Jul 032017
 
 July 3, 2017  Posted by at 9:32 am Finance Tagged with: , , , , , , , , , ,  


Paul Klee Girl in Mourning 1939

 

Merkel Promises Full Employment In Party Platform (R.)
Theresa May Steps Back From Public Sector Pay Cap Amid Austerity Backlash (Ind.)
Donald Trump May Make ‘Sneak’ Visit To UK Within Fortnight (G.)
Maine, New Jersey Lawmakers Scramble To End Partial Government Shutdowns (R.)
Illinois House Approves Major Income Tax Hike (CTrib)
China Inc’s $7.8 Billion of Dividend Payments Will Stress the Yuan (BBG)
Japan PM Abe’s Party Suffers Historic Defeat In Tokyo Election (R.)
Abe’s Mentor Says BOJ Needs Fresh Face as Kuroda Is Out of Ideas (BBG)
Saudi Arabia, Allies Give Qatar Two More Days To Accept Demands (R.)
The Crash of 1929 (Jesse’s Café/PBS)
Italy Urges EU Ports To Take Migrants As Pressure Builds (AFP)
‘Our Future Is Slavery, The West Gets Everything’ – Congo (RT)

 

 

Note: tomorrow’s a travel day for me. Not sure about a Debt Rattle.

 

 

Plus tax relief. Plus support for young families to build new housing. Now compare that to Greece, where over half of young people are unemployed, and where taxes are being raised all the time and pensions cut. That, too, is a German decision. But Greeks don’t get to vote for or against Merkel.

Merkel Promises Full Employment In Party Platform (R.)

Chancellor Angela Merkel’s conservatives will promise to all but eliminate unemployment in Germany by the year 2025 when they announce their 2017 election campaign platform on Monday. Merkel’s Christian Democrats (CDU) and their Bavarian sister party, the Christian Social Union (CSU), will present their platform for the Sept. 24 election on Monday with other already known policies such as income tax cuts worth 15 billion euros per year and promises to build flats. “A major point is that we’d like to achieve full employment,” Horst Seehofer, CSU chairman and state premier in Bavaria, said on Sunday on his way into a meeting of the conservative leadership. The CDU/CSU consider full employment to be a jobless rate of less than 3% – compared to 5.5% now.

Those “Economic Miracle” levels of unemployment have not been seen in the country since the mid-1970s. The two parties also want to add 15,000 police officers in the 16 federal states. The sister parties, however, will not agree on a joint position on refugees. The CSU wants an upper limit of 200,000 per year, which Merkel and the CDU rejects. “We agree to disagree on that,” Interior Minister Thomas de Maiziere (CDU) said in a Bild am Sonntag newspaper interview, referring to the issue that split the two parties badly since some 1 million refugees arrived in late 2015. The CDU/CSU hold a 16%age point lead over the center-left Social Democrats in opinion polls with a 40-24 lead, but would still need a coalition partner. They rule with the SPD and in the past they have ruled with the Free Democrats (FDP).

[..] Earlier on Sunday, CDU Finance Minister Wolfgang Schaeuble said in a radio interview there could be room to cut taxes by more than the €15 billion already announced. Germany has had balanced budgets since 2014 and the government plans to have no new borrowing in its planning through 2021. Schaeuble told Deutschlandfunk radio he hoped there could be tax relief beyond that already promised €15 billion income tax cut. “We’re planning, all in all, to do more than just correcting the income taxes by €15 billion,” he said, referring to plans to reduce the country’s “cold progression” tax increases – or clandestine tax increases. [..] Schaeuble said aside from fighting “cold progression”, the Christian Democrats want to support young families to build new housing while also supporting research and development for small- to medium-sized companies.

Read more …

Messing it up as they go along.

Theresa May Steps Back From Public Sector Pay Cap Amid Austerity Backlash (Ind.)

Tory austerity appeared to be crumbling at the edges today, as Theresa May further distanced herself from a hated public sector pay freeze. Downing Street said the Government would consider potential wage increases for nurses, police officers and firefighters on a “case by case” basis after a string of top cabinet ministers signalled backing for an end to the blanket 1 per cent cap on all public servants. Environment Secretary Michael Gove said the Government should now listen to the recommendations of salary review bodies ignored by ministers for almost ten years. Education Secretary Justine Greening and Health Secretary Jeremy Hunt are also both reported to be pushing for new deals for teachers and nurses. The Independent reported last week how the Government faced a first ever strike from the Royal College of Nursing over a crisis in the profession.

There has also been mounting pressure from Jeremy Corbyn’s Labour – whose party fought a successful election campaign on an anti-austerity message. A Downing Street spokesman defended the Government’s record, but pointed to potential changes ahead. He said: “Dealing with the economic mess we inherited from Labour has meant hard work and sacrifice, including for public sector workers. That hard work and those tough decisions have helped get our deficit down by three quarters, and public sector pay restraint has helped us protect jobs. “Independent public sector pay review bodies are currently reporting to Government and we are responding to them on a case-by-case basis. While we understand the sacrifice that has been made, we must also ensure we continue to protect jobs and deal with our debts.”

Read more …

What is the Queen would be received like this?:

“MPs and trade unions vowed to hold the largest demonstrations in UK history if Donald Trump made a state visit to the UK..”

Donald Trump May Make ‘Sneak’ Visit To UK Within Fortnight (G.)

Anti-Donald Trump protesters are preparing to spring into action at short notice, after it emerged that Downing Street is braced for a snap visit from the US president in the next two weeks. A formal state visit, which was expected to take place over the summer, was postponed last month, amid fears that it could be disrupted by mass protests, despite Theresa May extending the invitation personally when she visited the White House late last year. But Whitehall sources confirmed the government has now been warned that the president could visit Turnberry, his golf resort in Scotland, during his trip to Europe, between attending the G20 summit in Hamburg next weekend and joining celebrations for Bastille Day in France on 14 July.

Trump would be expected to come to Downing Street to meet the prime minister for informal talks as part of any such visit – though final confirmation would be likely to be given with just 24 hours’ notice, to minimise the risk of disruption. May invited Trump to Britain seven days after his inauguration when she became the first foreign leader to visit him in the White House. In February activists, MPs and trade unions vowed to hold the largest demonstrations in UK history if Donald Trump made a state visit to the UK, forming The Stop Trump coalition, even hiring a permanent staff member. In early June, just after the UK general election, it emerged that the US president had told May that he did not want to go ahead with the state visit to Britain until the British public supports his coming, fearing large-scale demonstrations.

Read more …

How about you borrow some more, guys? Or, you know, come clean and tell people their pensions are shot.

Maine, New Jersey Lawmakers Scramble To End Partial Government Shutdowns (R.)

