Jun 042017
 
 June 4, 2017  Posted by at 9:28 am Finance Tagged with: , , , , , , , , ,  3 Responses »
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Eugène Delacroix Les femmes d’Alger 1834

 

Theresa May Suppresses Release Of Report On Who Funds Terrorism In UK (Ind.)
‘Sensitive’ UK Terror Funding Inquiry May Never Be Published (G.)
British PM May’s Election Gamble In Doubt As Poll Lead Falls To One Point (R.)
What Young People Think About This Election
The Biggest Real Estate Bubble Of All Time Just Did The Impossible (ZH)
Australia’s Record-Breaking Run Teeters On Edge With ‘Paltry’ Growth (Smh)
Why A $15 Minimum Wage Is Good For Business (MacLeans)
Noam Chomsky: Neoliberalism Is Destroying Our Democracy (Nation)
Clapper Says Russians ‘Genetically Driven’ To Be Untrustworthy (Ryan)
A Moment of Intoxication (K.)
Greece Debt Relief Could Mean Creditors Waiting For Up To €123 Billion (R.)
EU Mulling Secret Plan B For Greece (K.)
Mediterranean Death Rate Doubles As Migrant Crossings Fall (G.)
Far Right Raises £50,000 To Target Boats On Refugee Rescue Missions In Med (G.)

 

 

This is a few days old (Mey 31). Think it’ll get more attention after last night’s attacks? A report, supposed to be out in early 2016, commissioned by Cameron while May was Home Secretary, is ‘disappeared’ now she is PM.

Theresa May Suppresses Release Of Report On Who Funds Terrorism In UK (Ind.)

An investigation into the foreign funding of extremist Islamist groups may never be published, the Home Office has admitted. The inquiry commissioned by David Cameron, was launched as part of a deal with the Liberal Democrats in December 2015, in exchange for the party supporting the extension of British airstrikes against Isis into Syria. But although it was due to be published in the spring of 2016, it has not been completed and may never be made public due to its “sensitive” contents. It is thought to focus on Saudi Arabia, which the UK recently approved £3.5bn worth of arms export licences to. A spokesperson from the Home Office told The Independent a decision on the publication of the report would be taken “after the election by the next government”.

But in a separate interview with The Guardian, a spokesperson said the report may never be published, describing its contents were “very sensitive”. Tom Brake, the Liberal Democrat foreign affairs spokesman, has written a letter to the Prime Minister pressing her on when the report will be published and what steps she proposes to take to address “one of the root causes of violent extremism in the UK”. “You will agree with me that the protection of our country, of the British people, is the most important job of any government,” he wrote. “Certainly, more important than potential trade deals with questionable regimes, which appear to be the only explanation for your reticence. “When will this report be finished and published? And what steps do you propose to take to address one of the root causes of violent extremism in the UK?”

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Same report. I’m doubling up.

‘Sensitive’ UK Terror Funding Inquiry May Never Be Published (G.)

An investigation into the foreign funding and support of jihadi groups that was authorised by David Cameron may never be published, the Home Office has admitted. The inquiry into revenue streams for extremist groups operating in the UK was commissioned by the former prime minister and is thought to focus on Saudi Arabia, which has repeatedly been highlighted by European leaders as a funding source for Islamist jihadis. The investigation was launched as part of a deal with the Liberal Democrats in exchange for the party supporting the extension of British airstrikes against Islamic State into Syria in December 2015. Tom Brake, the Lib Dem foreign affairs spokesman, has written to the prime minister asking her to confirm that the investigation will not be shelved.

The Observer reported in January last year that the Home Office’s extremism analysis unit had been directed by Downing Street to investigate overseas funding of extremist groups in the UK, with findings to be shown to Theresa May, then home secretary, and Cameron. However, 18 months later, the Home Office confirmed the report had not yet been completed and said it would not necessarily be published, calling the contents “very sensitive”. A decision would be taken “after the election by the next government” about the future of the investigation, a Home Office spokesman said. In his letter to May, Brake wrote: “As home secretary at the time, your department was one of those leading on the report. Eighteen months later, and following two horrific terrorist attacks by British-born citizens, that report still remains incomplete and unpublished.

“It is no secret that Saudi Arabia in particular provides funding to hundreds of mosques in the UK, espousing a very hardline Wahhabist interpretation of Islam. It is often in these institutions that British extremism takes root.”

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How can you have an election in these circumstances? Campaigning this time has been suspended only until the end of the day…

British PM May’s Election Gamble In Doubt As Poll Lead Falls To One Point (R.)

British Prime Minister Theresa May’s gamble on a June 8 snap election was thrust into doubt after a Survation poll showed her Conservative Party’s lead had dropped to a new low of just one percentage point. While British pollsters all predict May will win the most seats in Thursday’s election, they have given an array of different numbers for how big her win will be, ranging from a landslide victory to a much more slender win without a majority. Some of the polls indicate the election could be on a knife edge that would throw Britain into political deadlock just days before formal Brexit talks with the European Union are due to begin on June 19.

In a sign of how much her campaign has soured just five days before voting begins, May’s personal rating turned negative for the first time in one of ComRes’s polls since she won the top job in the turmoil following the June 23 Brexit referendum. Survation said the Conservatives were on 40% and Labour on 39%, indicating May’s lead has collapsed by 11 percentage points over two weeks and that her majority was now in doubt. “Prime Minister May’s overall majority now hangs in the balance based on our most recent data,” Survation founder Damian Lyons Lowe told Reuters. “The risk of May not having an overall majority has increased significantly based on our data.”

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The Tories rely on the ‘grey’ vote.

What Young People Think About This Election (HnH)

Nearly two-thirds of young people say that they are certain to vote in Thursday’s General Election, which, if it happens, could see them play a decisive role in many marginal seats and thus, in the final outcome. Of those who are registered and say they are certain to vote, two-thirds (68%) plan to back Labour. That’s according to an exclusive ICM poll commissioned by Hope Not Hate and supported by the National Union of Teachers (NUT). If the turnout is anywhere near the 63% of young people who said that they were “certain” to vote, then this represents a major increase on the 43% who voted in the 2015 General Election.

Living in a key battleground seat could be an important factor in youth turnout, with four out of ten (39%) of 18-24 year-olds saying that living in a marginal constituency would make them more likely to vote. With the latest Lord Ashcroft polling, out yesterday, suggesting that there are 70 constituencies where the two leading parties’ estimated vote shares are within 5% of each other, the turn out rate amongst young people could define the outcome. Among the marginal seats where the youth vote could decide the outcome are Leeds North West, Norwich South, Cambridge, and Cardiff Central. But it is not just the big University seats where the youth vote could make the difference. In Harrow West, for example, Ashcroft’s polling predicts there is only 2% between Labour and Conservatives and according to the 2011 census, there are 9,500 18-24 years in the constituency.

Even if only two-thirds of them are registered, a turnout of 60% could have a major influence on the result. Our poll found huge support for Jeremy Corbyn’s Labour Party, with two-thirds of those who were registered and certain to vote saying they supported Labour (68%), with half (50%) saying Jeremy Corbyn had the right qualities to be Prime Minister (vs 28% for Theresa May).

Trust, or more precisely the lack of it, remains a major issue for young people. Most of them also felt that tabloid newspapers and wealthy individual donors had an unhealthy influence on British politics. The BBC came out as a trusted source of information for 49% of young people, making it the single most trusted news platform. This compares to just 22% who trust newspapers (and 42% distrusted) and 18% social media (and 45% distrusted). Family and friends were trusted by 46%.

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Vancouver doesn’t stop. Not by itself. Do all these people think they’ll be bailed out when the crash comes? The government can hardly afford to bail out the banks.

The Biggest Real Estate Bubble Of All Time Just Did The Impossible (ZH)

One month ago, we said that “the Vancouver housing bubble Is back, and it’s (almost) bigger than ever.” Fast forward to today, when we can scrap the almost part: according to the latest data from the Real Estate Board of Greater Vancouver, nearly a year after British Columbia implemented a 15% property tax targeting foreign buyers, in May the biggest real estate bubble of all time did the impossible and in a testament to the persistence of Chinese oligarchs, criminals, money launderers and pretty much anyone who is desperate to park their cash as far away as possible, after a modest drop following last summer’s tax the Vancouver housing bubble has bounced right back to new all time highs, as prices of detached, attached houses and apartment all surged to new record highs.

The only thing that did fall in May was the number of actual transactions, as residential property sales in the region totaled 4,364 in May 2017, a decrease of 8.5% from the 4,769 sales in May 2016, an all-time record. In other words, all that the 15% surtax achieved was to drastically slowdown the rate of transactions (or perhaps home flipping). Meanwhile, as sellers held out to find more aggressive buyers, they were in luck as the new wave of buyers has emerged, and undeterred by the 15% premium, they have been slowly but surely lifting all available offers. While there is little we can add to this month’s update that we didn’t already say a month ago, below we again put Canada’s housing market, and bubble, in perspective with some of our favorite charts, first showing total Canadian household debt compared to the US. Most of this is in the form of mortgages.

[..] the punchline: indexed home prices in Canada compared to the US. This needs to commentary.

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Slow bursting bubbles are exceedingly rare.

Australia’s Record-Breaking Run Teeters On Edge With ‘Paltry’ Growth (Smh)

Australia is on the brink of hitting a technical recession just as it breaks the record for the longest run of uninterrupted economic growth in the developed world. While Treasurer Scott Morrison has insisted there are “better days ahead,” consumers are suffering from a dual frustration of weak wages and underemployment hitting household budgets, fuelling low levels of growth and restricting how much they are willing to spend. Three of Australia’s major financial institutions are forecasting a “paltry” growth of 0.1% or less, with the National Australia Bank the first to tip negative growth for the three months to March when National Accounts figures are released on Wednesday. Morgan Stanley has predicted negative growth of 0.3%. If it were to happen, it would only be the fourth time since the recession of the early 1990s that Australia had endured a quarter of negative territory.

The sluggish outcomes offer some good news for home owners, with many tipping the Reserve Bank will keep interest rates on hold for the forseeable future, and, when they do move, it will be a cut. The prediction comes after house prices Australia wide fell for the first time in 18 months, also giving some hope to aspiring home owners struggling to get into the market. If Wednesday’s gross domestic product figures reveal a contraction, it would be the second in three quarters, narrowly avoiding the technical recession, defined as two consecutive quarters of negative growth. Analysts say there is a “small possibility of a negative GDP” in the next quarter, due to the impact of Cyclone Debbie, which would take Australia “into technical, but not real, recession”, according to the National Australia Bank. “While some of the contraction has undoubtedly been driven by the weather and other one-offs, the question for next week will be whether the slowdown includes signal as well as noise, and implies a more fundamental economic slowdown,” said NAB Chief Economist Alan Oster.

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There’s one thing missing from here: You have to take into account how much of what’s for sale in a society is produced within it. If too much of it is imported, no minimum wage can save anything, the money will just vanish.

Why A $15 Minimum Wage Is Good For Business (MacLeans)

When higher income households see wage gains, some of it goes to savings. Additional consumption also often flows to vacations and luxury goods, often imported. In other words a non-trivial part leaks out of the local economy. When lower income households see a sustained rise in incomes, they spend virtually all of it. Most goes to food (more nutritious food or eating out), better health care and more education. Sometimes it also goes to rent (moving to a better neighbourhood). Almost all of this spending stays in the local economy. So boost the minimum wage and you boost the economy from the bottom up.

You may be surprised to learn nearly 30% of Ontario’s labour market earned less than $15 an hour in 2016. The nation’s biggest labour market has more people working at low wages than any other big economic engine of Canada (Quebec, B.C., Alberta) While some workers may lose their job after the minimum wage increase (more on that in a minute), a very large number of workers will see an important pay hike, and that will loop back into the economy. Increased consumer spending will grow the top line of businesses, and increase the need for more workers to meet the higher demand for goods and services…and earning better pay. Rising costs will also raise productivity, something virtually every business and economist says we want and need. That’s harder to do if you’re doing things the way you’ve always done them.

Canada has been running a low-wage economy for decades, relatively speaking, according to Statistics Canada. In fact, at last count Canada outpaced the U.S. in the reliance on low-wage work. Within Canada, Ontario has the highest reliance on low-wage work. Boosting wages may knock out some jobs and some marginal businesses. The remaining enterprises that rely on low-wage work will see improved productivity, less absenteeism and turnover, reducing recruitment and training costs. We shouldn’t rue the loss of a few poorly paid jobs, particularly when rising minimum wages also help meet the twin challenges of the early 21st century: constrained revenue growth and higher service needs due to population aging. We’ve got to spur change, and a substantially higher minimum wage will surely spur change.

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Good long interview with Noam. We’re going to miss him something awful when he dies. Societies need thinkers like him, no matter what the political views are.

Noam Chomsky: Neoliberalism Is Destroying Our Democracy (Nation)

I think is if you take a look at recent history since the Second World War, something really remarkable has happened. First, human intelligence created two huge sledgehammers capable of terminating our existence—or at least organized existence—both from the Second World War. One of them is familiar. In fact, both are by now familiar. The Second World War ended with the use of nuclear weapons. It was immediately obvious on August 6, 1945, a day that I remember very well. It was obvious that soon technology would develop to the point where it would lead to terminal disaster. Scientists certainly understood this. In 1947 the Bulletin of Atomic Scientists inaugurated its famous Doomsday Clock. You know, how close the minute hand was to midnight? And it started seven minutes to midnight. By 1953 it had moved to two minutes to midnight.

That was the year when the United States and Soviet Union exploded hydrogen bombs. But it turns out we now understand that at the end of the Second World War the world also entered into a new geological epic. It’s called the Anthropocene, the epic in which humans have a severe, in fact maybe disastrous impact on the environment. It moved again in 2015, again in 2016. Immediately after the Trump election late January this year, the clock was moved again to two and a half minutes to midnight, the closest it’s been since ’53. So there’s the two existential threats that we’ve created—which might in the case of nuclear war maybe wipe us out; in the case of environmental catastrophe, create a severe impact—and then some. A third thing happened. Beginning around the ’70s, human intelligence dedicated itself to eliminating, or at least weakening, the main barrier against these threats. It’s called neoliberalism.

There was a transition at that time from the period of what some people call “regimented capitalism,” the ’50s and ’60s, the great growth period, egalitarian growth, a lot of advances in social justice and so on— Social democracy, yeah. That’s sometimes called “the golden age of modern capitalism.” That changed in the ’70s with the onset of the neoliberal era that we’ve been living in since. And if you ask yourself what this era is, it’s crucial principle is undermining mechanisms of social solidarity and mutual support and popular engagement in determining policy. It’s not called that. What it’s called is “freedom,” but “freedom” means a subordination to the decisions of concentrated, unaccountable, private power. That’s what it means. The institutions of governance—or other kinds of association that could allow people to participate in decision making—those are systematically weakened. Margaret Thatcher said it rather nicely in her aphorism about “there is no society, only individuals.”

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Russiagate is rotting America.

Clapper Says Russians ‘Genetically Driven’ To Be Untrustworthy (Ryan)

The former US Director of National Intelligence James Clapper thinks Russians have some sort of biological predilection to be an untrustworthy bunch. I wish I was making that up, but sadly, I’m not. Clapper said it during last Sunday’s episode of Meet The Press on NBC, during a response to a question about Jared Kushner’s ties to Moscow. The Russians are “typically, almost genetically driven to co-opt, penetrate, gain favor, whatever” — was the exact quote.There’s great irony in that comment by Clapper, with his own record of perjury, implying that an entire ethnicity can’t be trusted. So, of course, widespread outrage followed the blatantly xenophobic comment. Nah, I’m only joking. No one actually noticed or cared.

Chuck Todd, the interviewer, let the comment slide without even acknowledging that Clapper had said something untoward. If there was a debate about Clapper’s comment and it was deemed somehow acceptable, that would be bad enough — but it’s actually worse than that, because anti-Russian sentiment is so deeply ingrained in the American psyche, that no one even notices when a high profile figure like Clapper makes a comment about the “genetics” of Russians in an effort to brand them as inherently devious and conniving. But it shouldn’t be surprising. Unlike any other group of people, it’s been well-established that you can say pretty much whatever you like about Russians with no repercussions or backlash of any kind, particularly if you pass it off as comedy.

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“We want a peaceful Europe, not one where Germany puts itself above all.”

A Moment of Intoxication (K.)

With Donald Trump elected to the office of president of the United States, developments are following their predetermined course, with the relationship between Washington and Berlin being sorely tested. Some had maintained hope that the new president of the US would adjust to the reality that’s been established for years. Trump, however, is battling and trying to overthrow this reality, treating it as something that’s against American interests. The informal NATO summit in Brussels and the G7 have dashed the optimists’ expectations. Trump strongly criticized his European partners, including Germany, for being inconsistent with their financial obligations toward NATO. Germany’s disappointment with this was to be expected, but less so was the audacity that followed.

German Chancellor Angela Merkel’s strong remarks at a Munich beer tent, that Europe cannot rely on its American and British partners and that it should take its fate into its own hands, were the product of arrogance. They represent the beginning of a rupture, even if some attempt to attribute a “strategic depth” to the whole issue – something like an emancipation for the European Union and a fresh impetus for the completion of the EU project. Except that the introduction of the common currency, rather than make Europe more united, has created a two-tiered Europe, divided between north and south, and Chancellor Merkel’s immigration policies have accelerated centrifugal trends. It doesn’t require much intelligence for one to realize the likely outcome of another amateur initiative like a “common European defense” structure without the active participation of the US and the UK.

This would be opportunism with disastrous consequences. It goes without saying that Greece outside the UK/US defense system puts us in grave danger. We haven’t, of course, reached that point just yet. We’ve simply reached a period of typical European babble and confusion. The hope is that it doesn’t last too long. Nevertheless, the cries of German politicians must stop. Of course, Pax Americana has been violently disputed from time to time. We have already had a taste of Germany in a dominant economic role, as implemented by Wolfgang Schaeuble. Let us consider the remarks by Chancellor Merkel as a moment of intoxication at the beer tent. We want a peaceful Europe, not one where Germany puts itself above all.

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Creative accounting as an excuse not to do the obvious. Germany’s power must be clipped or else.

Greece Debt Relief Could Mean Creditors Waiting For Up To €123 Billion (R.)

A Greek debt relief scenario that put back interest payments until 2048 would mean the nation’s eurozone creditors deferring receipt of up to €123 billion, according to a forecast by Germany’s Finance Ministry. The ministry’s calculations, which were contained in a letter to a member of parliament seen by Reuters on Friday, contemplated the various restructuring scenarios laid out by the eurozone bailout fund, the European Stability Mechanism (ESM). “With such an interest deferral, it would de facto be a new loan with a volume that depends on the development of interest rates,” the document said. “The estimated volume of the deferred interest up until 2048 would be around €118-123 billion.”

The IMF says it cannot contribute loans to Greece’s current bailout unless it gets assurances that its debt will be sustainable. The Fund has estimated that the Greek economy will only grew by 1% per year on average and that Greece will return to a primary surplus of 1.5% from 2023 after five years at 3.5%. Greece needs about €7 billion in loans from its €86 billion rescue package to repay debt maturing in July, but the disbursement hinges on its lenders’ assessment of its bailout progress, the conclusion of the so-called second review.

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No IMF.

EU Mulling Secret Plan B For Greece (K.)

In the wake of last week’s Eurogroup impasse, European officials are mulling a plan B for Greece that would sideline the IMF, curb debt relief and reduce the need for austerity after 2019, Kathimerini understands. According to sources, European officials have already started discussing an alternative plan that could be put into effect in the fall, after September elections in Germany, which have made Berlin cautious of any politically contentious moves. The plan being considered would ensure that the IMF is no longer in the “driving seat of the Greek bailout program,” the sources said, adding that it would offer Greece less debt relief than it had hoped for but also less austerity in 2019 onward, after the current bailout has expired.

That would mean Athens could revoke some of the tough austerity measures it pushed through Parliament last month. The pension cuts and tax increases are due to come into effect in 2019 and 2020 respectively. However, a worse deal for Greece as regards debt relief would be a hard sell for the government of Prime Minister Alexis Tsipras, who has basically reneged on all pre-election promises and is keen to deliver something concrete with respect to the country’s debt. His government has already started shifting its narrative away from an insistence on a “comprehensive solution on the debt” to a “solution that will pave the way for accessing the markets.” Athens is still expected to make one last push for a deal at a Eurogroup summit on June 15.

According to sources, Tsipras will aim to broach the issue at a subsequent summit of EU leaders on June 22 if no solution transpires at the Eurogroup, as is expected. The Greek leader has already secured the support of French President Emmanual Macron for such a discussion to take place, sources say. Earlier this week German Finance Minister Wolfgang Schaeuble hit out at Tsipras, claiming the leftist premier has not shifted the burden of austerity away from poorer Greeks as he had pledged and that party influence in the public administration has increased, not decreased, during his time in government. Tsipras did not respond in person but a government source issued a terse response. “The responsibility of Schaeuble in managing the Greek crisis has been recorded historically,” the source said. “There is no point in his ascribing it to others.”

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Merkal won’t lift a finger until her election. Those are the priorities. And no other country can do a thing without her.

Mediterranean Death Rate Doubles As Migrant Crossings Fall (G.)

The death rate among migrants attempting to cross the Mediterranean to enter Europe has almost doubled over the past year. Comparing the first five months of this year with the same period last year, UN agency data reveals that the mortality rate grew from 1.2% to 2.3%. The death rate during all of 2015 was 0.37% – a sixth of its current level. Details of the drownings came as it emerged that far-right activists are planning to send boats to the Mediterranean this summer to disrupt search-and-rescue vessels that are attempting to save the lives of refugees. The new figures prompted calls for the international community to stop turning a blind eye to the unfolding crisis. Aid agencies said the rising death rate was caused by a shortage of search-and-rescue vessels and the increasingly unsafe boats being provided by smugglers and traffickers in Libya.

Last week a Médecins Sans Frontières (MSF) vessel rescued 1,500 people in 10 hours, more than double the boat’s capacity. Vickie Hawkins, executive director of MSF UK, accused world leaders of turning their backs on refugees and choosing to focus on border security instead of adopting a humanitarian approach that would lower the Med’s death toll. “The deterrence policies implemented to keep people away from Europe have little regard for the human consequences. As a result, the Mediterranean has turned into a giant cemetery with over 1,500 missing or dead so far this year and tens of thousands of people detained inside Libya.” Leonard Doyle, chief spokesman for the UN migration agency, the IOM, said it had detected a hardening of attitude towards economic migrants from Africa, who were looking for work as they moved north towards Europe.

“These are impoverished, black, sub-saharan Africans and there’s definitely less interest in them and less warmth towards them than there was towards the refugees coming in from Syria last year, there’s no question about that,” said Doyle. He added: “The rate of deaths has gone sky high. People looking for work are being told to get into a dinghy and they’ll get a job. These are very vulnerable people ending up in exploitative situations.” During the first five months of last year the IOM recorded 205,858 migrants reaching Europe via the Mediterranean with 2,512 deaths. So far this year a far smaller amount – 71,029 – of migrants and refugees have crossed the Med to enter Europe yet the number of deaths stands at 1,650.

Research by the University of Warwick published last week – the first large-scale comparative study of the backgrounds and aspirations of refugees and migrants heading for Europe – challenged the prevailing view that they pick Europe as their destination of choice. Instead, researchers found that many did not even know anything about the EU prior to their arrival and had in fact been manipulated by traffickers who promised them work.

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Inevitable in view of government- and media rhetoric.

Far Right Raises £50,000 To Target Boats On Refugee Rescue Missions In Med (G.)

Far-right activists are planning a sea campaign this summer to disrupt vessels saving refugees in the Mediterranean, after successfully intercepting a rescue mission last month. Members of the anti-Islam and anti-immigrant “Identitarian” movement – largely twentysomethings often described as Europe’s answer to the American alt-right – have raised £56,489 in less than three weeks to enable them to target boats run by aid charities helping to rescue refugees. The money was raised through an anonymous crowdfunding campaign with an initial goal of €50,000 to pay for ships, travel costs and film equipment. On Saturday the group confirmed they had reached their target but were still accepting donations. A French far-right group hired a boat for a trial run last month, disrupting a search-and-rescue vessel as it left the Sicilian port of Catania. They claimed they had slowed the NGO ship until the Italian coastguard intervened.

Figures from the UN’s migration agency, the IOM, reveal that 1,650 refugees have died crossing the Mediterranean so far this year with a further 6,453 migrants rescued off Libya and 228 bodies pulled from the waters. Humanitarian charities operating in the Mediterranean have helped save the lives of thousands of refugees, with women and children making up almost half of those making the crossing. The threat from the far right infuriates charities operating in the Mediterranean. One senior official, who requested anonymity, said politicians had helped create a climate where supporters of the far right felt emboldened to act in such a way. “When the British government and its European counterparts talk about ‘swarms’ of migrants, or perpetuate the myth that rescue operations are a ‘pull factor’ or a ‘taxi service’, that gives fuel to extreme groups such as this. The simple reality is that without rescue operations many more would drown, but people would still attempt the crossing,” the official said.

[..] During the first five months of 2015, no European or NGO search-and-rescue operations took place with 1,800 people drowning trying to make the crossing. In April alone 1,000 lives were lost. All search-and-rescue operations in the Mediterranean are coordinated by the official Maritime Rescue Coordination Centre in Rome in accordance with international maritime law. Yet the European far-right groups have accused NGOs of working with traffickers to bring migrants to Europe and claim that search-and-rescue boats are not carrying out a humanitarian intervention. The central aim of the new wave of far-right groups is preserving national differences in the belief that white Europeans will be replaced by immigrants, a stance that is articulated with anti-migrant, anti-Muslim, anti-media sentiments but repackaged for a younger audience.

The number of far-right groups is difficult to establish, but Génération Identitaire has held demonstrations in France that drew around 500 people, while its Facebook page has 122,662 likes. Its Austrian counterpart, Identitäre Bewegung Österreich, has 37,628 likes on Facebook, although critics warn of increasing links with the US alt-right which helped to propel Donald Trump to the White House. Also on the boat that attempted to obstruct SOS Méditerranée’s vessel last month was the Canadian alt-right journalist Lauren Southern, who has 278,000 Twitter followers and whose presence confirms a transatlantic convergence.

