the New Development Bank, its Silk Route projects and a recapitalisation of the two policy banks that help recycle its reserves.

Suddenly, though, the question has shifted from what China will do with all the capital that flowed in and its arguably excessive reserves to whether it has enough money and adequate reserves at all. “It is neither the sell-off in Chinese stocks nor weakness in the currency that matters most,” notes George Saravelos, a currency strategist in London with Deutsche Bank. “It is what is happening to China’s FX reserves and what this means for global liquidity. The People’s Bank of China’s actions are equivalent to an unwind of QE or, in other words, Quantitative Tightening.”

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Shanghai down another 2.52% today.

China Freezes Outbound Investment Quotas as Outflows Hurt Yuan (Bloomberg)

China refrained from granting new quotas for residents to invest in overseas markets for a fifth month in August, the longest halt in six years, as authorities seek to stem weakness in the yuan. The State Administration of Foreign Exchange, which has approved 132 local institutions to put as much as $89.99 billion in offshore assets via its Qualified Domestic Institutional Investor program, hasn’t granted new allocations since March. Quotas for overseas investors to access domestic capital markets rose $16.4 billion to $140.3 billion in the period, data from the regulator show. The yuan traded 1.5% weaker outside of China than inside the country on Monday, indicating depreciation pressure.

China is trying to open its capital account enough for the yuan to win reserve status from the International Monetary Fund, while trying to curb an exodus of funds from an economy expanding at the slowest pace since 1990. Chinese investors are seeking to diversify in overseas assets after the Shanghai Composite Index of shares tumbled 39% from this year’s peak on June 12. The yuan slumped 3.6% in Shanghai and 4.9% in Hong Kong in the past 12 months. “Interest is there but whether the money can leave in the short term is the problem,” said Thomas Kwan, Hong Kong-based chief investment officer at Harvest Global Investments Ltd., whose Chinese unit offers QDII funds. “To avoid triggering excessive yuan outflows, I don’t think regulators would grant additional QDII quotas in the short term.”

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Stand up act. Very funny people, the Chinese.

China Revises Down 2014 GDP To 7.3% From 7.4% (CNBC, Reuters)

China’s National Bureau of Statistics on Monday revised down 2014 gross domestic product (GDP) growth to 7.3% from a previously reported 7.4%. This growth revision comes on the back of comments by China’s Finance Minister Lou Jiwei over the weekend that GDP growth will remain around 7% in 2015, as predicted earlier in the year, and the new economic normal may last for four to five years. A lower GDP number for 2014 should also make year-on-year comparisons for economic growth in 2015 more favorable. GDP stood at 63.6 trillion yuan ($10.00 trillion) last year, down by 32.4 billion yuan from the initial estimate, Reuters reported, citing the statistics bureau.

“China revises growth data every year, but it’s usually upwards. In that regard, it is unusual that the revision was downwards,” said Dariusz Kowalczyk, senior economist and strategist at Credit Agricole. “Rationally speaking, a 0.1% revision isn’t a big deal – and it doesn’t tell us much about the Chinese economy, but when it comes to sentiment, this is a negative development,” he said. The government will not particularly care about quarterly economic fluctuations and maintain steady macro-economic policy, Lou said, according to a statement late Saturday on the People’s Bank of China website. China is headed for its slowest economic expansion in 25 years in 2015 and mainland markets have slumped 40% since mid-June, sending global financial markets skittering.

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“Like a zoo,” Mr. Hadad said. “Like we are dogs.”

As Europe Grasps for Answers, More Migrants Flood Its Borders (NY Times)

Along Hungary’s border with Serbia, the scene was anything but smooth. “While Europe rejoiced in happy images from Austria and Greece yesterday, refugees crossing into Hungary right now see a very different picture: riot police and a cold, hard ground to sleep on,” Barbora Cernusakova, an Amnesty International researcher, said in a statement released by the group. The new camp in Roszke was being called a “reception center” by Hungarian officials, though the police on the scene referred to it as an “alien holding center.” Both migrants and relief groups were reporting harsh treatment and a hostile reception from the border authorities. On the Serbian side, officials temporarily blocked at least some trains headed north, amid numerous reports of the police demanding bribes to allow the migrants to pass.

Photos on social media from the new camp showed the police with dogs guarding a desolate compound surrounded by high fences. Omar Hadad, 24, from Dara’a, Syria, had been at a nearby camp along the border before he was shifted on Sunday to one west of Budapest, in the town of Bicske. “The Hungarian police came into the camp and they beat me with batons,” he said of his time in the holding center near the Serbian border. He peeled off his socks to show a bruised foot and leg. Journalists were not allowed into the Bicske camp, but the migrants could come out or speak across the entrance gate. Several other migrants rushed toward Mr. Hadad when they saw him displaying his wounds.

“Here, here, look,” said Salam Barajakly, a student from Damascus who began counting off the wounds and scars on his arms, legs and neck that he said he had gotten on the journey to Hungary, some by accident, some from the police, some from crawling under razor-wire fences. Two men held out smartphones showing videos of the camp where they had been held near the Serbian border. Hundreds of people squatted in the dust while the police tossed sandwiches and bottles of water to them over a barbed-wire fence. “Like a zoo,” Mr. Hadad said. “Like we are dogs.”

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And that’s just the Catholics. But let’s see the response.

Pope Francis Calls On European Parishes To House Up To 500,000 Refugees (WaPo)

In a statement that could have far-reaching implications, Pope Francis called on all Catholic parishes and monasteries in Europe to each house one refugee family that has fled “death from war and hunger.” “Every parish, every religious community, every monastery, every sanctuary of Europe, take in one family,” the pope said during his customary Sunday address, the news agency Agence France-Presse reported. He also said the Vatican will welcome two families of refugees. There are about 122,000 Catholic parishes in Europe, according to a study conducted by Georgetown University and published in June. If each of them housed one refugee family consisting of three to four people, about 360,000 to 500,000 refugees could be accommodated in the coming months.

It is unclear, however, whether all parishes will accede to the pope’s wish. In addition, housing refugees in parishes would have little bearing on the strict policies in countries such as France that have left desperate refugees — fleeing conflict and persecution — with limited options when they make their way to European shores. Addressing thousands of people in St. Peter’s Square on Sunday, Francis provided few details about his call to accommodate refugees, many of whom are not Catholics. The pope called his idea a “concrete gesture” ahead of a “year of mercy” that starts in December. The announcement, nevertheless, could relieve some of the countries that have taken in a large share of the refugees who have recently arrived in Europe, such as Germany or Sweden.

If all of Germany’s 12,000 parishes responded favorably to the pope’s demand, they alone could house a total of more than 30,000 refugees, according to Reuters. However, Germany expects about 800,000 refugees to apply for asylum in the country by the end of the year. The pope’s push resembles other, smaller initiatives already popular in the country. Some Germans have invited refugees to stay in their homes for free as authorities confront increasing difficulties in their bid to provide adequate apartments and reception centers. Many refugees are still housed in tent camps, and it is unclear whether alternative housing can be provided before winter arrives, as WorldViews reported earlier.

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“They all knew about it … but they just let it go.”

‘If This Is Your Idea Of Europe, You Can Keep It’ (CNBC)

“If this is your idea of Europe, keep it for yourself.” Thus spoke an irate Matteo Renzi, Italy’s Prime Minister, during an E.U. Council meeting last June as his East European colleagues refused any obligation to accept some of the thousands of Middle Eastern and African refugees lucky enough to reach alive the Greek and the Italian shores. More than two months later, there is still no unified E.U. policy on how to resettle the growing waves of refugees overwhelming Italy, Greece, Serbia and Hungary. In the middle of all that, some European leaders say they are defending Europe’s Christian values with barbed wires and overcrowded railway cars stuffed with suffocating people – the chilling images reminiscent of the darkest chapters in European history.

Viktor Orbán, Hungary’s Prime Minister, and a self-proclaimed defender of the “Christian Europe,” is justifying such acts by saying that “Europeans are scared because they see that their leaders have completely lost control of the situation.” Along with hundreds of thousands of refugees during the recent Balkan wars, and close to a million of refugees and displaced people from Ukraine’s eastern provinces, this latest human tragedy is emblematic of E.U.’s inability to respond to any major challenges – to say nothing of its inability to anticipate such extraordinary events. And that is not for lack of institutional infrastructure. The E.U. Commission has people in charge of everything – economic, social and foreign policy issues, including even the “specialists” writing the rules and procedures for cheese manufacturing.

The refugee crisis is not a sudden emergency. It is a disaster that has brewed over the past three years. The U.N. confirmed last Friday that it repeatedly warned the E.U. Commission of the coming influx of refugees from war-torn areas of Africa and Middle-East. This horrendous case of ineptitude and mismanagement will remind some of the European “shock” at “discovering” in 2009 that many euro area countries had been violating for years the monetary union’s fiscal rules, and that some of them had totally lost control of their banking systems. How was it possible that nobody knew about that? Jean-Claude Trichet, the former President of the ECB had the answer: “They all knew about it … but they just let it go.”

Can you then blame an angry German Chancellor Angela Merkel for roiling the markets with incendiary statements and imposing debilitating austerity policies to punish the fiscal transgression and banks’ mismanagement in a number of euro area countries? Yes, you can. As a key euro area member, Germany had the responsibility to help enforce the fiscal and financial treaty obligations binding the countries where the euro serves as a legal tender. Anger and vindictiveness are no substitutes for anticipating problems and applying proper policies.

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Amen. Even a failed Canadian politician can oversee this.

The Refugee Crisis Isn’t a ‘European Problem’ (Michael Ignatieff)

Those of us outside Europe are watching the unbelievable images of the Keleti train station in Budapest, the corpse of a toddler washed up on a Turkish beach, the desperate Syrian families chancing their lives on the night trip to the Greek islands — and we keep being told this is a European problem. The Syrian civil war has created more than four million refugees. The United States has taken in about 1,500 of them. The United States and its allies are at war with the Islamic State in Syria — fine, everyone agrees they are a threat — but don’t we have some responsibility toward the refugees fleeing the combat? If we’ve been arming Syrian rebels, shouldn’t we also be helping the people trying to get out of their way? If we’ve failed to broker peace in Syria, can’t we help the people who can’t wait for peace any longer?

It’s not just the United States that keeps pretending the refugee catastrophe is a European problem. Look at countries that pride themselves on being havens for the homeless. Canada, where I come from? As few as 1,074 Syrians, as of August. Australia? No more than 2,200. Brazil? Fewer than 2,000, as of May. The worst are the petro states. As of last count by Amnesty International, how many Syrian refugees have the Gulf States and Saudi Arabia taken in? Zero. Many of them have been funneling arms into Syria for years, and what have they done to give new homes to the four million people trying to flee? Nothing. The brunt of the crisis has fallen on the Turks, the Egyptians, the Jordanians, the Iraqis and the Lebanese.

Funding appeals by the United Nations High Commissioner for Refugees have failed to meet their targets. The squalor in the refugee camps has become unendurable. Now the refugees have decided, en masse, that if the international community won’t help them, if neither Russia nor the United States is going to force the war to an end, they won’t wait any longer. They are coming our way. And we are surprised? Blaming the Europeans is an alibi and the rest of our excuses — like the refugees don’t have the right papers — are sickening. Political leadership from outside Europe could reverse the paralysis and mutual recrimination inside Europe. The United Nations system to register refugees is overwhelmed. Countries like Hungary say they can’t resettle them all on their own. The obvious solution is for Canada, Australia, the United States, Brazil and other countries to announce that they are willing to send processing teams to Budapest, Athens and the other major entry points to register refugees and process them for admission.

Countries will set their own targets, but for the United States and Canada, for example, a minimum of 25,000 Syrian refugees is a good place to start. (The United States’ recent promise to take in 5,000 to 8,000 Syrian refugees next year is still far too small.) Churches, mosques, community groups and families could agree to sponsor and resettle refugees. Most of the burdened countries — Hungary, Greece, Turkey, Italy — would accept help in a heartbeat. Once these states take a lead, other countries — including those wretched autocrats in the Gulf States — could be shamed into doing their part.