Partial government shutdowns in Maine and New Jersey entered a second day on Sunday as lawmakers returned to their respective state capitals in a bid to break budget impasses that have led to the suspension of many nonessential services. In Maine, a bipartisan legislative committee met in Augusta in hopes of breaking a stalemate between Republican Governor Paul LePage and Democratic lawmakers. The shutdown came after LePage threatened to veto a compromise reached by lawmakers in the state’s $7.055 billion, two-year budget. In New Jersey, the legislature was due to reconvene to resolve a political fight over a controversial bill that Governor Chris Christie said must be passed alongside the state’s budget.

After House Republicans in Maine voted to reject a compromise deal on Saturday, the Bangor Daily News reported that Republican Minority Leader Ken Fredette presented a $7.1 billion plan he said could get the governor’s approval, but some Democrats noted that was costlier than the rejected compromise. “The Speaker thinks it is unconscionable that Maine doesn’t have a budget, especially leading into the holiday weekend,” Mary-Erin Casale, a spokeswoman for Democratic House Speaker Sara Gideon, said Sunday morning. If the budget committee meeting on Sunday in Augusta agrees on a deal, the measure would go to the full legislature. LePage has insisted on a budget with deeper spending cuts than those contemplated by lawmakers and has promised to veto any spending plan that raises taxes.

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Sign of things to come.

Illinois House Approves Major Income Tax Hike (CTrib)

The Illinois House on Sunday approved a major income tax increase as more than a dozen Republicans broke ranks with Gov. Bruce Rauner amid the intense pressure of a budget impasse that’s entered its third year. The Republican governor immediately vowed to veto the measure, saying Democratic House Speaker Michael Madigan was “protecting the special interests and refusing to reform the status quo.” The measure, which needed 71 votes to pass and got 72, is designed to start digging the state out of a morass left by the lengthy stalemate. Madigan, in a statement, praised the action as “a crucial step toward reaching a compromise that ends the budget crisis by passing a fully funded state budget in a bipartisan way.”

The tax hike now heads to the Senate, but whether there will be enough votes to send it to Rauner’s desk is in question. When the Senate approved its own tax hike in late May, no Republicans voted for it and several Democrats voted against it. Senators return to the Capitol on Monday. The crucial vote in the House was the big story Sunday, though. Ultimately, pressure that had built up in districts across the state moved enough Republicans to defy the governor. With state government operating without a budget for two full years, public universities risk losing their accreditation, social service providers are closing their doors and layoffs of road construction workers are imminent.

Adding to lawmakers’ anxiety was a promised downgrade of the state’s credit rating to junk status, which could spike the cost of borrowing at a time when the state has $15 billion in unpaid bills. Left out of the House budget package was a plan for dealing with the unpaid bills, though both sides generally agree that some amount of borrowing will be needed. Rauner, a former private equity specialist from Winnetka, had spent tens of millions of dollars on legislative campaigns and TV ads to prop up the Illinois Republican Party as a counterweight to Madigan and his labor union allies. And Republican lawmakers largely had stuck by their governor — until Sunday. [..] The proposal mirrors a plan the Senate passed earlier this year and calls for raising the personal income tax rate from the current 3.75% to 4.95%, which would generate roughly $4.3 billion. An increase in the corporate income tax rate from 5.25% to 7% would bring in another $460 million.

Read more …

Bearish on the dollar? You sure?

China Inc’s $7.8 Billion of Dividend Payments Will Stress the Yuan (BBG)

The yuan’s rebound may be undermined by a seasonal hunt for dollars as Chinese companies prepare to pay dividends to shareholders overseas. Demand for the greenback and other currencies will peak at $7.8 billion in July, a substantial sum considering that local lenders settled an average of $11.8 billion in foreign-exchange for clients in the first five months of 2017. China’s currency reserves have shrunk every July in the last three years, with former regulator Guan Tao saying last week that demand for foreign-exchange surges in this period. China’s exchange rate has turned more volatile in the past two months, climbing the most in more than a year in May and then declining in June before suspected central bank intervention spurred a rally.

Goldman Sachs warned capital outflows have picked up, while recent data suggest the economy is showing signs of slowing as an official deleveraging drive crimps spending. “The need for dividend payouts will pressure the yuan and may pressure a recent increase in China’s foreign reserves,” said Xia Le at BBVA. “The yuan’s advance in the past few days is not sustainable – short-term factors such as dividend payments and long-term ones like capital outflows will work together to push the currency weaker in the coming months.” Offshore-listed Chinese firms need to pay a combined $16 billion of dividends in foreign exchange in the three months through August. That includes $2.4 billion in June and $5.9 billion for August.

Read more …

Abe will shuffle his cabinet to deflect attention from himself. But he’s in trouble.

Japan PM Abe’s Party Suffers Historic Defeat In Tokyo Election (R.)

Prime Minister Shinzo Abe’s Liberal Democratic Party suffered an historic defeat in an election in the Japanese capital on Sunday, signaling trouble ahead for the premier, who has suffered from slumping support because of a favoritism scandal. On the surface, the Tokyo Metropolitan assembly election was a referendum on Governor Yuriko Koike’s year in office, but the dismal showing for Abe’s party is also a stinging rebuke of his 4-1/2-year-old administration. Koike’s Tokyo Citizens First party and its allies took 79 seats in the 127-seat assembly. The LDP won a mere 23, its worst-ever results, compared with 57 before the election. “We must recognize this as an historic defeat,” former defense minister Shigeru Ishiba was quoted as saying by NHK.

“Rather than a victory for Tokyo Citizens First, this is a defeat for the LDP,” said Ishiba, who is widely seen as an Abe rival within the ruling party. Past Tokyo elections have been bellwethers for national trends. A 2009 Tokyo poll in which the LDP won just 38 seats was followed by its defeat in a general election that year, although this time no lower house poll need be held until late 2018. [..] “We must accept the results humbly,” said Hakubun Shimomura, a close Abe ally and head of the LDP’s Tokyo chapter. “The voters have handed down an extremely severe verdict.” Abe is expected to reshuffle his cabinet in coming months in an effort to repair his damaged ratings, a step often taken by beleaguered leaders but one that can backfire if novice ministers become embroiled in scandals or commit gaffes.

Read more …

If Kuroda’s out of ideas, that means Abenomics has failed. And that in turn means Abe should go too.

Abe’s Mentor Says BOJ Needs Fresh Face as Kuroda Is Out of Ideas (BBG)

Haruhiko Kuroda shouldn’t serve another term as governor of the Bank of Japan because the central bank will need fresh ideas as it moves toward exiting years of unprecedented monetary easing, according to an adviser to the prime minister. “An exit will surely come up within the next five years and we need someone who can prepare for it,” said Nobuyuki Nakahara, a former BOJ board member. “He will fall into inertia and struggle to come up with bold new ideas. It’s the same in the private sector when a corporate president stays too long,” he said. Nakahara’s comments come amid growing speculation among private economists that Prime Minister Shinzo Abe will reappoint Kuroda, 72, after his five-year term ends in April.