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May 262017
 
 May 26, 2017  Posted by at 9:34 am Finance Tagged with: , , , , , , , , , , ,  1 Response »
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Henri Matisse Le Bonheur de Vivre 1906

 

Trump Directly Scolds NATO Allies, Says They Owe ‘Massive’ Sums (R.)
Trump Joins New-Look G7 Amid Trade, Climate Discord (AFP)
US Appeals Court Refuses To Reinstate Travel Ban (R.)
NSA Under Obama Secretly Spied On Americans For Years (Circa)
UK Labour Party Slashes Tory Lead To Just Five Points In Latest Poll (Ind.)
UK Election Campaign Resumes After Manchester Attack (AFP)
Not A Little List: EU Draws Up Brexit Bill (R.)
China’s Reforms Not Enough To Arrest Mounting Debt – Moody’s (R.)
Toronto Area Home Sales Sink After Cooling Measures (G&M)
World Bank Star Economist Paul Romer Sidelined in War Over Words (BBG)
Fed Faces A ‘Surprise’ Problem On US Inflation (R.)
No-Nonsense Finns Ready to Rain on Franco-German Euro Parade (BBG)
Greece Debt Talks Remain Fraught Despite IMF Optimism (AFP)
Unease On Greek Island of Chios Over New Migrant Detention Center (K.)

 

 

It’s an anti-Trump love fest.

Spending $1 billion on a new building that you will never be able to visit tells you what these people think of you. But the, NATO is the ideal vehicle for the arms industry: no democracy anywhere in sight.

Trump Directly Scolds NATO Allies, Says They Owe ‘Massive’ Sums (R.)

U.S. President Donald Trump on Thursday intensified his accusations that NATO allies were not spending enough on defense and warned of more attacks like this week’s Manchester bombing unless the alliance did more to stop militants. In unexpectedly abrupt remarks as NATO leaders stood alongside him, Trump said certain member countries owed “massive amounts of money” to the United States and NATO – even though allied contributions are voluntary, with multiple budgets. His scripted comments contrasted with NATO’s choreographed efforts to play up the West’s unity by inviting Trump to unveil a memorial to the Sept. 11, 2001, attacks on the United States at the new NATO headquarters building in Brussels.

“Terrorism must be stopped in its tracks, or the horror you saw in Manchester and so many other places will continue forever,” Trump said, referring to Monday’s suicide bombing in the English city that killed 22 people, including children. “These grave security concerns are the same reason that I have been very, very direct … in saying that NATO members must finally contribute their fair share,” Trump said. NATO Secretary-General Jens Stoltenberg defended Trump, saying that although he was “blunt” he had “a very plain and clear message on the expectations” of allies. But one senior diplomat said Trump, who left the leaders’ dinner before it ended to fly to Italy for Friday’s Group of Seven summit, said the remarks did not go down well at all. “This was not the right place or time,” the diplomat said of the very public harangue. “We are left with nothing else but trying to put a brave face on it.”

In another unexpected twist, Trump called on NATO, an organization founded on collective defense against the Soviet threat, to include limiting immigration in its tasks. And Trump did say that the United States “will never forsake the friends who stood by our side” but NATO leaders had hoped he would more explicitly support the mutual defense rules of a military alliance’s he called “obsolete” during his campaign. Instead, he returned to a grievance about Europe’s drop in defense spending since the end of the Cold War and failed to publicly commit to NATO’s founding Article V rule which stipulates that an attack on one ally is an attack against all. “23 of the 28 member nations are still not paying what they should be paying for their defense,” Trump said, standing by a piece of the wreckage of the Twin Towers. “This is not fair to the people and taxpayers of the United States, and many of these nations owe massive amounts of money from past years,” Trump said as the other leaders watched.

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It’ll give the press some more material to talk about on handshakes; it’s all they do these days anyway.

Trump Joins New-Look G7 Amid Trade, Climate Discord (AFP)

G7 leaders meet Friday determined to put on a display of united resolve in the fight against jihadist terrorism, despite deep divisions on trade and global warming. The two-day summit in Sicily’s ancient hilltop resort of Taormina kicks off four days after children were among 22 people killed in a concert bomb attack in Manchester. British Prime Minister Theresa May will lead a discussion on terrorism in one of Friday’s working sessions and is expected to issue a call for G7 countries to put more pressure on internet companies to remove extremist content. “The fight is moving from the battlefield to the internet,” a senior British official said ahead of the talks.

With May and Donald Trump among four new faces in the club of the world’s major democracies, the gathering in Italy is being billed as a key test of how serious the new US administration is about implementing its radical policy agenda, particularly on climate change. Senior officials are preparing to work through the night of Friday-Saturday in a bid to bridge what appear to be irreconcilable differences over Trump’s declared intention of ditching the US commitment to the landmark Paris according on curbing carbon emissions. Officials acknowledge the summit, one of the shortest in the body’s history, is effectively about damage limitation against a backdrop of fears among US partners that the Trump presidency, with its ‘America First’ rhetoric, could undermine the architecture of the post-World War II world. Summit host Paolo Gentiloni, a caretaker Italian prime minister also making his G7 debut, acknowledged as much on the eve of the meeting.

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Long dead. It was supposed to be for 30 days only anyway, and those are long gone.

US Appeals Court Refuses To Reinstate Travel Ban (R.)

In a stinging rebuke to President Donald Trump, a U.S. appeals court refused on Thursday to reinstate his travel ban on people from six Muslim-majority nations, calling it discriminatory and setting the stage for a showdown in the Supreme Court. The decision, written by Chief Judge Roger Gregory, described Trump’s executive order in forceful terms, saying it uses “vague words of national security, but in context drips with religious intolerance, animus, and discrimination.” Attorney General Jeff Sessions said in a statement that the government, which says the temporary travel ban is needed to guard against terrorist attacks, would seek a review of the case at the Supreme Court. “These clearly are very dangerous times and we need every available tool at our disposal to prevent terrorists from entering the United States and committing acts of bloodshed and violence,” said Michael Short, a White House spokesman.

He added that the White House was confident the order would ultimately be upheld by the judiciary. In its 10-3 ruling, the U.S. 4th Circuit Court of Appeals said those challenging the ban, including refugee groups and individuals, were likely to succeed on their claim that the order violates the U.S. Constitution’s bar against favoring one religion over another. Gregory cited statements by Trump during the 2016 presidential election calling for a Muslim ban. During the race, Trump called for “a total and complete shutdown of Muslim’s entering the United States” in a statement on his website. The judge wrote that a reasonable observer would likely conclude the order’s “primary purpose is to exclude persons from the United States on the basis of their religious beliefs.”

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Where’s the anger?

NSA Under Obama Secretly Spied On Americans For Years (Circa)

The National Security Agency under former President Barack Obama routinely violated American privacy protections while scouring through overseas intercepts and failed to disclose the extent of the problems until the final days before Donald Trump was elected president last fall, according to once top-secret documents that chronicle some of the most serious constitutional abuses to date by the U.S. intelligence community. More than 5%, or one out of every 20 searches seeking upstream Internet data on Americans inside the NSA’s so-called Section 702 database violated the safeguards Obama and his intelligence chiefs vowed to follow in 2011, according to one classified internal report reviewed by Circa. The Obama administration self-disclosed the problems at a closed-door hearing Oct. 26 before the Foreign Intelligence Surveillance Court that set off alarm.

Trump was elected less than two weeks later. The normally supportive court censured administration officials, saying the failure to disclose the extent of the violations earlier amounted to an “institutional lack of candor” and that the improper searches constituted a “very serious Fourth Amendment issue,” according to a recently unsealed court document dated April 26, 2017. The admitted violations undercut one of the primary defenses that the intelligence community and Obama officials have used in recent weeks to justify their snooping into incidental NSA intercepts about Americans. Circa has reported that there was a three-fold increase in NSA data searches about Americans and a rise in the unmasking of U.S. person’s identities in intelligence reports after Obama loosened the privacy rules in 2011. Officials like former National Security Adviser Susan Rice have argued their activities were legal under the so-called minimization rule changes Obama made, and that the intelligence agencies were strictly monitored to avoid abuses.

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May was losing a lot of votes before AMnchester.

UK Labour Party Slashes Tory Lead To Just Five Points In Latest Poll (Ind.)

Labour has slashed the Conservatives’ lead in the polls to just five points, the latest YouGov/Times results show. The party has made consistent gains in recent weeks as leader Jeremy Corbyn claimed his message was finally getting through to voters. The results show a four point change since last week when the Tories were leading by 9 percentage points – the first time Labour had narrowed the gap to single figures since Theresa May called the snap election on 18 April. The latest poll comes after the Prime Minister made an unprecedented U-turn over her “dementia tax” plans, just four days after making them the centrepiece of her election manifesto.

A separate poll, conducted after the Tory manifesto launch, found 28% of voters said they were less likely to vote Conservative because of the social care package. It comes as Mr Corbyn prepares to take the hugely controversial step of blaming Britain’s foreign wars for terror attacks such as the Manchester suicide bombing. The Labour leader will claim a link between “wars our government has supported or fought in other countries and terrorism here at home”, as he relaunches his party’s election campaign on Friday after the three-day pause. Mr Corbyn will stress his assessment is shared by the intelligence and security services and “in no way reduces the guilt of those who attack our children”. The Independent understands Mr Corbyn wishes to draw attention to his March 2011 vote against the Libya bombing – when he was one of just 13 MPs to oppose David Cameron.

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May will use Manchester and fear for all she can suck out of it. Corbyn will be portrayed as incapable leader for the country, in the same way he has been called unfit to lead his party. He would have been way ahead in the polls if his own party had not turned on him. Re: Bernie.

UK Election Campaign Resumes After Manchester Attack (AFP)

Britain’s politicians resume campaigning in earnest on Friday with national security in the spotlight, as police scramble to bust a Libya-linked jihadist network thought to be behind the Manchester terror attack. Prime Minister Theresa May and Labour leader Jeremy Corbyn had suspended campaigning after Monday’s bombing at a Manchester pop concert, which killed 22 people, including many teenagers, and wounded dozens more. Eight suspects are currently in detention on UK soil in connection with the blast, for which the Islamic State group has claimed responsibility, while police in Libya have detained the father and brother of 22-year-old suicide bomber Salman Abedi. Washington’s top diplomat Rex Tillerson is due to visit London on Friday in an expression of solidarity, after Britain reacted furiously to leaks of sensitive details about the investigation to US media.

Opposition leader Corbyn in a speech in London later on Friday is expected to say it is the “responsibility” of governments to minimise the risk of terror by giving police the funding they need. A YouGov poll published in Friday’s edition of The Times put Conservatives on 43% compared to Labour on 38%, far better for Labour than the double-digit margin that had previously separately it from the ruling party. YouGov polled 2,052 people on Wednesday and Thursday. But analysts said that the Conservative prime minister – who previously served as interior minister for six years – could benefit at the polls from the shift in focus ahead of the general election on June 8. “If security and terrorism become more prominent then I can only see one winner from this – Theresa May,” said Steven Fielding, a professor of politics at the University of Nottingham. The YouGov poll also found that 41% of respondents said that the Conservatives would handle defence and security best, compared to 18% who said the same of Labour.

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Will May be part of these discussions?

Not A Little List: EU Draws Up Brexit Bill (R.)

The EU will next month demand Britain agree to pay a fixed percentage of the EU’s outstanding obligations on the day it leaves the bloc, in defiance of a British rejection of that logic as “preposterous”. A draft EU negotiating paper, seen by Reuters, that will be put to London when Brexit talks begin following a national election in Britain on June 8 makes clear that suggestions from Prime Minister Theresa May’s government that the Union might end up owing rather than getting money cut no ice in Brussels. The paper on principles of the financial settlement that the EU wants from London on departure in March 2019 sets no figure, and chief negotiator Michel Barnier has made clear it cannot be calculated until the end as it depends on the EU’s spending.

However, he wants an agreement on how the “Brexit bill” will be calculated, perhaps by late this year, before the Europeans agree to launch talks that May wants on a free trade agreement. EU chief executive Jean-Claude Juncker has said Britain may have to pay its 27 allies some €60 billion on departure and some experts estimated the up-front cost, before later refunds, could be nearly double that – suggestions May’s foreign minister Boris Johnson called “absolutely preposterous”. The paper to be discussed among diplomats next week before Barnier presents the opening demands to London in the week of June 19, spells out that while Britain will get some credit – notably its €39 billion share of the capital of the European Investment Bank.

But the list of what it must pay, and go paying for some years after Brexit, is much longer. Four pages of appendix details list more than 70 EU bodies and funds to which Britain has committed payment in a budget set out to 2020. Yet the three-page main document made no mention of Britain getting credit for a share of, say, EU buildings, as British ministers have said it should have. EU officials argue Britain was not asked to pay extra for existing infrastructure in Brussels when it first joined the bloc in 1973. Among obligations Britain will be asked to cover are the funding until summer 2021 of British teachers seconded to schools catering to the EU’s staff and diplomats.

Other payments include promises to fund Syrian refugees in Turkey, aid for the Central African Republic, the EU aviation safety agency and the European Institute for Gender Equality. “The United Kingdom obligations should be fixed as a percentage of the EU obligations calculated at the date of withdrawal in accordance with a methodology to be agreed in the first phase of the negotiations,” the paper states. It adds that people, businesses and organizations in Britain would continue to benefit from some EU funds for some time after Brexit. Britain has about 13% of the EU’s 507 million population and accounts for some 16% of its economy. Its net contribution to the EU’s €140 billion annual budget has typically been roughly €10 billion in recent years.

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CHina is not in good shape. Moody’s diagnosis came late.

China’s Reforms Not Enough To Arrest Mounting Debt – Moody’s (R.)

China’s structural reforms will slow the pace of its debt build-up but will not be enough to arrest it, and another credit rating cut for the country is possible down the road unless it gets its ballooning credit in check, officials at Moody’s said. The comments came two days after Moody’s downgraded China’s sovereign ratings by one notch to A1, saying it expects the financial strength of the world’s second-largest economy to erode in coming years as growth slows and debt continues to mount. In announcing the downgrade, Moody’s Investors Service also changed its outlook on China from “negative” to “stable”, suggesting no further ratings changes for some time.

China has strongly criticized the downgrade, asserting it was based on “inappropriate methodology”, exaggerating difficulties facing the economy and underestimating the government’s reform efforts. In response, senior Moody’s official Marie Diron said on Friday that the ratings agency has been encouraged by the “vast reform agenda” undertaken by the Chinese authorities to contain risks from the rapid rise in debt. However, while Moody’s believes the reforms may slow the pace at which debt is rising, they will not be enough to arrest the trend and levels will not drop dramatically, Diron said. Diron said China’s economic recovery since late last year was mainly thanks to policy stimulus, and expects Beijing will continue to rely on pump-priming to meet its official economic growth targets, adding to the debt overhang.

Moody’s also is waiting to see how some of the announced measures, such as reining in local government finances, are actually implemented, Diron, associate managing director of Moody’s Sovereign Risk Group, told reporters in a webcast. China may no longer get an A1 rating if there are signs that debt is growing at a pace that exceeds Moody’s expectations, Li Xiujun, vice president of credit strategy and standards at the ratings agency, said in the same webcast. “If in the future China’s structural reforms can prevent its leverage from rising more effectively without increasing risks in the banking and shadow banking sector, then it will have a positive impact on China’s rating,” Li said. But Li added: “If there are signs that China’s debt will keep rising and the rate of growth is beyond our expectations, leading to serious capital misallocation, then it will continue to weigh on economic growth in the medium term and impact the sovereign rating negatively.”

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Down 26% yoy.

Toronto Area Home Sales Sink After Cooling Measures (G&M)

House sales fell 26% in the Toronto region in the month following the Ontario government’s introduction of a foreign-buyer’s tax as many potential purchasers stepped back and waited to assess the market impact. In the 30 days after the province announced the immediate introduction of a 15-per-cent foreign-buyer’s tax on April 20, the number of houses sold in the Greater Toronto Area fell 26% compared with the same period last year, according to data compiled by Toronto realtor John Pasalis, president of Realosophy Realty Inc. Communities north of Toronto saw the greatest declines between April 20 and May 20, with sales falling 61% in Richmond Hill, 46% in Markham and 44% in Newmarket. The City of Toronto recorded a 23% drop in the number of homes sold, while Brampton and Mississauga west of Toronto had sales declines of 16% and 27%, respectively.

The sales review looked only at freehold homes, including detached and semi-detached houses, but did not include condominiums. The drop in selling activity is part of a broad cooling in the Toronto region market that began in April as buyers moved to the sidelines while home owners rushed to list their houses to try to cash in before the market peaked. In the first two weeks of May alone, sales of all types of homes in the GTA fell 16% compared with the same period in May last year, while the number of new listings soared 47%, according to data compiled by the Toronto Real Estate Board. The average GTA home sold for $890,284 in the first two weeks of May, a 17-per-cent increase from a year earlier, primarily because of large gains earlier this year. But the price was down 3% compared with April, when the average sale price for all types of GTA homes was $920,791.

Mr. Pasalis said he does not believe the new foreign-buyer’s tax is directly responsible for much of the drop in sales since April 20 because foreign buyers were not a large enough part of the market to cause such a significant decline, and many foreign buyers will qualify for rebates of the tax. Instead, he believes the drop is a result, in part, to a decline in demand from domestic investors who were purchasing second properties to rent or flip. Most investors have stopped buying as they wait to see the impact of a suite of new measures announced by the province in April, including the foreign-buyer’s tax, he said. “They disappeared – no one is talking about buying money-losing rental properties any more,” Mr. Pasalis said. “The whole excitement and euphoria is kind of gone right now.”

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The fight over conventional economic theories.

World Bank Star Economist Paul Romer Sidelined in War Over Words (BBG)

The World Bank’s chief economist has been stripped of his management duties after researchers rebelled against his efforts to make them communicate more clearly, including curbs on the written use of “and.” Paul Romer is relinquishing oversight of the Development Economics Group, the research hub of the Washington-based development lender, according to an internal staff announcement seen by Bloomberg. Kristalina Georgieva, the chief executive for the bank’s biggest fund, will take over management of the unit July 1. Romer will remain chief economist, providing management with “timely thought leadership on trends directly affecting our client countries, including the ‘future of work,’” World Bank President Jim Yong Kim said in the note to staff dated May 9.

Romer said he met resistance from staff when he tried to refine the way they communicate. “I was in the position of being the bearer of bad news,” he said in an interview. “It’s possible that I was focusing too much on the precision of the communications and not enough on the feelings my messages would invoke.” [..] But in recent years, his attacks on the credibility of macroeconomic models irritated many of his peers. His combativeness didn’t endear him to some of the more than 600 economists who work in DEC, according to people familiar with the matter. Romer wanted DEC to set the intellectual agenda among those who think deeply about how to help the world’s poorest countries, said one of the people, who spoke on condition of anonymity.

The World Bank is already considered a major source of development research, ranking first among institutions in terms of the number of times its work is cited, ahead of Brown University, the London School of Economics and Harvard University. But Romer expressed to those around him that the department should communicate more clearly, dive right into public debates, and align its work with the institution’s goals of ending extreme poverty and reducing inequality. It didn’t take him long to shake things up. He declared several positions redundant and enforced term limits on senior managers. In the interview, Romer said he cut more than $1 million in annual expenses from the group’s budget.

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A fight between fabricated numbers.

Fed Faces A ‘Surprise’ Problem On US Inflation (R.)

Recent data on the performance of the U.S. economy has been generally on the soft side, a sore point discussed at length by Federal Reserve officials at their latest meeting, minutes of the gathering released on Wednesday showed. In fact, measures developed by Citigroup economists to track how incoming economic data stacks up against market expectations show the latest numbers from the United States have been falling persistently short of forecasts. Meanwhile, Citi’s comparable “economic surprise” indexes for other regions show just the opposite: upside surprises. Of particular concern for the Fed are recent undershoots on key gauges of inflation that have been lagging the central bank’s stated target of 2% annualized consumer price growth.

Market-based measures of long-term inflation expectations have also weakened substantially, enough so that Fed policymakers agreed at their last meeting that before raising rates again they would need stronger data to confirm recent weakness was not a new trend. With doubts rising over U.S. President Donald Trump’s ability to deliver policies to promote faster economic growth, many of these gauges have fallen back to near Election Day levels. Citi’s inflation surprise indexes underscore the Fed’s anxiety. [..] recent U.S. inflation readings have returned to their long-term trend of underperforming against forecasts after a brief run of upside surprises earlier this year.

Meanwhile, inflation reports from Europe have topped expectations by the widest margin on record. The rest of the so-called Group of 10 largest developed economies are meanwhile beating forecasts by the most since the financial crisis nearly a decade ago, even after taking into account the drag from U.S. numbers. Even Japan, notorious for its decades-long struggles against deflation, is posting inflation data notably above forecasts.

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Will France and Germany push through a closer union despite the protests? They could….

No-Nonsense Finns Ready to Rain on Franco-German Euro Parade (BBG)

The euro area should focus on implementing its banking union and consigning bailouts to the history books, rather than exploring ambitious ideas such as a common budget or shared liabilities, according to Finland’s finance minister. “We’re willing to engage in a discussion on different scenarios on the future of European Monetary Union,” Petteri Orpo said in an emailed response to questions Wednesday. “I would be cautious about proposals that aren’t consistent with the current stage of political union in Europe, such as eurobonds.” The debate over the future of the EU has received new impetus following the U.K.’s decision to leave, with the European Commission outlining five possible scenarios.

Those hoping for a re-start in the integration drive in response to populist criticisms have drawn new energy from the lovefest on display in Berlin when German Chancellor Angela Merkel hosted a first meeting with Emmanuel Macron, the new French president. Italy and Spain, meanwhile, are renewing their push for mutually-backed debt. The priorities of Finland’s finance minister are not as lofty. “The banking union is by far the most important element,” Orpo said. “Risk reduction must come before risk sharing.” Finland may have a special interest in boosting the banking union now that the largest Nordic lender, Nordea Bank, is considering relocating its headquarters to Helsinki from Stockholm.

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My long-term point exactly: “Greece cannot grow while maintaining such a high surplus,” Rice said.”

Greece Debt Talks Remain Fraught Despite IMF Optimism (AFP)

Critical talks on easing Greece’s massive debt burden remain fraught with conflict, despite assurances from the IMF on Thursday that the sides are closer to an agreement. A deal to secure debt relief for Athens from the eurozone is the missing piece to unlocking loans the country needs to make debt payments and begin to recover from the years-long crisis. But transcripts of part of the recent discussions between the IMF, the ECB and eurozone finance ministers published by Greek financial website Euro2day on Thursday show many disputes remain and few of the participants are satisfied, least of all Greece Finance Minister Euclid Tsakalotos. He slammed one of the proposals floated in the discussions the “worst of all worlds” for Greece. “I don’t think anyone here can say that is a good deal for us, who have negotiated in good faith.”

This seems to contradict comments from an IMF official Thursday, who said the differences are narrowing even though the fund needs more specifics on a debt relief plan before it can agree to release more financing. “Everyone is optimistic that agreement can be reached and hopefully can be reached at the next Eurogroup meeting” in mid-June, IMF spokesman Gerry Rice told reporters. In contrast, the IMF’s main negotiator, Poul Thomsen, said he was “very far away from being able to tell our board that we are close to a strategy we can agree to” on debt relief, according to the transcripts. [..] Eurogroup president Jeroen Dijsselbloem floated the possibility of the IMF approving a loan for Greece, but withholding disbursement of the funds until it had sufficient details on the debt relief — something virtually unheard of in IMF aid programs.

Thomsen said it was an “interesting proposal” that he could raise with the management, even while Tsakalotos slammed the idea. One advantage to the unusual arrangement, were the IMF to agree, is that it would take the discussion of Greek debt relief out of play in Germany’s election in September. The German public is hostile to more financial support for Athens. Rice vehemently denied doing any political favors for Germany. “We are exploring all options within our existing practices and rules,” he said. IMF lending depends on each country’s circumstances “but we try to be as flexible as we can,” he added. German Finance Minister Wolfgang Schaeuble called the lack of a deal at Monday’s talks “a major failure,” and said “I’m not very optimistic that things will improve.”

The IMF also disagrees with Europe’s forecasts for Greek growth and primary fiscal surplus which are key to the debt discussions, Rice said. Europe continues to forecast a surplus excluding debt payments of 3.5% of GDP even after 2022, which the IMF believes is not sustainable and would impose undue hardship on the country. Athens could better use its budget to fuel growth and “Greece cannot grow while maintaining such a high surplus,” Rice said. “It does not help anyone to have assumptions that are overly optimistic.”

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Detention centers for people fleeing western-induced misery and chaos breaks so many international laws that these laws are invalidated in one fell swoop.

Unease On Greek Island of Chios Over New Migrant Detention Center (K.)

People living near the location of a new migrant detention center on the island of Chios say they will fight its construction. The facility will be used as a holding center for those who have had their asylum requests rejected and are due to be deported. A high-ranking police official, Nikolaos Zisimopoulos, informed authorities on Chios that construction of the new center would begin immediately, and containers carrying building materials arrived on the island Thursday. The municipal council called an emergency meeting last night to discuss the matter, as residents say their patience is reaching breaking point and that they will take action to fight the center’s construction.

Chios Mayor Manolis Vournous has asked for more time to allow the island’s residents to discuss the location of the new center. The Hellenic Police (ELAS), however, says there is no more time for any further discussion as the situation on the island’s existing camps is dire. ELAS also notes that a shift in the main flow of migrants toward Chios and away from Lesvos is adding fuel to the fire. Authorities say this shift can be attributed to the migrants knowing Chios does not have a closed facility like Lesvos does. So far this month more than half of all refugee and migrant arrivals in Greece have come to Chios.