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Somewhat plausible.

Refugee Flow Linked To Turkish Policy Shift (Kath.)

A sharp increase in the influx of migrants and refugees, mostly from Syria, into Greece is due in part to a shift in Turkey’s geopolitical tactics, according to diplomatic sources. These officials link the wave of migrants into the eastern Aegean to political pressures in neighboring Turkey, which is bracing for snap elections in November, and to a recent decision by Ankara to join the US in bombing Islamic State targets in Syria. The analyses of several officials indicate that the influx from neighboring Turkey is taking place as Turkish officials look the other way or actively promote the exodus. According to one Greek official, security fears are a key reason for Turkey’s encouragement of migrant flows.

“Turkey is facilitating or at least is not hampering the movement of illegal immigrants toward Greece, thinking that in this way it will limit the risk of a possible new terrorist attack on its territory as a reprisal for the military operations it has carried out on Syrian soil,” the official said. Another diplomat said Turkey wants to create a “dead zone” on its border with Syria that would allow the Turkish military to freely move against jihadists and Syrian Kurds. “This is why it is encouraging, or at least not obstructing, the movement of refugees from camps near the Syrian border to the Aegean and Greece,” he said.

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Hungary is largely a nation of former refugees.

Hungarian Official Admits Campaign To Generate Hate Against Migrants (EurActiv)

A Hungarian official indirectly admitted that the poster campaign ordered by the government last summer to discourage immigrants from coming into the country was aimed at generating hate towards them. Anti-immigration posters put up by the Hungarian government have sparked political controversy since June, featuring slogans such as “If you come to Hungary, you cannot take away Hungarians’ jobs”, and “If you come to Hungary, you have to respect our culture!”

Strangely enough, the posters can hardly be understood by migrants, because they are written in Hungarian. The posters – widely ridiculed on social media – were part of a larger anti-immigration campaign driven by Prime Minister Viktor Orban in response to a surge in asylum seekers. The campaign included a public questionnaire linking migration to terrorism and blaming EU policies for the influx of refugees.

But now a Hungarian official has admitted that the posters were in fact aimed at instigating hate against the migrants. Gergely Prohle, substitute state secretary of EU affairs in the Ministry of Human Resources, started by saying that the radical football hooligans did not become radical due to the country’s poster campaign. Then he added that Hungarian society displayed vast solidarity with the refugees, and if the poster campaign did have the desired effects on our society this would not be so.

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Next year?!

Merkel Seeks $6.7 Billion for Refugees NEXT YEAR! (Bloomberg)

German Chancellor Angela Merkel’s government announced plans to spend an extra €6 billion on refugees next year as thousands more migrants poured into the country over the weekend. Merkel’s governing coalition said on Monday that Germany will add 3 billion euros in spending to the 2016 federal budget and provide another €3 billion to states and municipalities to tackle the region’s biggest refugee crisis since World War II. Germany and Austria plan to end emergency measures that allowed the passage of thousands of migrants over the weekend from Hungary without registering in that country. That decision came after talks between Merkel, Austrian Chancellor Werner Faymann and Hungarian Prime Minister Viktor Orban, Faymann said in a statement on Sunday.

The countries late on Friday suspended European Union rules that require migrants to register and stay in the EU country where they first enter. The refugees, many coming from war-torn Syria, traveled on trains to Munich’s main station and were then sent to shelters around the country as German citizens volunteered in mass numbers to help the newcomers. Merkel’s government is considering putting excess 2015 tax revenue in a fund that would help cover the refugee costs next year, according to a person familiar with the plans, who asked not to be identified discussing private deliberations. In her weekly podcast, Merkel said the government would stick to its balanced budget goal even as it spends more on refugees.

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Reuters said “Migration crisis”. But that sounds too nonsensical.

Greece Asks EU For Humanitarian Aid To Cope With Refugee Crisis (Reuters)

Greece asked the European Union on Monday for humanitarian aid to help it cope with what it called “a volatile situation” following the large flow of migrants and refugees from the Middle East and Africa onto its shores. It requested the EU activate its civil protection mechanism, the bloc’s crisis-response body, to provide staff, medical and pharmaceutical supplies, clothes and equipment, the Interior Ministry said. Greece is struggling to cope with the thousands of people fleeing poverty and war in countries such as Syria for Europe. Tensions have flared on eastern islands including Kos and Lesbos where most refugees land due to their proximity to Turkey.

On Monday morning, a Greek ferry unloaded 2,500 migrants at the port of Piraeus, bringing the total number of people moved to the mainland since last Monday to more than 15,000. Thousands more are waiting to be identified and ferried to Athens to continue their trip to other European countries. “The First Response Service requested that the EU civil protection mechanism is activated in order to substantially strengthen the efforts undertaken by the First Reception Service to manage a volatile situation,” the ministry said. “The satisfaction of the said request is expected to be of critical assistance to the work of the First Response System, which, under current conditions, is extremely difficult.”

The EU’s civil protection mechanism coordinates the bloc’s humanitarian aid efforts, channeling aid and sending special teams with equipment to disaster areas. It has previously helped Greece fight forest fires. European Commission First Vice President Frans Timmermans and Migration Commissioner Dimitris Avramopoulos have already promised Athens €33 million to help it tackle the crisis.

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Refugees as an election issue, Alexis? You sure?

Statement By The President Of SYRIZA On The Refugees (Alexis Tsipras)

Europe is experiencing an unprecedented humanitarian crisis as a result of the refugees that are fleeing war and violence in our region. Greece is at the forefront of this crisis. Yesterday’s picture of three-year old Ailan, dead in the Aegean Sea, on the coast of Bodrum, was a powerful punch in the gut for all of us. And particularly for Europe. A Europe that has responded with initial indifference, nonsensical repression and now awkwardness in the face of a global drama caused by erratic foreign policy and the West’s military interventions.

Yesterday’s horrific picture that shocked the world unfortunately demonstrates the tremendous irresponsibility and great shame of the political forces and especially of New Democracy, which from the outset sought to exploit the problem for petty gains; stoking the most extreme populist instincts, the very ones Golden Dawn is manipulating as well to gain more votes. For now, I will ignore New Democracy’s inability to manage this – even rudimentarily – as a government, and will concentrate on its criticism of open borders. What exactly were they demanding from the Greek government? To use Greek coast guard ships to sink the inflatable boats carrying refugees? And to turn the Aegean into a watery grave for thousands of children like Ailan? Even populism and trying to win votes must have some limits.

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Stop making sense?!

Tsipras Vows Battle To Improve Bailout After Greek Election (Reuters)

Former prime minister Alexis Tsipras promised on Sunday to fight to improve the terms of Greece’s latest bailout as he tried to shore up a rapidly collapsing lead in opinion polls, two weeks before a snap election. In a campaign speech in the northern town of Thessaloniki, Tsipras offered no new policy ideas but pledged thousands of new jobs and an attack on corruption. He defended his record of battling Greece’s creditors in his seven months in office, even though he was eventually forced to capitulate to their demands to secure the €86 billion rescue package, Greece’s third in a protracted debt crisis that at times has threatened its future in the euro.

“The battle to improve it is far from over,” Tsipras said, referring to the bailout. He said he would seek to win some form of debt relief and press Greek demands to restore collective bargaining powers for workers, a move the creditors oppose. Tsipras resigned last month to make way for the election, hoping to secure a stronger mandate. But having started out as the clear frontrunner, his leftist SYRIZA party’s poll lead has now all but disappeared, making for an unexpectedly close contest against the conservative New Democracy party. The prospect of a fractured result after the September 20 vote has stoked fears of yet more turmoil in a country hit by years of instability and recession, and raised the prospect of Greece having to go to the polls again.

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A sad state. Beyond repair.

On The State Of The European Union (Yanis Varoufakis)

In a session entitled ‘Old and New Conflicts and Challenges in the EU’, featuring also Peter Sutherland (FT), Mario Monti and Otmar Issing, I used the unwillingness of the Eurogroup, and the troika, even to consider a document prepared by my (then) ministry (entitled “A Policy Framework for Greece’s Fiscal Consolidation, Recover and Growth“) as a case in point of how Europe has lost its integrity and is in the process of losing its soul (judging by the scandalous failure to address the refugee crisis).

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Hats off to the Greek people.

Greek Crisis Prompts A Rethink On Food Waste (AFP)

With little end to their economic misery in sight, Greeks are finding inventive ways to feed the poor while also fighting waste – a movement that is chipping away at traditional attitudes to food. Three years ago, Xenia Papastavrou came up with a simple idea: take unsold food from shops and restaurants that was headed for the bin, and use it to feed the growing number of Greeks going hungry as the financial crisis took hold. “In June, they gave us 3,000 kilos of melons; in August we got 7,200 cartons of milk,” the 39-year-old told AFP at her office behind Athens’ central market. Boroume (“We Can”), the organization she founded, matches donated foodstuffs with charities in need – whether vegetables, bread or “even these 12 tiropita (cheese pies), which weren’t sold at the bakery.”

These days the food routed through Boroume provides an average of 2,500 meals a day across Greece, from Athens to Thessaloniki in the north. “Greece is a country that throws a lot away,” explained Papastavrou from behind a computer screen covered with data tables and the addresses of charities. In Greek tavernas, if the plates aren’t piled with huge pyramids of food, a meal between friends can be considered a failure, she added. “There isn’t really a mentality of paying attention to this,” she said. “Here, it’s: ‘I’ve paid for it, so I can do what I want with it.'” But years of hardship have started to change habits in a country where official figures show a quarter of the population is at risk of poverty.

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Sep 062015
 
 September 6, 2015  Posted by at 9:05 am Finance Tagged with: , , , , , , , , ,  


NPC Grief monument, Rock Creek cemetery, Washington, DC 1915

Central Banks Can Do Nothing More To Insulate Us From An Asian Winter (Guardian)
Europe’s Biggest Bank: Is The Fed Preparing For A ‘Controlled Demolition’? (ZH)
China FinMin: Growth Of About 7% Is The New Normal
Don’t Forget China’s “Other” Spinning Plate: Trillions In Hidden Bad Debt (ZH)
China Stock-Market Correction Almost Done, Says PBOC Governor (Bloomberg)
Barclays Warns On Massive Cost Of China’s FX Intervention (Zero Hedge)
Hundreds Of 3-Year-Old Toddlers Have Died As A Result Of The Syrian War (WaPo)
Hungary PM Orban: Tens Of Millions Of Refugees Coming To Europe (Reuters)
The Huge Wave Of Syrian Refugees To Europe Has Only Just Begun (Haaretz)
First Trainloads Of Syrian Refugees Reach Germany (WaPo)
Elation As Migrants Received With Open Arms In Austria And Germany (Reuters)
We Are People – The Façade Of European Values (MSF-Doctors Without Borders)
Refugees Who Could Be Us (Nicholas Kristof)
Germany At Fault In Europe’s Tragic Refugee Crisis (MarketWatch)
Migration Crisis Tears At EU’s Cohesion And Tarnishes Its Image (Reuters)
East And West Europe Split As Leaders Resent Germany For Waiving Rules (Guardian)
Greece Still Needs To Build Trust: Eurogroup Head Dijsselbloem (CNBC)
Varoufakis Might Come Back To Greek Politics To Give ‘Bitter Medicine’ (BBG)
Spain Set For Secessionist Clash As Catalonia’s Election Looms (Guardian)

So much for that game indeed. But they’re not done yet.

Central Banks Can Do Nothing More To Insulate Us From An Asian Winter (Guardian)

The ECB proudly announced on Friday that it is erecting a 17-metre-high bronze and granite tree outside its Frankfurt headquarters – an artwork intended to “convey a sense of stability and growth” – and, with its gilded leaves and massive trunk, presumably also wealth and power. But when Mario Draghi, the ECB’s president, appeared before the world’s media on Thursday at his regular press conference, it was the limit to central bankers’ power that was on display. Draghi was forced to admit that the outlook for eurozone growth and inflation had darkened considerably as a result of the slowdown in emerging economies and the market turmoil in China – the latter an issue he said he would take up with officials at the People’s Bank of China at this weekend’s G20 meeting in Ankara.