Nakahara, who was close to Abe’s father, Shintaro, has known the prime minister since he was young and has advised him for years. In an interview on June 29, Nakahara, one of the architects of Abenomics, said he didn’t have any replacements for Kuroda in mind. But he said change at the top of the BOJ would be good because the government and central bank should strike a new accord and form a new strategy for the next five years. The current accord, issued in January 2013, says the central bank should aim for price stability at an annual inflation rate of 2%, while the government is responsible for strengthening competitiveness and the nation’s growth potential. More than four years later, the inflation target remains far off.

[..] Kuroda’s propensity to surprise markets with innovative ideas has been waning, according to Nakahara. And the strains of his record easing are particularly evident in the bank’s purchases of exchange-traded funds, which are distorting the market, he said. “They can’t keep holding ETFs forever,” he said. Nakahara offered a possible solution. How about getting companies to buy back their own shares from the BOJ? Or the BOJ could tell companies it plans to sell the shares on the market. If the companies need funding for share buybacks, the central bank could help with a loan-support program. “That’s my secret strategy,” he said.

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Really, close Al Jazeera? What an awful signal that would be. Why not close CNN then?!

Saudi Arabia, Allies Give Qatar Two More Days To Accept Demands (R.)

Four Arab states that accuse Qatar of supporting terrorism agreed to extend until Tuesday a deadline for Doha to comply with a list of demands, as U.S. President Donald Trump voiced concerns about the dispute to both sides. Qatar has called the charges baseless and says the stiff demands – including closing Qatar-based al Jazeera TV and ejecting Turkish troops based there – are so draconian that they appear designed to be rejected. Saudi Arabia, Bahrain, Egypt and the United Arab Emirates (UAE) have raised the possibility of further sanctions against Qatar if it does not comply with the 13 demands presented to Doha through mediator Kuwait. They have not specified what further sanctions they could impose on Doha, but commercial bankers in the region believe that Saudi, Emirati and Bahraini banks might receive official guidance to pull deposits and interbank loans from Qatar.

According to a joint statement on Saudi state news agency SPA, the four countries agreed to a request by Kuwait to extend by 48 hours Sunday’s deadline for compliance. Foreign ministers from the four countries will meet in Cairo on Wednesday to discuss Qatar, Egypt said on Sunday. Kuwait state media said its Emir Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah had received a response by Qatar to the demands. It did not elaborate. The four states cut diplomatic and commercial ties with Qatar on June 5, accusing it of supporting terrorism, meddling in their internal affairs and cosying up to regional adversary Iran, all of which Qatar denies. Mediation efforts, including by the United States, have been fruitless. Trump spoke separately to the leaders of Saudi Arabia, Qatar and the Crown Prince of Abu Dhabi in the UAE to discuss his “concerns about the ongoing dispute”, the White House said.

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For history buffs.

The Crash of 1929 (Jesse’s Café/PBS)

“…people believed that everything was going to be great always, always. There was a feeling of optimism in the air that you cannot even describe today.” “There was great hope. America came out of World War I with the economy intact. We were the only strong country in the world. The dollar was king. We had a very popular president in the middle of the decade, Calvin Coolidge, and an even more popular one elected in 1928, Herbert Hoover. So things looked pretty good.” “The economy was changing in this new America. It was the dawn of the consumer revolution. New inventions, mass marketing, factories turning out amazing products like radios, rayon, air conditioners, underarm deodorant…One of the most wondrous inventions of the age was consumer credit. Before 1920, the average worker couldn’t borrow money. By 1929, “buy now, pay later” had become a way of life.”

“Wall Street got the credit for this prosperity and Wall Street was dominated by just a small group of wealthy men. Rarely in the history of this nation had so much raw power been concentrated in the hands of a few businessmen…” “One of the most common tactics was to manipulate the price of a particular stock, a stock like Radio Corporation of America…Wealthy investors would pool their money in a secret agreement to buy a stock, inflate its price and then sell it to an unsuspecting public. Most stocks in the 1920s were regularly manipulated by insiders ” “I would say that practically all the financial journals were on the take. This includes reporters for The Wall Street Journal, The New York Times, The Herald-Tribune, you name it. So if you were a pool operator, you’d call your friend at The Times and say, “Look, Charlie, there’s an envelope waiting for you here and we think that perhaps you should write something nice about RCA.”

And Charlie would write something nice about RCA. A publicity man called A. Newton Plummer had canceled checks from practically every major journalist in New York City… Then, they would begin to — what was called “painting the tape” and they would make the stock look exciting. They would trade among themselves and you’d see these big prints on RCA and people will say, “Oh, it looks as though that stock is being accumulated. Now, if they are behind it, you want to join them, so you go out and you buy stock also. Now, what’s happening is the stock goes from 10 to 15 to 20 and now, it’s at 20 and you start buying, other people start buying at 30, 40. The original group, the pool, they’ve stopped buying. They’re selling you the stock. It’s now 50 and they’re out of it. And what happens, of course, is the stock collapses.”

Read more …

Prediction: the EU will offer more money. They simply don’t understand that some things are not about money.

Italy Urges EU Ports To Take Migrants As Pressure Builds (AFP)

The French and German interior ministers met with their Italian counterpart Marco Minniti in Paris on Sunday to discuss a “coordinated response” to Italy’s migrant crisis, hours after Minniti had called on other European countries to open their ports to rescue ships. The working dinner at the French interior ministry – also attended by EU Commissioner for Refugees Dimitris Avramopoulos – was aimed at finding “a coordinated and concerted response to the migrant flux in the central Mediterranean (route) and see how to better help the Italians,” a source close the talks said. The four-way talks between Minniti, Thomas de Maiziere of Germany, Gerard Collomb of France and Avramopoulos will also prepare them for EU talks in Tallinn this week. “The talks went off very well,” a member of the Italian delegation told AFP after the Paris meeting, with the “Italian proposals being discussed”.

“We are under enormous pressure,” Minniti had said earlier Sunday in an interview with Il Messaggero. With arrivals in Italy up nearly 19% over the same period last year, Rome has threatened to close its ports to privately-funded aid boats or insist that funding be cut to EU countries which fail to help. “There are NGO ships, Sophia and Frontex boats, Italian coast guard vessels” saving migrants i the Mediterranean, Minniti said, referring to the aid boats as well as vessels deployed under EU border security missions. “They are sailing under the flags of various European countries. If the only ports where refugees are taken to are Italian, something is not working. This is the heart of the question,” he said. “I am a europhile and I would be proud if even one vessel, instead of arriving in Italy, went to another European port. It would not resolve Italy’s problem, but it would be an extraordinary signal” of support, he said.

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I’ve often said that the Congo is perhaps richer in resources than any other country. It should be prosperous, but instead it ranks 227th out of 230 countries for GDP per capita. That’s our doing.