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May 242017
 
 May 24, 2017  Posted by at 9:32 am Finance Tagged with: , , , , , , , , , ,  6 Responses »
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Henri Matisse Nu Blue IV 1952

 

China Hit by First Moody’s Downgrade Since 1989 on Debt Risk (BBG)
Chinese Banks Are In Big Trouble (ZH)
American Exceptionalism – Population Growth vs Money Growth (Econimica)
Shiller: Stay In The Market, It ‘Could Go Up 50% From Here’ (CNBC)
German Police Search Daimler Facilities In Dieselgate Probe (DW)
Canada Must Deflate Its Housing Bubble (BBG Ed.)
The Violence of Austerity (OD)
IMF Wants More Realism In Eurozone Assumptions On Greece (R.)
QE Remains A Long Shot For Greece (K.)
In Germany, Syrian Man Wins Case Against Deportation To Greece (AP)
Elder Refugees Seeking Asylum in Europe Left Stranded in Greece – HRW (GR)
Tasmania Bans Super Trawlers From Its Waters (AAP)
Fossils Cast Doubt On Human Lineage Originating In Africa (R.)

 

 

Moody’s worries are the local government financing vehicles and state-owned enterprises, which are umbilically linked to the shadow banks.

You can’t run an entire economy from and in the shadows.

China Hit by First Moody’s Downgrade Since 1989 on Debt Risk (BBG)

Moody’s Investors Service cut its rating on China’s debt for the first time since 1989, challenging the view that the nation’s leadership will be able to rein in leverage while maintaining the pace of economic growth. Stocks and the yuan slipped in early trading after Moody’s reduced the rating to A1 from Aa3 on Wednesday, with markets paring losses in the afternoon. Moody’s cited the likelihood of a “material rise” in economy-wide debt and the burden that will place on the state’s finances, while also changing the outlook to stable from negative. It’s “absolutely groundless” for Moody’s to argue that local government financing vehicles and state-owned enterprise debt will swell the government’s contingent liabilities, according to a response released by the Ministry of Finance. The ratings company has underestimated the capability of the government to deepen reform and boost demand, the ministry said.

It wouldn’t be the first time a rating company was behind the curve, nor is such pushback unique – U.S. Treasury officials questioned the credibility of a 2011 downgrade from Standard & Poor’s. Still, the move underscores broader doubts over whether President Xi Jinping’s government can simultaneously cut excessive leverage and steady growth, all with a twice a decade reshuffle of top party posts looming later this year. “It is a psychological blow that China will not take kindly to and absolutely speaks to the rising financial pressures,” said Christopher Balding, an associate professor at the HSBC School of Business at Peking University in Shenzhen. That said, “it doesn’t matter much in the grand scheme of things because so much of Chinese debt is held by state or quasi-state actors and minimal amounts are international investors.”

Total outstanding credit climbed to about 260% of GDP by the end of 2016, up from 160% in 2008. At the same time, China’s external debt is low by international standards, at around 12% of gross domestic product, according to the IMF, meaning that a downgrade isn’t likely to be as disruptive as it would be for nations more reliant on international funding. Overseas institutions’ holdings of onshore bonds dropped to 830 billion yuan ($121 billion) as of the end of March, from 853 billion yuan three months earlier, People’s Bank of China data show. That’s less than 1.5% of 63.7 trillion yuan of outstanding notes. Moody’s last cut China’s sovereign rating in 1989, when it downgraded the sovereign to Baa2 from Baa1, according to spokesperson, Manvela Yeung. Moody’s lowered China’s credit-rating outlook to negative from stable in March 2016, citing rising debt, falling currency reserves and uncertainty over authorities’ ability to carry out reforms.

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Starting to be painful. At some point, Beijing total control will come up empty.

Chinese Banks Are In Big Trouble (ZH)

That’s not supposed to happen… With the crackdown on financial system leverage underway, Chinese banks (and securities firms) are in big trouble. As we noted previously, China’s bond curve is inverted, yields are surging, and Chinese regulatory decisions shutting down various shadow-banking pipelines has crushed securities firms’ stocks. However, as Bloomberg points out, as China’s deleveraging efforts cut into banks’ profit margins, rising base funding costs and interbank credit risk concerns have pushed banks’ cost of borrowing beyond the rate they charge customers for loans for the first time in history. As the chart shows, the one-year Shanghai Interbank Offered Rate has exceeded the Loan Prime Rate, the first time this has happened since the latter was introduced in 2013. “This is probably just the beginning” and interbank funding costs will rise further amid the drive to reduce leverage, said Xu Hanfei at China Merchants Securities in Shanghai.

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Wonderful from Chris Hamilton.

American Exceptionalism – Population Growth vs Money Growth (Econimica)

Since 1971, and the disconnection of the dollar from a finite gold backing, the value of money (the dollar) has been determined by it’s purchasing power versus the inflation of the assets to be purchased. Thus printing more money has not necessarily created “wealth” if the assets to be purchased are rising as fast or faster than the purchasing power of the “money”. The Fed touts it’s dual mandate of full employment and stable prices…but the result in prices; not so stable. The primary global asset purchasable only in US dollars, crude oil, has told a story of wildly gyrating prices. Since the end of Bretton Woods and the subsequent Congressionally dual mandated roles bestowed on the Fed…crude oil prices have gone bezerk, twice climbing nearly 10x’s within a decade. This is the opposite of stable (particularly compared to the price stability from WWII’s end until the Fed took over).

Soooo, theoretically the growth of “money” should be linked to the growth of the population, to ensure an adequate and stable money supply exists for the growing population. In a moment I’ll show you anything but a stable money supply. But first, the chart below shows the total 25-54yr/old US population, those employed among them, and the value in dollars of all publicly traded US stocks (represented by the Wilshire 5000). Something far beyond population growth or employment growth is pushing up the value of dollar based assets, gauging by US stock markets accelerating appreciation.

With that in mind, the chart below shows the growth of M3 money (the broadest measure of US “money”) and the broader 15-64yr/old US population since 1971. The money supply has grown in excess of 20x’s (2,000%) vs. the working age population (15-64yr/olds) which has grown less than 1x (nearly 70% increase).

This results in a rising ratio of “money” on a per capita of the core population basis, as the chart below details. The total amount of “money” rose from approximately $5 thousand dollars per working age adult to todays $65 thousand dollars per adult…an increase of 13x’s (1.300%).

The annual growth of the 15-64yr/old core US population peaked in 2003 and annual core population growth has decelerated by 90% since…while annual M3 growth has doubled over the same time period. [..] The chart below from 2000 into 2017 shows the change in both core population and M3 money supply, showing the year over year change on a monthly basis…and the current fall in core population growth will continue downward, likely turning negative at times over the next year (yet another first for America).

The final chart is the growth in M3 money supply per the growth in the adult, working age population. I’m not an economist or expert on much of anything…but that doesn’t look particularly good to me (something to do with “hyper-monetization” or some such thing). All I can say is the appearance of hockey sticks typically aren’t a good or stable sign but their appearance, just like those of black swans, has become the “new normal”.

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It could also fall by 50%.

Shiller: Stay In The Market, It ‘Could Go Up 50% From Here’ (CNBC)

Nobel Prize-winning economist Robert Shiller believes investors should continue to own stocks because the bull market may continue for years. CNBC’s Mike Santoli spoke with Shiller in an exclusive interview for CNBC PRO. Santoli asked Shiller about his market outlook. “I would say have some stocks in your portfolio. It could go up 50% from here. That’s what it did around 2000, after it reached this level, it went up another 50%. So I’m not against investing in the stock market when you consider the alternatives. But I think if one wants to diversify, US is high in its CAPE ratio. You can go practically anywhere else in the world and it’s lower,” Shiller said. “We could even set a new another record high in CAPE, that’s not a forecast.”

Shiller developed the “cyclically adjusted price-to-earnings ratio” (CAPE) market valuation measure, which is calculated using price divided by the index’s average historical 10-year earnings, adjusted for inflation. The economist’s research found future 10-year stock market returns were negatively correlated to high CAPE ratio readings on a relative basis. However, even though the current CAPE ratio is at 29, which is above the 17 historical average, the economist is not calling for a market decline. “I can see it as a real possibility that stocks prices and house prices would both keep going up for years, but I’m not forecasting that by any means,” he added.

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Dragging on.

German Police Search Daimler Facilities In Dieselgate Probe (DW)

German authorities have raided several locations associated with German premium carmaker Daimler. They acted on an initial suspicion of fraud involving misleading information about emission levels. Prosecutors in the southern German city of Stuttgart confirmed Tuesday they had searched about a dozen locations associated with the maker of Mercedes-Benz cars. The raids came as a result of the company being suspected of fraud and misleading advertising in relation to the selling of diesel-powered vehicles. Prosecutors have yet to provide further details on the raids. They only said the raids were carried out by well over 200 investigators across the country, with the focus of the search in progress on locations in the states of Baden-Württemberg, Lower Saxony, Saxony and the the city state of Berlin.

The carmaker said the investigations targeted “known and unknown employees of Daimler over suspicion of fraud related to the possible manipulation of exhaust gas emissions in passenger cars with diesel engines.” Daimler executives said they were not aware of any emissions scandal, adding that they were fully co-operating with investigators. The automaker had earlier agreed with Germany’s Federal Motor Transport Authority to “voluntarily” recall 247,000 vehicles to remove “potentially problematic technology,” which Daimler said had been installed to prevent engines from being damaged. Daimler has also been in the crosshairs of prosecutors in the US where it faces a number of class-action suits by car owners who have accused the company of not being accurate in stating emissions levels for a number of its diesel-powered models.

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You don’t say.

Canada Must Deflate Its Housing Bubble (BBG Ed.)

Canada’s housing market offers a case study in a contentious economic issue: If a central bank sees a bubble forming, should it act to deflate it? In this instance, the answer should be a resounding yes. A combination of foreign money, local speculation and abundant credit has driven Canadian house prices to levels that even government officials recognize cannot be sustained. In the Toronto area, for example, they were up 32% from a year earlier in April. David Rosenberg, an economist at Canadian investment firm Gluskin Sheff, notes that it would take a decline of more than 40% to restore the historical relationship between prices and household income. Granted, the bubble bears little resemblance to the U.S. subprime boom that triggered the global financial crisis.

Although one specialized lender, Home Capital, has had issues with fraudulent mortgage applications, regulation has largely kept out high-risk products. Homeowners haven’t been withdrawing a lot of equity, and can’t legally walk away from their debts like many Americans can. Banks aren’t sitting on the kinds of structured products that destroyed balance sheets in the U.S. Nearly all mortgage securities and a large portion of loans are guaranteed by the government. That said, the situation presents clear risks. As buyers stretch to afford homes, household debt has risen to 167% of disposable income – the highest among the Group of Seven industrialized nations. This is a serious vulnerability, and a big part of the rationale behind Canadian banks’ recent ratings downgrade. The more indebted people are, the more sensitive their spending becomes to changes in prices and interest rates, potentially allowing an otherwise small shock to result in a deep recession.

What to do? Administrative efforts to curb lending and tax foreign buyers have helped but haven’t solved the problem. That’s largely because extremely low interest rates are still giving people a big incentive to borrow. The Bank of Canada has held its target rate at 1% or lower since 2009, and at 0.5% since 2015, when it eased to counteract the effect of falling oil prices. That’s a very stimulative stance in a country where the neutral rate is estimated to be about 3% or higher. One can’t help but see a parallel with the low U.S. rates and the housing bubble of the early 2000s.

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The Violence of Austerity, edited by Vickie Cooper and David Whyte, is published by Pluto Press.

The Violence of Austerity (OD)

As we move towards the general election, we are paralyzed by what is probably the biggest single issue affecting ordinary people in the country: austerity. We are unable to fully understand both the economic madness of austerity and the true scale of the human cost and death toll that ‘fiscal discipline’ has unleashed. Since coming into power as Prime Minister, Theresa May has made a strategic decision not to use the word ‘austerity’. Instead she has adopted a more palatable language in a vain attempt to distance herself from the Cameron governments before her: “you call it austerity; I call it living within our means.” The experience of countless thousands of people is precisely the opposite: people are actively prevented from living within their means and are cut off from their most basic entitlement to: housing, food, health care, social care and general protection from hardship.

And people are dying as a result of these austerity effects. In February, Jeremy Corbyn made precisely this point when he observed the conclusions of one report that 30,000 people were dying unnecessarily every year because of the cuts to NHS and to local authority social care budgets. But this is really only the tip of the iceberg. The scale of disruption felt by people at the sharp end of these benefit reforms is enormous. Countless thousands of others have died prematurely following work capability assessments: approximately 10,000 according the government’s own figures. People are dying as a result of benefit sanction which has fatal impacts on existing health conditions, such as diabetes and heart disease. Austerity is about dismantling social protection. The crisis we face in social care is precipitated by cuts to local authority funding.

In the first 5 years of austerity, local authority budgets were cut by 40%, amounting to an estimated £18bn in care provision. A decade of cuts, when added up, also means that some key agencies that protect us, such as the Health and Safety Executive and the Environment Agency will have been decimated by up to 60% of funding cuts. Scaling back on an already paltry funding in these critical areas of regulation will lead to a rise in pollution related illness and disease and will fail to ensure people are safe at work. The economic folly is that austerity will cost society more in the long term. Local authorities are, for example, housing people in very expensive temporary accommodation because the government has disinvested in social housing.

The crisis in homelessness has paradoxically led to a £400 million rise in benefit payments. The future costs of disinvesting in young people will be seismic. Ending austerity would mean restoring our system of social protection and restoring the spending power of local authorities. It would mean, as all the political parties except the Conservatives recognise, taxing the rich, not punishing the poor in order to pay for a problem that has its roots in a global financial system that enriched the elite. It would also mean recognizing that the best way to prevent the worsening violence of austerity and to rebuild the economy is to re-invest in public sector jobs.

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The Greek government is being played for fools. Given how long this has been going on, one might suggest they are.

IMF Wants More Realism In Eurozone Assumptions On Greece (R.)

The IMF needs to see more realistic euro zone assumptions about Greece’s economy and more detail on planned debt relief measures to join a bailout, IMF’s European Department head Poul Thomsen said. Thomsen said the IMF and Greece’s euro zone lenders made progress in talks on Monday, but were not yet quite there. “We still think there is a need for more realism in assumptions and more specificity,” Thomsen said on Tuesday. The euro zone and the IMF agreed on Monday that Greece would have to keep a primary surplus – the budget balance before debt servicing – at 3.5% of GDP for five years after the bailout ends in 2018. But officials said the size of the surplus afterwards was still under discussion and there were also differences on economic growth assumptions, especially that forecasts used for debt relief plans spanned dozens of years. A group of euro zone countries led by Germany wants the IMF to join the Greek bailout, now handled by euro zone governments alone, to increase credibility. The IMF says that it will only join if Greece is granted debt relief.

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Greece will be declared eligible for inclusion in the ECB’s QE only AFTER the central bank says it will taper QE.

QE Remains A Long Shot For Greece (K.)

Greece is nowhere near a swift inclusion in the ECB’s QE program, according to senior officials at domestic banks. They argue that the issue of the national debt, and securing its sustainability in a way that would satisfy the IMF too, constitutes a particularly complex problem that may well be too hard to resolve by next month’s Eurogroup. They therefore consider Greece’s entry into the ECB’s bond-buying program this summer unlikely – instead expecting it to happen after the German election in the fall, either by the end of 2017 or in early 2018. Some go as far as expressing concern as to whether Greece will make it in at all before the program ends.

While there are more and more voices within the ECB speaking in favor of concluding the program earlier, Greece would like enjoy its benefits for more than two years. Greek banks are hoping a formula will be found at the next Eurogroup, on June 15, that will allow the disbursement of the next bailout tranche while putting off any decisions on the debt. The most optimistic observers note there is a chance of Greece entering QE between July and September and next month’s Eurogroup will be crucial to this end. The ECB argues that Greece’s inclusion in the bond-buying program requires the safeguarding of the debt’s sustainability.

In this context political statements or a mere reference to a series of measures will not suffice, as they will have to constitute legally binding pledges, which is highly unlikely before the German election. Goldman Sachs stated in an analysis that this country is not likely to fulfill the terms the ECB has set to join QE before the reduction of the monthly rate of bond purchases is activated. It also highlighted the high rate of bad loans as a point of concern that might also delay the decision for Greece to enjoy the benefits of QE. Similarly, Citi estimates that without an agreement on the easing of the debt, both inclusion in QE and a return to the bond markets would be quite difficult for Greece.

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In one and the same Union, laws and rights are widely divergent. That is not a union.

In Germany, Syrian Man Wins Case Against Deportation To Greece (AP)

Germany’s highest court has upheld a complaint by a Syrian whose asylum claim was rejected because he’d already been granted asylum in Greece. The man, whose name wasn’t released, arrived in Germany in 2015. He told officials he had already been granted protection in Greece but had been living on the street there and received no support from the Greek government. The man’s claim in Germany was rejected, meaning that he risked deportation to Greece. Germany’s Federal Constitutional Court said Tuesday that a lower court had wrongly failed to take account of a lack of welfare payments for refugees in Greece and to check whether there were assurances that the man would be given at least temporary housing. Judges sent the case back to the lower court to reconsider.

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Who cares about human rights declarations when elections are coming up?

Elder Refugees Seeking Asylum in Europe Left Stranded in Greece – HRW (GR)

There are many unnecessary delays and arbitrary barriers which keep older refugees and asylum seekers stranded in Greece, unable to reunite with family members who have legal status in the EU, Human Rights Watch said on Monday. According to their publication on Monday, EU: Older Refugees Stranded in Greece, one of the main issues that older refugees face is that family reunification does not focus on reuniting an entire family, but spouses and parents with minor children who are under the age of 18. Hundreds of older refugees and asylum seekers currently in Greece who have fled war zones and persecution are waiting to learn if they will be allowed to reunite with adult family members who have been granted residency in another EU country. Although EU law provides for family reunification for older people, lack of clarity or explicit provisions governing the process means that they can remain in limbo, far from their family for prolonged periods of time.

“These older people, already victims of conflict and persecution, hoped to find protection in the EU after treacherous journeys to Greece, and to be reunited with their family,” said Bethany Brown, researcher on older people’s rights at Human Rights Watch. “Now they don’t know if they will ever see their relatives again.” While several barriers are common to all asylum seekers, they can have a more significant impact on older people. Older people have been shown, in some contexts, to have significantly higher rates of psychological distress than the general refugee population, and often suffer from health issues, injuries and violence during displacement, and frailty that can be exacerbated by time and uncertainty.

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A little piece of news. But a good one.

Tasmania Bans Super Trawlers From Its Waters (AAP)

Tasmania’s parliament has passed laws banning super trawler fishing vessels from operating in the state’s waters. Legislation was given a green light on Wednesday, with Liberal government MP Mark Shelton confirming that any future attempts to allow freezer trawler vessels would require an act of parliament. “Our bill should give recreational fishers additional comfort that any future attempt to let super trawlers into the small pelagic fishery will be met with parliamentary hurdles,” he said.

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Graecopithecus freybergi.

Fossils Cast Doubt On Human Lineage Originating In Africa (R.)

Fossils from Greece and Bulgaria of an ape-like creature that lived 7.2 million years ago may fundamentally alter the understanding of human origins, casting doubt on the view that the evolutionary lineage that led to people arose in Africa. Scientists said on Monday the creature, known as Graecopithecus freybergi and known only from a lower jawbone and an isolated tooth, may be the oldest-known member of the human lineage that began after an evolutionary split from the line that led to chimpanzees, our closest cousins. The jawbone, which included teeth, was unearthed in 1944 in Athens. The premolar was found in south-central Bulgaria in 2009.

The researchers examined them using sophisticated new techniques including CT scans and established their age by dating the sedimentary rock in which they were found. They found dental root development that possessed telltale human characteristics not seen in chimps and their ancestors, placing Graecopithecus within the human lineage, known as hominins. Until now, the oldest-known hominin was Sahelanthropus, which lived 6-7 million years ago in Chad. The scientific consensus long has been that hominins originated in Africa. Considering the Graecopithecus fossils hail from the Balkans, the eastern Mediterranean may have given rise to the human lineage, the researchers said.

The findings in no way call into question that our species, Homo sapiens, first appeared in Africa about 200,000 years ago and later migrated to other parts of the world, the researchers said. “Our species evolved in Africa. Our lineage may not have,” said paleoanthropologist Madelaine Böhme of Germany’s University of Tübingen, adding that the findings “may change radically our understanding of early human/hominin origin.” Homo sapiens is only the latest in a long evolutionary hominin line that began with overwhelmingly ape-like species, followed by a succession of species acquiring more and more human traits over time.

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Apr 272017
 
 April 27, 2017  Posted by at 8:41 am Finance Tagged with: , , , , , , , , , ,  4 Responses »
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Pablo Picasso Self portrait with palette 1906

 

The Destruction Of Greece – “Only A Down Payment” According To The IMF (Bilbo)
Greek Supermarkets Report Dramatic Recession (K.)
US Student Loan Implosion (PolCal)
If Mortgage Rates Rise, What Happens to Canada’s House Price Bubble? (WS)
Canada’s Housing Bubble Explodes As Biggest Lender Crashes (ZH)
Canada’s Housing Watchdog Warns of ‘Problematic Conditions’ (BI)
It’s Tough Being Canada These Days (BBG)
Trump Tells Canada, Mexico, He Won’t Terminate NAFTA Treaty Yet (R.)
Trump Tax Plan Would Raise US Debt by $5.5 Trillion, 20% of 2027 GDP (CRFB)
What Happened Last Time US Companies Got A Break On Overseas Profits (CNBC)
New Zealand Plans Spending Splurge to Keep ‘Growing Like Sydney’ (BBG)
Russian Spokeswoman On ‘Ridiculous’ Airstrikes In Syria, Fake News (Y!)
German Court Upholds Greek Teacher’s Case Against Pay Cut (AP)

 

 

Excellent lenghty takedown by Bill Mitchell.

The Destruction Of Greece – “Only A Down Payment” According To The IMF (Bilbo)

With Greece still wallowing in the depths of recession, it is clear that the IMF hasn’t finished with the destruction of that formerly independent nation. The destruction to date (27% contraction and increased poverty) are considered by the IMF to be “only a down payment” on what Greece has to do so satisfy the Troika. At what point do people start to realise that the on-going costs of this austerity dwarf the significant costs that would accompany exit? And the Troika is not done with Greece yet. They intend to screw it down even further. And the costs of remaining in the dysfunctional monetary union escalate by the day. At some point, the Greeks will realise they have been dudded. What is left is anyone’s guess – but it won’t be pretty. The destruction of Greece is “only a down payment” according to the IMF – keep that mentality in mind when you are working out whether Greece should remain obedient or tell them all to f*ck off and regain their currency independence and restore prosperity.

[..] The ‘event’ that brought Greece to heal in June 2015 was the ECB decision to starve the Greek banks of liquidity – in total violation of its charter to maintain financial stability within its jurisdiction. How many Greek people lost income over that blackmail? How many took their own lives? How many plunged into mental illness? Did the IMF come up with a measure of their sordid part in all that? And now Thomsen is back – threatening and haranguing a subservient polity in Greece who call themselves Socialists but have done more damage to their own nation by taking the obedience option that the conservatives could have ever dreamed of doing. The Troika are now claiming (largely at the behest of the IMF) that if Greece cuts further it will receive debt relief.

Why the Greeks are worried about their external debt is beyond me. Why not just refuse to pay it and let the debtors (largely the ECB these days as a result of the deals done with the previous bailouts (which insulated the private German and French banks from exposure) sort out the implications of that? Why not threaten Brussels with default (redenomination) and exit if they don’t allow the Greek government to expand its fiscal deficit to stimulate growth – along the lines of Spain, which only is growing because its fiscal position is in violation with the fiscal rules – conveniently ignored by Brussels as it wanted the PP government returned? Why not demand that the ECB include Greek government debt in its QE program – thereby ‘funding’ the deficit. If not, we leave!

Then the bullies would be on call and the compromises would come thick and fast. But the spinelessness of the Greek polity combined with the sociopathological joy of the Troika in bringing this rogue nation to heel will ensure no such confrontation occurs and Greece will continue to wallow at the bottom of the Eurozone. It is forecast that Greece currently needs an injection of around “€100 billion in emergency bailout cash” to stay afloat for a while. This would further add to its “already massive debt burden, that could also deepen the budget cuts and economic overhauls required to get Athens’ balance sheets back into the black and prolong what has already been a near decadelong ordeal for the country.” And the costs of staying in – huge and getting bigger.

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A “dramatic drop in consumption of basic commodities such as milk and bread..”

Greek Supermarkets Report Dramatic Recession (K.)

The supermarket sector in Greece is experiencing a deep recession ranging from 8 to 15% year-on-year across its categories, according to the marketing and strategic planning director of AB Vassilopoulos, Zeta Cheimonidou. Her statements at a corporate event confirmed the general mood in the industry and data compiled by researchers surveying the sector. Cheimonidou went on to estimate that 2017 will see a 4 to 5% decline in supermarket turnover compared with 2016. “The market is experiencing a much steeper decline than last year. There is a very deep recession,” Cheimonidou stated, although she added that it would be safer to wait and see how demand evolves up until the end of May before drawing any conclusions for the entire year.

If proven correct, her estimate for a 4% drop in turnover will come on the back of a major decline in 2016 compared to 2015, which, depending on the surveying company, ranges from 4.5 to 6.5%. In its recent annual general meeting, the Hellenic Food Industry Federation (SEVT) noted the dramatic drop in consumption of basic commodities such as milk and bread, while a senior market research company official told Kathimerini that “our clients, suppliers and retailers, were crying in the first quarter.”

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Congress wil have to address this soon.

US Student Loan Implosion (PolCal)

The Consumer Federation of America recently put out a press release that reports that they’ve found that 1.1 million student loan borrowers in the United States have gone 270 or more days without making payments on their Federal Direct Student Loans, with more than $137 billion worth of the loans issued by the U.S. government now qualifying as being in default by that standard. Data from the CFA’s press release has made the rounds among multiple news outlets, but we have a pretty basic question: Are those big numbers? They certainly seem like big numbers, what with all the millions and billions being thrown about, but how do these numbers fit into the bigger U.S. government-issued student loan story? Let’s start with the biggest numbers, where we discover that $137 billion worth of Federal Direct Student Loans are in default, against the larger total of $1.3 trillion worth of Federal Direct Student Loans that have been issued through the end of December 2016.