Meanwhile, Federal Reserve policymakers will have to decide in the coming days whether to stick to their carefully signalled plan to push up America’s interest rates at their next policy meeting on 17 September, in the face of growing fears about a Chinese slowdown. Certainly, the IMF made it clear last week that it believed policymakers should be cautious about pushing up rates in the current fragile environment. Central bankers slashed rates to their current emergency levels in the depths of the crisis. They also unleashed quantitative easing on a massive scale, as a short-term measure meant to prevent an outright economic slump and buy time for other engines of growth – trade, investment, consumer demand – to be restarted.

Yet even with rock-bottom borrowing costs, the recovery in many countries has been tepid, leaving central bankers little choice but to keep the cash taps on. The ECB and the Japanese central bank are still quantitatively easing; and the Bank of England and the Fed are yet to raise rates, seven years on from the collapse of Lehman Brothers. Whatever the diagnosis for the less-than-impressive post-crisis recovery – the debt overhang from the boom years, chronic underinvestment, weak consumer demand as a result of deep-seated inequality, or some other as yet undiagnosed economic disease – the cure is unlikely to lie with the central banks.

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“..equity price appreciation could decelerate easily to 20 or even 40% based on near zero central bank liquidity..”

Europe’s Biggest Bank: Is The Fed Preparing For A ‘Controlled Demolition’? (ZH)

Before we continue, we present a brief detour from Deutsche Bank’s Dominic Konstam on precisely how it is that in the current fiat system, global central bank liquidity is fungible and until a few months ago, had led to record equity asset prices in most places around the globe. To wit: [..]

Liquidity in the broadest sense tends to support growth momentum, particularly when it is in excess of current nominal growth. Positive changes in liquidity should therefore be equity bullish and bond price negative. Central bank liquidity is a large part of broad liquidity and, subject to bank multipliers, the same holds true. Both Fed tightening and China’s FX adjustment imply a tightening of liquidity conditions that, all else equal, implies a loss in output momentum.

But while the impact on global economic growth is tangible, there is also a substantial delay before its full impact is observed. When it comes to asset prices, however, the market is far faster at discounting the disappearance of the “invisible hand”:

Ultimately in a fiat money system asset prices reflect “outside” i.e. central bank money and the extent to which it multiplied through the banking system. The loss of reserves represents not just a direct loss of outside money but also a reduction in the multiplier. There should be no expectation that the multiplier is quickly restored through offsetting central bank operations.

Here Deutsche Bank suggests you panic, because according to its estimates, while the US equity market may have corrected, it has a long ways to go just to catch up to the dramatic slowdown in global plus Fed reserves (that does not even take in account the reality that soon both the BOJ and the ECB will be forced by the market to taper and slow down their own liquidity injections):

Let’s start with risk assets, proxied by global equity prices. It would appear at first glance that the correlation is negative in that when central bank liquidity is expanding, equities are falling and vice versa. Of course this likely suggests a policy response in that central banks are typically “late” so that they react once equities are falling and then equities tend to recover. If we shift liquidity forward 6 quarters we can see that the market “leads” anticipated” additional liquidity by something similar. This is very worrying now in that it suggests that equity price appreciation could decelerate easily to 20 or even 40% based on near zero central bank liquidity, assuming similar multipliers to the post crisis period.

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The G-20 hires comedy acts these days.

China FinMin: Growth Of About 7% Is The New Normal

China’s financial markets are expected to remain stable and the renminbi is not on course for a long-term devaluation, while fiscal spending will grow faster than expected this year, the country’s top financial officials told the G20. Finance Minister Lou Jiwei said that central government spending will rise 10% this year, more than the 7% growth budgeted at the start of the year, according to a statement late Saturday on the People’s Bank of China website. China will raise dividend payments from designated state-owned enterprises to make up for any shortfalls. China is headed for its slowest economic expansion in 25 years in 2015 and mainland markets have slumped 40% since mid-June, sending global financial markets skittering.

Ailing Chinese shares dragged down Hong Kong stocks to their lowest close in two years on Wednesday. China’s financial markets were closed on Thursday and Friday to commemorate the 70th anniversary of the end of World War Two. China’s overall GDP growth will remain around 7%, as predicted earlier in the year, and the new economic normal may last for four to five years, Lou said. The government will not particularly care about quarterly economic fluctuations and maintain steady macro-economic policy, he added.

China can no longer rely on policy supports to achieve 9-10% growth, as it may already take several years to digest excess industrial capacity and inventories, he said. It will go through “labour pains” in the next five years as it aims to complete main structural reforms by 2020, Lou added. The quality of growth, however, is already improving with 7 million jobs created in the first half of the year, consumption overtaking investment in contributing to economic growth and the balance of payments becoming more even, he said.

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The shadow banks need far more scrutiny.

Don’t Forget China’s “Other” Spinning Plate: Trillions In Hidden Bad Debt (ZH)

To be sure, there’s every reason to devote nearly incessant media coverage to China’s bursting stock market bubble and currency devaluation. The collapse of the margin fueled equity mania is truly a sight to behold and it’s made all the more entertaining (and tragic) by the fact that it represents the inevitable consequence of allowing millions of poorly educated Chinese to deploy massive amounts of leverage on the way to driving a world-beating rally that, at its height, saw day traders doing things like bidding a recently-public umbrella manufacturer up 2,700%.

Meanwhile, the world has recoiled in horror at China’s crackdown on the media and anyone accused of “maliciously” attempting to exacerbate the sell-off by engaging in what Beijing claims are all manner of “subversive” activities such as using the “wrong” words to describe the debacle and, well, selling stocks. Finally, China’s plunge protection has been widely criticized for, as we put it, “straying outside the bounds of manipulated market decorum.” And then there’s the yuan devaluation that, as recent commentary out of the G20 makes abundantly clear, is another example of a situation where China will inexplicably be held to a higher standard than everyone else. That is, when China moves to support its export-driven economy it’s “competitive devaluation”, but when the ECB prints €1.1 trillion, it’s “stimulus.”

Given the global implications of what’s going on in China’s stock market and the fact that the devaluation is set to accelerate the great EM FX reserve unwind while simultaneously driving a stake through the heart of beleaguered emerging economies from LatAm to AsiaPac on the way to triggering a repeat of the Asian Financial Crisis complete with the implementation of pro-cyclical policy maneuvers from a raft of hamstrung central banks, it’s wholly understandable that everyone should focus on equities and FX. That said, understanding the scope of the risk posed by China’s many spinning plates means not forgetting about the other problems Beijing faces, not the least of which is a massive collection of debt that, thanks to the complexity of local government financing and the (related) fact that as much as 40% of credit risk is carried off balance sheet via an eye-watering array of maturity mismatched wealth management products, is nearly impossible to quantify or even to get a grip on.

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Just 50% or so to go?

China Stock-Market Correction Almost Done, Says PBOC Governor (Bloomberg)

China’s stock-market rout that erased $5 trillion in value is close to ending, according to the nation’s central bank governor. With the yuan’s exchange rate versus the dollar close to stabilizing and a stock-market correction almost done, China’s financial markets are expected to be more stable, governor Zhou Xiaochuan said. His comments were made in a statement on the bank’s website Saturday after a meeting by finance ministers and central bankers from the Group of 20 nations in Ankara. The Shanghai Composite Index has tumbled 39% since June 12, when the gauge reached its highest level in more than seven years as mainland investors borrowed record amounts of funds to buy equities. China’s shock devaluation of the yuan in August rattled world markets and sparked exchange-rate declines in emerging economies.

Volatility in China’s stock markets is nearing its end, Zhu Jun, director-general in the People’s Bank of China’s international department, said in an interview on Saturday in Ankara, after G20 finance chiefs flagged concerns about potential global spillovers. The Chinese government’s intervention has prevented a free-fall in the market and systemic risk, Zhou said in the statement. The leverage ratio has clearly dropped and the impact on the real economy is limited, Zhou said. Zhou reiterated that China’s economic fundamentals are substantially unchanged, and that there is no basis for long-term yuan depreciation. The country’s determination to deepen market reforms has not changed, he said.

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“..when China liquidates its reserves, it sucks liquidity out of the system. That works at cross purposes with the four RRR cuts the PBoC has implemented so far this year.”

Barclays Warns On Massive Cost Of China’s FX Intervention (Zero Hedge)

One of the most important things to understand about China’s doomed attempt to simultaneously manage the stock market, the economy, a deleveraging in some sectors, a re-leveraging in others, and the yuan is that it’s bound to produce all manner of conflicting directives and policies that trip over each other at nearly every turn. One rather poignant example of this is the attempt to rein in shadow lending without choking off credit growth. Another – and the one that will invariably receive the most attention going forward – is the push and pull on money markets by the PBoC’s FX intervention and offsetting liquidity injections. Recall that Beijing’s open FX ops in support of the yuan necessitate the drawdown of the country’s vast store of USD reserves. In other words, they’re selling USTs.

The effect this historic liquidation of US paper will have on global liquidity, core yields, and Fed policy has become the subject of fierce debate lately although, as we’ve been at pains to make clear, this is really just a continuation of the USD asset dumping that was foretold nearly a year ago when Saudi Arabia killed the petrodollar. In any event, when China liquidates its reserves, it sucks liquidity out of the system. That works at cross purposes with the four RRR cuts the PBoC has implemented so far this year. In short, Beijing, in a desperate attempt to boost lending and invigorate the decelerating economy, has resorted to multiple policy rate cuts, but to whatever degree those cuts freed up banks to lend, the near daily FX interventions undertaken after the August 11 deval effectively offset the unlocked liquidity.

What this means is that each successive round of FX intervention must be accompanied by an offsetting RRR cut lest managing the yuan should end up completely negating the PBoC’s attempts to use policy rates to boost the economy – or worse, producing a net tightening. What should be obvious here is that this is a race to the bottom on two fronts. That is, the more you intervene in the FX market the more depleted your reserves and the more you must cut RRR until eventually, both your USD assets and your capacity to deploy policy rate cuts are exhausted.

There are only two ways to head off this eventuality i) move to a true free float, or ii) implement a variety of short- and medium-term lending ops to offset the tightening effect of FX interventions in the hope of forestalling further RRR cuts. Clearly, this is a spinning plate if there ever was one, as attempting to figure out exactly what the right mix of RRR cuts and band-aid reverse repos is to offset FX interventions is well nigh impossible. It’s against this backdrop that Barclays is out with what looks like one of the more cogent attempts yet to outline and illustrate the above and explain why it simply isn’t sustainable.

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Make that thousands.

Hundreds Of 3-Year-Old Toddlers Have Died As A Result Of The Syrian War (WaPo)

A photograph of Aylan Kurdi, a 3-year-old Syrian child, lying face down and lifeless in the sand on a Turkish beach, has sparked anger and anguish worldwide. It’s raised a difficult question: Why did Aylan’s family leave Syria and decide to take the journey that led to his death? The answer to that question is equally uncomfortable: By staying in Syria, Kurdi would have risked becoming one of the hundreds of other 3-year-olds killed by the civil war there. These children’s deaths are little acknowledged by the international community, but a variety of activist groups have recorded their deaths in the hope that they won’t be totally in vain.

One group which tracks the deaths in the war, the Syrian Revolution Martyr Database, has detailed records for the deaths of at least 232 children aged 3. The real number may be far higher: The organization, which is run by opponents to the Syrian regime, notes that in many cases the age of the child is not known and thus cannot be recorded. In other cases, the death itself is never even recorded. A closer look at the database’s details reveals more horror. Of the 232 known deaths, almost half were killed by artillery fire. Most of the rest were killed either by aerial bombing or gunfire, with a smaller amount reported to have died from a variety of other causes – including, in one case, a slit throat.

Children of other ages suffered as well. In total, the Syrian Revolution Martyr Database found evidence of almost 2,000 children under the age of 10 who had been killed since the fighting began. Estimates from other groups may skew far higher – the Syrian Observatory for Human Rights, a group based in Britain, has said that at least 11,493 children have died since the war began. These estimates do not include children like Kurdi who died after fleeing the chaos.