From July 5, see documentary at https://rtd.rt.com/films/congo-my-precious/

‘Our Future Is Slavery, The West Gets Everything’ – Congo (RT)

RT Documentary travels to the vast, landlocked Democratic Republic of Congo, prized for its mineral resources, but plagued by centuries of colonial rule, dictatorship, civil wars and lawlessness, and meets people trying to make a living in one of the most desperate places on Earth. The documentary crew’s key to understanding the country, seven times the size of Germany, was Bernard Kalume Buleri, born in 1960, the same year DRC was granted its independence from Belgium. Buleri served as an interpreter, guide, and finally the hero and symbol of the country, having been a direct participant in some of its bloodiest chapters. “I can’t say that the Congolese, we are in control of our destiny. No, because the ones who benefit from our minerals are not the local population, but Western countries are the ones who are taking everything.

They make themselves rich, while we are getting poorer and poorer,” says Buleri. The country of almost 80 million is one of the world’s largest exporters of diamonds, coltan – essential for electronics – and has massive deposits of copper, tin and cobalt. “I’m afraid even for my children. Because they will continue in this system to be slaves forever. We’ll never be powerful enough to challenge the Western countries. So, the future will be the future of slaves,” Buleri continues. There is plenty of blame to go around for the predicament of what is also a fertile and scenic land. With almost no educated elite, DRC was poorly-prepared for its separation from Belgian rule, now best remembered for the atrocity-filled reign of King Leopold II, which may have killed as many as half of the country’s population.

The vacuum was filled by the archetype-setting African kleptocrat Mobutu Sese Seko, who ruled the country for more than three decades, until he was deposed in 1997, plunging Africa into a series of continent-wide conflicts that may have resulted in as many as 5 million deaths through violence, starvation and disease. The country’s below-ground wealth means that it was never left alone for long enough to reform and wean itself off its reliance on metals and gems – the widely-mentioned “mineral curse.” The mines the RT crew passes are now owned by local warlords, chiefs and officials, with exports mostly going to China. [..] Millions of locals – perhaps as many as one-fifth of the adult population – are employed in what is known as artisanal mining, inefficient small-scale prospecting with simple handheld tools, with no safety measures or guaranteed wages. But for a country that ranks 227th out of 230 for GDP per capita, according to World Bank data, any job at all is a matter of survival.

Read more …

Jul 012017
 
 July 1, 2017  Posted by at 9:50 am Finance Tagged with: , , , , , , , , , , ,  


Fred Lyon Terrific Street, Barbary Coast, San Francisco 1947

 

Bill To Remove Trump From Office Picks Up Democratic Support (DM)
Bank of America: The Fed Is Preparing To Make The Rich Poorer (ZH)
Debt Is the Third Benjamin Franklin Certainty (Stockman)
UK Household Incomes Fall Most In 40 Years, Savings Rates Crash (Ind.)
China’s Opening Of Bond Market May Spark ‘Massive Demand’ From Foreigners (CNBC)
Judge Orders Illinois To Pay Billions More Toward Medicaid (CT)
Maine Governor Won’t Sign Latest Budget Proposal, Will Allow A Shutdown (BDN)
Connecticut Social Service Agencies Brace for Deep Cuts With No Budget (AP)
America’s Pension Bomb: Illinois Is Just the Start (BBG)
An Awful Lot Of Americans Are A Walking Illinois Now (Jim Kunstler)
US Says Its Warning Appears To Have Averted Syrian Chemical Attack (R.)
Make No Mistake, We Are Already at War in Syria (Giraldi)
Qatar Crisis: Armed Conflict And Protracted Dispute Grow More Likely (CNBC)
Oliver Stone: Edward Snowden Is The “Most American Of Patriots” (ZH)
Billionaires And Aristocrats Biggest Beneficiaries Of EU Farm Subsidies (TLE)
Juncker: EU To Discuss More Migrant Help For Greece And Italy (R.)

 

 

I thought they were kidding, Daily Mail after all. But there are more reports on this. In a nutshell: the people who support this are much less capable of doing THEIR jobs than Trump is of doing his. They’re 100% delusional. And they lack a very essential respect for the American system and the Office of the President.

But it’ll all just keep coming. This is on the same day that both the NYT and AP feel forced finally to state that their Russiagate/hacking reporting has been based on nothing at all.

Bill To Remove Trump From Office Picks Up Democratic Support (DM)

A Democratic congressman has proposed convening a special committee of psychiatrists and other doctors whose job would be to determine if President Donald Trump is fit to serve in the Oval Office. Maryland Rep. Jamie Raskin, who also teaches constitutional law at American University, has predictably failed to attract any Republicans to his banner. But the U.S. Constitution’s 25th Amendment does allow for a majority of the president’s cabinet, or ‘such other body as Congress may by law provide,’ to decide if an Oval Office occupant is unable to carry out his duties – and then to put it to a full congressional vote. Vice President Mike Pence would also have to agree, which could slow down the process – or speed it up if he wanted the levers of power for himself.

The 25th Amendment has been around since shortly after the John F. Kennedy assassination, but Congress has never formed its own committee in case it’s needed to judge a president’s mental health. Raskin’s bill would allow the four Republican and Democratic leaders of the House and Senate to each choose a psychiatrist and another doctor. Then each party would add a former statesman – like a retired president or vice president. The final group of 10 would meet and choose an 11th member, who would become the committee’s chairman. Once the group is officially seated, the House and Senate could direct it through a joint resolution to conduct an actual examination of the president ‘to determine whether the president is incapacitated, either mentally or physically,’ according to the Raskin bill.

And if the president refuses to participate, the bill dictates, that ‘shall be taken into consideration by the commission in reaching a conclusion.’ Under the 25th Amendment, such a committee – or the president’s cabinet – can notify Congress in writing that a sitting president is unfit. In either case the vice president must concur, and he would immediately become ‘acting president.’ Presidents have voluntarily transferred their powers to vice presidents in the past, including when they are put under anesthesia for medical procedures. In the case of Raskin’s plan, the Constitution holds that both houses of Congress would hold a vote within three weeks. If two-thirds majorities in the House and Senate agreed that the president couldn’t discharge his duties, he would be dismissed.

Raskin’s plan could have a fatal flaw, however: Legal scholars tend to agree that when the Constitution’s framers first provided for the replacement of a president with an ‘inability to discharge the Powers and Duties of the Office,’ they weren’t talking about mere eccentricities. And when the 25th Amendment was sent to the states for ratification in 1965, the Senate agreed that ‘inability’ meant that a president was ‘unable to make or communicate his decisions’ and suffered from a ‘mental debility’ rendering him ‘unable or unwilling to make any rational decision.’ So far two dozen members of the House, all Democrats, have signed on to cosponsor the bill. Texas Rep. Sheila Jackson Lee, a far-left liberal Democrat, claimed Friday in a Fox Business Channel interview that Congress can remove ‘incompetent’ presidents. ‘The 25th Amendment is utilized when a president is perceived to be incompetent or unable to do his or her job,’ she said.