Here, we calculate that the percentage of student loans that have gone 270 or more days without having had a payment made upon them represents about 11% of the total amount borrowed. That means that some 1.1 million people whose student loans require that they make some sort of scheduled payment went more than 9 months without making any. To tell if that’s a big number or not requires that we put that number into some kind of context. Here, we’ll draw on the U.S. Federal Reserve’s data for the delinquency rates on loans and leases issued by all commercial banks in the U.S., where for the fourth quarter of 2016, we find that the total delinquency rate is 2.04%. That value had previously peaked at 7.4% back in the first quarter of 2010, following the bottoming of the Great Recession.

But another important thing to consider is that delinquency rate would include all private-sector issued loans and leases that have payments that are past due, including those that have gone without payment for much less than 270 days. That figure tells us that the default rate of 11% for Federal Direct Student Loans is, to put it in Trumpian terms, “Yuge!” [..] The average student loan balance in the U.S. is $30,650. For Americans who haven’t defaulted on their student loans, that average figure drops to $28,150. But for Americans who have defaulted on their payments to their U.S. government creditor, the average balance on their Federal Direct Student Loan is $124,545.

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If you were not scared yet…

If Mortgage Rates Rise, What Happens to Canada’s House Price Bubble? (WS)

Housing affordability is a function of down payment, monthly payment, and household income. With home prices skyrocketing while household incomes were lagging far behind, low mortgage rates were the grease that kept it going. But what happens when mortgage rates begin to tick up? A “payment shock.” “An increase in interest rates of 100 bps [1 percentage point] on a 5 year term would represent a rise of C$388 for the monthly mortgage payment in the Vancouver market (+9% to C$4,669) and C$239 in Toronto (+7% to C$3,692). With housing affordability problem in these markets being already acute, we doubt current home prices could resist such an interest rate hike.”

This chart via NBF Economics and Strategy shows by how much monthly mortgage payments would rise if mortgage rates ticked up just 1 percentage point. Note the impact on monthly payments for homes in Toronto (Ontario) and Victoria and Vancouver (British Columbia):

So just how big is the Canadian housing bubble? The chart below by NBF Economics and Strategy compares US home prices (Case-Shiller 20-City index) to Canadian home prices (Teranet-National Bank 26-city index). Both indices are based on similar methodologies of comparing pairs of sales of the same home over time. The shaded areas denote recessions in Canada. The brief dip during the last recession in Canada pales against the multi-year housing bust in the US:

Like so many other assets classes in central-bank nirvana, this one too has reached ludicrous levels. But there’s a difference. People don’t live in stocks, bonds, classic cars, or art, and these asset bubbles have less impact on the real economy. But people do have to live in homes. Now that the results are clearer than daylight, central banks and governments worry about the consequences: Bubbles don’t just plateau. Now they wonder, belatedly, how to get out of it without bringing the whole construct down. The fact that a 1-percentage point increase in mortgage rates poses existential questions for some of the hottest markets shows how far policy makers have painted themselves into a corner.

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“Home Capital shares dropped by 61% in Toronto..”

Canada’s Housing Bubble Explodes As Biggest Lender Crashes (ZH)

Call it Canada’s “New Century” moment. We first introduced readers to the company we said was the “tip of the iceberg in Canada’s magnificent housing bubble” nearly two years ago, in July 2015 when we exposed a major problem that we predicted would haunt Home Capital Group, Canada’s largest non-bank mortgage lender: liar loans in particular, and a generally overzealous lending business model with little regard for fundamentals. In the interim period, many other voices – most prominently noted short-seller Marc Cohodes – would constantly remind traders and investors about the threat posed by HCG.

Today, all those warnings came true, when the stock of Home Capital Group cratered by over 60%, its biggest drop on record, after the company disclosed that it struck an emergency liquidity arrangement for a C$2 billion ($1.5 billion) credit line to counter evaporating deposits at terms that will leave the alternative mortgage lender unable to meet financial targets, and worse, may leave it insolvent in very short notice. As part of this inevitable outcome, one which presages the company’s eventual disintegration and likely liquidation, Bloomberg reports that the non-binding rescue loan with an unnamed counterparty will be secured by a portfolio of mortgage loans originated by Home Trust, the Toronto-based firm said in a statement Wednesday.

Home Capital shares dropped by 61% in Toronto to the lowest since 2003, dragging down other home lenders. Equitable fell 17%, Street Capital fell 13%, while First National declined 7.6%. In short, the Canadian mortgage bubble has finally burst. refundable commitment fee of C$100 million, while standby fee on undrawn funds is 2.5%. The initial draw must be C$1 billion. The loan has an effective – and very much distressed – interest rate of 22.5% on the first C$1 billion, declining to 15% if fully utilized, according to a note from Jaeme Gloyn, an analyst at National Bank of Canada. Home Capital said the credit line is intended to “mitigate” a sharp drop in Home Trust’s high-interest savings account balances, which sank by $591 million from March 28 to April 24, at which point the total balance was $1.4 billion. Home Capital warned on Wednesday that further outflows are anticipated. Translated: what until last night was a depositor bank jog just became a sprint.

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Dangerous shoptalk: “..overvaluation has been downgraded to moderate from a previously strong assessment..”

Canada’s Housing Watchdog Warns of ‘Problematic Conditions’ (BI)

Canada’s housing watchdog maintained its view that there is “strong evidence of problematic conditions” in the market that some economists have classified as being in a bubble. The market is characterized by imbalances, defined as when demand and prices are far from their historical averages, Canada Mortgage and Housing Corporation said in second-quarter report. “While the overall assessment of problematic conditions remains strong for Canada, overvaluation has been downgraded to moderate from a previously strong assessment,” CMHC said.

“Careful analysis by geography shows that local differences continue to divide the Canadian housing market into several markets: centers in the East are showing weak evidence of overvaluation, while centres in Southern Ontario and the West are showing moderate to strong evidence of overvaluation,” it added. In Victoria, for example, the CMHC determined that overvaluation had accelerated from “moderate” to “strong.” The Teranet and National Bank of Canada house-price index showed a 24.8% gain year-on-year in March. It jumped 12.2% for Vancouver. Separately on Wednesday, shares of Canada’s home lenders fell after Home Capital Group said it obtained a $1.5 billion credit line to cope with falling deposits. Home Capital shares plunged by more than 60%.

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“George Washington used to complain about British lumber coming in from Canada..”

It’s Tough Being Canada These Days (BBG)

It’s tough being Canada these days. There’s no other way, really, to explain why the Trump administration announced on Tuesday that it was imposing tariffs on exports of Canadian softwood lumber – tariffs that will cost the Canadian lumber industry $1 billion annually. The Canadian dairy industry is also in Trump’s crosshairs, as he made plain in a threatening tweet Tuesday morning. Trump spent much of his campaign railing about China’s “unfair” trade practices, and all the “American jobs” that have migrated to Mexico. But now that he’s president, he’s apparently been made to understand that slapping tariffs on Chinese goods could lead to a catastrophic trade war. And any moves that might destabilize Mexico would have negative consequences for the U.S.

Ah, but hit Canada with a tariff, and you get all of the political upside of looking tough with no downside. This is not just because Canadians are nice. It’s because the Canadian economy is more U.S.-dependent than any other. “20% of Canada’s GDP relies on the U.S.,” said Laura Dawson, the director of the Canada Institute at the Wilson Center. “And 70% of Canada’s exports go to the U.S.” Even if Canada wanted to retaliate, what exactly could it do? Stop the Ford plants in Canada from shipping cars to Ford in Detroit? A rational administration would never let these minor disputes get in the way of a smooth-functioning economic relationship with Canada. To start with, there’s the fact that Canada is the staunchest U.S. ally, which you would think would count for something.

And the U.S. benefits enormously from trade with Canada, which buys 18% of all American exports, more than any other country. Last year, Canada’s trade surplus with the U.S. was a minuscule $11.2 billion. The integration of the two economies has been beneficial to both. Nor are the two disputes anything new. The American lumber industry has been complaining about Canadian softwood lumber since pretty much forever. “George Washington used to complain about British lumber coming in from Canada,” Dawson said with a chuckle. The basic allegation is that most timberland in Canada is owned by its provinces, which sell logging rights at below-market prices. The U.S. views this as a government subsidy, a notion Canada rejects. Although Americans and the Canadians have never been able to put this dispute to rest, they have been able to negotiate a truce on three separate occasions since the early 1980s.

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Advisers can’t agree.

Trump Tells Canada, Mexico, He Won’t Terminate NAFTA Treaty Yet (R.)

U.S. President Donald Trump told the leaders of Canada and Mexico on Wednesday that he will not terminate the NAFTA treaty at this stage, but will move quickly to begin renegotiating it with them, a White House said. The announcement came after White House officials disclosed that Trump and his advisers had been considering issuing an executive order to withdraw the United States from the trade pact with Canada and Mexico, one of the world’s biggest trading blocs. The White House said Trump spoke by telephone with Mexican President Enrique Pena Nieto and Canadian Prime Minister Justin Trudeau and that he would hold back from a speedy termination of NAFTA, in what was described as a “pleasant and productive” conversation.

“President Trump agreed not to terminate NAFTA at this time and the leaders agreed to proceed swiftly, according to their required internal procedures, to enable the renegotiation of the NAFTA deal to the benefit of all three countries,” a White House statement said. “It is my privilege to bring NAFTA up to date through renegotiation. It is an honor to deal with both President Peña Nieto and Prime Minister Trudeau, and I believe that the end result will make all three countries stronger and better,” Trump was quoted as saying in the statement. The Mexican and Canadian currencies rebounded in Asian trading after Trump said the U.S. would stay in NAFTA for now. The U.S. dollar dropped 0.6% on its Canadian counterpart and 1% on the peso.

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This is not going to be easy to pass.

Trump Tax Plan Would Raise US Debt by $5.5 Trillion, 20% of 2027 GDP (CRFB)

The White House released principles and a framework for tax reform today. We applaud the President’s focus on tax reform, but the plan includes far more detail on how the Administration would cut taxes than on how they would pay for those cuts. Based on what we know so far, the plan could cost $3 to $7 trillion over a decade– our base-case estimate is $5.5 trillion in revenue loss over a decade. Without adequate offsets, tax reform could drive up the federal debt, harming economic growth instead of boosting it. The framework proposes a number of specific changes including: consolidating and reducing individual income tax rates to 10, 25, and 35%; doubling the standard deduction; cutting the business tax rate to 15% on both corporations and pass-through businesses; repealing the Alternative Minimum Tax (AMT) and estate tax; repealing the 3.8% investment surtax from the Affordable Care Act (“Obamacare”); moving to a territorial tax system; and imposing a one-time tax on money held overseas.

The plan also includes some vaguer proposals, including “providing tax relief for families with child and dependent care expenses” and eliminating “targeted tax breaks that mainly benefit the wealthiest taxpayers.” Although the framework itself is vague on the latter, at their press conference Secretary of the Treasury Steven Mnuchin and National Economic Director Gary Cohn seemed to imply it meant repealing all individual deductions unrelated to savings, charitable giving, or mortgage interest (revenue would come mostly from repealing the state and local tax deduction). Even with the detailed portions of the plan, there are not enough parameters specified to provide a certain revenue estimate of the tax plan. But making some assumptions based on prior proposals, our best rough estimate suggests the specified parts of the plan would cost $5.5 trillion. Assuming tax break limits only apply only to higher earners, that cost could be as high as $7 trillion; assuming credits and exclusions are eliminated as well as deductions, it would cost $3 trillion.

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“..as much as 91 cents on the dollar went to share repurchases, even though that, along with compensation increases, was an expressly prohibited use by Congress.”

What Happened Last Time US Companies Got A Break On Overseas Profits (CNBC)

The Trump administration wants to give companies a break on profits earned overseas and brought back to the United States — a program that’s been tried before to little effect. Current estimates put the total stockpile that U.S firms are holding abroad so as to avoid U.S. taxes at somewhere in the $2.5 trillion range. Back in 2004, Congress approved a plan to “repatriate” such overseas funds that companies could bring back home at a reduced rate. The program was part of the American Jobs Creation Act. The hope then, as now, was that companies would shovel that money back into the economy in the form of investment and job creation. It didn’t quite work out that way. Contrary to the intent, the benefits skewed toward a select few companies in a select few industries.

Rather than use the money for hiring and capital purchases, companies plowed the cash into share buybacks and dividends, and many of the biggest beneficiaries actually cut American jobs in the years after the repatriation. “While empirical evidence is clear that this provision resulted in a significant increase in repatriated earnings, empirical evidence is unable to show a corresponding increase in domestic investment or employment,” the Congressional Research Service, Congress’ nonpartisan think tank, said in a report. The CRS cited a series of reports into the benefits of repatriation, with a common theme that the 2004 program was “an ineffective means of increasing economic growth.” In the 2004 case, 9,700 companies were eligible to take part in a tax holiday that would bring the overseas cash back at a rate of 5.25%, well below the 35% rate for profits earned abroad.

Of that group, 843 firms participated. They brought home $312 billion in qualified earnings, or about one-third of the total cash held overseas, according to the CRS. That translated into total deductions of $265 billion. [..] In the 2005-06 time frame, Pfizer, which repatriated $37 billion, slashed 10,000 jobs. Merck, which brought back $15.9 billion, cut 7,000 jobs, and HP pared its employment rolls by 14,500 after repatriating $14.5 billion. Most of the money went to repairing balance sheets and rewarding shareholders, according to the CRS. According to one study cited, as much as 91 cents on the dollar went to share repurchases, even though that, along with compensation increases, was an expressly prohibited use by Congress.

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Once was a nice country.

New Zealand Plans Spending Splurge to Keep ‘Growing Like Sydney’ (BBG)

New Zealand’s government announced plans to substantially increase infrastructure spending to help sustain economic growth and cope with a swelling population. In its May 25 budget, the government will allocate NZ$11 billion ($7.6 billion) in additional spending on infrastructure like schools, roads, hospitals and housing between 2017 and 2020, Finance Minister Steven Joyce said in a speech in Wellington Thursday. When added to already-planned investments, a total of around NZ$23 billion would be spent over the four-year period, representing “the biggest addition to the government’s capital stock in decades,” he said. New Zealand’s economy is among the fastest-growing in the developed world, expanding at around 3% a year, and the government predicts rising budget surpluses.

Growth is being driven in part by record immigration and fewer New Zealanders seeking work abroad, which is straining infrastructure. “As a country we are now growing a bit like South-East Queensland or Sydney, when in the past we were used to growing in fits and starts,” Joyce said. “That’s great because we used to send our kids to South-East Queensland and Sydney to work, and now they come back here.” Details of the first tranche of spending would be unveiled in the budget, and Joyce said the government wants to make greater use of public-private partnerships and joint ventures to boost infrastructure further.

[..] The government will aim to cut net debt to 10-15% of GDP by 2025, from an estimated 24.3% at June 30 this year. Its current target is to reduce net debt to 20% of GDP by 2020. Joyce said the government borrowed heavily to help the country through the global financial crisis and a devastating earthquake in Christchurch in 2011. “Shocks can come along at any time, and sometimes they come in pairs,” he said. “We are a geologically young country, and we are also a small country in an often turbulent world – so there are plenty of shocks ahead of us.”

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“I just want any example of Russia spreading fake news, just show me one example.. I can present you tons, dozens, billions of examples of Western media spreading false news about Russia..”

Russian Spokeswoman On ‘Ridiculous’ Airstrikes In Syria, Fake News (Y!)

Recent U.S. airstrikes against Syria were “ridiculous,” according to Russian Foreign Ministry spokesperson Maria Zakharova. In a blunt, at times contentious, interview with Yahoo Global News Anchor Katie Couric, Zakharova called the strikes “unacceptable” and said they violated international law and made no military or political sense. “They brought the situation nowhere,” she said. She went on to say that the goal of the West to oust Syrian President Bashar Assad is “not a way out, it is a dead end.” When pressed on whether Assad was responsible for the chemical attacks that led to the U.S. military action, she said, “Our decisions should be based on real evidence,” detailing Russia’s desire to have independent investigators determine blame.

She pointed to U.S. claims in 2003 that Iraq had weapons of mass destruction, which later turned out to be false. “That was the worst thing that happened to the Security Council, to the United States, to the Middle East region,” Zakharova said. The wide-ranging, exclusive conversation began with Zakharova objecting to Couric’s characterization of the Russian government as a “regime.” “I think if a president is elected by the people of his country, it’s not about being a regime, it’s about being a democracy,” she said. Zakharova said that relations between the U.S. and Russia began to deteriorate during the Obama administration, in part because of what she called “fake news” reports about her country that were disseminated during those years.

“What I’m facing today is, the main role of the media is to separate people (in order) to divide the world into separate parts. I think it’s dangerous.” She dismissed claims from American and European intelligence officials that, in actuality, Russia is disseminating fake news to achieve its geopolitical goals. “I just want any example of Russia spreading fake news, just show me one example,” she said. “I can present you tons, dozens, billions of examples of Western media spreading false news about Russia,” she told Couric.

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Germany forces Greece to take measures that are illegal under German law. Both are -equal- members of an economic union.

German Court Upholds Greek Teacher’s Case Against Pay Cut (AP)

A German federal court has upheld a complaint by a teacher at a Greek school in Germany against a pay cut that the Greek government imposed at the height of the country’s financial crisis. The teacher, a Greek citizen, works at a Greek government-run school in Nuremberg but his contract is subject to German law. He sued after his pay was cut in 2010. A lower court granted his demand for some €20,000 ($21,780) in extra pay for Oct. 2010-Dec. 2012 — the amount by which his salary was lowered. The Federal Labor Court said Wednesday it has rejected a Greek appeal against that ruling. It ruled that Greek austerity legislation isn’t directly applicable on German territory and that Greece doesn’t have legal immunity over the labor contract.

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Apr 232017
 
 April 23, 2017  Posted by at 2:31 pm Finance Tagged with: , , , , , , , , , ,  11 Responses »
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René Magritte Le Cri du Coeur 1960

 

Austerity is over, proclaimed the IMF this week. And no doubt attributed that to the ‘successful’ period of ‘five years of belt tightening’ a.k.a. ‘gradual fiscal consolidation’ it has, along with its econo-religious ilk, imposed on many of the world’s people. Only, it’s not true of course. Austerity is not over. You can ask many of those same people about that. It’s certainly not true in Greece.

IMF Says Austerity Is Over

Austerity is over as governments across the rich world increased spending last year and plan to keep their wallets open for the foreseeable future. After five years of belt tightening, the IMF says the era of spending cuts that followed the financial crisis is now at an end. “Advanced economies eased their fiscal stance by one-fifth of 1pc of GDP in 2016, breaking a five-year trend of gradual fiscal consolidation,” said the IMF in its fiscal monitor.

In Greece, the government did not increase spending in 2016. Nor is the country’s era of spending cuts at an end. So did the IMF ‘forget’ about Greece? Or does it not count it as part of the rich world? Greece is a member of the EU, and the EU is absolutely part of the rich world, so that can’t be it. Something Freudian, wishful thinking perhaps?

However this may be, it’s obvious the IMF are not done with Greece yet. And neither are the rest of the Troika. They are still demanding measures that are dead certain to plunge the Greeks much further into their abyss in the future. As my friend Steve Keen put it to me recently: “Dreadful. It will become Europe’s Somalia.”

An excellent example of this is the Greek primary budget surplus. The Troika has been demanding that it reach 3.5% of GDP for the next number of years (the number changes all the time, 3, 5, 10?). Which is the worst thing it could do, at least for the Greek people and the Greek economy. Not for those who seek to buy Greek assets on the cheap.

 

But sure enough, the Hellenic Statistical Authority (ELSTAT) jubilantly announced on Friday that the 2016 primary surplus was 4.19% (8 times more than the 0.5% expected). This is bad news for Greeks, though they don’t know it. It is also a condition for receiving the next phase of the current bailout. Here’s what that comes down to: in order to save itself from default/bankruptcy, the country is required to destroy its economy.

And that’s not all: the surplus is a requirement to get a next bailout tranche, and debt relief, but as a reward for achieving that surplus, Greece can now expect to get less … debt relief. Because obviously they’re doing great, right?! They managed to squeeze another €7.3 billion out of their poor. So they should always be able to do that in every subsequent year.

The government in Athens sees the surplus as a ‘weapon’ that can be used in the never-ending bailout negotiations, but the Troika will simply move the goalposts again; that’s its MO.

A country in a shape as bad as Greece’s needs stimulus, not a budget surplus; a deficit would be much more helpful. You could perhaps demand that the country goes for a 0% deficit, though even that is far from ideal. But never a surplus. Every penny of the surplus should have been spent to make sure the economy doesn’t get even worse.

Greek news outlet Kathimerini gets it sort of right, though its headline should have read “Greek Primary Surplus Chokes Economy“.

Greek Primary Surplus Chokes Market

The state’s fiscal performance last year has exceeded even the most ambitious targets, as the primary budget surplus as defined by the Greek bailout program, came to 4.19% of GDP, government spokesman Dimitris Tzanakopoulos announced on Friday. It came to €7.369 billion against a target for €879 million, or just 0.5% of GDP. A little earlier, the president of the Hellenic Statistical Authority (ELSTAT), Thanos Thanopoulos, announced the primary surplus according to Eurostat rules, saying that it came to 3.9% of GDP or €6.937 billion.

The two calculations differ in methodology, but it is the surplus attained according to the bailout rules that matters for assessing the course of the program. This was also the first time since 1995 that Greece achieved a general government surplus – equal to 0.7% of GDP – which includes the cost of paying interest to the country’s creditors. There is a downside to the news, however, as the figures point to overtaxation imposed last year combined with excessive containment of expenditure.

The amount of €6-6.5 billion collected in excess of the budgeted surplus has put a chokehold on the economy, contributing to a great extent to the stagnation recorded on the GDP level in 2016. On the one hand, the impressive result could be a valuable weapon for the government in its negotiations with creditors to argue that it is on the right track to fiscal streamlining and can achieve or even exceed the agreed targets. On the other hand, however, the overperformance of the budget may weaken the argument in favor of lightening the country’s debt load.

Eurogroup head Dijsselbloem sees no shame in admitting this last point :

Dijsselbloem Sees ‘Tough’ Greek Debt Relief Talks With IMF

“That will be a tough discussion with the IMF,” said Dijsselbloem, who is also the Dutch Finance Minister in a caretaker cabinet, “There are some political constraints where we can go and where we can’t go.” The level of Greece’s primary budget surplus is key in determining the kind of debt relief it will need. The more such surplus it has, the less debt relief will be needed.

That’s just plain insane, malicious even. Greek PM Tsipras should never have accepted any such thing, neither the surplus demands nor the fact that they affect debt relief, since both assure a further demise of the economy.

Because: where does the surplus come from? Easy: from Troika-mandated pension cuts and rising tax levels. That means the Greek government is taking money OUT of the economy. And not a little bit, but a full 4% of GDP, over €7 billion. An economy from which so much has already vanished.

The €7.369 billion primary surplus, in a country of somewhere between 10 and 11 million people, means some €700 per capita has been taken out of the economy in 2016. Money that could have been used to spend inside that economy, saving jobs, and keeping people fed and sheltered. For a family of 3.5 people that means €200 per month less to spend on necessities (the only thing most Greeks can spend any money on).

I’ve listed some of the things a number of times before that have happened to Greece since the EU and IMF declared de facto financial war on the country. Here are a few (there are many more where these came from):

25-30% of working age Greeks are unemployed (and that’s just official numbers), well over 1 million people; over 50% of young people are unemployed. Only one in ten unemployed Greeks receive an unemployment benefit (€360 per month), and only for one year. 9 out of 10 get nothing.

Which means 52% of Greek households are forced to live off the pension of an elderly family member. 60% of Greek pensioners receive pensions below €700. 45% of pensioners live below the poverty line with pensions below €665. Pensions have been cut some 12 times already. More cuts are in the pipeline.

40% of -small- businesses have said they expect to close in 2017. Even if it’s just half that, imagine the number of additional jobs that will disappear.

 

But the Troika demands don’t stop there; they are manifold. On top of the pension cuts and the primary surplus requirement, there are the tax hikes. So the vast majority of Greeks have ever less money to spend, the government takes money out of the economy to achieve a surplus, and on top of that everything gets more expensive because of rising taxes. Did I ever mention businesses must pay their taxes up front for a full year?

The Troika is not “rebalancing Greece’s public finances in a growth-friendly manner”, as Dijsselbloem put it, it is strangling the economy. And then strangling it some more.

There may have been all sorts of things wrong in Greece, including financially. But that is true to some degree for every country. And there’s no doubt there was, and still is, a lot of corruption. But that would seem to mean the EU must help fight that corruption, not suffocate the poor.

 


Yes, that’s about a 30% decline in GDP since 2007

 

The ECB effectively closed down the Greek banking system in 2015, in a move that’s likely illegal. It asked for a legal opinion on the move but refuses to publish that opinion. As if Europeans have no right to know what the legal status is of what their central bank does.

The ECB also keeps on refusing to include Greece in its QE program. It buys bonds and securities from Germany, which doesn’t need the stimulus, and not those of Greece, which does have that need. Maybe someone should ask for a legal opinion on that too.

The surplus requirements will be the nail in the coffin that do Greece in. Our economies depend for their GDP numbers on consumer spending, to the tune of 60-70%. Since Greek ‘consumers’ can only spend on basic necessities, that number may be even higher there. And that is the number the country is required to cut even more. Where do you think GDP is headed in that scenario? And unemployment, and the economy at large?

The question must be: don’t the Troika people understand what they’re doing? It’s real basic economics. Or do they have an alternative agenda, one that is diametrically opposed to the “rebalancing Greece’s public finances in a growth-friendly manner” line? It has to be one of the two; those are all the flavors we have.

You can perhaps have an idea that a country can spend money on wrong, wasteful things. But that risk is close to zilch in Greece, where many if not most people already can’t afford the necessities. Necessities and waste are mutually exclusive. A lot more money is wasted in Dijsselbloem’s Holland than in Greece.

In a situation like the one Greece is in, deflation is a certainty, and it’s a deadly kind of deflation. What makes it worse is that this remains hidden because barely a soul knows what deflation is.