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“..the supply of immigrants is endless.”

Hungary PM Orban: Tens Of Millions Of Refugees Coming To Europe (Reuters)

Hungary could deploy its military along its southern border to stem the influx of refugees, Viktor Orban, the country’s prime minister, has said. Mr Orban said that police would be deployed after the 15 September and that military units could follow if parliament approves the proposal. “We’ll bring the border under control step by step,” he said. “We’ll send in the police, then, if we get approval from parliament, we’ll deploy the military.” He said the proposed move was because there was a potentially “endless” number of migrants and refugees heading for Europe. He was quoted by Reuters as saying: “It’s not 150,000 [migrants and refugees] that some want to divide according to quotas, it’s not 500,000, a figure that I heard in Brussels, it’s millions, then tens of millions, because the supply of immigrants is endless.”

Hungary has faced days of tension with thousands of refugees attempting to cross the country to reach other parts of Europe. The authorities eventually opted to bus the refugees to the Western border with Austria, after Austria and Germany said that they would accept them. Amid the refugee crisis, the Hungarian prime minister has previously indicated he plans to send military to his country’s border with Serbia, where a 100-mile long fence is already under construction. He has also several times antagonised his European colleagues over the crisis, claiming that it should be seen as a “German problem” since the majority of migrants want to settle in Germany, due at least in part to Germany’s willingness to accept them.

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“Turkey has taken in two million Syrian refugees over the past four years..”

The Huge Wave Of Syrian Refugees To Europe Has Only Just Begun (Haaretz)

“I am not willing to register for anyone until I get to Germany” says Alaa, who refused to give his last name. Until last week, he had been working as a chef in a Damascus hotel until he decided to leave because “I’m simply too afraid to walk down the street for fear Assad’s men will arrest me and make me disappear.” Alaa traveled with his wife Maryam and their 8-month-old son Tayim, to Lebanon and from there to Turkey. Like almost all the Syrian migrants reaching Europe, he paid Turkish smugglers $3,000 for himself and his wife – he did not have to pay for Tayim. The boat capsized and the family floated for five hours, until they were rescued by the Greek Coast Guard, Alaa said. The family lost almost everything except the clothes on their back when the boat overturned.

Tayim has only his shorts, a shirt and one pair of socks to face the cold Hungarian autumn. Tayim and his parents are now sitting by the roadside, a few hundred meters from the Hungarian-Serbian border, on the Hungarian side. Alaa is trying to hide from the Hungarian police patrols who are trying to pick up the thousands of refugees who every day try to walk across the old Belgrade-Budapest train tracks. The thousand Euros he managed to save from the sea he gave to a man who said he would drive them to Budapest. “He took us to the end of the road, threw us out and disappeared with the money,” Alaa said. Refugees are easy prey. The fact that tens of thousands of them can find a smuggler so easily in the streets of Turkish cities to take them to Greece shows that the authorities are turning a blind eye to the operations.

One refugee said: “If I, who have never been to Turkey, can find a smuggler so quickly in the street in Izmir, I imagine that they are bribing the police to continue their operations.” Turkey has taken in two million Syrian refugees over the past four years. Smugglers have already been responsible for thousands of deaths. Meanwhile, the Hungarian government seems unable to formulate a policy regarding the refugees.  At one point, police look the other way, in another, they are welcoming and give out food collected by volunteers. But in many cases, they beat the refugees with their batons and use pepper spray to force them into registration camps. When the refugees who agree to go to the camps arrive there, they find installations too small to accommodate them and the police give no information as to what to expect.
read more: https://www.haaretz.com/news/world/.premium-1.674670

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The WaPo doesn’t understand what happened at all. It’s not a defeat for Orban, but a victory. He got Merkel to give in.

First Trainloads Of Syrian Refugees Reach Germany (WaPo)

A column of thousands of people fleeing war and poverty made it to Western Europe on Saturday, after forcing Hungary’s anti-immigrant leaders to yield in a days-long campaign to turn them back. But with a fresh rush of migrants at Europe’s borders, the broader refugee crisis only looked to be worsening. The Hungarian reversal was a defeat for the country’s nationalist prime minister, Viktor Orban, who had declared himself a defender of Europe’s Christian heritage against the mostly Muslim families seeking entrance. He has vowed to seal the country’s southern border by Sept. 15. But with passage to Europe soon to grow more difficult, the number of newcomers has only expanded in the continent’s worst refugee crisis since the Balkan wars of the 1990s.

New asylum-seekers were arriving in Hungary as quickly as they were draining out Saturday, highlighting the absence of a unified European plan for their accommodation. Germany and Sweden have thrown open their doors to people fleeing Syria’s war. Other nations have barred themselves shut. The turnabout began in the early hours of Saturday, when Hungary’s leaders dispatched blue city buses to pick up migrants who had paralyzed traffic when they set off on the hundred-mile trek to Austria after spending days in squalid conditions in Budapest. By midday, the asylum-seekers were limping across the border into the arms of Austrian volunteers.

As the day ended, thousands were pulling up on trains in Germany, where they were receiving sustenance, shelter and welcome in a nation that has declared no limit to the numbers it will aid. As many as 7,000 were expected Saturday. “I had a smile to both my ears. I was finished with Hungary,” said Omar Mansour, a 24-year-old Syrian physical education teacher, who sat Saturday on a large stone in the border-station parking lot in the pastoral Austrian town of Nickelsdorf, warming himself against the September chill with a green sleeping bag before he continued on to Germany. He said he had spent the past week at Budapest’s main train station, where a makeshift refugee camp accumulated after authorities blocked migrants’ paths to Western Europe on Tuesday.

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Back to ‘migrants’. No more refugees, Reuters?

Elation As Migrants Received With Open Arms In Austria And Germany (Reuters)

Austria and Germany threw open their borders to thousands of exhausted migrants on Saturday, bussed to the Hungarian border by a rightwing government that had tried to stop them but was overwhelmed by the sheer numbers reaching Europe’s frontiers. Left to walk the last yards into Austria, rain-soaked migrants, many of them refugees from Syria’s civil war, were whisked by train and shuttle bus to Vienna, where authorities promptly arranged for thousands to head straight on to Germany. German police said the first 1,000 of up to 10,000 migrants expected on Saturday had arrived on special trains in Munich. Austrian police said more than 6,000 people had entered the country by Saturday afternoon.

Munich police said Arabic-speaking interpreters helped refugees with procedures at emergency registration centres. The seemingly efficient Austrian and German reception contrasted with the disorder prevalent in Hungary. “It was just such a horrible situation in Hungary,” said Omar, arriving in Vienna with his family. In Budapest, almost emptied of migrants the night before, the main railway station was again filling up with new arrivals, but trains to western Europe remained cancelled. So hundreds set off by foot, saying they would walk to the Austrian border, 110 miles away, like others had tried on Friday. After days of confrontation and chaos, Hungary’s government deployed over 100 buses overnight to take thousands of migrants to the Austrian frontier.

Austria said it had agreed with Germany to allow the migrants access, waiving asylum rules that require them to register in the first EU state they reach. Wrapped in blankets and sleeping bags against the rain, long lines of weary migrants, many carrying small, sleeping children, got off buses on the Hungarian side of the boundary and walked into Austria, receiving fruit and water from aid workers. Waiting Austrians held signs that read “Refugees welcome”. “We’re happy. We’ll go to Germany,” said a Syrian man who gave his name as Mohammed, naming Europe’s famously biggest and most affluent economy that is the favoured destination of many refugees. Another, who declined to be named, said: “Hungary should be fired from the European Union. Such bad treatment.”

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“The majority of MSF’s 36,000 employees are not European. We are not Europe, we are people and many of us have no illusions about European double standards..”

We Are People – The Façade Of European Values (MSF-Doctors Without Borders)

In a recent opinion piece, the Director of MSF UK states that “we are Europe – we should do better”. The logic of the argument is that because Europe promotes human rights abroad, it should uphold the values of human rights at home in its response to the refugees risking their lives in crossing the Mediterranean into Europe. But what is implied in this logic is that Europe should do better because Europe is better. This is not the case. Almost all states preach and promote the respect of human rights, and very few respect and act according to such rights at home or abroad. For example, Saudi Arabia is currently the chair of the Human Rights Commission and yet can hardly be considered to practice the values it is tasked to uphold both abroad and in its approach to its own population.

“Europe [is] – a continent that respects and protects human life and dignity”, asserts this opinion piece – the problem with this assertion is that it ignores the fact that Europe has rarely upheld its virtuous rhetoric in its foreign policy practice. The inadequate response to the Syrian refugee crisis, the war in Iraq and the failure to condemn the Israeli occupation of Palestine, all issues set within a history of European colonisation of the Middle East, are just a few examples that illustrate Europe’s complicity in the crises that animate the region today. Here are some important questions and real reasons why Europe “should do better” in its response to the current refugee crisis:

What role has Europe played in contributing to the conditions from which people flee? Whether through the history of colonialism and the arbitrary drawing of borders, the propping up for decades of dictators, or in the case of Libya and Iraq, direct involvement in a military offensive. Historical amnesia is used to turn the act of welcoming refugees and migrants from a responsibility to an act of charity that has its limits. Contrary to international conventions and legislation signed by European governments, the European Union decided to have an active policy of restricting and denying refugees safe and legal routes to Europe, and this is why people are drowning at sea.

[..] The majority of MSF’s 36,000 employees are not European. We are not Europe, we are people and many of us have no illusions about European double standards – especially for those of us whose families, friends, and communities have been affected by these double standards. Europe should do more because it has a responsibility that comes with power that has been built on the backs of the mothers and fathers of those now seeking refuge on European shores and it has duties that come with international laws and conventions. Most of all Europe should do more for the same reason everyone else should do more: not because ‘we’ are Europe, but because ‘we’ are people.

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Even Kristof is right sometimes.

Refugees Who Could Be Us (Nicholas Kristof)

Watching the horrific images of Syrian refugees struggling toward safety or in the case of Aylan Kurdi, 3, drowning on that journey I think of other refugees. Albert Einstein. Madeleine Albright. The Dalai Lama. And my dad. In the aftermath of World War II, my father swam the Danube River to flee Romania and become part of a tide of refugees that nobody much cared about. Fortunately, a family in Portland, Ore., sponsored his way to the United States, making this column possible. If you don’t see yourself or your family members in those images of today s refugees, you need an empathy transplant. Aylan’s death reflected a systematic failure of world leadership, from Arab capitals to European ones, from Moscow to Washington. This failure occurred at three levels:

• The Syrian civil war has dragged on for four years now, taking almost 200,000 lives, without serious efforts to stop the bombings. Creating a safe zone would at least allow Syrians to remain in the country.

• As millions of Syrian refugees swamped surrounding countries, the world shrugged. United Nations aid requests for Syrian refugees are only 41% funded, and the World Food Program was recently forced to slash its food allocation for refugees in Lebanon to just $13.50 per person a month. Half of Syrian refugee children are unable to go to school. So of course loving parents strike out for Europe.

• Driven by xenophobia and demagogy, some Europeans have done their best to stigmatize refugees and hamper their journeys.

Bob Kitchen of the International Rescue Committee told me he saw refugee families arriving on the beaches of Greece, hugging one another and celebrating, thinking that finally they had made it unaware of what they still faced in southern Europe. This crisis is on the group of world leaders who have prioritized other things, rather than Syria, Kitchen said. This is the result of that inaction. Antonio Guterres, the head of the U.N. refugee agency, said the crisis was in part a failure of leadership worldwide. This is not a massive invasion, he said, noting that about 4,000 people are arriving daily in a continent with more than half a billion inhabitants. This is manageable, if there is political commitment and will.

We all know that the world failed refugees in the run-up to World War II. The U.S. refused to allow Jewish refugees to disembark from a ship, the St. Louis, that had reached Miami. The ship returned to Europe, and some passengers died in the Holocaust. Aylan, who had relatives in Canada who wanted to give him a home, found no port. He died on our watch. Guterres believes that images of children like Aylan are changing attitudes. Compassion is winning over fear, he said. I hope he’s right. Bravo in particular to Icelanders, who on Facebook have been volunteering to pay for the flights of Syrian refugees and then put them up in their homes. Thousands of Icelanders have backed this effort, under the slogan Just because it isn t happening here doesn t mean it isn t happening.