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Interesting idea, but how valid?:“Fed/ECB are now tightening to make Wall St poorer” because it is “no longer politically acceptable to stoke Wall St bubble.”

Bank of America: The Fed Is Preparing To Make The Rich Poorer (ZH)

Remember when – for years and years after the grand, global QE experiment started – any suggestion that central bankers are the primary cause behind global wealth inequality, and thus directly responsible for such political outcomes as Brexit and Trump – was branded as a conspiracy theory by bloggers living in their parents’ basement? We do, because we were accused over and over of just that (our position on the Fed and other central banks should be familiar to all by now). Well, as of this morning, none other than the chief investment strategist at BofA, Michael Hartnett, is a basement dwelling, tinfoil hatter because in his latest Flow Show report, writes that “central banks have exacerbated inequality via Wall St inflation & Main St deflation.”

Of course we knew that, you knew that, and pretty much everyone else knew that, but those whose jobs depended on not admitting it, kept their mouths shut terrified of pointing out that the central banking emperor is not only naked, but an idiot. Well, the seal has been broken, and even the biggest cowards from within the financial establishment, most of whom can be found on financial twitter for some inexplicable reason, can speak up now. However, it’s what Hartnett said next that was more notable, namely that the “massive outperformance of deflation assets versus inflation assets shows central bank failure in War on Deflation…they have failed to boost wage expectations, inflation expectation, “animal spirits” on Main St.”

And, according to the Bank of American, now that central banks are in full reverse mode, there are “two ways to cure inequality…you can make the poor richer…or you can make the rich poorer…” So for anyone still confused, about what is taking place right now, the “Fed/ECB are now tightening to make Wall St poorer” because it is “no longer politically acceptable to stoke Wall St bubble.” Sooner or later the market will get it, and when it does, those who sell first will be happy. Everyone else will be stuck with a market that is locked limited down, with no position sales possible indefinitely, maybe in perpetuity.

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“..the nation effectively performed a leveraged buyout (LBO) on itself during the last forty years. And that did temporarily add to the appearance of prosperity.”

Debt Is the Third Benjamin Franklin Certainty (Stockman)

Once upon a time people used to have mortgage burning ceremonies when later in their working years the balance on the one-time loan they took out in their 30s to buy their castle was finally reduced to zero. And there was no such thing as student loans, and not only because students are inherently not credit worthy. College was paid for with family savings, summer jobs, work study and an austere life of four to a dorm room. No more. The essence of debt in the present era is that it is perpetually increased and rolled-over. It’s never reduced and paid-off. To be sure, much of mainstream opinion considers that reality unremarkable — even evidence of economic progress and enlightenment. Keynesians, Washington politicians and Wall Street gamblers would have it no other way because their entire modus operandi is based not just on ever more debt, but more importantly, on ever higher leverage.

The chart below not only proves the latter point, but documents that over the last four decades rising leverage has been insinuated into every nook and cranny of the U.S. economy. Nominal GDP (dark blue) grew by 6X from $3 trillion to $18 trillion, whereas total credit outstanding (light blue) soared by 13X from $5 trillion to $64 trillion. Consequently, the national leverage ratio rose from 1.5X in 1980 to 3.5X today. My point today is not to moralize, but to discuss the practical implications of the nation’s debt-topia for Ben Franklin’s other two certainties — death and (especially) taxes. There’s no doubt that the modus operandi of the American economy has been transformed by the trends displayed in the below chart. It so happened that the 1.5X ratio of total debt-to-income (GDP) at the beginning of the chart was not an aberration.

It had actually been a constant for 100 years — except for a couple of unusual years during the Great Depression. It was also linked with the greatest period of capitalist prosperity, economic growth and rising living standards in recorded history. By contrast, today’s 3.5X debt-to-income ratio has two clear implications. First, the nation effectively performed a leveraged buyout (LBO) on itself during the last forty years. And that did temporarily add to the appearance of prosperity. But it also means that the U.S. economy is now lugging two turns of extra debt compared to the historic norm. Mainstream opinion, of course, says “so what?” The U.S. economy is lugging $35 trillion of extra debt, that’s what. That’s right. In the absence of the 40-year leverage aberration since the late 1970s, the chart below would show about $29 trillion of credit market debt (public and private) outstanding, not $64 trillion.

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Just don’t blame this on Brexit. It’s a much longer trajectory. Britain has been living above its weight for a long time, and austerity has made that much worse.

UK Household Incomes Fall Most In 40 Years, Savings Rates Crash (Ind.)

The aggregate real disposable income of UK households has fallen for three quarters in a row for the first time since the 1970s, according to the Office for National Statistics. The ONS said that the inflation-adjusted compensation of the household sector fell 1.4% in the first three months of 2017, reflecting spiking inflation and weak pay growth. It was the biggest decline since the first quarter of 2013 and followed a 0.4% fall in Q4 2016 and a 0.3% slip in Q3 2016. Three consecutive quarters of contraction is the worst run for the series since 1976-77. The ONS also said that the aggregate household savings rate collapsed to just 1.7%, down from 3.3% in the final quarter of 2016, and the lowest on record, although it said one-off tax payment factors might have distorted the latest reading.

Nevertheless, weak pay growth means that households have had to resort to running down their savings and borrowing to support consumption, which has almost single-handedly powered the overall economy since last June’s Brexit vote. “This is not sustainable and fuels the belief that weakened consumer spending is likely to hold back the economy over the coming months,” said Howard Archer of the EY Item Club. “With consumer confidence declining and banks reporting that they intend to restrict the supply of secured credit, the saving rate is more likely to rise than fall ahead,” said Samuel Tombs of Pantheon.

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Those foreigners would have to sell somthing first, we presume. There goes the S&P?!

China’s Opening Of Bond Market May Spark ‘Massive Demand’ From Foreigners (CNBC)

China’s move to open up its fixed income market to foreign investors will eventually unleash “massive” demand for the mainland’s bonds, the chief executive of the company that operates Hong Kong’s stock exchange, told CNBC on Friday. In May, regulators in Hong Kong and on the mainland approved a “bond connect” program to allow investors operating in Hong Kong to trade Chinese bonds, called a “northbound” flow, with a “southbound” flow of Chinese investment into Hong Kong to be considered later. Authorities also won’t cap the amount that foreigners can invest in China. “I think this is a huge breakthrough,” HKEx CEO Charles Li told CNBC’s “Squawk Box” on the anniversary of Hong Kong’s handover to China.