Greece’s deflation hides behind rising taxes. Which is why taxes should never be counted towards inflation; it would mean all a government has to do to raise inflation is to raise taxes; a truly dumb idea. Which is nevertheless used everywhere on a daily basis.

In reality, inflation/deflation is money/credit supply multiplied by the velocity of money. And in Greece both are falling rapidly. The primary surplus requirements make it that much worse. It really is the worst thing one could invent for the country.

For the Greek economy, for its businesses, for its people, to survive and at some point perhaps even claw back some of the 30% of GDP it lost since 2007, what is needed is a way to make sure money can flow. Not in wasteful ways, but in ways that allow for people to buy food and clothing and pay for rent and power.

If you want to do that, taking 4% of GDP out of an economy, and 3.5% annually for years to come, is the very worst thing. That can only make things worse. And if the Greek economy deteriorates further, how can the country ever repay the debts it supposedly has? Isn’t that a lesson learned from the 1919 Versailles treaty?

The economists at the IMF and the EU/ECB, and the politicians they serve, either don’t understand basic economics, or they have their eyes on some other prize.

 

Apr 222017
 
 April 22, 2017  Posted by at 8:38 am Finance Tagged with: , , , , , , , , ,  Comments Off on Debt Rattle April 22 2017
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Andrei Rublev Trinity 1411

 

White House Orders Agencies to Prepare for Potential Government Shutdown (BBG)
Beware: The Next Financial Crisis Is Coming (Planet Ponzi)
Robert Prechter Is Awaiting A Depression-Like Shock In The US (MW)
Fed’s Fisher Warns Trump About Plans To ‘Do A Number’ On Dodd-Frank (BI)
Former FinMin Says China Should Let Local Governments Default on Debt (BBG)
Everything Gets Worse – Pakistan vs. India (Bhandari)
Dijsselbloem Sees ‘Tough’ Greek Debt Relief Talks With IMF (BBG)
Schaeuble Says Greece to Blame for Delays in Bailout Program
Greece Blows EU-IMF Bailout Targets Away With Strong Budget Performance (R.)
Greek Primary Surplus Chokes Market (K.)
On Neocons and their Mental Defects (Taleb)
28 Refugees Found Dead In Drifting Dinghy Off Libyan Coast (Ind.)

 

 

It could happen.

White House Orders Agencies to Prepare for Potential Government Shutdown (BBG)

The White House ordered federal agencies Friday to began preparations for a potential partial government shutdown after signaling President Donald Trump would demand money for key priorities in legislation to continue funding the government beyond April 29. But the president and his aides expressed confidence that Congress would work out a spending agreement and that there won’t be any halt in government operations. Administration officials portrayed the order as normal contingency planning, stressing that the previous administration had followed the same practice as funding deadlines approached. “I think we’re in good shape” on avoiding a deadlock on maintaining funding, Trump told reporters in the Oval Office on Friday. White House press secretary Sean Spicer said the administration is “confident” because negotiations are ongoing and “no one wants a shutdown.”

The push to reach an agreement on spending is complicated by White House efforts to try again for a House vote on replacing Obamacare next week, crowding the congressional schedule with two politically thorny measures the same week. House approval of an Obamacare repeal would give the president a legislative victory to boast about before his 100th day in office April 29. But failure to reach an agreement on spending legislation would risk marring the anniversary with a government shutdown. House Republicans plan a conference call Saturday with Ryan and other leaders to discuss the health-care bill as well as spending legislation. Republican Congressional leaders have pushed back against scheduling an Obamacare vote during the week, indicating there isn’t a clear strategy yet for achieving passage.

Mick Mulvaney, Trump’s director of Office of Management and Budget, said Thursday Democrats will need to agree to pay for some Trump’s top priorities, including a wall at the U.S.-Mexico border, in legislation to fund the government for the remainder of the fiscal year, which ends Oct. 1. Democrats responded harshly to Mulvaney’s remarks Thursday. “Everything had been moving smoothly until the administration moved in with a heavy hand,” said Matt House, spokesman for Senate Minority Leader Chuck Schumer of New York.

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“Constantly printing more money will not end in prosperity, but in ruin.”

Beware: The Next Financial Crisis Is Coming (Planet Ponzi)

There is more debt, credit, and leverage today than there was preceding the banking crisis of 2008. No lessons were learned from that catastrophe as trillions of taxpayer dollars were provided in the form of bank bailouts from the US Federal Reserve. Despite their name, US Federal Reserve Banks are not part of the federal government and they are not banks. For the past 11 years, the Federal Reserve has been run by non-elected officials, Ben Bernanke and Janet Yellen (career academics), alongside a host of X Goldman and JP Morgan bankers. Since 2007, these non-elected bankers have provided banks “temporary, emergency liquidity measures.” Since when is eight years temporary?

Banks have continued to lend trillions and trillions of dollars to fund the construction of grotesquely overpriced residential and commercial properties around the world. The trillions of dollars given in bank bailouts are a perfect example of government “pay-to-play.” When giving out this money, most bankers are making at least three flawed assumptions:
1. Real estate prices will always go up. Clearly, this is the denial phase of “a bubble mentality.”
2. Rents will always keep rising. Rents peaked a few years ago. There is a massive oversupply of high-end residential and commercial properties on the market while real wages have declined. This is a sign that a crash is imminent.
3. The Federal Reserve will always bail them out. With zero transparency or an audit the Federal Reserve’s balance sheet has ballooned from 500 billion to nearly 5 trillion in a short period. The Federal Reserve doesn’t have the money to keep bailing companies out.

The Federal Reserve has become nothing more than a rogue hedge fund taking leveraged, wildly speculative, gargantuan and high-risk positions in bonds and mortgages. Next up, the Fed will angle to dump these toxic real estate assets in your pension fund. There are several steps that need to be taken to address this situation and save your pensions:
1. The President and Congress need to order an immediate audit of the Fed.
2. The Fed’s positions need to be unwound.
3. No more taxpayer funded bailouts – save your pension!

Capitalism without bankruptcy is like Catholicism without hell. Constantly printing more money will not end in prosperity, but in ruin. The coming collapse will be much worse than in 2008-2009 because the debt is so much larger and the Federal Reserve has run out of bullets. Since the 1980s, we have seen real average wages decline, college tuition skyrocket nearly 2,000%, and housing prices hitting all-time new highs while high-paying jobs have disappeared. Rents have risen so much that many small businesses are no longer economically viable. The situation doesn’t look any better for graduates. Graduates entering the jobs market have nearly $250,000 in student debt. A graduate may get a job in Manhattan for $40,000 a year ($3,333 a month before tax) but rent on a studio apartment costs $3,000 a month. The numbers just don’t add up anymore.

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Social mood: “declining stock and property prices, contracting debt, angry and somber music, more intense horror movies..”

Robert Prechter Is Awaiting A Depression-Like Shock In The US (MW)

Avi Gilburt: You’ve said that, once the stock market tops, you expect a major bear market and economic contraction to take hold. What is your general timing for this to occur?

Robert Prechter: The true top for stocks in terms of real money (gold) occurred way back in 1999. Overall prosperity has waned subtly since then. Primary wave five in nominal terms started in March 2009, and wave B up in the Dow/gold ratio started in 2011. Their tops should be nearly coincident.

Gilburt: What do you foresee will set off this event?

Prechter: Triggers are a popular notion, borrowed from the physical sciences. But I don’t think there are any such things in financial markets. Waves of social mood create trends in the stock market, and economic and political events lag behind them. Because people do not perceive their moods, tops and bottoms in markets sneak right past them. At the top, people will love the market, and events and conditions will provide them with ample bases for rationalizing being heavily invested.

Gilburt: You’ve said we will be mired in a “depression-type” event. How long could that last?

Prechter: I don’t know. All I can say for sure is that the degree of the corrective wave will be larger than that which created the malaise of the 1930s and 1940s.

Gilburt: How are conditions going to change from what we have now?

Prechter: The increasingly positive trend in social mood over the past eight years has been manifesting in rising stock and property prices, expanding credit, buoyant pop music, lots of animated fairy tales and adventure movies, suppression of scandals, an improving economy and — despite much opinion — fairly moderate politics. This trend isn’t quite over yet. In the next wave of negative mood, we should see the opposite: declining stock and property prices, contracting debt, angry and somber music, more intense horror movies, eruption of scandals, a contracting economy and political upheaval. That’s been the pattern of history.

It’s all relative, though, and it’s never a permanent condition. Just as people give up on the future, its brightness will return. The financial contraction during the negative mood trend of 2006-2011 was the second worst in 150 years. Yet, thanks to the return of positive mood, many people have already forgotten about it. Investors again embrace stocks, ETFs, real estate, mortgage debt, auto-loan debt and all kinds of risky investments that they swore off just a few years ago.

Read more …

Because the Fed is doing such a great job of keeping banks in check.

Fed’s Fisher Warns Trump About Plans To ‘Do A Number’ On Dodd-Frank (BI)

Stanley Fischer, the vice chairman of the Federal Reserve, on Friday delivered an unusually sharp warning to President Donald Trump and his plan to “do a number” on post-crisis reforms aimed at reining in Wall Street. Fed officials usually go out of their way to not appear political, which makes the comments all the more startling. Fischer, a former Citigroup banker and respected policymaker who led the Bank of Israel for many years, appears truly concerned. “We seem to have forgotten that we had a financial crisis, which was caused by behavior in the banking and other parts of the financial system, and it did enormous damage to this economy,” Fischer told CNBC’s Sara Eisen in the lobby of the IMF, responding to a question about the potential rolling back of Dodd-Frank rules.

This happened just as the president was signing an executive order aimed at what he said was “reviewing” Dodd-Frank. “Millions of people lost their jobs. Millions of people lost their houses,” Fischer said. “This was not a small-time, regular recession. This was huge, and it affected the rest of the world, and it affected, to some extent, our standing in the world as well. We should not forget that. “The strength of the financial system is absolutely essential to the ability of the economy to continue to grow at a reasonable rate, and taking actions which remove the changes that were made to strengthen the structure of the financial system is very dangerous.”

Asked specifically about Trump’s vow to “do a number” on Dodd-Frank, Fischer shot back: “I’m not sure precisely what the president said and what a ‘number’ is, but there are aspects of Dodd-Frank, which if they were taken away would have very serious potential consequences for the economy — not immediately but when times get tough.” What provisions is he most worried about? The ability of the Fed and other regulators to wind down large banks, many of which are still seen as too big to fail. “I think it is very important that big banks be subject to the discipline of the possibility of going bankrupt. It is also very important that that discipline extends to not making those changes, the bankruptcy of a big bank, a huge shock and the source of crisis or damage to the overall economy,” Fischer said. “So we need the resolution mechanisms that have been put in place which will allow the authorities and the markets to wind up a big bank.”

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Beware the cascade.

Former FinMin Says China Should Let Local Governments Default on Debt (BBG)

Former Finance Minister Lou Jiwei said China should allow smaller local governments to default on debt because it would signal that central government bailouts aren’t assured. Such defaults would educate investors that their investments will be allowed to go bad, Lou said Friday at a public finance forum in Beijing. “They need to shoulder responsibility,” said Lou, who’s now chairman of the country’s social security fund. “Nobody will save them.” Lou’s comments reiterate those by Premier Li Keqiang and other central government officials such as current Finance Minister Xiao Jie that local government debt shouldn’t be bailed out, or benefit from assumptions it will be.

With economic growth accelerating for a second-straight quarter to 6.9% through March, policy makers have more room to cut leverage and rein in risks. A credit surge since 2014 that underpinned growth has also fueled a further buildup in borrowing. Total debt rose to 258% of economic output last year from 161% in 2008, Bloomberg Intelligence estimates show. Lou said government debt remains broadly safe, but borrowing levels are poised to keep climbing given increased investment in substandard public-private partnership projects.

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Great long read on India and its region.

Everything Gets Worse – Pakistan vs. India (Bhandari)

When Narendra Modi announced on 8th November 2016 that he was demonetizing 86% of the monetary value of all currency in circulation, he gave three major reasons for doing so: to end corruption, to end terrorism and to eliminate counterfeit currency. Ironically, all three are now in far worse condition than they were previously, and even worse than the predictions I made. Many ATMs in India still dispense no cash. The economy is in shatters. This had to happen, as any new cash is rapidly moving under the carpets of the financial powerful that hoard currency. Small businesses are traumatized by the lack of access to cash – many are closing for good. People continue to avoid making non-essential purchases. Even food demand has failed to recover. Poor people very likely are still forced to go to bed half-hungry.

No-one knows whether there are famines in parts of India, as none of the mainstream media are covering the issue. Not unlike North Koreans or the Chinese during the times of Mao, Indians today, particularly members of the so-called educated class, simply cannot see what Modi or their nationalistic paradigm does not want them to see. Indian banks and other financial institutions are extremely unethical. Since privatization was implemented in the 1990s, they have charged fees and commissions for accounts that were never agreed upon. Indians never fight, so this continues. After the demonetization exercise, these mysterious charges have started to appear more often. Then they deduct certain services and financial taxes, and most people don’t make the effort to try to understand them. Indians are getting very tired of the banks – not for moral, but simply for financial reasons.

Bank websites are extremely unwieldy. They require a sequence of passwords and OTPs (one time pad codes), which have an automatic expiry date. Getting the whole sequence right to make an online payment without having these websites freeze during the procedure leaves one with a sense of accomplishment. Most people prefer to walk down to their banks to get bank officials to perform such online transactions. India is simply not ready for the digital age. This experiment in going cashless will end in a disaster. Similar to every tyrant, Modi likes to think that tax collection should be at the heart of society. He imagines a society in which subjects dance around the state. The problem is, one can perfect the tax system or minimize corruption, but with a per capita GDP of $1,718, India simply does not have the required productivity.

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Anything you do can and will be used against you: The more such surplus it has, the less debt relief will be needed.

Dijsselbloem Sees ‘Tough’ Greek Debt Relief Talks With IMF (BBG)

Discussions between Greece’s European creditors and the IMF on additional debt relief for the Mediterranean euro region member will be difficult because of political hurdles within the 19-nation bloc, though a solution is on the horizon, Eurogroup Chairman Jeroen Dijsselbloem said. “Greece: We’re very close, it’s really the last stretch,” he said in a Bloomberg Television interview on Friday in Washington with Francine Lacqua and Tom Keene. “We have a full agreement on the major reforms. How they are to be designed, when they are to be implemented, the size of them.”

IMF Managing Director Christine Lagarde said Friday she had “constructive discussions” with Greek Finance Minister Euclid Tsakalotos in preparation for the return of bailout auditors to Athens after euro-area finance ministers reached a tentative agreement on the measures Greece needs to implement to qualify for the next tranche of emergency loans. Dijsselbloem met Tsakalotos earlier on Friday in Washington. “That will be a tough discussion with the IMF,” said Dijsselbloem, who is also the Dutch Finance Minister in a caretaker cabinet, “There are some political constraints where we can go and where we can’t go.” The level of Greece’s primary budget surplus is key in determining the kind of debt relief it will need. The more such surplus it has, the less debt relief will be needed.

The Hellenic Statistical Authority on Friday unveiled data on last year’s primary surplus, which Eurostat is expected to validate on Monday. The surplus was 3.9% according to the European Union’s statistics office methodology, or 4.2% according to what has been agreed in the bailout program. The bailout target was for a primary surplus of 0.5% of GDP. In spite of its better-than-expected primary surplus last year, the IMF is not convinced Greece will be able to maintain that level of performance for 2018 and beyond. The fund estimates that at least half of the primarily surplus for 2016 came from one-off measures rather than structural changes that will continue delivering results in the years to come, according to a person familiar with its analysis. That has prompted the fund to demand more austerity measures.

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Groundhog man.

Schaeuble Says Greece to Blame for Delays in Bailout Program

German Finance Minister Wolfgang Schaeuble said the Greek government bore responsibility for current delays in the country’s bailout program. Greece is to blame that its creditors didn’t return to Athens during the Greek Easter break to finish negotiations on steps the nation must take to qualify for the next tranche of emergency loans, Schaeuble told reporters Friday on the sidelines of the IMF spring meetings. IMF European Department head Poul Thomsen said at a media briefing there’s been enough progress recently to send back a mission to Greece. Greece and its international creditors struck a tentative agreement at a meeting of euro-area finance ministers in Malta earlier this month, breaking the latest deadlock over the country’s rescue and paving the way for about €7 billion in aid for Athens.

Although the decision represents progress, the euro area won’t unlock the payout until their audit in Athens is concluded. “It would have been possible to continue the mission in Athens immediately in the week after Malta,” said Schaeuble. “This was not possible during the Greek Easter break.” In a statement on Friday, IMF Managing Director Christine Lagarde said she had a “constructive dialogue” with Greek Finance Minister Euclid Tsakalotos “in preparation for the return of the mission to discuss the two legs of the Greece program: policies and debt relief.” The IMF isn’t holding back progress, said Schaeuble. “The IMF isn’t delaying this process at all,” he said.

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The worst thing Greece could do.

Greece Blows EU-IMF Bailout Targets Away With Strong Budget Performance (R.)

Greece far exceeded its international lenders’ budget demands last year, official data showed on Friday, posting its first overall budget surplus in 21 years even when debt repayments are included. The primary surplus – the leftover before debt repayments that is the focus of IMF-EU creditors – was more than eight times what they had targeted. Data released by Greek statistics service ELSTAT – to be confirmed on Monday by the EU – showed the primary budget surplus at 3.9% of GDP last year versus a downwardly revised 2.3% deficit in 2015. This was calculated under European System of Accounts guidelines, which differ from the methodology used by Greece’s in bailout deliberations.

Under EU-IMF standards, the surplus was even larger. Government spokesman Dimitris Tzanakopoulos said the primary budget surplus under bailout terms reached 4.19% of GDP last year versus the 0.5% of GDP target. “It is more than eight times above target,” Tzanakopoulos said in a statement. “Therefore, the targets set under the bailout program for 2017 and 2018 will certainly be attained.” Debt-strapped Greece and its creditors have been at odds for months over the country’s fiscal performance, delaying the conclusion of a key bailout review which could unlock needed bailout funds. The IMF, which has reservations on whether Greece can meet high primary surplus targets, has yet to decide if it will fund Greece’s current bailout, which expires in 2018.

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The surplus kills the economy even more.

Greek Primary Surplus Chokes Market (K.)

The state’s fiscal performance last year has exceeded even the most ambitious targets, as the primary budget surplus as defined by the Greek bailout program, came to 4.19% of GDP, government spokesman Dimitris Tzanakopoulos announced on Friday. It came to €7.369 billion against a target for €879 million, or just 0.5% of GDP. A little earlier, the president of the Hellenic Statistical Authority (ELSTAT), Thanos Thanopoulos, announced the primary surplus according to Eurostat rules, saying that it came to 3.9% of GDP or €6.937 billion. The two calculations differ in methodology, but it is the surplus attained according to the bailout rules that matters for assessing the course of the program. This was also the first time since 1995 that Greece achieved a general government surplus – equal to 0.7% of GDP – which includes the cost of paying interest to the country’s creditors.

There is a downside to the news, however, as the figures point to overtaxation imposed last year combined with excessive containment of expenditure. The amount of €6-6.5 billion collected in excess of the budgeted surplus has put a chokehold on the economy, contributing to a great extent to the stagnation recorded on the GDP level in 2016. On the one hand, the impressive result could be a valuable weapon for the government in its negotiations with creditors to argue that it is on the right track to fiscal streamlining and can achieve or even exceed the agreed targets. On the other hand, however, the overperformance of the budget may weaken the argument in favor lightening the country’s debt load. It is no coincidence that German Finance Minister Wolfgang Schaeuble noted in Washington that over the last couple of years, Greek government deficit forecasts are more realistic than those of the IMF.

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Skin in the game.

On Neocons and their Mental Defects (Taleb)

So we tried that thing called regime change in Iraq, and failed miserably. We tried it in Libya, and now there are now active slave markets in the place. But we satisfied the objective of “removing a dictator”. By the exact same reasoning, a doctor would inject a patient with “moderate” cancer cells “to improve his cholesterol numbers”, and claim victory after the patient is dead, particularly if the post-mortem shows remarkable cholesterol readings. But we know that doctors don’t do that, or, don’t do it in such a crude format, and that there is a clear reason for it. Doctors usually have some skin in the game. And don’t give up on logic, intellect and education, because a tight but higher order logical reasoning would show that the logic of advocating regime changes implies also advocating slavery.

So these interventionistas not only lack practical sense, and never learn from history, but they even make mistakes at the pure reasoning level, which they drown in some form of semi-abstract discourse. The first flaw is that they are incapable in thinking in second steps and unaware of the need for it –and about every peasant in Mongolia, every waiter in Madrid, and every car service operator in San Francisco knows that real life happens to have second, third, fourth, nth steps. The second flaw is that they are also incapable of distinguishing between multidimensional problems and their single dimensional representations –like multidimensional health and its stripped, cholesterol-reading reduced representation. They can’t get the idea that, empirically, complex systems do not have obvious one dimensional cause and effects mechanisms, and that under opacity, you do not mess with such a system.

An extension of this defect: they compare the actions of the “dictator” to the prime minister of Norway or Sweden, not to those of the local alternative. And when a blow up happens, they invoke uncertainty, something called a Black Swan, not realizing that one should not mess with a system if the results are fraught with uncertainty, or, more generally, avoid engaging in an action if you have no idea of the outcomes. Imagine people with similar mental handicaps, who don’t understand asymmetry, piloting planes. Incompetent pilots, those who cannot learn from experience, or don’t mind taking risks they don’t understand, may kill many, but they will themselves end up at the bottom of, say, the Atlantic, and cease to represent a threat to others and mankind.

So we end up populating what we call the intelligentsia with people who are delusional, literally mentally deranged, simply because they never have to pay for the consequences of their actions, repeating modernist slogans stripped of all depth. In general, when you hear someone invoking abstract modernistic notions, you can assume that they got some education (but not enough, or in the wrong discipline) and too little accountability. Now some innocent people, Yazidis, Christian minorities, Syrians, Iraqis, and Libyans had to pay a price for the mistakes of these interventionistas currently sitting in their comfortable air-conditioned offices. This, we will see, violates the very notion of justice from its pre-biblical, Babylonian inception. As well as the ethical structure of humanity.

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Just a week ago we commemorated a man on a cross whose image we remember but whose teachings we’ve forgotten.

28 Refugees Found Dead In Drifting Dinghy Off Libyan Coast (Ind.)

Almost 30 migrants have been found dead in a boat drifting off the coast of Libya as the number of refugees dying in attempts to reach Europe reach record highs. Fishermen found the bodies of 28 people, including four children, in waters near the smuggling hub of Sabratha after more than 8,300 asylum seekers were rescued over the Easter weekend. “Their boat stopped in the middle of the water because the engine was broken,” said Ahmaida Khalifa Amsalam, the interior ministry’s security commander. He said the victims appeared to have died of thirst and hunger after their vessel was left drifting in the Mediterranean.

They were buried in a cemetery dedicated to migrants whose bodies are regularly washed up on the coast of Libya, which remains embroiled in a bloody civil war six years after the UK helped overthrow Muammar Gaddafi. Smugglers have increasingly resorted to packing migrants into flimsy dinghies that are unable to survive the crossing to Europe, with some being intercepted and forced back by the Libyan coastguard, others being rescued by EU officials and aid agencies, and many sinking. Tuesday’s tragic discovery was the latest incident of refugees being found dead inside boats, with a worrying trend emerging suggesting engines are being removed or sabotaged at sea.

Read more …

Apr 202017
 
 April 20, 2017  Posted by at 9:04 am Finance Tagged with: , , , , , , , ,  5 Responses »
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Fra Filippo Lippi 1406-1469 The Virgin Mary

 

The IMF Says Austerity Is Over (Tel.)
Reflation Trades of 2016 Deflate With Remarkable Speed (R.)
IMF Warns High US Corporate Leverage Could Threaten Financial Stability (WSJ)
Securities-Based Loans Are Scaring Fiscal Experts (NYP)
Telling the Truth: (P + G) – M = I (MarkGB)
You’re Hired! A Guaranteed Job For Anyone Who Wants One (DJ)
Japan’s Middle-Aged ‘Parasite Singles’ Face Uncertain Future (R.)
The EU’s Collapse Is Now “Imminent” (Doug Casey)
Greece Needs To Start Having Babies Again or Face Financial Oblivion (Ind.)
40% of Spanish Children Live in Poverty (EurA)
Ontario Set to Unveil Its Plan to Cool Toronto Housing (BBG)
Feds Knew of 700 Wells Fargo Whistleblower Cases in 2010 (CNN)
So It Goes (Oliver Stone)
A Melting Arctic Changes Everything (BBG)

 

 

Yeah, sure, just come look in Greece. Where the IMF itself demands ever more austerity. While claiming austerity is over.

The IMF Says Austerity Is Over (Tel.)

Austerity is over as governments across the rich world increased spending last year and plan to keep their wallets open for the foreseeable future. After five years of belt tightening, the IMF says the era of spending cuts that followed the financial crisis is now at an end. “Advanced economies eased their fiscal stance by one-fifth of 1pc of GDP in 2016, breaking a five-year trend of gradual fiscal consolidation,” said the IMF in its fiscal monitor. “Their aggregate fiscal stance is expected to remain broadly neutral in 2017 as well as in the following years.” The British Government is still trying to reduce the deficit but at a slower pace, as Philip Hammond, the Chancellor, wanted to ease spending cuts following the vote for Brexit last year.

Although extra spending may be welcomed by those who want funds for specific projects or public services, the IMF is worried that governments are still heavily indebted and need to be careful with their budgets. The US government, for instance, should use the current economic growth spurt as a chance to get its finances under control. “In the United States, where the economy is close to full employment, fiscal consolidation could start next year to put debt firmly on a downward path,” the IMF said. That contrasts heavily with President Donald Trump’s plans to spend more on infrastructure and defence while cutting taxes, a combination that risks ramping up the budget deficit. “These policies are expected to generate rising deficits over the medium term.