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Germany wants to lead. And then doesn’t. Yeah, after 20,000 deaths, and photos in the media. Sure.

Germany At Fault In Europe’s Tragic Refugee Crisis (MarketWatch)

German Chancellor Angela Merkel is belatedly taking a leadership role in pushing the European Union to solve its refugee crisis, but the EU’s difficulty in acting together is largely a result of policies championed by Germany. It is Germany that has blocked every effort to name an EU leader of any stature to a top post for the union, because it prefers for national leaders to call the shots. So Poland’s Donald Tusk, who has little international experience but was Merkel’s choice, is president of the European Council, while Jean-Claude Juncker from tiny Luxembourg, also Merkel’s choice, is the hapless president of the European Commission.

It is Germany, and Merkel specifically, that has systematically turned France into an unequal partner, paying French Presidents Nicolas Sarkozy and François Hollande little heed except when they were needed as a fig leaf to make Merkel’s chosen policies more palatable. And of course it was Germany that inflexibly led EU negotiators to impose a new load of unsustainable debt and more economic austerity on Greece in July’s bailout accord. Germany is indeed opening its doors to a much larger share of the refugees from the Middle East and Africa than other EU countries and is offering more generous settlement conditions. It is the only EU country that has provided financial aid to Greece to help it bear the brunt of the flow of refugees.

There is no doubt that the vast majority of Germans are genuinely motivated by altruism to aid these displaced persons. But German political leaders can hardly complain of the lack of solidarity and compassion in the EU after railroading through the exceedingly harsh treatment of Greece. They can scarcely make an appeal to EU humanitarian values after ruthlessly fomenting a humanitarian crisis in a member state. While some commentators see the German response to the refugee crisis making up in part for its brutal treatment of Greece, it is rather the case that Berlin’s loss of moral authority from that crisis prevents it from forging any sort of unity on refugees. And Europe, with its postwar history of stinginess and not-in-my-backyard myopia, would require strong moral leadership to come together on an issue like this.

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It exposes EU for what it is.

Migration Crisis Tears At EU’s Cohesion And Tarnishes Its Image (Reuters)

Deep divisions over how to cope with a flood of migrants from the Middle East, Africa and Asia pose a threat to the European Union’s values and global standing and may diminish its ability to act jointly to reform the euro zone and ease Greece’s debt. With harrowing images of drowning children, refugees being herded on and off trains and beaten by police, and barbed-wire fences slicing across Europe, the migration crisis is the moral equivalent of the euro zone crisis. In both cases, the principle of solidarity is being sorely tested. By making the EU look ineffective, disunited and heartless, pitting member states against each other and fuelling political populism and anti-Muslim sentiment, the latest crisis is undermining the ideals of European integration.

However, it often takes a bout of disarray and recrimination before the EU finds a joint response to a new challenge. Policy may be shifting in reaction to unbearable pictures of suffering, and to fears that the Schengen zone of open-border travel among 26 continental European countries may otherwise fall apart. “The world is watching us,” German Chancellor Angela Merkel said last week as she tried to persuade European peers to share the burden of taking in people fleeing war and misery in Syria, Iraq, Afghanistan, Libya and beyond. “If Europe fails on the refugee question, its tight bond with universal human rights will be destroyed, and it will no longer be the Europe we dreamed of,” she said.

Merkel’s bold attempt to exercise leadership, in contrast to her deep caution in the euro crisis, has won only cautious support from close allies like France, where domestic opposition to more immigration is strong, and been rejected outright by countries such as Hungary and Britain. For many European politicians trying to keep in tune with voters, preventing unwanted immigration is a greater priority than welcoming hundreds of thousands of haggard, uprooted foreigners, especially if they are Muslims.

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It’s all turning into one giant blame game.

East And West Europe Split As Leaders Resent Germany For Waiving Rules (Guardian)

Hungary’s prime minister, Viktor Orbán, is the cheerleader of the “Europe is useless” chorus, but Robert Fico, the Slovakian premier, and President Milos Zeman in Prague are not far behind. Ewa Kopacz, the prime minister of Poland, sounds more moderate, but she looks likely to lose an election next month to the nationalist right. Her hands are tied. When Europe’s leaders last met to grapple with the crisis, in June, they argued until 3.30am and dispersed without agreement, bringing Matteo Renzi, the Italian prime minister, to lament: “If this is Europe, you can keep it.” Entirely predictably, things have worsened considerably since then.

Governments are floundering, pirouetting on policy in response to front-page pictures of tragedy on a Turkish beach, engaging in a blame game which, coming on top of five years of division over Greece and the euro, is exposing major divisions. If the euro proved to be a fair-weather currency whose structures and rules buckled and nearly collapsed in a storm, the same is now evident on immigration. The system is flimsy, not fit for purpose in an emergency. There is no “European” immigration policy or regime. There is a mish-mash of national policies, a patchwork of systems and criteria which are contradictory, incoherent, fragmented. Italy is very far way from Finland, not only geographically, but when it comes to immigration and asylum.

France and Germany have quite different historical approaches to integrating newcomers. Sweden and Denmark are neighbours with a close shared history, but their immigration policies are chalk and cheese. National governments guard these prerogatives jealously. “Europe” in the form of the EU authorities in Brussels has minimal say over policymaking. Almost all power here lies with heads of national governments and interior ministries. Yet, in this crisis, Brussels-bashing has become routine, the cheap and easy option for shameless national leaders acting unilaterally, blocking every suggestion that comes out of Brussels and then blaming it for the ensuing chaos.

Orbán proved the point in Brussels last week. “Europe” had failed, its leaders had irresponsibly created this mess, their response was “madness”. He has put up a razor-wire fence on the border with Serbia and announced he was fasttracking legislation to establish a zero-immigration regime within 10 days, with the army deployed on the border. Brussels cannot stop him because these powers are national. If need be, he said, he would put up another fence on the border with Croatia, a barrier between two EU countries. On Friday Brussels shrugged and said it did not like this, but couldn’t do anything about it.

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This will be used against all Greeks all the time for a long time to come. And therefore also against refugees, by default: no budgets to help them.

Greece Still Needs To Build Trust: Eurogroup Head Dijsselbloem (CNBC)

Trust in the Greek government has yet to return after months of wrangling to secure a third bailout deal for the debt-struck country, the head of the Eurogroup of finance ministers said Saturday. “In the last half year with the Syriza government, trust has gone away completely…So what we need now is a serious government which is implementing (reforms) seriously and that will bring back trust and I think that’s the key issue…trust, consumers, producers, investors trust that’s key,” Eurogroup president Jeroen Dijsselbloem,told CNBC on the sidelines of the G20 meeting in Ankara, Turkey. Dijsselbloem, was a key figure in negotiating Greece’s bailout in return for the country implementing reforms.

The Dutch politician also had a number of clashes with Greece’s leftist Syriza government and in particular, the firebrand ex-finance minister Yanis Varoufakis. The debt saga saw a breakdown in relations between Greece and many of the negotiators, including Dijsselbloem, who said that trust has still not returned. The Eurogroup president said that the Syriza government wanted to reject “the whole fundamentals of the euro zone” which was not acceptable. “In the end, the Tsipras government decided we want to stay in the euro zone, we will accept the basic arrangements of that, and commit to a basic program which they need. So if you ask me has trust returned, that will be a bit quick to say that, it’s going to take time,” Dijsselbloem said.

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“..if we don’t try to implement it, they will chuck us out of the euro zone. What? Is this what Europe has come to?” “It’s the height of irrationality..”

Varoufakis Might Come Back To Greek Politics To Give ‘Bitter Medicine’ (BBG)

Former Greek Finance Minister Yanis Varoufakis has flagged his interest in a political comeback after the Greek election – but only if the new rulers ask him to administer “bitter medicine” rather than “poison.” The parties fighting the election are backing the reform package because they’ve been blackmailed, Varoufakis told Bloomberg TV, in an interview at the Ambrosetti Forum in Cernobbio, Italy. “If ever there is a government interested in bitter medicine and it is not simply committing to administering poison, then I am on board,” he said. Asked if he might play an active role in the new government, Varoufakis replied he would insist that the reform program “be very harsh.”

The former finance minister has since his resignation in July sought to justify his controversial sparring with European Union counterparts including Germany’s Wolfgang Schaeuble through interviews and public speeches. Varoufakis said political parties are hiding their opposition to the reform package. “You only have to listen to the parties themselves. All of them disagree with the program, but they vote on it on the basis of blackmail. The argument is: this is a terrible program, it will not work but if we don’t try to implement it, they will chuck us out of the euro zone. What? Is this what Europe has come to?” “It’s the height of irrationality,” Varoufakis said.

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“Its reaction to Junts pel Sí has been to rush through an amendment to the constitution so that any politician who declares independence can be imprisoned.”

Spain Set For Secessionist Clash As Catalonia’s Election Looms (Guardian)

Catalans go to the polls at the end of this month to choose a new regional government in what is shaping up to be a showdown between the secessionists and central government in Madrid and between Catalans themselves, who are split on independence. The majority of pro-independence groupings have come together as Junts pel Sí (United for a Yes Vote), a single-issue coalition that includes Artur Mas, the incumbent Catalan president. The poll has been billed as a plebiscite, and Mas has said he will declare unilateral independence if the group wins a majority of seats, even if it has not obtained a majority of the popular vote.

The first test will be the turnout on Friday, in what has become an annual show of force by the secessionists on Catalan National Day, as tens of thousands will converge on the capital to demand independence. This year the demonstration has been billed as “The Open Road to the Catalan Republic”. In spite of polls showing waning support for independence, Raül Romeva i Rueda, the ex-communist who leads Junts pel Sí, says a unilateral declaration of independence is justified because “they [Spain] have beaten us with unjust laws and huge fines”.

The Madrid government has refused to enter into a dialogue on independence and has adopted a hardline stance throughout. Its reaction to Junts pel Sí has been to rush through an amendment to the constitution so that any politician who declares independence can be imprisoned. Mas says there is no option but to treat the election as a plebiscite, as central government has refused to allow a referendum. He says that if Junts pel Sí wins the Catalan elections on 27 September and goes on to win in Catalonia at the general election expected on 20 December, “that will serve as a second plebiscite that will send an extraordinary message to Europe and the rest of the world”.

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Sep 052015
 
 September 5, 2015  Posted by at 11:22 am Finance Tagged with: , , , , , , , , , ,  


Russell Lee Saloon, Craigville, Minnesota Aug 1937

US Stocks End Sharply Lower After Jobs Report (MarketWatch)
China’s Central Banker Says His Nation’s Bubble ‘Burst’ (Bloomberg)
100% Risk Of A 50% Stock Crash (Paul B. Farrell)
The Bible Is Clear: Let The Refugees In, Every Last One (Guardian)
UK Must Emulate Kindertransport To Aid Refugee Crisis: Lord Sacks (Guardian)
Grant Visas To Refugees Before They Take The Death Route (ThePressProject)
The March of Shame (Irate Greek)
Migrants Stream Into Austria, Swept West By Overwhelmed Hungary (Reuters)
Over 1,000 Exhausted Migrants Reach Austria Border (AP)
Hungary Provides 100 Buses To Take Refugees To Austrian Border (WaPo)
This Refugee Crisis Is Too Big For Europe’s Broken Institutions (Paul Mason)
European Union Cracking Under Pressure Of Migrant Crisis (Globe and Mail)
The Poisoned Chalice (James Galbraith And J. Luis Martin)
On CNBC Discussing Greece And Europe – Full Transcript (Varoufakis)
You Never Want a Serious Crisis to go to Waste (Legrain)
Capital Outflow From China Adds Another Layer Of Worry (MarketWatch)
Canada, Australia Feel Squeeze In Wake Of Chinese Economic Slowdown (Guardian)
South Korean Exports Fall 14.7%, GDP Forecasts Cut (WSJ)
Scientists Find Mathematical Secret To How Nature Works (WaPo)

Not in labor force is the only number rising strongly.