Li said that while large investors are already able to access the mainland fixed income market though existing programs, the bond connect would be fundamentally different. “People are now finally able to do it and able to do it in a way that is familiar, that is similar to the way we trade U.S. dollar Treasurys or other international treasury fixed income instruments,” he said. “That is something so new. That the demand, underlying demand, the potent demand are massive.” He noted that with China’s yuan being included in the IMF’s Special Drawing Rights (SDR) basket in November 2015, some investors must include at least some renminbi assets on their balance sheets. Inclusion in the SDR means the renminbi is now officially recognized as a reserve currency. “That will require massive reallocation of capital but over quite a long period of time,” Li said, saying foreign investment into Chinese bonds was “at the beginning of the beginning.”

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Not all of this will come out as bad as it may look tomorrow morning, but down the line it’s all a toxic swamp. In the short term, deep cuts to social programs.

Judge Orders Illinois To Pay Billions More Toward Medicaid (CT)

A federal judge on Friday ordered Illinois to start paying $293 million in state money toward Medicaid bills every month and an additional $1 billion over the course of the next year, worsening a cash-flow problem caused by two years of budget-free spending by state government. U.S. District Judge Joan Lefkow’s ruling came after lawyers representing Medicaid patients and attorneys for the state were unable to agree on a plan to deal with bills and pay down a $3 billion backlog owed to health care providers. The ruling requires the state to start promptly paying all new Medicaid bills, which is estimated at about $586 million per month, and to pay down $2 billion of its bill backlog in payments spread out over the course of the coming fiscal year. The federal government pays half of those costs, so the bottom line for the state will be $293 million per month and $1 billion in backlogged bill payments over the next year.

Comptroller Susana Mendoza’s office earlier in the week had offered to pay an additional $150 million per month, but the plaintiffs rejected it, saying it wasn’t enough. The $150 million would have only cost the state $75 million because of the federal match, and Mendoza’s office said that was all the state could spare while meeting other demands. Now, Mendoza said Friday’s ruling would cause her to likely have to cut payments to the state’s pension funds, state payroll or payments to local governments. Payments to bond holders won’t be interrupted, she said. “As if the governor and legislators needed any more reason to compromise and settle on a comprehensive budget plan immediately, Friday’s ruling by the U.S. District Court takes the state’s finances from horrific to catastrophic,” Mendoza said in a statement. “A comprehensive budget plan must be passed immediately.”

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Maine beat Illinois to it! Partial shutdown started today.

Maine Governor Won’t Sign Latest Budget Proposal, Will Allow A Shutdown (BDN)

Gov. Paul LePage said Friday that he won’t sign a state budget package endorsed Thursday night by a special panel, ensuring a partial shutdown of state government at midnight. The Republican governor’s opposition to the budget deal would force Maine’s first state government shutdown since 1991, which could stretch 10 days if LePage holds a budget bill for the full time the Constitution allows before he must act. A budget would go to him tonight if the Legislature can muster two-thirds votes in both chambers, but even that was a big “if” on Friday. LePage hosted House Republicans for a Friday morning meeting where he reportedly implored them to oppose the budget deal negotiated by Senate President Mike Thibodeau, R-Winterport, and House Speaker Sara Gideon, D-Freeport.

LePage told reporters his major objections were the overall cost of the budget package – around $7.1 billion – and that it proposes raising the state’s lodging tax from 9% to 10.5% without income tax cuts. However, the budget package currently under consideration contains an income tax cut of 3% because it eliminates the surtax on income above $200,000 per year for education which was approved by voters last year. LePage said “on June 30” – the deadline for Maine’s next fiscal year – “they’re trying to put a gun to the governor’s head,” but it won’t work. “This budget they have has no prayer, and if they’re hell-bent on bringing this budget down, we will shut down at midnight tonight and we will talk to them in 10 days,” LePage said.

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Whack-a-state.

Connecticut Social Service Agencies Brace for Deep Cuts With No Budget (AP)

Nonprofit social service agencies prepared Friday to cut programs, close facilities and lay off staff after Gov. Dannel P. Malloy signed an order that slashes funding to maintain essential state services after lawmakers couldn’t come to terms on a budget before the end of the fiscal year. Barry Simon, president and CEO of Oak Hill, said his Hartford-based agency which serves people with developmental disabilities has decided to close four group homes and consolidate two others. Oak Hill was already losing money on those programs and anticipated the problem would be acerbated by the additional state reimbursement cuts in Malloy’s executive order. “Because of this situation, we’re pulling the trigger because it’s only going to get worse,” he said. Simon said 26 individuals live at the six affected group homes, some as long as 20 years. Most are being moved into other facilities.

Meanwhile, Oak Hill is scaling back day programs and employment services for people currently receiving services. And Simon said his agency cut off new admissions two months ago, in anticipation of the state budget impasse. Malloy called it “regrettable” he had to sign the executive order. When it became clear an agreement wasn’t possible on a new, two-year state budget before the fiscal year ended, the Democrat urged the General Assembly to pass a three-month “mini budget” he created. Malloy said it would be less draconian than the executive order and give lawmakers more time to reach a budget deal. While Democratic and Republican state Senate leaders supported Malloy’s mini budget, House leaders did not. Democratic House officials instead offered an eleventh-hour, two-year budget they said can be ready for a vote July 18. Malloy, however, was unenthusiastic about the proposal.

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A healthy pension fund today should really be over 100% funded- because of future demographic expectations. Only South Dakota’s complies.

America’s Pension Bomb: Illinois Is Just the Start (BBG)

We’ve been hearing it for years: America’s public pensions are a ticking time bomb. Well, at long last, the state of Illinois is about to expose just how big this blowup could be. As of the 2015 fiscal year, Illinois had promised its employees $199 billion in retirement benefits. Right now, it’s $119.1 billion short. That gap lies at the center of a years-in-the-making fiscal mess that’s threatening to drop the state’s credit rating to junk-bond status. But Illinois is hardly alone. Connecticut and New Jersey—states that, to most of the world, seem like oases of prosperity—are under growing financial strain, too. We’ve ranked the states by the size of their funding gap. The lower the funding ratio, the more money the state has to come up with to meet its pension obligations.

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“The American people, by and large, have no more idea how false and fragile the financial arrangements of the nation are than the average eight-year-old has about why the re-po squad is towing away Daddy’s Ford-F150.”

An Awful Lot Of Americans Are A Walking Illinois Now (Jim Kunstler)

The preview of coming attractions is currently playing out in Illinois — soon to be joined by Connecticut, California, Kentucky, and many other bankrupt states. Illinois is dead broke. It can’t pay the contractors who fix things like roads and storm drains, and supply food to its prisons. It’s over $200-billion deep in pension obligations that will never be honored. Its Medicaid system is a shambles. It doesn’t even have the cash-on-hand to pay lottery winners (what happened to all the cash paid into the lottery by the suckers who didn’t win, which is supposed to pay off the winners?). The state legislature hasn’t passed a budget in three years. The governor and the mayor of Chicago and everybody else nominally in charge have no idea what they’re going to do about it. Think the federal government is going to just step in and save the day there?