As a result, the US debt ratio is projected to increase continuously over the five-year forecast horizon,” the IMF warned. Overall the IMF believes government debts “should stabilise in the medium term, averaging more than 100pc of GDP, rather than decline as previously expected.” With debts that high, governments have to walk a fine line to use fiscal policy to support sustainable economic growth, but avoid dangerous over-indebtedness. “Fiscal policy is generally seen as a powerful tool for promoting inclusive growth and can contribute to stabilising the economy, particularly during deep recessions and when monetary policy has become less effective,” said the IMF.

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How can anyone get this right if they can’t even properly define inflation?

Reflation Trades of 2016 Deflate With Remarkable Speed (R.)

Stocks, bond yields and the dollar are all falling, yield curves are flattening and sterling is marching higher. The “reflation” trades of 2016 that were supposed to mark a turning point in global markets are fading. Fast. The question for investors is whether this is the play book for the rest of the year, or whether the trends of 2016 will resume in the second half of the year. What is clear is that much of the conviction with which investors went into 2017 has been lost. This week, Goldman Sachs ditched its long-standing bullish call on the U.S. dollar, and Deutsche Bank did likewise with their gloomy sterling outlook. Following the developed world’s two most seismic events last year – the U.S. presidential election and Brexit – investors around the world had positioned for a broad-based reflation trade.

Trump’s surprise election victory was supposed to unleash a wave of tax cuts, banking deregulation and fiscal largesse that would lift U.S. – and global – growth. Meanwhile, sterling’s 20% plunge after the Brexit vote was supposed to pave the way for a surge in UK equities and inflation. This, indeed, is how it played out as 2017 got underway. The Federal Reserve raised interest rates twice, the dollar reached a 14-year peak, Wall Street hit record highs, and government bond yield curves around the world steepened to the benefit of banks and financial stocks. But it is now unraveling, in large part due to a clear slowdown in U.S. growth and signs that global inflation is leveling off. Flatter yield curves where short- and long-term bond yields are close to each other suggest economic uncertainty.

[..] Citi’s economic surprises indexes for most of the world’s major economies have been heading south for the past month. The U.S. index has suddenly tumbled to lows not seen since November, and is below all its peers apart from Japan’s. And inflation expectations are showing signs of peaking too. The dollar is now down 2.5% year-to-date (but still up 2% since the U.S. election; U.S. bank stocks are down 10% from their February peak (but still up 20% from the election); and sterling is down 13% against the dollar since the Brexit vote last June (but it has been down as much as 20%). Estimates of first quarter U.S. growth have been slashed in recent weeks, with the Atlanta Fed’s closely-watched GDPNow model pointing to just 0.5% compared with around 2.5% less than two months ago.

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All it takes is a few rate hikes.

IMF Warns High US Corporate Leverage Could Threaten Financial Stability (WSJ)

U.S. corporate debt has ballooned on cheap credit to levels exceeding those prevailing just before the 2008 financial crisis, a potential threat to financial stability, the IMF warned in its latest review of the top threats to markets and banks. High corporate leverage could become problematic as the Federal Reserve raises short-term interest rates, the IMF warned, since higher borrowing costs could hinder the ability of firms to service debts. While borrowing costs remain low, debt servicing as a proportion of income has risen to its highest level since 2010, raising questions over firms’ ability to service their debts, according to the IMF’s study of nearly 4,000 U.S. firms accounting for about half of the economywide corporate sector balance sheet.

Companies have added $7.8 trillion of debt and other liabilities since 2010, while issuing $3 trillion of equity, net of buybacks, according to the IMF. The IMF’s message stands in contrast to the one being sent by the corporate bond market, which has been rallying for more than a year now. In early March, the average spread between junk-rated corporate bond yields and U.S. Treasury yields reached 3.44 percentage points, its lowest point since July 2014, according to Bloomberg Barclays data. It was most recently at 3.92 percentage points, still a very low level by historical standards, indicating that investors don’t see the debt as very risky.

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So you buy mortgage backed securities, and then use them as collateral for a loan that lets you buy more securities. The serpent and the tail.

Securities-Based Loans Are Scaring Fiscal Experts (NYP)

Forget subprime mortgages – one of Wall Street’s biggest risks doesn’t even show up on most banks’ balance sheets. Financial insiders are getting increasingly worried over the popularity of securities-based loans, or SBLs – a risky form of debt marketed to wealthy investors who typically use it to buy big assets like houses. The loans, which are taken against pools of stocks and bonds, offer borrowers cheap money fast without having to sell their underlying securities – an attractive option when the Dow is rising. But if markets crash, brokers can unload their clients’ holdings at fire-sale prices – and go after the house to cover the the vig. Fears of such ugly scenarios are growing as the Fed hikes interest rates, stocks are hitting all-time highs, and high-net-worth individuals are using this form of “shadow margin” to borrow more against stocks and bonds in their portfolios than ever before.

It’s not clear how much debt has been taken out in the form of SBLs, and a lack of regulatory oversight is partly to blame. Finra, the brokerage regulator, doesn’t track it, nor does the Securities and Exchange Commission — even though both have warned investors about the risks. However, several advisers surveyed by The Post estimated there is between $100 billion and $250 billion in outstanding SBLs among all brokerages. At least one concerned financial executive is in talks with lawyers to file a whistleblower case over the issue against a major bank with the Securities and Exchange Commission, The Post has learned. “When the market does turn, and it will at some point, it will be a major disaster,” said the exec, who requested confidentiality in exchange for speaking on the issue with The Post.

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Here’s what I think will lead to UBI: poor old people. I skipped all the examples and links provided here. Do read them. “Where ‘P’ is pensions, ‘G’ is ‘government intervention’, ‘M’ is media oversight, and ‘I’ is insolvency.”

Telling the truth: (P + G) – M = I (MarkGB)

Telling the truth has never been popular with politicians. They believe that it would prevent them from getting elected. Making new promises that will never be kept, and covering up the unaffordability of old promises…is how politicians get elected. The pattern is well worn and predictable: they use promises to ‘bribe’ people to vote for them, then they fail to deliver, then they blame someone else, then they change the subject…rinse and repeat…meanwhile the really important stuff get’s brushed under the carpet or kicked down the road…choose your own metaphor. There are few greater examples of this than the approaching crisis in pensions: A tale that has been decades in the telling, the climax will be a calamity that the corporate media doesn’t want to look at, and politicians never mention or acknowledge. Short of being strapped to a metal chair and entertained with an electrical massage they never will…which is a nice thought but regrettably still illegal, at least on the mainland.

[..] Despite the dark pleasure it would give me to label our political and economic elites: ‘as thick as two short planks’…the truth is that many of them are not. It’s far worse than that I’m afraid. They are ‘liars’. The politicians, central bankers, economists and journalists who understand the situation we face, but do nothing to address it, are discrediting the positions of responsibility that they hold…by lying through omission, by obfuscation, through denial, by issuing false and/or misleading information, and via the good old fashioned ‘art’ of bull$hitting straight to camera. Finally, and on a slightly lighter note, for anyone reading this who has been brainwashed with the idea that any theory or observation that can’t be reduced to an equation, is not real ‘economics’…here is an equation for you (but don’t expect your professor to like it):

(P + G) – M = I

Where ‘P’ is pensions, ‘G’ is ‘government intervention’, ‘M’ is media oversight, and ‘I’ is insolvency. Throughout recorded history, this equation has never failed to balance eventually…ask any legionnaire.

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Another -more palatable?!- way of phrasing UBI.

You’re Hired! A Guaranteed Job For Anyone Who Wants One (DJ)

Democrats have begun the presidency of Donald Trump exiled to the political wilderness. They’ve lost the White House, both houses of Congress, a shocking number of state governments, while the “blue state” vote has turned out to be really just the “blue city” vote. The party has cast about for solutions, battling it out over identity politics, the proper opposition strategy, and more. But Democrats might consider taking a cue from Trump himself. Namely, his relentless promises to bring back good-paying American jobs. “It’s the first and most consistent thing he discusses,” observed Mike Konczal, a fellow at the Roosevelt Institute, after reviewing Trump’s speeches. The President understands, as The New York Times’s Josh Barro noted, that most Americans think the purpose of private business is to provide good jobs, not merely turn a profit.

Even Trump’s xenophobia and white nationalism are not totally separate from this: Kicking out all the immigrants and rolling foreign competitors are critical components of how he would restore jobs. Democrats tend to treat jobs as the happy by-product of other goals like infrastructure revitalization or green energy projects. Or they treat deindustrialization and job dislocation as regrettable inevitabilities, offering training, unemployment insurance, health care, and so on to ameliorate their effects. All these policies are worthy. But a job is not merely a delivery mechanism for income that can be replaced by an alternative source. It’s a fundamental way that people assert their dignity, stake their claim in society, and understand their mutual obligations to one another. There’s pretty clear evidence that losing this social identity matters as much as the loss of financial security.

The damage done by long-term joblessness to mental and physical health is rivaled only by the death of a spouse. It wreaks havoc on marriages, families, mortality rates, alcoholism rates, and more. The 2008 crisis drove long-term unemployment into the stratosphere, and today it remains near a historic high. Trump went right at this problem, telling Michigan in October of 2016: “I am going to bring back your jobs.” Period. Democrats should consider making the same moon shot promise. But unlike Trump, they should back it up with a policy plan. And there’s an idea that could do the trick. It emerges naturally from progressive values. It’s big, bold, and could fit on a bumper sticker. It’s generally called the “job guarantee” or the “employer of last resort.” In a nutshell: Have the federal government guarantee employment, with benefits and a living wage, to every American willing and able to work.

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More pension troubles. Today Japan, tomorrow your neck of the woods.

Japan’s Middle-Aged ‘Parasite Singles’ Face Uncertain Future (R.)

Their youth long gone, members of Japan’s generation of “parasite singles” face a precarious future, wondering how to survive once the parents many depended on for years pass away. Some 4.5 million Japanese aged between 35 and 54 were living with their parents in 2016, according to a researcher at the Statistical Research and Training Institute on a demographic phenomena that emerged two decades ago, when youthful singles made headlines for mooching off parents to lead carefree lives. Now, without pensions or savings of their own, these middle-aged stay-at-homes threaten to place an extra burden on a social welfare system that is already creaking under pressure from Japan’s aging population and shrinking workforce.

Hiromi Tanaka once sang backup for pop groups, and epitomized the optimism of youth. “I got used to living in an unstable situation and figured somehow it would work out,” Tanaka told Reuters as she sat at the piano in a small parlor of an old house connected to her elderly mother’s next door. Now aged 54, Tanaka relies on income from giving private singing lessons to a dwindling number of students, and her mother’s pension to make ends meet. She has no pension plan of her own, and has used up most of her savings. “My father died last year so pension income was halved,” she said. “If things go on like this, my mother and I will fall together.” Tanaka is one of the growing ranks of “life-time singles,” whose numbers hit a record in 2015, according to data released this month that showed that among 50-year-olds, 1 in 4 men and 1 in 7 women were unmarried.

“During the ‘bubble economy’ until the mid-1990s, the 20-somethings were happily amusing themselves. They thought by the time they were in their 30s, they’d be married,” said Masahiro Yamada, a Chuo University sociologist who coined the term “parasite singles” in 1997. “But one-third never married and are now around age 50,” Yamada said. The trend is not only a factor behind Japan’s low birthrate and shrinking population. It also puts an extra damper on consumption since new household formation is a key driver of private spending. And since about 20% of the middle-aged stay-at-home singles rely on parents for support, they also threaten to weigh on social safety nets. “Once they use up inherited assets and savings, when nothing is left, they will go on the dole,” Yamada said.

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Casey gets lots of things spectacularly wrong. The EU did need trade pacts etc., to enhance, guarantee quality control. The EU did a lot of good things. But it got taken over by the shit that floats to the top: “The European Union in Brussels is composed of a class of bureaucrats that are extremely well paid, have tremendous benefits, and have their own self-referencing little culture. They’re exactly the same kind of people that live within the Washington, D.C. beltway.”

The EU’s Collapse Is Now “Imminent” (Doug Casey)

A free trade pact between different governments is unnecessary for free trade. An individual country interested in prosperity and freedom only needs to eliminate all import and export duties, and all import and export quotas. When a country has duties or quotas, it’s essentially putting itself under embargo, shooting its economy in the foot. Businesses should trade with whomever they want for their own advantage. But that wasn’t the way the Europeans did it. The Eurocrats, instead, created a treaty the size of a New York telephone book, regulating everything. This is the problem with the EU. They say it is about free trade, but really it’s about somebody’s arbitrary idea of “fair trade,” which amounts to regulating everything. In addition to its disastrous economic consequences, it creates misunderstandings and confusion in the mind of the average person.

Brussels has become another layer of bureaucracy on top of all the national layers and local layers for the average European to deal with. The European Union in Brussels is composed of a class of bureaucrats that are extremely well paid, have tremendous benefits, and have their own self-referencing little culture. They’re exactly the same kind of people that live within the Washington, D.C. beltway. The EU was built upon a foundation of sand, doomed to failure from the very start. The idea was ill-fated because the Swedes and the Sicilians are as different from each other as the Poles and the Irish. There are linguistic, religious, and cultural differences, and big differences in the standard of living. Artificial political constructs never last. The EU is great for the “elites” in Brussels; not so much for the average citizen.

Meanwhile, there’s a centrifugal force even within these European countries. In Spain, the Basques and the Catalans want to split off, and in the UK, the Scots want to make the United Kingdom quite a bit less united. You’ve got to remember that before Garibaldi, Italy was scores of little dukedoms and principalities that all spoke their own variations of the Italian language. And the same was true in what’s now Germany before Bismarck in 1871. In Italy 89% of the Venetians voted to separate a couple of years ago. The Italian South Tyrol region, where 70% of the people speak German, has a strong independence movement. There are movements in Corsica and a half dozen other departments in France. Even in Belgium, the home of the EU, the chances are excellent that Flanders will separate at some point.

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Another feature brought to you by the Troika.

Greece Needs To Start Having Babies Again or Face Financial Oblivion (Ind.)

People in Greece can’t afford to have more than one child, and many are opting to have none at all. Fertility doctor Minas Mastrominas tells the New York Times that some women have decided not to conceive, and single-child parents have been asking him to destroy their remaining embryos. He said: “After eight years of economic stagnation, they’re giving up on their dreams.” It isn’t just Greece suffering low birth rates. In fact the trend spreads to most of Europe, with Spain, Portugal and Italy also reporting dangerously low rates. Unemployment continues to be a serious issue in Greece. Rates are slightly lower than in 2016 when they were 23.9%, but are still very high at 23.5%. The slump has affected women more, with unemployment rates at 27% compared to 20% of men.

Child tax breaks and subsidies for large families have decreased, and the country stands at having to lowest budget in the EU for family and child benefits. During the height of the crisis, women postponed childbirth in favour of working. As the years dragged on, the rate of fertility decreased, making it biologically more difficult to conceive. Additionally, gender equality came to a standstill, and many women of ‘childbearing age’ were denied employment, or had their contract changed to part time involuntarily, as soon as they got pregnant. One of the most prominent areas that will be detrimentally affected is pensions and the welfare system. Additionally, according to Eurostat, such low birth rates – under 2.1 – could create a demographic disaster. This will have a knock-on effect on pensions, with fewer young people working.

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And the children we do have, we treat like this. No wonder there are fewer of them.

40% of Spanish Children Live in Poverty (EurA)

Spain has the EU’s third highest rate of child poverty, after Romania and Greece. EURACTIV Spain reports. After the economic crisis and years of austerity, child poverty is on the rise in wealthy countries, according to Unicef. In Spain, the proportion of children living below the poverty line increased by 9 percentage points between 2008 and 2014, to reach almost 40%. While child poverty in general rose significantly, the sharpest increase (56%) was among households of four people (two adults and two children) living on less than €700 per month, or €8,400 per year. Spain has the third widest gap in the EU, behind Latvia and Cyprus, between the levels of social protection offered to children and people over 65. During the crisis, Spain’s oldest citizens were much better protected than its youngest.

According to the Spanish Statistical Office, cited by Unicef, investment in the social protection of families fell by €11.5 billion between 2009 and 2015. Unicef also highlighted that families with children, large families, single-parent families and teenagers suffered the most from the effects of poverty. As for Madrid’s response to the crisis, the UN’s agency for children criticised its failure to contain child poverty. “Social protection policies are very fragmented and very unequal, with little focus on children,” Unicef said. For the organisation, this is due, among other causes, to the strong link between social security and workers’ contributions, and the fact that many of the state’s family aid programmes take the form of tax credits, which have little impact on low earners.

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They’ll get it awfully wrong. It’s too late in the game.

Ontario Set to Unveil Its Plan to Cool Toronto Housing (BBG)

Ontario is expected to impose a tax on “non-resident speculators” when it announces new measures Thursday to cool the red-hot housing market in Toronto, according to people familiar with the plans. The measures are intended to improve housing affordability, and address both supply and demand, the people said, speaking on condition of anonymity because the plans are not yet public. The measures are also said to include a new tax aimed at curbing purchases from non-resident speculators. [..] Home prices in the Toronto area climbed 6.2% last month, the biggest one-month gain on record, according to a benchmark price index by the Canadian Real Estate Association, and are up almost 30% in the past 12 months. Bank of Canada Governor Stephen Poloz said last week the price gains are “divorced” from the typical measures of demand, such as income growth and demographics, and said they are unsustainable.

“The focus has to be on runaway prices, more so than affordability per se,” Robert Hogue, a senior economist at Royal Bank of Canada, said in a phone interview. “The risk now is about expectations in the market, or market psychology, as you have both sellers and buyers expecting much higher prices.” The Toronto Star reported earlier, without saying where it got the information, that Sousa will announce some 10 measures ranging from rent controls to a new tax on speculators. The move comes a week before the province tables its budget on April 27, and two days after Sousa said the government recognizes that “now” is the time to address runaway home prices. Sousa on Tuesday met Canadian Finance Minister Bill Morneau and Toronto Mayor John Tory, who said that possible steps include taxing homes left empty for speculative purposes. Rent increases on newer buildings may be limited to about 1.5% above the inflation rate, which was at 2% in February, the Star reported.

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Daddy, please tell the story again of why we have regulators!

Feds Knew of 700 Wells Fargo Whistleblower Cases in 2010 (CNN)

America’s chief federal banking regulator admits it failed to act on numerous “red flags” at Wells Fargo that could have stopped the fake account scandal years earlier. One particularly alarming red flag that went unheeded: In January 2010, the regulator was aware of “700 cases of whistleblower complaints” about Wells Fargo’s sales tactics. An internal review published on Wednesday by the Office of the Comptroller of the Currency found that the regulator didn’t live up to its responsibilities. The report found that oversight of Wells Fargo was “untimely and ineffective” and federal examiners overseeing the bank “missed” several opportunities to uncover the problems that led to the creation of millions of fake accounts. The review painted a damning picture of the OCC’s ability to spot what in retrospect should have been obvious problems at one of the nation’s biggest banks.

The OCC did confront Carrie Tolstedt, then head of Wells Fargo’s community bank, about the stunning number of whistleblower claims. However, there are no records that show that federal inspectors “investigated the root cause,” or force Wells Fargo to probe it. It’s now clear that root cause of Wells Fargo’s problems – both the creation of fake accounts and the related 5,300 firings – was the notoriously aggressive sales goals targets set by senior management. At one point, rank and file bankers were asked to open as many as eight accounts per customer. That’s why the bank has eliminated them. From top management to Wells Fargo’s board of directors, everyone turned a blind eye to these issues. There’s evidence now that some of this was flagged as early as 2004 to management.

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Stone states the obvious.

So It Goes (Oliver Stone)

I confess I really had hopes for some conscience from Trump about America’s wars, but I was wrong – fooled again! – as I had been by the early Reagan, and less so by Bush 43. Reagan found his mantra with the “evil empire” rhetoric against Russia, which almost kicked off a nuclear war in 1983 – and Bush found his ‘us against the world’ crusade at 9/11, in which of course we’re still mired. It seems that Trump really has no ‘there’ there, far less a conscience, as he’s taken off the handcuffs on our war machine and turned it over to his glorified Generals – and he’s being praised for it by our ‘liberal’ media who continue to play at war so recklessly. What a tortured bind we’re in. There are intelligent people in Washington/New York, but they’ve lost their minds as they’ve been stampeded into a Syrian-Russian groupthink, a consensus without asking – ‘Who benefits from this latest gas attack?’

Certainly neither Assad nor Putin. The only benefits go to the terrorists who initiated the action to stave off their military defeat. It was a desperate gamble, but it worked because the Western media immediately got behind it with crude propagandizing about murdered babies, etc. No real investigation or time for a UN chemical unit to establish what happened, much less find a motive. Why would Assad do something so stupid when he’s clearly winning the civil war? No, I believe America has decided somewhere, in the crises of the Trump administration, that we will get into this war at any cost, under any circumstances – to, once again, change the secular regime in Syria, which has been, from the Bush era on, one of the top goals – next to Iran – of the neoconservatives. At the very least, we will cut out a chunk of northeastern Syria and call it a State.

Abetted by the Clintonites, they’ve done a wonderful job throwing America into chaos with probes into Russia’s alleged hacking of our election and Trump being their proxy candidate (now clearly disproved by his bombing attack) – and sadly, worst of all in some ways, admitting no memory of the same false flag incident in 2013, for which again Assad was blamed (see Seymour Hersh’s fascinating deconstruction of this US propaganda, ‘London Review of Books’ December 19, 2013, “Whose sarin?”). No memory, no history, no rules – or rather ‘American rules.’ No, this isn’t an accident or a one-off affair. This is the State deliberately misinforming the public through its corporate media and leads us to believe, as Mike Whitney points out in his brilliant analyses, “Will Washington Risk WW3” and “Syria: Where the Rubber Meets the Road,” that something far more sinister waits in the background.

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BBG can’t even run a story on climate anymore without adding “..the emerging risk of an emboldened and growing Russian empire..”, and more of such useful hints.

A Melting Arctic Changes Everything (BBG)

The story of the Arctic begins with temperature but it’s so much more—this is a tale about oil and economics, about humanity and science, about politics and borders and the emerging risk of an emboldened and growing Russian empire. The world as a whole has warmed about 0.9 degrees Celsius (1.7 degrees Fahrenheit) since 1880. Arctic temperatures have risen twice that amount during the same time period. The most recent year analyzed, October 2015 to September 2016, was 3.5C warmer than the early 1900s, according to the 2016 Arctic Report Card. Northern Canada, Svalbard, Norway and Russia’s Kara Sea reached an astounding 14C (25F) higher than normal last fall. Scientists refer to these dramatic physical changes as “Arctic amplification,” or positive feedback loops. It’s a little bit like compound interest.

A small change snowballs, and Arctic conditions become much less Arctic, much more quickly. “After studying the Arctic and its climate for three-and-a-half decades,” Mark Serreze, director of the National Snow and Ice Data center, wrote recently. “I have concluded that what has happened over the last year goes beyond even the extreme.” The heat is making quick work of its natural prey: ice. Scientists track the number of “freezing-degree days,” a running seasonal tally of the amount of time it’s been cold enough for water to freeze. The 2016-2017 winter season has seen a dramatic shortfall in coldness—more than 20% below the average, a record. Sea ice has diminished much faster than scientists and climate models anticipated. Last month set a new low for March, out-melting 2015 by 23,000 square miles.

Compared with the 1981-2010 baseline, the average September sea-ice minimum has been dropping by more than 13% per decade. A recent study in Nature Climate Change estimated that from 30-50% of sea ice loss is due to climate variability, while the rest occurs because of human activity. Receding ice decreases the Earth’s overall reflectivity, making the Arctic darker and therefore absorbing even more heat. The ice is not all the same age or thickness, although it has become somewhat more uniform. In 1985, about 45% of Arctic sea ice was made up of older and thicker multi-year ice. By 2016, that number shrank to 22%.

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Apr 192017
 
 April 19, 2017  Posted by at 9:06 am Finance Tagged with: , , , , , , , , ,  2 Responses »
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Jan van Eyck Saint Barbara 1437

 

The Great Western Economic Depression (Nielson)
How Western Civilisation Could Collapse (BBC)
Why the Federal Reserve Is Bad for America (DDMB)
Trump’s New Problem: Americans Aren’t Shopping (CNN)
British PM Wants Election Now, Before Cost of Brexit Becomes Clear (ICept)
UK Tory MPs Still Under Investigation For Election Fraud (Can.)
China’s $8.5 Trillion Shadow Bank Industry Is Back in Full Swing (BBG)
So China’s Authorities Crack Down on Housing Speculation? (WS)
Subsidiarity – A European Union Smokescreen To Justify Failure (Bilbo)
Greece’s Migration Policy Ministry to Spread Migrants in Small Towns (GR)
How the Greek Crisis is Profitable for the International Monetary Fund (GR)
Key South Africa Leopard Population Crashing (AFP)

 

 

“Consider 0% and near-zero interest rates to be the economic equivalent of a defibrillator: the most-extreme, last-resort attempt to “stimulate” the human body when it is near death. Our economies have had this economic defibrillator attached to them for more than eight years – without the slightest glimmer of life.”

The Great Western Economic Depression (Nielson)

Western economies are “recovering”. How do we know this? We are told this, over and over and over again by our governments. Then this assertion is repeated thousands of times more by the dutiful parrots of the Corporate media. The problem is that in the real world there is not a shred of evidence to support this assertion. In the U.S.; ridiculous official lies were created claiming the creation of 15 million new jobs. In reality, there are three millionless Americans with jobs today than at the official end of the “recession”. These imaginary jobs are invented by assorted statistical frauds, with the primary deceit being so-called “seasonal adjustments”. To be legitimate, all seasonal adjustments must to net to zero at the end of each year. Instead, in the U.S.A., the biggest job creator in the nation every year is the calendar.

Beyond the grandiose but absurd claims of new jobs in the U.S., there have been few signs of economic health across the Corrupt West. Despite this, these traitorous regimes continue the pretense that their horrific mismanagement of our economies is making things better rather than worse. There are numerous subtle means of demonstrating that Western economies have never been in more calamitous ill health than they are today. Fortunately, there are also two very large and important indicators which provide absolute proof that all of the economies of the Corrupt West are in a Greater Depression: interest rates and energy demand. Regular readers have often seen the observation in these commentaries that interest rates across the West have never been this low for this long in the entire history of these nations – not even close. Why not? Two reasons:

1) Interest rates this low have always been perceived (by our governments and all legitimate economic commentators) as being so reckless that any short-term benefit from such rates would have been more than offset by long-term harm.