US Stocks End Sharply Lower After Jobs Report (MarketWatch)

U.S. stocks ended Friday’s session sharply lower, as a highly anticipated monthly jobs report intensified the debate about the Federal Reserve’s decision to raise interest rates in September. Widely seen as the last notable economic report before the Federal Reserve decides whether to raise interest rates at its two-day meeting on Sept. 16-17, the jobs data showed that the U.S. economy added a weaker-than-estimated 173,000 nonfarm jobs last month, while the unemployment rate dropped to 5.1%—marking its lowest level since April 2008.

The employment report began a downbeat day for the market as investors seemed to read the data as signaling that the Fed may soon decide to end its ultraloose monetary policy in two weeks. “The Fed has been clear about wanting to raise rates this year and at least now they have a green light if they decide to do so,” said Kate Warne, investment strategist at Edward Jones. Friday’s losses capped another brutal week for the main indexes, which suffered their second-largest weekly losses this year.

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That sounds clear enough.

China’s Central Banker Says His Nation’s Bubble ‘Burst’ (Bloomberg)

Zhou Xiaochuan, governor of China’s central bank, couldn’t stop repeating to a G-20 gathering that a bubble in his country had “burst.” It came up about three times in his explanation Friday of what is going on with China’s stock market, according to a Japanese finance ministry official. When asked by a reporter if Zhou was talking about a bubble, Japanese Finance Minister Taro Aso was unequivocal: “What else bursts?” A dissection of the slowdown of the world’s second-largest economy and talk about the equity rout which erased $5 trillion of value was a focal point at the meeting of global policy makers in Ankara. That wasn’t enough for Aso, who said that the discussions hadn’t been constructive.

Chinese stocks have plunged almost 40 percent since a June peak, triggering unprecedented intervention from the authorities. The central bank cut rates for the fifth time since November last month and lowered the amount of cash banks must set aside, falling back on its major levers to support equity prices and the slowing economy. It was China, rather than the timing of an interest-rate increase by the Federal Reserve, that dominated the discussion, according to the Japanese official, with many people commenting that China’s sluggish economic performance is a risk to the global economy and especially to emerging-market nations.

“It’s clear there are problems in the Chinese market, and at today’s G-20 meeting, many people other than myself also expressed that opinion,” Aso said after a meeting of finance chiefs and central bank governors. The PBOC shocked global markets by allowing the biggest yuan depreciation in two decades on Aug. 11, when it changed the exchange-rate mechanism to give markets a bigger role in setting the currency’s level. That historic move would not get a mention in the communique, according to the Japanese official, who asked not to be named, citing ministry policy.

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After the election.

100% Risk Of A 50% Stock Crash (Paul B. Farrell)

“Who will get the Dreary Recovery Going?” taunts Mort Zuckerman in a Wall Street Journal op-ed. The head of U.S. News & World Report warns America that a recession is coming: “They occur about every eight years and America is ill-prepared to weather the one on the horizon.” Ill-equipped. Yes, the clock is ticking, every 8 years. 2000. 2008. Next 2016, even with a President Trump. Another great newsman, Bill O’Neill, publisher of Investors Business Daily, author of perennial best-seller “How To Make Money in Stocks,” agrees: Markets have peaked and crashed roughly every four years for the last century, with bigger crashes, long recessions, every eight years. And still most investors will be ill-prepared.

Sounds like a double-teamed confirmation of Jeremy Grantham’s famous BusinessInsider prediction for 2016: “Around the presidential election or soon after, the market bubble will burst, as bubbles always do, and will revert to its trend value, around half of its peak or worse.” Get it? A mega crash is coming, dropping half off its peak, down below Dow 5,000. Not just another 1,000-point correction like last month. But a heart-stopping collapse coinciding with the 2016 elections … then a long systemic recession … probably lasting till the 2020 presidential election, maybe longer … no matter who’s in the White House, Doanld Trump, Jeb Bush or Hillary Clinton.

Yes, recessions hit every eight years. The last was just about 8 years ago, warned Zuckerman with these facts: “The period since the Great Recession ended in 2009 has seen the weakest U.S. recovery since World War II,” Our aging bull is actually warning us … recession dead ahead.

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Jesus was a refugee.

The Bible Is Clear: Let The Refugees In, Every Last One (Guardian)

Thousands more, says David Cameron now, grudgingly conceding to popular pressure. But why not all of them? Surely that’s the biblical answer to the “how many can we take?” question. Every single last one. Let’s dig up the greenbelt, create new cities, turn our Downton Abbeys into flats and church halls into temporary dormitories, and reclaim all those empty penthouses being used as nothing more than investment vehicles. Yes, it may change the character of this country. Or maybe it won’t require anything like such drastic action – who knows? But let’s do whatever it takes to open the door of welcome. “Keep, ancient lands, your storied pomp! Give me your tired, your poor, Your huddled masses yearning to breathe free, The wretched refuse of your teeming shore. Send these, the homeless, tempest-tost to me, I lift my lamp beside the golden door!”

And yes, when Emma Lazarus wrote these words – later inscribed on the Statue of Liberty – by “storied pomp”, she meant us Brits. For years our politicians have piggy-backed upon Christian morality for electoral advantage. We should “feel proud that this is a Christian country”, said Cameron earlier this year (pre-election, of course), in what some might uncharitably see as a call to maintain a Muslim-free view from his Cotswold village. But there is no respectable Christian argument for fortress Europe, surrounded by a new iron curtain of razor wire to keep poor, dark-skinned people out. Indeed, the moral framework that our prime minister so frequently references – and to which he claims some sort of vague allegiance – is crystal clear about the absolute priority of our obligation to refugees.

For the moral imagination of the Hebrew scriptures was determined by a battered refugee people, fleeing political oppression in north Africa, and seeking a new life for themselves safe from violence and poverty. Time and again, the books of the Hebrew scriptures remind its readers not to forget that they too were once in this situation and their ethics must be structured around practical help driven by fellow-feeling. The Passover, first celebrated as a last-minute preparation before leaving Egypt (unleavened bread as there wasn’t time for it to rise) – and the Christian Eucharist that was built on top of it – is nothing less than a call to re-live this basic human solidarity in the face of existential fear and uncertainty. And when the author of Matthew’s gospel describes Jesus as a child refugee, fleeing his country from a despotic ruler intent on taking his life – Herod not Assad – he is deliberately sampling that basic foundational myth of the Exodus.

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If not Jesus, would the Holocaust do it?

UK Must Emulate Kindertransport To Aid Refugee Crisis: Lord Sacks (Guardian)

Britain needs to make a bold gesture similar to Kindertransport to help address the humanitarian crisis engulfing Europe, the former chief rabbi has said. Lord Sacks said it was time for human compassion to triumph in the same way as the scheme that saved thousands of Jewish children before the second world war broke out. He said that a “very clear and conspicuous humanitarian gesture, like Kindertransport” would help to achieve that aim. “Europe is being tested as it has not been tested since the second world war … The European Union was created as a way of saying that we recognise human rights, after the catastrophe of two world wars and the Holocaust, and it’s very chilling to see some of these scenarios being re-enacted,” Sacks told BBC2’s Newsnight on Thursday.

He believes that the UK could accommodate 10,000 displaced people: “It’s a figure to which Britain would respond. The churches, the religious groups, the charities would all join in, and I think we would be better for doing that.” Meanwhile, former home secretary David Blunkett said the UK had a moral obligation to take about 25,000 refugees – which was still a fraction of Germany’s total. “We should concentrate on those coming through Turkey, who have been persecuted and ejected from Syria, and we should concentrate on women and children,” he said. While a global response was needed, Blunkett added: “If we are going to be taken seriously by anybody as a nation in putting that programme together, we are going to have to face the challenge of taking refugees in very large numbers ourselves.”

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Sign the petition.

Grant Visas To Refugees Before They Take The Death Route (ThePressProject)

By now, most of us have seen the gut-wrenching picture of the lifeless three year old Aylan who perished in the Aegean sea while trying to reach Greece. Little Aylan and his family have tried all legal means to reach Canada. But their applications were rejected. They were left with no other option than the perilous journey by sea. They paid for it with their lives. Just a few days earlier, more lifeless bodies of Syrian children were washed ashore after their desperate attempt to find refuge in Europe led to disaster. Dozens more have died a terrible death, suffocating in smuggler’s trucks, crushed by trains, perished of exhaustion, shot by armed coast guards. Some 2,600 people have perished so far in the Mediterranean waters, how many more deaths can we stomach?

Syrians first fled into the neighbouring countries of Jordan, Lebanon, and Turkey. Once there, they found that they had escaped into a prison. They are not allowed to work in Jordan – currently home to 630,000 refugees. They are banned from working in Lebanon – a country of four million people that hosts one million refugees. Turkey, where almost 2 million refugees have sought protection, is trying harder to support them inside their borders, but resources are running low. The US has announced that it will accept 1000 to 2000 refugees. Great Britain has relocated just 216. Syrians that are trying to use formal channels to obtain legitimate visas to Europe or Canada, see their applications rejected. There is no other hope left for them than to jump on a floating coffin to try and reach Europe and claim asylum.

Yet, the poorest of the poor and the unaccompanied Syrian children that beg in the streets of Amman, Istanbul, Beirut, have little hope to raise the money that smugglers are demanding to “sail” them to Europe. They will probably end their lives in the streets. How many floating bodies do we need to see before our governments start re-enforcing asylum processes in the host country? If Syrians could apply for protection while they are still in Turkey, Lebanon or Jordan, through formal channels, less people would opt to travel by sea, less people would become prey to smugglers.

We ask western Governments to create legal channels for the refugees which will grant humanitarian visas, and facilitate family reunions and resettlement, before Syrians are forced to take the “death route” to Europe. We ask the European countries, the United States and Canada to facilitate all mechanisms to allow Syrian refugees that are stranded in Turkey, Lebanon and Jordan, to be able to apply for visas and legal documents that they may travel to their chosen destination.

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“..we will not brutalise them, we will not force them to crawl under our fences, we will not write numbers on their skin and we will not ship them off on trains to nowhere.”

The March of Shame (Irate Greek)

They are people, like us. They are young, they are old, they are men, women and children, they are lawyers or masons or doctors or barbers or plumbers or computer engineers. They are people, and they are coming. Their countries fell apart, their houses were destroyed, their neighbours died. They lost friends and relatives, they lost their loved ones, they lost a limb. They fled. They took trucks or buses or cars or bicycles. They walked. They were smuggled, assaulted, abused, kidnapped on the way. They crossed a border, or two, or three. They were detained, arrested, beaten. They were parked in camps. They were told to live a life without a future, they were told to wait until their country is fixed, they were told to wait with no end in sight.

And then they came. Of course they came. They got on those rickety boats to cross the sea. Some of them were pushed back. Some of them sank and had to return to the coast. Some of them drowned. But they kept coming, and instead of greeting them with open arms, our governments screamed, “we’re being overrun!” Yes, we’re being overrun. It was about time it happened. Because as much as you expect people to stay put and die out of sight, out of mind, they have other plans for their life. As a matter of fact, they want a life worth living. And they are coming to get it. They are coming. Get over it, Europe, they are coming. And if we still want to call ourselves people, if we still want to call ourselves human beings, we will not turn our backs on them, we will not tell them to go away, we will not let them sleep in the streets of our harbours, we will not brutalise them, we will not force them to crawl under our fences, we will not write numbers on their skin and we will not ship them off on trains to nowhere.

There’s a limit to how long you can stay behind the safety of your television screen with pictures of dead children and destroyed cities, and your only reaction is, “how sad”. For them it’s beyond sad. They lost everything. Then they risked what little they had left to come, and they lost even more. ‘Sad’ doesn’t begin to describe that. They are not swarms, they are not invaders, they are not quotas. They are people. They want a life, a life in safety, with a job, a home and a future for their children. They are people, just like us. They are people, and there’s no stopping that. Today they are walking from Budapest to Vienna. Hundreds, maybe thousands of them, decided that they had enough of Viktor Orban’s nonsense, and when he wouldn’t re-establish the trains, they decided to walk.