They’d have to bail out every other foundering state and that’s just not going to happen, especially with that same federal government about to run out of cash money itself, with no resolution of the debt ceiling controversy that might allow it to even pretend to borrow more money by issuing treasury bonds that are instantly bought by the Federal Reserve — which, of course, is not an official government agency but a private banking consortium contracted to manage the nation’s money. Do you begin to see the outlines of the clusterfuck rising like a bad moon over the harvest season of 2017? The American people, by and large, have no more idea how false and fragile the financial arrangements of the nation are than the average eight-year-old has about why the re-po squad is towing away Daddy’s Ford-F150.

We’re just doing what we always do: gittin’ our summer on. Breaking out the potato salad and the Bud Lites – at least those who have enough mojo left in their MasterCards to charge the party supplies. An awful lot of Americans must be maxed out, though, people who actually used to work at things and get paid for it. Each one of them is a walking Illinois now, facing each dawning day with a bigger load of problems, more things they can’t pay for, and moving closer to the dreadful day when everything is gone, every chattel, every knickknack, the very roof over their head, and most particularly the belief that they live in a fair and decent society.

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Absurd theater 2017. Because: “The intelligence that prompted the administration’s warning to Syria this week was “far from conclusive,” said a U.S. official familiar with it. “It did not come close to saying that a chemical weapons attack was coming,” the official said.”

But Nikki Haley says: “I would like to think that the president saved many innocent men, women and children.”

US Says Its Warning Appears To Have Averted Syrian Chemical Attack (R.)

U.S. Defense Secretary Jim Mattis said on Wednesday that the Syrian government of President Bashar al-Assad appeared so far to have heeded a warning this week from Washington not to carry out a chemical weapons attack. Russia, the Syrian government’s main backer in the country’s civil war, warned that it would respond proportionately if the United States took pre-emptive measures against Syrian forces to stop what the White House says could be a planned chemical attack. The White House said on Monday it appeared the Syrian military was preparing to conduct a chemical weapons attack and said that Assad and his forces would “pay a heavy price” if it did so. The warning was based on intelligence that indicated preparations for such a strike were under way at Syria’s Shayrat airfield, U.S. officials said.

“It appears that they took the warning seriously,” Mattis said. “They didn’t do it,” he told reporters flying with him to Brussels for a meeting of NATO defense ministers. He offered no evidence other than the fact that an attack had not taken place. Asked whether he believed Assad’s forces had called off any such strike completely, Mattis said: “I think you better ask Assad about that.” Washington accused Syrian forces of using the Shayrat airfield for a chemical weapons attack in April. Syria denies this. The intelligence that prompted the administration’s warning to Syria this week was “far from conclusive,” said a U.S. official familiar with it. “It did not come close to saying that a chemical weapons attack was coming,” the official said.

[..] Russian Foreign Minister Sergei Lavrov said on Wednesday that Moscow will respond if the United States takes measures against Syrian government forces. “We will react with dignity, in proportion to the real situation that may take place,” he said at a news conference in the city of Krasnodar. Lavrov said he hoped the United States was not preparing to use its intelligence assessments about the Syrian government’s intentions as a pretext to mount a “provocation” in Syria. [..] In Washington, the U.S. ambassador to the United Nations, Nikki Haley, credited Trump with saving Syrian lives. “Due to the president’s actions, we did not see an incident,” Haley told U.S. lawmakers. “I would like to think that the president saved many innocent men, women and children.”

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Suggestion: look at this through Russian eyes. They don’t think Trump is crazy, they think all of America is.

Make No Mistake, We Are Already at War in Syria (Giraldi)

Donald Trump has been in office for five months and it would appear that at least some of the outlines of his foreign policy are beginning to take shape, though that may be exaggeration as no one seems to be in charge. The “America First” slogan seemingly does not apply to what is developing, as actual U.S. interests do not appear to be driving what takes place, and there does not seem to be any overriding principle that shapes the responses to the many challenges confronting Washington worldwide. The two most important observations that one might make are both quite negative. First, lamentably, the promised détente with Russia has actually gone into reverse, with the relationship between the two countries at the lowest point since the time of the late, lamented Hillary Rodham Clinton as Secretary of State.

Second, we are already at war with Syria even though the media and Congress seem blissfully unaware of that fact. We are also making aggressive moves intended to create a casus belli for going to war with Iran, and are doubling down in Afghanistan with more troops on the way, so Donald Trump’s pledge to avoid pointless wars and nation-building were apparently little more than glib talking points intended to make Barack Obama look bad. The situation with Russia can be repaired as Vladimir Putin is a realist head of state of a country that is vulnerable and willing to work with Washington, but it will require an end to the constant vituperation being directed against Moscow by the media and the Democratic Party. That process could easily spin out for another year with all parties now agreeing that Russia intervened in our election even though no one has yet presented any evidence that Russia did anything at all.

Syria is more complicated. Senators Tim Kaine and Rand Paul have raised the alarm over American involvement in that country, declaring the U.S. military intervention to be illegal. Indeed it is, as it is a violation of the United Nations Charter and the American Constitution. No one has argued that Syria in any way threatens the United States, and the current policy is also an affront to common sense: like it or not Syria is a sovereign country in which we Americans have set up military bases and are supporting “rebels” (including jihadis and terrorists) who are seeking to overthrow the legitimate government. We have also established a so-called “de-confliction” zone in the southeast of the country to protect our proxies without the consent of the government in Damascus. All of that adds up to what is unambiguously unprovoked aggression, an act of war.

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Expect Russia to react to this too, and soon.

Qatar Crisis: Armed Conflict And Protracted Dispute Grow More Likely (CNBC)

A diplomatic crisis on the Arabian Peninsula is turning into a protracted standoff, and some analysts now say the risk of armed conflict is emerging. The dispute between Qatar, a major natural gas exporter, and its neighbors is now entering its fifth week. Saudi Arabia, the United Arab Emirates, Egypt and Bahrain cut diplomatic ties with Qatar and implemented a partial blockade on June 5 in a bid to bring the tiny Persian Gulf monarchy in line with Saudi-dominated foreign policy. Some analysts initially thought the parties would seek a resolution by the end of the Muslim holy month of Ramadan, but last week, the anti-Qatar alliance issued a series of harsh demands. “It’s escalated to a stage where it’s very difficult for both sides to back down,” Firas Modad, analyst at IHS Markit, told CNBC this week.

The demands include non-starters such as shutting down Al Jazeera news and closing a Turkish military base. The coalition also calls on Qatar to end its alleged ties to terrorist groups and political opposition figures in Gulf nations and Egypt. It demanded Qatar pay reparations and submit to compliance reviews going forward. Qatar has rejected the demands. That is likely to trigger a series of additional economic and political sanctions against the government in Doha, causing the impasse to stretch out for months, risk consultancy Eurasia Group concluded in a briefing this week. “The crisis will continue to escalate before the Qatari leadership ultimately adjusts its policy positions, or in a slightly less likely scenario, opts to cement an alliance with Turkey and closer ties with Iran,” Eurasia Group said.