2) The reason why our governments have always deemed interest rates this low to be reckless is that in remotely healthy economies such rates would cause these economies to “over-heat” so rapidly and extremely that they would reach unsustainable levels of production and demand.

Are our economies over-heating? No. Nothing could be further from the truth. We see nothing but over-capacity all around us: one hundred million permanently unemployed people across the West, relentless business closures, declining real wages, and near-empty shopping malls (in “consumer economies”). Interest rates this low are supposed to cause such rapid business expansion that the economy suffers from a labour shortage. Why are there a hundred million people unemployed across the West instead of labour shortages? Regular readers have seen this question answered in the past in the form of a metaphor.

Consider 0% and near-zero interest rates to be the economic equivalent of a defibrillator: the most-extreme, last-resort attempt to “stimulate” the human body when it is near death. Our economies have had this economic defibrillator attached to them for more than eight years – without the slightest glimmer of life. What would happen to a human body if it was defibrillated continuously for more than eight years? Charred meat. This is what Western economies have become: charred meat.

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Bit bland, because BBC. But useful to note that inequality collapses civilizations.

How Western Civilisation Could Collapse (BBC)

While it’s impossible to predict the future with certainty, mathematics, science and history can provide hints about the prospects of Western societies for long-term continuation. Safa Motesharrei, a systems scientist at the University of Maryland, uses computer models to gain a deeper understanding of the mechanisms that can lead to local or global sustainability or collapse. According to findings that Motesharrei and his colleagues published in 2014, there are two factors that matter: ecological strain and economic stratification. The ecological category is the more widely understood and recognised path to potential doom, especially in terms of depletion of natural resources such as groundwater, soil, fisheries and forests – all of which could be worsened by climate change.

That economic stratification may lead to collapse on its own, on the other hand, came as more of a surprise to Motesharrei and his colleagues. Under this scenario, elites push society toward instability and eventual collapse by hoarding huge quantities of wealth and resources, and leaving little or none for commoners who vastly outnumber them yet support them with labour. Eventually, the working population crashes because the portion of wealth allocated to them is not enough, followed by collapse of the elites due to the absence of labour. The inequalities we see today both within and between countries already point to such disparities.

For example, the top 10% of global income earners are responsible for almost as much total greenhouse gas emissions as the bottom 90% combined. Similarly, about half the world’s population lives on less than $3 per day. For both scenarios, the models define a carrying capacity – a total population level that a given environment’s resources can sustain over the long term. If the carrying capacity is overshot by too much, collapse becomes inevitable. That fate is avoidable, however. “If we make rational choices to reduce factors such as inequality, explosive population growth, the rate at which we deplete natural resources and the rate of pollution – all perfectly doable things – then we can avoid collapse and stabilise onto a sustainable trajectory,” Motesharrei said. “But we cannot wait forever to make those decisions.”

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Seeing the world through beer goggles.

Why the Federal Reserve Is Bad for America (DDMB)

Commercial real estate and bonds are more overvalued than at any time in history and stocks are trading at their priciest level save one period, the late 1990s before the dotcom implosion. The beer goggles, it would seem, have blinded investors to the bubble wrap that’s enveloped their portfolios. There are a few brave souls at the Fed who have raised a red flag. On March 22nd, Boston Fed President Eric Rosengren warned, “…we must acknowledge that the commercial real estate sector has the potential to amplify whatever problems may emerge when we at some point face an economic downturn.”

Wiser words, especially given so few who recall that it was not the decline in oil prices that made the late 1980s such a painful period for the economy, but rather the crash in commercial real estate the energy crunch catalyzed. Underlying the multiple overheating markets is a persistent underappreciation of financial instability among Fed policymakers. The institution, overladen as it is with PhD economists, has yet to revisit the models that drive its setting of interest rate policy. Had the Fed’s inflation metrics taken into account runaway stock prices in the late 1990s and skyrocketing home prices in the early 2000s, it’s likely they would have intervened to tighten financial conditions much sooner than they did. Revisiting the wisdom of former Fed chair McChesney Martin is useful:

The danger with these econometricians is they don’t know their own limitations, and they have a far greater sense of confidence in their analyses than I have found to be warranted. Such people are not dangerous to me because I understand their limitations.

They are, however, dangerous to people like you and the politicians because you don’t know their limitations, and you are impressed and confused by the elaborate models and mathematics. The flaws in these analyses are almost always embedded in the assumptions on which they are based. And that is where broader wisdom is required, a wisdom that these mathematicians generally do not have.

You always want these technical experts on tap in positions like this, but never on top. The hope is that President Donald Trump heeds McChesney Martin’s 1970s-era wisdom, that he respects the wishes of those who originally envisioned the Fed as an appreciably more intellectually diverse entity. After all, the original 1913 Federal Reserve Act requires the president to appoint leaders across a diversity of industries.

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How is it possible that these people completely miss out on the reason why? Which is: they have no money to spend. They’re not stingy, or skeptical, they’re simply poor.

Trump’s New Problem: Americans Aren’t Shopping (CNN)

President Trump keeps pushing “Buy American.” He’s planning to tout it again at a stop in Wisconsin on Tuesday. But the alarming reality is Americans aren’t spending much money on anything right now, regardless of where it’s made. Retail sales declined in February and March from the prior month, according the Commerce Department. Shoppers haven’t been this stingy since early 2015, and it’s likely to hurt the economy. The U.S. is on track for very sluggish 0.5% growth in the first three months this year, according to the latest estimates from Macroeconomic Advisers and the Atlanta Federal Reserve. That falls massively short of the 4% growth that Trump has promised. Trump loves to plug how Americans’ confidence in the economy has skyrocketed since he won the election. He’s right.

Consumers, businesses (big and small) and investors are all feeling a lot more optimistic, according to various surveys. But all that enthusiasm isn’t translating into more shopping, which drives the U.S. economy. About 70% of the American economy comes from people buying stuff. Kate Warne, a long-time investment strategist at Edward Jones, calls this the era of “skeptical optimism.” “People are more optimistic, but they’re skeptically optimistic,” Warne told CNNMoney. “I don’t think they are confident yet that things will change as much as they would like them too.” [..] Another twist is that Republicans are a lot more optimistic than Democrats. [..] Overall, the University of Michigan index of consumer confidence has jumped from 87 in October to 98 today. But that headline figure masks a wild division.

Democrats believe “a deep recession” is coming under Trump (their confidence index is a mere 55), while Republicans expected a “new era of robust economic growth” (their index level is a sky-high 122). Independents are in between, as you might expect. If half the country thinks recession is near, that might explain why retail sales are slowing, or even showing some signs of decline.

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Good observation. But a good chance for May’s opponents.

British PM Wants Election Now, Before Cost of Brexit Becomes Clear (ICept)

Prime Minister Theresa May, who was actually against Brexit before she was for it, made another dramatic U-turn on Tuesday, declaring that Britain needs to elect a new Parliament in June, three years ahead of schedule, despite her clear promise not to call an election when she campaigned to succeed David Cameron last year. Her decision to subject Britons to a third national election campaign in just over two years — after the 2015 general election and the referendum on exiting the European Union ten months ago — was met with something less than enthusiasm by many voters. In her address to the nation, May claimed that a fresh election was necessary to keep opposition parties from obstructing her Conservative government during negotiations over Britain’s withdrawal from the European Union.

That argument rang hollow, however, given that the opposition Labour Party had just voted for the government’s bill to begin the process of leaving the E.U. and is not campaigning to overturn the results of last year’s referendum. To most political observers, it was clear that May’s decision was driven by something else: a desire to capitalize on the unprecedented weakness of the Labour Party, which is divided over Brexit, and its own leader, Jeremy Corbyn, and has trailed the Conservatives by up to 21 points in recent polls. As the writer Robert Harris and the broadcaster James O’Brien suggested, it might also be in May’s own self-interest, and that of her party, to ask the nation for a five-year term now, before the costs of Brexit become apparent. Although even many die-hard Labour supporters seemed resigned to defeat, some on the left welcomed the chance to vote against what they see as the potentially disastrous policy of a complete break with Europe.

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What is this, Brazil?

20 UK Tory MPs Still Under Investigation For Election Fraud (Can.)

Theresa May has announced a snap election on 8 June 2017. But as the country prepares for another election campaign, it’s important to remember that MPs in her party are being investigated for election fraud for the 2015 general election. And given the mainstream media’s reluctance to report the issue, we need to ensure it is kept firmly on the agenda. 12 police forces have submitted files to the Crown Prosecution Service (CPS) over allegations that up to 20 MPs and/or their agents broke election spending limits in the 2015 election. The CPS is deciding whether charges should be brought. And a decision is expected soon – and is likely to come during the election campaign. The allegations centre around the ‘battle bus’ campaign, and associated expenses such as hotel rooms.

Many argue that the campaign promoted prospective local MPs in key seats. Under election law, any expenditure which promotes a local candidate should be covered locally. But the ‘battle bus’ and associated costs were declared nationally. Each constituency has a fixed amount of money it can spend locally. And including the ‘battle bus’ expenditure would have meant many candidates overspent. Additionally, the Election Commission has fined the Conservatives £70,000 for multiple breaches in connection to election spending during the 2015 campaign. But it isn’t just the ‘battle bus’ campaigns where the Conservatives have been accused of fraud. As The Canary previously reported, there are questions over how the party used social media and, particularly, Facebook, to target voters.

A report by the London School of Economics has also warned [pdf] that Facebook targeting opens the door to electoral fraud: “The ability to target specific people within a particular geographic area gives parties the opportunity to focus their attention on marginal voters within marginal constituencies. This means, in practice, that parties can direct significant effort – and therefore spending – at a small number of crucial seats. Yet, though the social media spending may be targeted directly at those constituencies, and at particular voters within those constituencies, the spending can currently be defined as national, for which limits are set far higher than for constituency spending.”

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“..the property and construction industries, which contribute about 25 to 30% of China’s economic output..”

China’s $8.5 Trillion Shadow Bank Industry Is Back in Full Swing (BBG)

China’s shadow banking is back in full swing, an unintended side effect of the government’s campaign against financial leverage, which has curbed traditional lending and squeezed bond financing. Data from the central bank Friday showed that off-balance sheet lending surged 754 billion yuan ($109 billion) in March, taking the first quarter’s total increase to a record 2.05 trillion yuan. Efforts by the People’s Bank of China to curb fresh lending may have prompted borrowers, especially real estate developers, to resort to alternative forms of financing, said Xu Gao at Everbright Securities. Since late last year, the PBOC and regulators have taken steps to rein in risks to China’s financial system, including raising short-term interest rates, clamping down on leverage in the bond market, and curbing funding for property speculation.

The measures have sent debt-reliant borrowers scurrying to shadow financing, an industry Moody’s Investors Service estimates is worth about $8.5 trillion, and another area where regulators are trying to reduce risk. “You must tread a fine line,” said Everbright’s Xu. “Choking the bond market to death doesn’t mean the financing needs will be curbed as well. Instead, it will drive funding to areas that are more unreachable for the regulators. At the end of the day, risks may be declining in the bond market, but in the overall financial system, they would be rising.” The PBOC in January ordered the nation’s lenders to strictly control new loans in the first quarter of the year, putting a particular emphasis on mortgage lending to contain runaway home prices.

The move saw banks extending 4.22 trillion yuan of new loans in the first quarter, 8.5% less than the same period in 2016. It was the first year-on-year decline since 2011. The government is trying to contain the possibility of a shock emanating from the property and construction industries, which contribute about 25 to 30% of China’s economic output, Moody’s estimates. The increasing role of shadow banks as providers of finance is among characteristics that have raised the financial system’s vulnerability to a property-related shock, Moody’s said in a March report. In a move to curb shadow banking, financial regulators are working together to draft sweeping new rules for asset-management products, people familiar with the matter said in February.

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Cracking down on what is 25-30% of your economy?!

So China’s Authorities Crack Down on Housing Speculation? (WS)

Dozens of cities have imposed ever tougher buying restrictions, more stringent down-payment requirements especially for second homes, stricter resale limits, etc. etc., and they’ve redoubled their efforts since mid-March when it became apparent that the prior redoubled efforts had not produced results, as people figured out how to get around them. But China depends heavily on property development and property speculation for its economic growth, and no one really wants to bring it down: The National Bureau of Statistics (NBS) reported on Monday that first-quarter growth in property investment – residential, commercial, and office spaces combined – soared 9.1%. This red-hot property sector, and the 40 other sectors that are directly affected by it, drove China’s official GDP growth in Q1 to 6.9%.

As always, analysts keep saying that it would take a few more months for the restrictions to take effect and start cooling the market. That line was once again repeated on Monday, officially: “Because the latest round of cooling measures came out after March 17, their impact on the entire economy including home prices may show in April or later,” Mao Shengyong, a spokesman for the NBS said at a briefing, according to Reuters. Houses are for habitation, not for speculative investment, he said. That would be a novel concept in these crazy times. But who really wants to cool the market, when state-owned developers and state-owned banks are firing it up? Yet, everyone sees the risks. Reuters: “Most analysts agree an overheating property market poses the single biggest risk to China’s economic growth, with increasingly tough government measures to cool soaring prices raising the risk of a nasty crash.”

But the cooling off is not happening yet. New construction measured in floor space soared 11.6% in the first quarter, year-over-year, the NBS reported, and sales jumped 19.5%, though that growth rate was down a notch from the year 2016, when sales at soared 22.5%, the highest in seven years, as the boom in first-tier cities was spilling into second- and third-tier cities. With state-owned developers, funded by state-owned banks, firing up much of the show, and with speculators, who assume the government has their back, running wild in a gushing celebration of ever-soaring prices and huge automatic profits, there’s little chance that this scheme that has already transcended irrational exuberance will simply “cool” to a level of “stability,” and plateau somewhere soon, as it is hoped. Phenomenal bubbles like this don’t go quietly.

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“The Oxford Dictionary defines subsidiarity as “(in politics) the principle that a central authority should have a subsidiary function, performing only those tasks which cannot be performed at a more local level”

Subsidiarity – A European Union Smokescreen To Justify Failure (Bilbo)

One of the various smokescreens that were erected by the European Commission and the bevy of economists that it either paid or were ideologically aligned to justify the design of the monetary union around the time of the Maastricht process was the concept of subsidiarity. In 1993, the Centre for Economic Policy Research (a European-based research confederation) published its Annual Report – Making Sense of Subsidiarity: How Much Centralization for Europe? – which attempted to justify (ex post) the decisions imported from the 1989 Delors Report into the Maastricht Treaty that eschewed the creation of a federal fiscal capacity.

It was one of many reports at the time by pro-Maastricht economists that influenced the political process and pushed the European nations on their inevitable journey to the edge of the ‘plank’ – teetering on the edge of destruction and being saved only because the European Central Bank has violated the spirit of the restrictions that a misapplication of the subsidiarity principle had created. It is interesting to reflect on these earlier reports. We find that the important issues they ignored remain the central issues today and predicate against the monetary union ever being a success. One of the authors of the 1993 Report, Jean-Pierre Danthine has recently reflected on the work some 25 years after its publication.

In his Op Ed (April 12, 2017) – Subsidiarity: The forgotten concept at the core of Europe’s existential crisis – he argues that “the disenchantment with Europe can arguably be traced to the failed application of the subsidiarity principle that was enshrined in the Maastricht Treaty.” He recognises that: “Europe’s deep-seated institutional design problem is tied to the inevitable trade-off between efficiency-enhancing centralisation and democracy-enhancing sovereignty.” Let’s go back to the Delors Report 1989, which I argue in my book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale – misapplied the concept of subsidiarity. It is clear from the historical record that the Delors Committee mainly relied on the concept of subsidiarity to justify the absence of a European-level fiscal function in the plan it outlined for monetary union.

The term, subsidiarity, a long-standing concept in political theory (as far back to Aristotle), entered the European dialogue in 1989 as part of a new ‘Eurolanguage’ as the political leaders were intent on pushing through the economic and monetary union. The Oxford Dictionary defines subsidiarity as “(in politics) the principle that a central authority should have a subsidiary function, performing only those tasks which cannot be performed at a more local level”. The concept was popularised by the Roman Catholic Church in the 1931 encyclical, Quadragesimo Anno, which pronounced that: “It is a fundamental principle of social philosophy, fixed and unchangeable, that one should not withdraw from individuals and commit to the community what they can accomplish by their own enterprise and/or industry.”

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An ‘everybody gets rich’ scheme.

Greece’s Migration Policy Ministry to Spread Migrants in Small Towns (GR)

The Migration Policy Ministry is developing a plan to spread about 20,000 migrants in small towns and rural communities across Greece, offering economic incentives to locals. According to a Proto Thema report, the project has been implemented in the town of Livadia with relative success. Now the ministry is looking for similar communities (with populations of 10,000-15,000) that have economic problems. According to the plan, such communities can accommodate 500-1,500 migrants in rented homes, while migrants can buy food and services using coupons provided by the State and the UNHCR. As authorities expect that some communities will be hostile to Muslim migrants, the ministry aims at counter-balancing religious differences and possible frictions by offering strong financial incentives to boost the ailing local economies.

The project will be extended in towns of Epirus, Western Macedonia and North-Western Greece that have high unemployment rates, provided that they are not located close to international borders. The Migration Policy Ministry also plans to offer high wages to people who wish to work in the migrant hospitality infrastructure. According to the Proto Thema report, a project coordinator working in Livadia right now earns an annual salary of 24,933 euros and a housing program director earns 22,666, wages that are double of that of an average public sector employee. Similar wages are offered to people who wish to work with migrants. The report says that such wages and overall economic incentives aim at mitigating any reactions by locals. Characteristically, the report says, apartments of 60-90 square meters in Livadia are rented for around 400 euros, again, a price above an average rental.

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“Interest rates of 3.6% for a super senior risk free lender were almost three times as high as the more junior ESM loans..”

How the Greek Crisis is Profitable for the International Monetary Fund (GR)

The relationship between Greece and the International Monetary Fund has been, from the start, very contentious to say the least. There is no question that Greece needs to build the trust and confidence of taxpayers and the global capital markets. But, the IMF advice more often than not seems to be more political or ideological than practical. However, the IMF should not be used as a scapegoat for successive Greek governments disappointing performance in building trust and confidence. The EC, especially Germany, enlisted the IMF to act as a foil for any failed policies, arguably smart political insurance. As the political foil, the IMF was provided with a cash cow to milk: Greece. And, milk Greece it has.

Greece has paid almost €4 billion in fees and interest to the IMF since the start of the programme. Interest rates of 3.6% for a super senior risk free lender were almost three times as high as the more junior ESM loans. Greece payments are so important to the IMF that they were 118% of IMF’s operating profit. Since 2010, IMF personnel expense have increased 48% compared to a decline of 8% in the prior seven years. And, not to go unnoticed, the IMF newly refurbished headquarters is 31% over budget at $562 million. With 97% of IMF’s cost now essentially fixed, losing Greece, Portugal, and Ireland, would cause massive financial trauma at the IMF and may well render it insolvent. So, the obvious question is: does the IMF have an incentive to keep Greece in crisis to protect its own financial survival and continue to milk the Greek cow?

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How many will just glance over a story like this? In only a few years, species are pushed over a cliff.

Key South Africa Leopard Population Crashing (AFP)

The leopard population in a region of South Africa once thick with the big cats is crashing, and could be wiped out within a few years, scientists warned on Wednesday. Illegal killing of leopards in the Soutpansberg Mountains has reduced their numbers by two-thirds in the last decade, the researchers reported in the Royal Society Open Science journal. “If things don’t change, we predict leopards will essentially disappear from the area by about 2020,” lead author Samual Williams, a conservation biologist at Durham University in England, told AFP. “This is especially alarming given that, in 2008, this area had one of the highest leopard densities in Africa.” The number of leopards in the wild worldwide is not known, but is diminishing elsewhere as well. The “best estimate” for all of South Africa, said Williams, is about 4,500.

What is certain, however, is that the regions these predators roam has shrunk drastically over the last two centuries. The historic range of Panthera pardus, which includes more than half-a-dozen sub-species, covered large swathes of Africa and Asia, and extended well into the Arabian Peninsula. Leopards once roamed the forests of Sri Lanka and Java unchallenged. Today, they occupy barely a quarter of this territory, with some sub-species teetering on the brink of extinction, trapped in 1 or 2% of their original habitat. Leopards were classified last year as “vulnerable” to extinction on the International Union for the Conservation of Nature’s Red List of endangered species, which tracks the survival status of animals and plants.

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Apr 182017
 
 April 18, 2017  Posted by at 9:26 am Finance Tagged with: , , , , , , , , , ,  2 Responses »
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Albrecht Dürer Study of the left hand of an apostle (for the Heller Altar) c.1508

 

Trump’s Next Big Policy Reversal Could Be On The TPP (CNBC)
Strong Dollar Could Cause Bond Market Crash – Martin Armstrong (USAW)
Stocks, Bonds Diverge Over Trump Tax Reform, Stimulus Odds (CNBC)
We’re Borrowing Our Way to Economic Disaster – Stockman (DR)
BMO Bundles Uninsured Mortgages in a Canadian Bond First
UK Will Never Build Enough Homes To Keep Prices Down (Tel.)
Greek Insurance Company Can Become a Weapon for China in Europe (GR)
Greek Debt Must Be Sustainable For IMF To Join Bailout – Lagarde (R.)
Taxation is Theft (Napolitano)
Is America’s Alliance with Turkey Doomed? (SCF)
Erdogan Says He Doesn’t Care What Europe Thinks About Turkey’s Vote (BBG)
Opening Of UN Files On Holocaust Will ‘Rewrite Chapters Of History’ (G.)
Critically Endangered Species Poached In World’s Protected Natural Sites (AFP)
At Least 8,500 Migrants Rescued From Mediterranean In Three Days (CNN)

 

 

And why not? He flip-flopped 5 times in one day last week, and his popularity rose.

Trump’s Next Big Policy Reversal Could Be On The TPP (CNBC)

From NATO to health care, President Donald Trump has evidenced he is comfortable making major policy flip-flops. His most recent reversal came last week, when a U.S. Treasury report declined to name China as a currency manipulator despite Trump’s repeated promises to formally accuse Beijing — a signature pledge during his campaign trail. So, what could Trump backtrack on next? One analyst said he hopes it will be the Trans-Pacific Partnership, the world’s largest trade deal that Trump withdrew from in January on the claim that it would hurt U.S. manufacturing. “Whoever thought that Trump would let China, a rival, off the hook on currency? If he can do that with a country that’s clearly not a friend, maybe he could reconsider reversing himself on TPP for a friend like Japan,” Sean King, senior vice president of Park Strategies, told CNBC on Tuesday.

Japan was set to be a major beneficiary of TPP, particularly the country’s auto sector that would have obtained cheaper access to U.S. markets. Tokyo, which has long lamented the trade pact would be “meaningless” without the U.S., has decided to forge ahead with the other remaining 10 participating nations to revive the deal but many are doubtful of whether the TPP will be a game-changer in Washington’s absence. Trump still has time to change his mind on TPP, King warned, noting that the treaty text remains valid until February 2018. “Trump said [TPP] was a disaster, but I’m sure the other members would be willing to make concessions to get the U.S. back in, just like South Korea was willing to make concessions to Obama for his endorsement of the U.S.-Korea [free trade agreement],” King said. “He’s certainly made greater reversals and claimed victory. Why not do this for our friends who want to stand with us against countries like China and North Korea? I’m all for it.”

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“There is no place to go but the dollar at this point.” “..you don’t collapse the core economy. It’s always the peripheral coming in.”

Strong Dollar Could Cause Bond Market Crash – Martin Armstrong (USAW)

Renowned financial expert Martin Armstrong says the biggest risk out there is the effect a strong U.S. dollar has on the global bond market. Armstrong explains, “There’s these people who keep saying the dollar is going to crash. If the dollar crashes, the world is happier and basically celebrating. You have half the U.S. debt equivalent in emerging market debt issued in dollars. If the dollar goes up, they are in trouble. Then you are going to see sovereign defaults .. The U.S. is not going to default, but as you start defaults elsewhere outside the country, it makes people begin to get concerned about sovereign debt. Sovereign debt is the worst of all. It’s not secured. If the U.S. government defaulted on its debt, what would happen? You cannot go down to the National Gallery and start lifting Picassos.”

So, a bond market crash is a distinct possibility? Armstrong says, “Yes. All these things are contagions .. The real risk is coming from Europe and Asia. That is the real risk .. There is no place to go but the dollar at this point.” If and when a global collapse comes, it will come from China or Europe. Armstrong says, “Yes, because you don’t collapse the core economy. It’s always the peripheral coming in. It was the same thing in the Great Depression. It wasn’t the fact that the U.S. defaulted. The problem was the first bank that went down was in Austria, and it happened to be owned in part by the Rothschilds. When people hear a bank owned by the Rothschilds went down, people started to sell off all other banks. Then all the countries defaulted.”

Armstrong says there is going to be a major “monetary reform” in the not so distant future, and the U.S. will end up with a dollar for domestic use and a dollar used for international trade, sort of like a “domestic dollar” and an “international trade dollar.” Armstrong says, “Yes. All it is doing is replacing the dollar as the reserve currency. That would satisfy China and Russia, and it would simply be maintained by an international board. I strongly advise against the IMF. It’s way, way too corrupt.” So, is gold a good asset to have with a coming currency reset? Armstrong says, “Yes, at that point, you are talking about a hedge against government. When you go through these monetary crises, effectively, all tangible assets rise in price, not just gold and silver. . . .

Tangible assets have a value to everybody globally. The downside is on real estate. I would never put 100% of my money in real estate because it is not moveable.” Fast-forward to now, and Armstrong predicts, “The economy is not going to come back. We are not going to see economic growth.” Where is all this taking the world? Armstrong, who is an expert on economic and political cycles, says, “You have to understand what makes war even take place? It does not unfold when everybody is fat and happy. Simple as that. You turn the economy down, and that’s when you get war. It’s the way politics works.”

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Are bonds the lesser bubble then?