But these people are only the tip of the iceberg. Europe’s march of shame started thousands of kilometers away. They are coming because of war, destruction, poverty, hopelessness. But this is a march of shame because we the people, we the European people, elected year after year leaders who don’t care about people but only about votes. And for years, despite our aging population, despite our immense wealth, despite all the good reasons for which we could open our borders, our leaders thought that pandering to the xenophobes was more important than helping people who have lost everything and that we could easily accommodate.

But they won’t wait anymore. They are coming, they are marching on Europe, and they are putting us to shame. For the young man in the picture below, the march of shame started when he pushed his grandmother’s wheelchair out of their family home and onto some road in Afghanistan. He has come thus far. Can anything stop him? Can he be made to go back? They are coming. And now it is for us to greet them, to care for them, to give them safe passage, to help them build the home they have lost. Not because we are Europeans, not because we have values, not even because we are filthy rich. But because we must be people. Like them.

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Merkel.

Migrants Stream Into Austria, Swept West By Overwhelmed Hungary (Reuters)

Hundreds of exhausted migrants streamed into Austria on Saturday, reaching the border on buses provided by an overwhelmed Hungarian government that gave up trying to hold back crowds that had set out on foot for western Europe. After days of confrontation and chaos, Hungary’s right-wing government deployed dozens of buses to move on migrants from the capital, Budapest, and pick up over 1,000 – many of them refugees from the Syrian war – walking down the main highway to Vienna. Austria said it had agreed with Germany that they would allow the migrants access, unable to enforce the rules of a European asylum system brought to breaking point by the continent’s worst refugee crisis since the Yugoslav wars of the 1990s.

Wrapped in blankets against the rain, hundreds of visibly exhausted migrants, many carrying small children, climbed off buses on the Hungarian side of the border and walked in a long line into Austria, receiving fruit and water from aid workers. “We’re happy. We’ll go to Germany,” said a Syrian man who gave his name as Mohammed. Hungary cited traffic safety for its decision to move the migrants on. But it appeared to mark an admission that the government had lost control in the face of overwhelming numbers determined to reach the richer nations of northern and western Europe at the end of an often perilous journey from war and poverty in the Middle East, Africa and Asia.

On Friday, hundreds broke out of an overcrowded camp on Hungary’s border with Serbia; others escaped from a stranded train, sprinting away from riot police down railway tracks, while still more took to the highway by foot led by a one-legged Syrian refugee and chanting “Germany, Germany!” The scenes were emblematic of a crisis that has left Europe groping for answers, and for unity. By nightfall, the Keleti railway terminus in Budapest, for days a campsite of migrants barred from taking trains west to Austria and Germany, was almost empty, as smiling families boarded a huge queue of buses that then snaked out of the capital.

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Utter lying cynicism: “Transportation safety can’t be put at risk..”

Over 1,000 Exhausted Migrants Reach Austria Border (AP)

More than 1,000 migrants, exhausted after breaking away from police and marching for hours toward Western Europe, have arrived before dawn Saturday on the border with Austria. The breakthrough became possible when Austria announced that it and Germany would take the migrants on humanitarian grounds and to aid their EU neighbor. In jubilant scenes on the border, hundreds of migrants bearing blankets over their shoulders to provide cover from heavy rains walked off from buses and into Austria, where volunteers at a roadside Red Cross shelter offered them hot tea and handshakes of welcome. Many collapsed in exhaustion on the floor, smiles on their faces.

Early Saturday, Austrian Chancellor Werner Faymann announced that it and Germany would take the migrants on humanitarian grounds and to aid their EU neighbor after speaking with German Chancellor Angela Merkel. Hours before, Hungary had announced it would mobilize a bus fleet to scoop the weary travelers overnight from Budapest’s main international train station and from the roadside of Hungary’s main highway and carry them to the Austrian border. In jubilant scenes on the border, hundreds of migrants bearing blankets over their shoulders to provide cover from heavy rains walked off from buses and into Austria, where volunteers at a roadside Red Cross shelter offered them hot tea and handshakes of welcome. Many collapsed in exhaustion on the floor, smiles on their faces.

Janos Lazar, chief of staff to Hungary’s prime minister, said authorities had reversed course and stopped trying to force migrants to go to state-run asylum shelters because the migrants’ movements were imperiling rail services and causing massive traffic jams. “Transportation safety can’t be put at risk,” he said. The asylum seekers chiefly from Syria, Iraq and Afghanistan often have spent months in Turkish refugee camps, taken long journeys by boat, train and foot through Greece and the Balkans, then crawled under barbed wire on Hungary’s southern frontier to a frosty welcome. While Austria, on Hungary’s western border, says it will offer the newcomers asylum opportunities, most say they want to settle in Germany.

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Guess who paid?

Hungary Provides 100 Buses To Take Refugees To Austrian Border (WaPo)

Sending Europe’s refugee crisis hurtling toward another country, Hungary’s leaders on Friday backed down from a confrontation with thousands of asylum-seekers, offering to bus the desperate migrants to the border with Austria. The late-night offer came after days of efforts to repel the thousands of migrants fleeing war and poverty who have streamed into Hungary in a bid to reach Western Europe, where they hope to begin new lives. Hungarian Prime Minister Viktor Orban had painted his hard-line approach against the mostly Muslim asylum-seekers as a stand to preserve Europe as a Christian continent.

But after a column of migrants more than a mile long streamed onto Hungary’s main highway to Austria, it appeared that authorities felt they had no alternative but to pass the challenge to their neighbor, another country that has been ambivalent about the influx. By early Saturday morning, the first asylum seekers began to walk across the border into Austria after having been dropped off by buses on the Hungarian side. The buses had picked people up at Budapest’s main train station. After initial hesitation, the crowds began to climb on board, relieved to be en route out of Hungary.

The Hungarian decision to provide up to 100 buses to take the asylum-seekers to the border did little to resolve the challenge facing Europe, which has failed to come up with a unified response to the mounting numbers on its borders. Instead, the plans simply shifted the crisis to another state, leaving the fundamental problem — a bloc of 503 million people unable to agree whether and how to house several hundred thousand refugees — to burn for another day.

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More like broken leadership.

This Refugee Crisis Is Too Big For Europe’s Broken Institutions (Paul Mason)

The disorder we have allowed to assemble at the borders of Europe does not easily divide into “economics” and “war”. The conceit that we can segment those coming here into the “deserving and undeserving” is going to shatter as their claims are processed. The immediate challenge for Europe is crisis management: the fiasco in Budapest is just the European leadership problem in microcosm. There is no coherence, no predictability and no urgency. As with Greece, and with the prolonged debt crisis of southern Europe, the institutions move sluggishly until leaders are forced into making flamboyant gestures, and no solution is ever reached. But, as they struggle to achieve coherence and to show compassion, the EU’s leaders are accumulating much bigger risks.

An EU into which half a million people can arrive to claim asylum in six months will struggle to justify the same rules and institutions as the Europe that believed its borders were under control. With Dublin III a dead letter, there will have to be a new asylum system based on reality. People will attempt to claim asylum whether they’re victims of war, drought or poverty. Either they’ll be processed in the place they want to settle, or there will have to be mass deportations back to Greece and Hungary – the two countries with the biggest fascist movements in the EU. And if hundreds of thousands of asylum seekers are given leave to remain in a continent where there is stagnation and mass unemployment, what happens to free movement? The home secretary, Theresa May, has already called for it to be constrained in response to the new situation.

The EU’s leaders can muddle along with broken institutions, flouted laws, flailing border police. Or they can think it through. The OECD’s central projection is that, to stand a chance of avoiding stagnation, the EU’s workforce will have to add 50 million more people through migration by 2060 (a similar number is needed in the US). The Paris-based thinktank says if that doesn’t happen, it is a “significant downside risk” to growth. What this means should be spelled out, because no politician has bothered to do so: to avoid economic stagnation in the long term, Europe needs migrants.

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“Finland, one of the wealthiest and least densely populated EU countries, said it would take a mere 800.” Finland’s PM offered to take refugess into his own home. All 800?

European Union Cracking Under Pressure Of Migrant Crisis (Globe and Mail)

The European Union is cracking, again. This time, it could shatter under the weight of a migrants’ crisis that has virtually every one of its member states madly pulling and pushing in all directions, undermining the founding concept of shared goals, vision, welfare – and shared pain. Every few years, the 28-country EU and the 19 countries within it that use the euro (the euro zone) face severe tests, typically the result of faulty crisis-fighting mechanisms or selfish national behaviour. These crises are inevitable, for the EU and the euro zone are economic and currency unions imposed upon sovereign countries, each of them fully capable of acting in its own interests when the going gets tough.

In 2012, when Europe was in deep recession and Greece in outright depression, the latter seemed on the verge of bolting from the euro zone and making a lie of the notion that the currency was “irreversible.” The European Central Bank (ECB), led by the eminently practical and flexible Mario Draghi, came to the rescue with a barrage of crisis-fighting mechanisms. They more or less worked – outright disaster was avoided – even if they exposed the fragility of the common currency. Three years later, when Greece decided once again to threaten the integrity of the euro zone, the ECB, backed by the financial might of Germany, prevented Greece from leaving. Thanks in good part to the bank, back-to-back existential crises were overcome, if only barely (Greece is an economic wreck and could still hit the road).

The current migrants’ crisis is much bigger than the one unleashed by the Greeks and there is no all-powerful migration version of Mr. Draghi to save the day. Potentially, millions of refugees and economic migrants from conflict areas in the Middle East and Africa are lining up to get in – some nine million Syrians have been displaced as the civil war shreds their country; many of them want to come to Europe. The numbers are already staggering – Europe is seeing the largest influx and internal movement of people since the end of the Second World War. About 350,000 people have entered this year, with Italy, Greece and, now, Hungary, bearing the brunt of the mass arrivals. In August alone, 50,000 migrants reached Hungary.

Almost 3,000 people have died so far this year in the Mediterranean. In April, a shipwreck off the Italian island of Lampedusa claimed 800 lives. On Aug. 28, the bodies of 71 migrants, many of them thought to be Syrian, were found in an abandoned truck in Austria. This week, the world was shocked by images of a three-year-old Syrian boy, whose lifeless body had washed up on a Turkish beach. He drowned when his family tried to reach the Greek island of Kos. But child deaths have been sadly routine among those making the treacherous voyage to southern Europe from Libya and Turkey. In April, several fishermen in Tunisia, near the badlands along the Libyan border, told The Globe and Mail that their nets sometimes snared the bodies of drowned African migrants, a few of them children.

The EU’s reaction to the migrant crisis has, all too predictably, been chaotic, contradictory, near-hysterical and sometimes mean-spirited, heightening the crisis and highlighting an ugly truth –– that the union has no mechanism to fix a disaster that could be managed to minimize the damage and stem outright bigotry. At the EU refugee relocation crisis meeting in July, some countries, such as Austria, refused to take any migrants; others agreed only to take a token number. Finland, one of the wealthiest and least densely populated EU countries, said it would take a mere 800. A few countries, notably Germany, agreed to take way more than their fair share.

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“The underlying reason is that the creditors wish to get their hands on as many Greek assets as possible at the lowest possible prices.”

The Poisoned Chalice (James Galbraith And J. Luis Martin)

Luis Martin: Since the outbreak of the Greek crisis in 2010, the European approach has been austerity now and the promise of supply-side policies later; once deficits have been brought under control and structural reforms have been implemented. Five years later, the Greek economy is depressed and debt has skyrocketed. In light of the third bailout Greece is now trying to secure, what is your vision for the Greek economy in the short and medium term?

James Galbraith: First of all, it’s important to distinguish between the public rationale for the policies that have been imposed on Greece, which are as you describe, and the underlying reasons which are quite different. The public rationale is the notion that so-called structural reforms will produce growth. The underlying reason is that the creditors wish to get their hands on as many Greek assets as possible at the lowest possible prices. Once you see that you’ll see that the policies are quite consistent with the reason, though not with the rationale.