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Or the Most Patriotic of Americans?

Oliver Stone: Edward Snowden Is The “Most American Of Patriots” (ZH)

Director Oliver Stone, who’s recently released series “The Putin Interviews” stirred up controversy among liberals who accused him of being a Russian propagandist, appeared on the Liberty Report with former Texas Congressman Ron Paul to discuss the documentary, his views about former NSA contractor Edward Snowden, and why the US’s aggressive approach to containing the purported threat posed by Russia has led to a breakdown in relations between the two powers. Stone said he’s been “interested” in Russia since being raised as a conservative in New York City, claiming that his father instilled a “fear” of Communism and Russians in him at a young age. In the early 1980s, Stone visited the country for the first time as a screenwriter with the idea of interviewing several dissidents. He has returned several times since.

In particular, Stone has become interested in the case of Snowden, whom he praised as “the most American of patriots.” “I was interested in Russia – I went back into the 2000s. The Snowden story occupied me. And of course, it’s so ironic that he the most American of patriots is living in Moscow because he has to. It’s the only country in the world that would give him asylum – in other words it’s the only country in the word that can deny the US what it wants which is Snowden.” “[Putin] explained to me that Russians wanted an extradition treaty with the US for years, but nothing doing, because there are a lot of Russian criminals in America who stole money from Russia. He did nothing wrong in Russian terms so they gave him asylum – now its 3 years 5 years whatever its going to be. I wish Ed well I really do.”

Stone also shared a story about watching the movie “Dr. Strangelove” with Putin, who he said was greatly moved. “I showed him the movie Dr. Strangelove…and he watched it very serious about it. He said this movie was very accurate of that time and it’s still accurate today.” Circling back to the issue of nuclear deterrents, Stone said he’s worried that rising tensions around the world could trigger a “nuclear confrontation.” “I’m saying I have reached that age when I am not really concerned about what happens to me but… it’s not just about the US, but about the whole planet and I feel a nuclear confrontation, an accident, could happen tomorrow. But you put ABMs in Poland and Romania – that’s a gigantic mistake.”

“An ABM can be converted overnight from a defensive missile to an offensive missile. They’re surrounded from the North the East and the West by US missiles and we don’t seem to realize it.” Stone says he’s “scared for America,” explaining that many US citizens prefer to blindly accept media spin that’s favorable to the US establishment, without questioning it, or trying to understand Russia’s point of view. “It’s a good thing I went through JFK when I was younger…there’s been a lot of controversy around my movies. I’m scared not for myself because I’m at that age, they can’t destroy me anymore, but I’m scared for America, I’m afraid they’ve lost their sense. I’m afraid there’s a lack of foresight and leadership.”

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EU farm budget is about €1 trillion. While Greece’s health care system and social programs are being murdered underpressure from the same EU.

Billionaires And Aristocrats Biggest Beneficiaries Of EU Farm Subsidies (TLE)

20% of the 100 largest payments under the European Union’s “direct” subsidy system now go to people or families on the Sunday Times Rich List. According to a new investigation by Energydesk billionaires and aristocrats last year scooped up an even greater proportion of the UK’s biggest farm subsidy payouts, with “basic payments” to the Top 100’s Rich List recipients totalling £11.2 million in 2016 – up from £10.6 million the previous year. Direct EU subsidies – now known as “basic payments” – have attracted criticism for largely rewarding landowners simply for owning land, rather than paying farmers to invest in environmental or other “public goods”. The National Trust – which itself received £1.6m in basic payments last year – said the system needed fundamental reform, even if it meant the trust getting less income for its land.

Richard Hebditch, the trust’s external affairs director, said: “Rather than being paid for how much land you happen to farm, a new model which delivers clear public benefit from the money being spent is within reach after Brexit. “Farmers should receive a fair market price for safe and sustainable supplies of food, with public funding paying for the crucial role of protecting vulnerable natural resources, caring for our heritage and landscape and helping address issues like flooding and climate change.” Ironically, the farm business owned by prominent Brexit-backing billionaire inventor Sir James Dyson is now the biggest for-profit recipient of direct EU farm subsidies in the UK. Beeswax Dyson Farming netted £1.6 million under the basic payment scheme last year – up from £1.4 million in 2015. According to the Rich List, Sir James and family are worth £7.8 billion, and he is a bigger landowner than the Queen, with holdings of around 25,000 acres.

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Nobody takes Juncker serious anymore.

Juncker: EU To Discuss More Migrant Help For Greece And Italy (R.)

The EU executive will discuss further measures with Italy and Greece in the coming week to help the Mediterranean states deal with irregular migrants, European Commission President Jean-Claude Juncker said on Friday. Asked at a news conference what, in particular, the Commission might do to help Italy, where arrivals from Libya are up a third on a year ago, Juncker said: “I will see with the Italian prime minister, with the Greek prime minister, during the coming week what further efforts the Commission can line up to relieve Italy and Greece in their difficult struggles.” He recalled that he had described both countries as “heroic” and said he had discussed the issue on Thursday at a meeting in Berlin with Italian Prime Minister Paolo Gentiloni and leaders of other big EU states which are members of the global G20.

“I said Italy and Greece … cannot be left alone in this refugee crises,’ Juncker told reporters in Tallinn, where he was meeting the Estonian government as it takes on the six-month presidency of European Union ministerial councils. He rejected any suggestion the Union had failed to help the countries where most refugees and migrants are arriving, noting EU funds allocated to Italy and Greece and border guard and other personnel sent to help process those arriving. The Commission on Thursday threw its weight behind a plea by Italy for fellow EU states to allow rescue boats carrying migrants to dock in their ports.

EU diplomats said they were looking at Italian concerns over how private charities are picking up people just off the Libyan coast. Some see that as encouraging more to take to the sea. The rescue organisations complain of unfair criticism. About 10,000 people have been rescued over the past three days. Italy has taken in 82,000 people so far this year. Voters dealt a blow to the ruling party in local elections last week, opting for groups promising a tougher line on immigration. The Commission has signalled readiness to give Italy more cash to help with increased arrivals, though officials and diplomats in Brussels are sceptical there would be any swift agreement for other EU states to take in the private boats.

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Jun 242017
 


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

 

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

 

 

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

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

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

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

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

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

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

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

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

First, Steve Keen…

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Two Italian Zombie Banks Toppled Friday Night (WS)

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

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

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

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

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

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

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

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

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

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

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

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May has become a very damaging force in Britain.

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

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

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

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

Corbyn Vows To Force Early British Election (Ind.)

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

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

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

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

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

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

The Fed Needs to Acknowledge the Slowing Economy (DDMB)

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

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

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

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

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

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

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

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

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Hopeless.

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

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

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

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

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

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

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

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

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Greece must refuse.

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

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

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

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

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

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