What we are going to see now is an intensification of those policies and the liquidation of public and private assets in Greece: public assets which are being auctioned at undoubtedly low prices under the so-called privatization fund, and private assets because the Memorandum provides for accelerated liquidation, basically foreclosures of people’s homes and real estate and of the remaining Greek businesses. Basically that is the direction of policy, and if the Memorandum stays in place that is what we are likely to see.

LM: If you are correct, it would seem that the institutions (the IMF, the EC and the ECB) will have to rescue Greece indefinitely…?

JG: There is no “rescue” going on here. There is no “rescue,” there is no “bailout,” there is no “reform” going on. I really need to insist on this, because these words creep into our discourse. They are placed there by the creditors in order for unwary people to use them, but there is nothing of the kind taking place. What is going on is a seizure of the assets owned by the Greek state, by Greek businesses and by Greek households. There is no sense that this has anything to do with the recovery of the Greek economy or with the welfare of the Greek people. On the contrary, the policy is utterly indifferent to those considerations.

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“Greece is going to be the canary in the mine.”

On CNBC Discussing Greece And Europe – Full Transcript (Varoufakis)

CNBC: The market and a lot of watchers have been wondering what type of man Alexis Tsipras is following the referendum and his success politically, with some saying he’s a masterful politician, others think perhaps he’s just a newcomer who has had a little bit of luck and is now on borrowed time, or perhaps he’s a man that has really great mentors in Brussels. How would you describe him and his political success so far?

Oh there is no doubt he is an excellent politician. I’ve watched him up close; he has what it takes to be a genuine leader. There were very important junctures when he demonstrated his leadership and I witnessed it. But, the political situation in Greece is so toxic, and has been for years now. When you have an economic system which is in free fall and you have this astonishing situation, I don’t think that economic history and political history has ever seen this before, you have lenders, creditors, who are imposing upon you new loans under the conditions that will ensure that they will not get their money back, I think this is a unique historical phenomenon. So no politician, however skilled they might be, can survive the economic implosion which drags down along with it the political system.

CNBC: But Syriza hasn’t helped out here, and we’ve got the spilt from the left platform who have created their own party. Has this been detrimental to Tsipras’ future or has it handed him a golden opportunity to move to the centre of politics?

No, look, this kind of thinking would probably be appropriate under normal circumstances, but this Greece is not experiencing normal circumstances. What happened on the 12th of July was that there was an imposition by the Euro Summit of a programme that everybody in the Euro Summit knew was unviable on an economy which is in a great depression and this debt spiral, debt deflationary spiral, so once you come to this state of irrationality, reflecting Europe’s dithering, Europe’s inability to make up its own mind as to what it wants to do with its monetary union, there is no sense in going into this discussion about left, right, moving, shifting to the centre, median voters and all that.

Think of what happened to the previous governments. The socialist government of the Papandreou period of 2010 and 2011 imploded, the conservative government of Samaras imploded, our government imploded. Why? Because we rest on a foundation of an economy which is imploding and until and unless the economy gets stabilised, and we have some sensible discussion about debt, about investment, about credit, about reforms, which we have not had with the Troika because they were not interested in it, while they are sorting out their own disagreements about what to do with the monetary union, Greece is going to be the canary in the mine.

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No one wants a tighter Union, at least not outside of Brussels.

You Never Want a Serious Crisis to go to Waste (Legrain)

For now, the threat of Grexit has been avoided. Frantic French efforts to keep Greece in the euro succeeded, after Athens submitted to Germany’s punitive terms. But like threatening divorce in a bitter marital dispute, what’s said cannot be unsaid. Indeed, far from backtracking, the German Council of Economic Experts, which advises Chancellor Angela Merkel’s government, has suggested formalising Schäuble’s proposal: any country that breaches the fiscal rules and “continually fails to cooperate” should exit the monetary union. The message to those tempted to defy the German line could scarcely be clearer. Such a Germanic euro is unacceptable to many Europeans, not least in Paris and Rome.

France’s president, François Hollande, has instead called for a democratically accountable eurozone government. Italy’s finance minister, Pier Carlo Padoan, has echoed the French call for a fiscal and political union. Any proposal with the word “union” in it goes down well in Brussels. But a reality check is needed. There was little support for a federal eurozone government even before the crisis. And now that a financial crisis pitting creditors (the banks) against debtors has become a political conflict between countries, with nationalist insults flying and EU institutions discredited by siding with the creditors, European common feeling is in tatters. With the best will in the world, it is scarcely conceivable that Germans and French people could happily share a government, let alone Germans and Greeks.

There is manifestly little appetite among Europeans for further integration right now. It’s been a decade since the French and the Dutch voted No to the EU constitution and they have become much more sceptical since then. A recent survey by Opinium Research finds that the Dutch are almost as wary of deeper integration as the British, who will be soon voting on whether to leave the EU, while the French are close behind. A mere 17% of Dutch people and 24% of French ones favour further steps towards “ever closer union”, while 42% of Dutch people and 32% of French want to repatriate powers from Brussels. So forget about winning a referendum on steps towards a eurozone government.

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Been going on for a long time.

Capital Outflow From China Adds Another Layer Of Worry (MarketWatch)

In yet another sign of deteriorating confidence in China’s economic prospects, capital outflows from the country are accelerating quickly, adding another layer of worry for investors and policy makers alike. “If all of the capital that went into China since 2010 were to exit, this would mean another $400 billion could leave. If we were to assume that all of the capital inflows that went in since 2008 were to exit, the number rises to another $700 billion,” said David Woo, FX and rates strategist at Bank of America Merrill Lynch. While Woo’s projections are based on the worst-case scenario, analysts at Goldman Sachs in July had noted the alarming pace of funds exiting the country.

“Net capital outflows could be around $224 billion in the [second] quarter, meaningfully up from the first quarter,” they said. “Capital outflows have become very sizeable and now eclipse anything seen in the recent past.” In theory, China’s foreign exchange reserves of $3.6 trillion are sufficient to handle the capital flight, but Woo believes Chinese officials are running out of tools to prop up the economy, forcing them to make a tough choice. “China cannot lower interest rates and defend the Chinese yuan at the same time,” he said. And once the Federal Reserve hikes interest rates, which BAML still expects this month, the interest rate differential between China and the U.S. will further narrow, leading to more capital leaving the country, he said.

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But their governments keep denying anything’s wrong.

Canada, Australia Feel Squeeze In Wake Of Chinese Economic Slowdown (Guardian)

In the mining town of Port Hedland, 1,500km north of Perth, modest prefabricated homes called fibro shacks, which were changing hands for more than A$1m four years ago, are now failing to find a buyer at a third of the price. Apartment blocks hurriedly tacked together by developers at the peak of the country’s boom stand empty, because their promised supply of “fly-in-fly-out” mineworkers has dried up, along with the jobs they were brought in to do. In 2011, the iron ore-rich Pilbara region of north-west Australia was on the frontier of a 21st century gold rush, this time with iron ore as the main prize – driven by China’s formidable appetite for natural resources to build up its infrastructure and modernise its economy.

Pilbara boasted salaries two-thirds higher than the national average and almost 80% of workers were flown into their jobs from Australia’s big cities. Now, mortgaged to the hilt on homes that lost value almost before the paint had dried, the mineworkers that remain are accepting longer hours and lower wages in an effort to keep up with the repayments. Their plight resonates thousands of miles away in Calgary, Canada. Oil, not iron ore, has been the foundation of that city’s prosperity. But fears that China’s appetite for natural resources is waning are sapping confidence; and as oil prices have plunged, another property boom could soon turn to bust.

“There’s a lot of people here that have been losing their jobs from the energy sector,” says Ann-Marie Lurie, chief economist at local estate agency CREB. Property prices have so far held up, but she says Calgarians are watching the global oil price with alarm. “Into next year the real question becomes, how long are energy prices going to remain this low?” she says, pointing out that, with building starts declining, the knock-on effects are already rippling through the construction industry. She expects house prices in Calgary, which rose by almost 10% in 2014, to go into reverse by the end of this year.

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That’s a big number.

South Korean Exports Fall 14.7%, GDP Forecasts Cut (WSJ)

South Korea’s government has cut its forecast for the nation’s economic growth next year because of the risks from China’s slowdown, Seoul’s finance minister said. Close economic interlinkage between China and South Korea also means a sharp deterioration of the Chinese economy would have an “extremely huge impact” on South Korea, although a so-called hard landing for China is unlikely, South Korean Finance Minister Choi Kyung-hwan said in an interview. Concerns about the Chinese economy are particularly acute in South Korea, an export-dependent nation that sends around a quarter of its overseas shipments to China. South Korean exports fell 14.7% from a year earlier in August—the sharpest drop in six years—as exports to China slid 8.8%.

Wild swings in global financial markets following a currency devaluation in China on Aug. 11 reflect fears that the world’s second-largest economy is entering a major downshift. “China is unlikely to crash-land. It has the capability to manage a soft landing,” Mr. Choi said in an interview with The Wall Street Journal on the sidelines of a conference for finance chiefs from the Group of 20 developed and major developing economies. “But a hard landing could have an extremely huge impact on South Korea.” Due to the increasing risks of a Chinese slowdown, South Korea cut its own growth forecast for 2016 to 3.3% from 3.5% when drawing up a new budget plan for next year, the minister said.

The budget details will be announced on Monday. For this year, there is no change to the forecast of 3.1% growth. Mr. Choi said the government was trying to achieve the target, citing stimulus efforts including the central bank’s policy rate cuts four times since last year and recently announced supplementary budget spending. South Korea’s economy expanded 3.3% last year. In the interview, the minister also called for the U.S. Federal Reserve to make more efforts to reduce uncertainty over pace of its expected interest rate increases through sufficient communications with markets.

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Very interesting. Does math describe life?

Scientists Find Mathematical Secret To How Nature Works (WaPo)

In nature, the relationship between predators and their prey seems like it should be simple: The more prey that’s available to be eaten, the more predators there should be to eat them. If a prey population doubles, for instance, we would logically expect its predators to double too. But a new study, published Thursday in the journal Science, turns this idea on its head with a strange discovery: There aren’t as many predators in the world as we expect there to be. And scientists aren’t sure why. By conducting an analysis of more than a thousand studies worldwide, researchers found a common theme in just about every ecosystem across the globe: Predators don’t increase in numbers at the same rate as their prey. In fact, the faster you add prey to an ecosystem, the slower predators’ numbers grow.

“When you double your prey, you also increase your predators, but not to the same extent,” says Ian Hatton, a biologist and the study’s lead author. “Instead they grow at a much diminished rate in comparison to prey.” This was true for large carnivores on the African savanna all the way down to the tiniest microbe-munching fish in the ocean. Even more intriguing, the researchers noticed that the ratio of predators to prey in all of these ecosystems could be predicted by the same mathematical function — in other words, the way predator and prey numbers relate to each other is the same for different species all over the world. “That’s what was very surprising to us, to see this same pattern come up over and over,” Hatton says. But what’s actually driving the pattern remains something of a mystery.

Hatton and his colleagues suspect that different aspects of different ecosystems may drive the predator-prey ratio: For example, Hatton says, competition for space might be a major factor controlling animal populations, but changes in the nutrients used and produced by plankton might have more of an effect on some marine ecosystems. The thing that’s puzzling is that the same mathematical function can be used to predict all of these ecosystems’ responses. And that’s not all: In a strange twist, the researchers observed that the same function can also be used to predict several other natural processes as well. One of these is the reproduction rates of prey species. If you remove predators from an ecosystem, prey populations start to increase, since there’s nothing eating them.

But there’s a catch: As their populations continue to grow, they reproduce at lower and lower rates – in other words, they continue to increase their numbers, but more and more slowly. And their growth rate can be predicted by the same mathematical function used to predict the way predators increase in response to their prey. Even more fascinating is that the same function applies to certain processes in individual organisms’ bodies. One phenomenon observed consistently in nature is that smaller animals, like mice, tend to be faster, have higher metabolisms, live shorter lives and reproduce at higher rates, while large animals, like elephants, are slower in all aspects. So as size increases, the rate at which bodily functions are performed changes. And the pattern in these changes is governed by – you guessed it – that same mathematical function.

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