Stocks, Bonds Diverge Over Trump Tax Reform, Stimulus Odds (CNBC)

Optimism that the Trump administration will be able to drive through a hefty pro-growth plan or tax package this year is fading by the day. Treasury Secretary Steve Mnuchin on Monday became the latest official to dial back expectations for a time table that included a tax plan by August. In an interview with the Financial Times, Mnuchin said getting tax reform by August was an “aggressive timeline” and would probably be delayed because of health care. In the bond market, there was little surprise. Bond yields, which move inversely to prices, have been falling for weeks as traders have become more skeptical that Washington will adopt any pro-growth policy this year. Stocks, meanwhile, have traded side ways recently, and the S&P 500 is still up 10% since election day, boosted by hope of fiscal stimulus and tax cuts.

Mnuchin’s remarks did not surprise markets, and, in fact, stocks rallied hard based on his comments that Treasury is looking at ways to raise funds to pay for the tax plan without the controversial border-adjustment tax. “That’s exactly why the [stock] market rallied. People hate the border-adjustment tax,” said Peter Boockvar at Lindsey Group. The tax is part of the Congressional tax reform plan and would slap a 20% tax on all imports but not tax exports. Opponents claim it could cause inflation and penalize consumers, while proponents say it would encourage more manufacturing in the U.S. and level the playing field for U.S. companies. The market was not surprised by the push back in the timeline for tax reform, since President Trump last week said health care would come ahead of taxes. Ever since Congress failed to vote on health care in March, the market has become increasingly doubtful a tax plan would get done any time soon.

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“Donald Trump is a tourist in the Imperial City of Washington D.C. He’s flipping, flopping and making it up as he goes.”

We’re Borrowing Our Way to Economic Disaster – Stockman (DR)

David Stockman joined the Fox Business and the show Mornings with Maria to discuss the tax reform highlights for the current White House and GOP platform and what he views as a real threat of economic disaster in the U.S. During the discussion Stockman highlights what to expect from a border adjustment tax possibility, the creation of jobs and the impact on Wall Street in the age of Donald Trump. Stockman takes to point the cause of tax reform in the current White House. He begins the segment noting, “I think the border adjustment tax will come out of the retailers margin – and it should. We do need revenue. We need to have a consumption tax, or a value added tax or a border adjustment tax – so that we may reduce taxation on wages and income. We desperately need more jobs in this country.

If you keep taxing the payroll at 15.5%, which we’re doing today, you’re not going to encourage the creation of jobs. You’re going to take what jobs there are and impact the take-home pay of those jobs.” David Stockman was then asked about his read on Donald Trump’s border tax proposals and the possibility of what the President described as a ‘reciprocal tax.’ “He has no idea what he’s talking about. He’s making it up as he goes along. Donald Trump is a tourist in the Imperial City of Washington D.C. He’s flipping, flopping and making it up as he goes.” “The border adjustment tax, or a value added tax is the way to get at the problem he’s talking about. Every other country in the world has a value added tax. You take it off the exports and put it on the imports. There is a proper way to do it and he ought to allow the republicans on the hill who understand that to move forward.

The idea that we can have a multi-trillion dollar tax cut and not pay for it with new revenue or spending cuts is dangerous. We are at $20 trillion in debt and it is headed to $30 trillion.” When asked about the pragmatic nature of a border adjustment tax, Stockman pressed “I think it’s basic math. If you want to cut the corporate tax rate to 20%, which I think would be wonderful, you’ve got to raise $2 trillion over the next ten years to pay for it. Where are you going to get the money? Are you going to close loopholes? I doubt that. The lobby effort will kill that. You need a new revenue source. If you don’t do that you’re stuck with the current tax system. You’re stuck with massive deficits that are going to kill this country. We are basically borrowing our way to economic disaster.”

[..] We are so “deep in the soup” debt wise and have such a massive, and building deficit that you have to have revenue neutral tax cuts. The border adjustment tax is dead. Without that you are not going to reduce the corporate tax rate down to 20% or 15%, etc.” “The Trump reflation fantasy is over. It is all downhill from here. The market it heading down 20 to 30% down, the 1600 on the S&P. We’re going to have negative shock after negative shock. It is about time they sober up. On April 28th the U.S government is going to shut down. That will be spring training on the continuing resolution until we get to MOAD in the summer.”

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Never been tried before.

BMO Bundles Uninsured Mortgages in a Canadian Bond First

Bank of Montreal is bundling uninsured residential mortgages into bonds in what could be the start of a new financing market for Canadian banks as the government scales back its support for home loans. The Toronto-based lender is planning to sell debt backed by nearly C$2 billion ($1.5 billion) of prime uninsured mortgages. That’s a new development in a country where big banks have historically packaged government-insured mortgages into bonds. If the Bank of Montreal deal is successful, other Canadian banks may follow its lead, providing banks with more financing to keep making mortgages, said Marc Goldfried, CIO at Canoe Financial. The net result may be that housing prices in Canada keep rising. “Right now the banks don’t have any other way to fund it, so there’s probably some form of internal limit on this kind of mortgage financing they’ll do,” Goldfried said by phone from Toronto.

But the Bank of Montreal deal may find headwinds, said Paul Gardner, partner and portfolio manager at Avenue Investment. Canada last year tightened access to the federal insurance to help tamp down rapid home price growth in areas like Toronto and Vancouver. The federal government or Ontario could craft more legislation to cool the housing market, Gardner said. The province’s finance minister is considering a foreign-buyers tax like the one that helped cool home prices in Vancouver. Canadian finance minister Bill Morneau, Ontario finance minister Charles Sousa, and Mayor John Tory are meeting in Toronto Tuesday to discuss the housing market in the Greater Toronto Area. “Residential mortgages, my God, it’s the last thing you want to invest in right now,” Gardner said by phone from Toronto. “When the capital markets are flush with cash, it makes sense that they would try at least to issue this stuff.”

[..] The bank will offer to renew the mortgage loans at the end of their term if the borrower is not in default, and if the borrowers satisfies the bank’s underwriting criteria at the time, which mitigates some of the risk of borrowers not being able to refinance. Canadian mortgage loans generally have a five-year term, and borrowers pay down their principal at a 25-to-30-year pace meaning they usually have to refinance a significant portion of their loan every five years.

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Oh boy. If these are the kind of people you rely on for advice, you’re in trouble.

UK Will Never Build Enough Homes To Keep Prices Down (Tel.)

Britain will never build enough houses to make property affordable for young people, according to research. A study presented to the Royal Economic Society’s annual conference said those hoping to get on the ladder may have to rely on windows of opportunity created by periodic slumps in the market. However, the overall trend will remain for residential property price rises to outpace salary growth, according to economists at the University of Reading. “The increases in housing supply required to improve affordability have to be very large and long-lasting; the step change would need to be much larger than has ever been experienced before on a permanent basis,” said Geoffrey Meen, Alexander Mihailov and Yehui Wang. The government has discussed moves to increase the supply of homes but the changes are on far too small a scale to act as a brake on price rises.

House prices in the UK stood at an average of £217,500 according to the Office for National Statistics. That is 7.7-times the average full-time salary in the UK of £28,200. By contrast in 2005 the average home cost £150,500, approximately 6.5-times the then-average full time salary of £22,888. Former Bank of England policymaker Kate Barker believes the country needs an additional 60,000 homes per year on top of those already being built. But the new paper argues there is little chance of this happening. “Although higher levels of house building are certainly desirable, the paper shows that there is a limit to what can be achieved by this route,” the report found. “The required increase in supply to stabilise the price to income ratio … is not feasible – permanent increases in construction would be required that have never been achieved in history.”

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The risks of garage-selling an entire country.

Greek Insurance Company Can Become a Weapon for China in Europe (GR)

It is no secret that the Chinese see Greece as a country that could help them get their foot (and saying) in the European Union. In GreekReporter’s recent documentary Athens Chinatown, it is the Cosco managing director in Greece who says the mediterranean country offers a strategic location and it was this factor that attracted Cosco to take over the Greek port of Piraeus. Furthermore, the editor of China-Greece times also states that the Chinese “see Greece as the gate to Europe.” The past few years, silently, China has looked into many Greek investments. After acquiring the Greek Port of Piraeus, now three Chinese companies are bidding for Greece’s biggest private insurer, Ethniki Asfalistiki. However what looks like a simple bidding, could possibly be of great importance to the future of Greece.

Established in 1891, Ethini Asfalistiki has invaluable contribution to the Greek economy for over a century. It is the largest insurance company in the country with total premiums of over €440 million and 18% market share, while it is in cooperation with the banking network for the sale of bank assurance products, provides access to a broad distribution network of about 500 offices. The estimated earnings for 2016 are €52 million. Ethniki Asfalistiki is also a sister company of Greece’s Ethniki Bank (National Bank), one of Greece’s four systemic banks. Whoever gets this bid will most likely acquire the bank as well. At the same time, another Chinese group has shown interest for Piraeus Bank. If they manage to close that deal then two out of Greece’s four main banks will be controlled by the Chinese. Eventually they will be able to have an important saying in the country’s economy, and maybe that’s what they are aiming for.

While the Chinese have done serious investments in Greece, this one, in combination with everything else they control can become a decisive factor on how much of a saying does Greece want the Chinese to have on the country’s future. Letting Ethniki Asfalistiki in the hands of China is probably allowing too much of their foothold in the Greek economy, which would mean a great political influence as well. China of course would like to be able to control and play with Greece’s economy in order to advance their interests. But it is dangerous for Greece when the country’s future becomes another argument on a geostrategic dialogue between the big powers. A forced Grexit threat, for example, could definitely be on the table and be directed to the EU or the U.S.A.

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That record is definitely broken beyond repair.

Greek Debt Must Be Sustainable For IMF To Join Bailout – Lagarde (R.)

The IMF will not take part in a bailout program for Greece if it deems the country’s debt is unsustainable, the international lender’s chief Christine Lagarde said in an interview published on Tuesday. Greece needs to implement reforms agreed by euro zone finance ministers earlier this month to secure a new loan under its €86 billion bailout programme, the third since 2010. The loan is needed to pay debt due in July, but talks continue and the IMF has not yet decided whether to join the bailout. The fund’s participation is seen as a condition for Germany to unblock new funds to Greece. “If Greek debts are not sustainable based on IMF rules and reasonable parameters, we will not take part in the program,” Lagarde told German newspaper Die Welt when asked if the IMF would take part in the plan if Greek debt is not restructured.

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Minor problem: so many people are dependent on Social Security. Highly relevant going forward.

Taxation is Theft (Napolitano)

With a tax code that exceeds 72,000 pages in length and consumes more than six billion person hours per year to determine taxpayers’ taxable income, with an IRS that has become a feared law unto itself, and with a government that continues to extract more wealth from every taxpaying American every year, is it any wonder that April 15th is a day of dread in America? Social Security taxes and income taxes have dogged us all since their institution during the last century, and few politicians have been willing to address these ploys for what they are: theft. During the 2012 election, then-Texas Gov. Rick Perry caused a firestorm among big-government types during the Republican presidential primaries last year when he called Social Security a Ponzi scheme. He was right. It’s been a scam from its inception, and it’s still a scam today.

When Social Security was established in 1935, it was intended to provide minimal financial assistance to those too old to work. It was also intended to cause voters to become dependent on Franklin Delano Roosevelt’s Democrats. FDR copied the idea from a system established in Italy by Mussolini. The plan was to have certain workers and their employers make small contributions to a fund that would be held in trust for the workers by the government. At the time, the average life expectancy of Americans was 61 years of age, but Social Security didn’t kick in until age 65. Thus, the system was geared to take money from the average American worker that he would never see returned.

Over time, life expectancy grew and surpassed 65, the so-called trust fund was raided and spent, and the system was paying out more money than it was taking in – just like a Ponzi scheme. FDR called Social Security an insurance policy. In reality, it has become forced savings. However, the custodian of the funds – Congress – has stolen the savings and spent it. And the value of the savings has been diminished by inflation. Today, the best one can hope to receive from Social Security is dollars with the buying power of 75 cents for every dollar contributed. That makes Social Security worse than a Ponzi scheme. You can get out of a Ponzi investment. You can’t get out of Social Security. Who would stay with a bank that returned only 75% of one’s savings?

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Essential reading on how the region came to be what it is.

Is America’s Alliance with Turkey Doomed? (SCF)

Shortly before his death in 1869, the pro-Western former Ottoman grand vizier and foreign minister Keçecizâde Mehmed Fuad Pasha commented, “It appeared preferable that . . . we should relinquish several of our provinces rather than see England abandon us.” In response to this commitment, the British made the territorial integrity of the Ottoman Empire against Russian aggression a key pillar of their foreign policy. Yet, in spite of the significance that Istanbul and London attached to their alliance in the 1850s, both sides were determined to eradicate each other by 1914. As Prime Minister Herbert Asquith put it, Britain was “determined to ring the death-knell of Ottoman dominion, not only in Europe, but in Asia as well.” In response, the Ottoman government described the British as “the greatest enemy” of not only the sultan’s empire but also of Islam itself.

The Anglo-Russian Great Game, waged across the vast lands stretching from Europe to Central Asia during the nineteenth century, rendered the Ottoman Empire an invaluable strategic asset in the eyes of British policymakers. Although the British public frowned upon the Ottoman Turks’ “peculiar Oriental ways,” and regarded them as “uncivilized Mohammedan barbarians” for their treatment of Christian subjects, Whitehall recognized that they could serve as a bulwark against Russia. The Ottomans, likewise, recognized the value of having Britain as an ally given the looming threats posed by their neighbors, Russia and Austria. Though the Ottomans previously regarded the British as an untrustworthy non-Muslim power, the cooperation was a win-win venture, and the two powers agreed to partner economically and militarily. The strategic collaboration between them reached its zenith in 1853 when, along with other allies, they successfully waged war against Russia in Crimea.

America’s relative indifference to the Ottoman Empire and the early Turkish Republic was reminiscent of Otto von Bismarck’s famous remark that European Turkey “was not worth the bones of a single Pomeranian grenadier.” The United States and the Ottoman Empire fought World War I on opposite sides, but did not clash with each other. Moreover, while President Woodrow Wilson discussed the future of the Ottoman Empire in his Fourteen Points, the United States did not actively participate in its partition. In 1922–23, Washington merely sent observers to the Conference of Lausanne, which produced the final peace treaty between the victors of World War I and Turkey.

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Only Trump has congratulated him.

Erdogan Says He Doesn’t Care What Europe Thinks About Turkey’s Vote (BBG)

Turkish President Recep Tayyip Erdogan treated a crowd of supporters gathered outside his presidential palace on Monday evening to a speech laced with invective against Europe, saying his victory in a referendum on Sunday took place under conditions that were democratic beyond compare. Erdogan belittled both domestic and foreign critics of the voting process, which culminated in a slim majority of Turks approving changes to 18 articles of the constitution that concentrate more power in his hands. A monitoring group from the Organization for Security and Cooperation in Europe – which said the referendum took place on an “unlevel playing field” – “should know its place,” he said. “We don’t care about the opinions of ‘Hans’ or ‘George,’” Erdogan said, using the names as stand-ins for his European critics. “All debates about the constitutional referendum are now over.”

The OSCE’s head of mission, Tana de Zulueta, said on Monday that freedom of expression was inhibited during the campaign, that the conditions of the vote fell “well short” of international standards, and that the OSCE was inhibited from the election monitoring that it was invited to do. The vote was held under a state of emergency that’s been in place since just after a failed coup last July, and which Turkey’s security council will meet tonight to consider extending. Since the coup attempt, some 40,000 of Erdogan’s alleged opponents have been jailed, and at least 100,000 more fired by decree. The European monitoring organization’s criticisms were echoed by opposition parties inside Turkey, which are asking for the result of the vote to be annulled, as well as by the U.S. state department, whose spokesman Mark Toner cited “observed irregularities” in the way the election was carried out.

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Wonder how redacted the files are.

Opening Of UN Files On Holocaust Will ‘Rewrite Chapters Of History’ (G.)

War crimes files revealing early evidence of Holocaust death camps that was smuggled out of eastern Europe are among tens of thousands of files to be made public for the first time this week. The once-inaccessible archive of the UN war crimes commission, dating back to 1943, is being opened by the Wiener Library in London with a catalogue that can be searched online. The files establish that some of the first demands for justice came from countries that had been invaded, such as Poland and China, rather than Britain, the US and Russia, which eventually coordinated the post-war Nuremberg trials. The archive, along with the UNWCC, was closed in the late 1940s as West Germany was transformed into a pivotal ally at the start of the cold war and use of the records was effectively suppressed.

Around the same time, many convicted Nazis were granted early release after the anti-communist US senator Joseph McCarthy lobbied to end war crimes trials. Access to the vast quantity of evidence and indictments is timed to coincide with the publication on Tuesday of Human Rights After Hitler: The Lost History of Prosecuting Axis War Crimes by Dan Plesch, a researcher who has been working on the documents for a decade. The documents record the gathering of evidence shortly after the UN was founded in January 1942. They demonstrate that rape and forced prostitution were being prosecuted as war crimes in tribunals as far apart as Greece, the Philippines and Poland in the late 1940s, despite more recent suggestions that this was a legal innovation following the 1990s Bosnian conflict.

[..] By the late 1940s, the US and British governments were winding down prosecutions of Nazis. President Harry Truman made anti-communism, rather than holding Nazis to account, a priority, Plesch says. “Even action against the perpetrators of the massacre of British RAF officers attempting to escape from prison camp Stalag Luft III, a flight made iconic by films such as The Great Escape, was curtailed.”

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One of the most important questions we can ask ourselves, said polio vaccine pioneer Dr Jonas Salke, is “Are we being good ancestors?”

Critically Endangered Species Poached In World’s Protected Natural Sites (AFP)

Illegal poaching, logging and fishing of sometimes critically endangered species is taking place in nearly half of the world’s most protected natural sites, environmental campaigners WWF warned Tuesday. Natural world heritage sites such as Australia’s Great Barrier Reef, Virunga National Park in the Democratic Republic of Congo and the Galapagos Islands support large populations of rare plant and animal species. But in a report WWF said species listed by the Convention on International Trade in Endangered Species (CITES) faced the threat of illegal harvesting and trafficking in 45% of the more than 200 natural world heritage sites on the planet. “Natural world heritage sites are among the most recognised natural sites for their universal value,” said Marco Lambertini, head of WWF International.

“Yet many are threatened by destructive industrial activities and… their often unique animals and plants are also affected by overexploitation and trafficking,” he added, stressing that “unless they are protected effectively, we will lose them forever.” Almost a third of the world’s remaining 3,890 wild tigers and 40% of all African elephants are found in UNESCO-listed sites, which are often a last refuge for critically endangered species such as the Javan rhino in Indonesia, the report said. Illegal poaching, logging and fishing inside such sites is therefore “driving endangered species to the brink of extinction”, WWF warned. The species most at risk because of illegal activity within natural world heritage sites is probably the vaquita, the world’s smallest porpoise, which is indigenous to Mexico’s Gulf of California, Colman O’Criodain, WWF’s wildlife policy manager, told AFP.

While the vaquita itself is not being fished illegally, it is being caught in nets used to poach the totoaba – a giant Mexican fish coveted in China for its swim bladder, which itself is considered a threatened species. “When I started working on the issue of vaquita two years ago, there were 96 left. Now it is less than 30,” O’Criodain said, adding that at the current rate the tiny porpoise could be extinct within a year. According to Tuesday’s report, poaching of vulnerable and endangered animal species such as elephants, rhinos and tigers occurs in 42 of the UNESCO-listed natural sites, while illegal logging of rosewood, ebony and other valuable plant species happens in 26 of them. Illegal fishing, including of sharks and rays occurs in 18 of 39 listed marine coastal world heritage sites, it said.

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Until the world finally has the emergency UN conference I’ve been calling for, I don’t see this change. It’s a global issue, and no-one wants to touch it because it’s so politically toxic.

At Least 8,500 Migrants Rescued From Mediterranean In Three Days (CNN)

Italian authorities were still bringing migrants and refugees to shore Monday after one of the busiest weekends ever for rescue services operating in the central Mediterranean sea. At least 8,500 refugees and migrants were plucked from small boats over the past three days in 73 separate rescue operations, the Italian Coastguard told CNN Monday. Thirteen bodies were recovered, including a pregnant woman and an eight-year-old boy. It is not known how many died before they were sighted. One 35-year-old woman from the Ivory Coast was giving birth as she was pulled aboard a rescue ship, Italian newspapers reported. The youngest migrant rescued over the weekend was just two weeks old. Asar was rescued along with her mother by the Migrant Offshore Aid Station (MOAS).

The Sea-Eye, a German charity boat that helped bring to safety hundreds of people stranded on rubber dinghies off the coast of Libya Sunday said in a statement it still had 210 on board “crowded closely together, exposed to the wind, the waves and the cold without protection. It said the Italian tanker La Donna and the coast guard ship CP920 was now accompanying the boat, whilst it waits for two smaller boats from the Italian island of Lampedusa, to bring the migrants to shore. The Italian Coastguard said 1004 migrants rescued on the board the ship the Panther would be disembarked in Messina in Sicily shortly. Frontex, the European Border and Coast Guard Agency, said in a statement it rescued more than 1,400 migrants in the central Mediterranean in 13 search and rescue operations from Friday to Sunday.

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Apr 142017
 
 April 14, 2017  Posted by at 8:23 am Finance Tagged with: , , , , , , , , , , , ,  5 Responses »
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American Soldiers Observing Eruption of Mount Vesuvius 1944

 

‘Russia Thinks We’re Crazy, Completely Crazy’ (ZH)
We’re Heading Straight Into a Recession – Jim Rickards (MWS)
How’s This For Grade 1 Central Bank Hubris? (Albert Edwards)
Wall Street Fear Gauge Hits Fresh High For The Year (CNBC)
The Ethical Case For Taxing Foreign Home Buyers (Gordon)
UK Banks Crack Down On Credit Card Lending After Borrowing Binge (Tel.)
CIA Director Brands Wikileaks A ‘Hostile Intelligence Service’ (G.)
‘US Will Keep ‘Open Mind’ On Any IMF Aid To Greece’ (AFP)
American Energy Use, In One Diagram (Vox)
Macroscale Modeling Linking Energy and Debt (King)
Refugee Rescue Group Accuses EU Border Agency Of Plotting Against Them (AFP)
At Least 97 Migrants Missing As Boat Sinks Off Libya (AFP)
The Ultimate Lovebird (DM)

 

 

As Cohen indicates, Tillerson signed multi-billion contracts with Putin. That required a lot of trust. That trust is now being put at risk.

‘Russia Thinks We’re Crazy, Completely Crazy’ (ZH)

Lastly, Stephen Cohen, Professor of Russian studies at Princeton and NYU, an actual expert on China, weighed in, saying ‘Russia thinks we’re crazy, completely crazy.’ He even took some time to express his ‘disgust’ with Al Mattour, saying ‘your previous guest, I don’t mean to be rude to him. First of all, he doesn’t know what he’s talking about. And, secondly, he excludes the reality that Russia has a politics. And the politics in Russia today as we talk is […] the concern that America is preparing war against Russia. If not on Syria, then on the other two cold war fronts […] where NATO is building up in an unprecedented way. This is not good because they have nuclear weapons and because accidents happen.’

He then theorized what the conversation between Putin and Tillerson was like, pointing to the two having a history of trust together from the time Tillerson led Exxon Mobile. ‘Rex, says Putin, what in the world is going on in Washington?’ Professor Cohen, ominously, summed it up, ‘I’m not young. I’ve been doing this 40 years, sometimes as a Professor, sometimes inside. I have never been as worried as I am today about the possibility of war with Russia.’

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Any day now.

We’re Heading Straight Into a Recession – Jim Rickards (MWS)

Before the holiday weekend begins, best-selling author James Rickards joins Olivia Bono-Voznenko outside the NYSE to talk all about the markets and his latest book, “The Road to Ruin.” Jim discusses the currency wars, Trump’s turnaround on China & the Fed and an inevitable crisis amid a weak system.

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Though he defines it poorly, Edwards is right that deflation is still here.

How’s This For Grade 1 Central Bank Hubris? (Albert Edwards)

Peter Praet, the ECB’s chief economist said in a recent interview that, “Since the crisis, we have had serious concerns about deflationary risks on several occasions in the euro area, but now we can say they have disappeared.” Really? Has he seen the chart below, which shows core CPI in the Eurozone heading sharply lower and now approaching its all-time low seen at the start of 2015! Not only that, but Eurozone inflation expectations are also declining again, after surging in the aftermath of Donald Trump’s election. To be fair, Praet was focusing on the rise in headline inflation in the Eurozone, which touched 2% in February before dropping back in March to 1.5%.

After some 18 months bobbing around the zero mark, I can understand why central bankers might be heaving a sigh of relief, but for them to take credit for a recovery in headline inflation is totally disingenuous given it has been entirely driven by a recovery in the oil price. Similarly, Janet Yellen was quoted saying the Fed is “doing pretty well” in meeting its congressionally mandated goals of low and stable inflation and a full-strength labor market. It’s this sort of comment that has led Marc Faber to want to short central bankers, the only way being to buy gold. The increasing volume of central bank hubris may even explain the recent breakout of gold to the upside! It is not just eurozone inflation expectations that seem to be in retreat. The same thing is happening in the US too (see chart below).

I am always surprised how dominated 10y inflation expectations are by short-term movements in the oil price and headline inflation, but it was noticeable just how rapidly inflation expectations ran up in the wake of Trump’s election – way in advance of what might have been expected by the bounce in the oil price. One might have thought the surge in the oil price from its trough some 12-18 months ago might have had more impact on wage inflation, but so far that does not seem to be the case. Despite the euphoria in the markets about the “reflation trade”, survey inflation expectations have continued to drift downwards. One thing is certain: for central banks to call victory over deflation may prove very premature indeed. Nemesis awaits.

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Easter jitters.

Wall Street Fear Gauge Hits Fresh High For The Year (CNBC)

Stocks may be in for a deeper pullback, now that the so-called fear index is finally breaking out higher. The CBOE Volatility Index (.VIX), considered the best gauge of fear in the market, closed above its 200-day moving average for the first time since the election this week. The indicator jumped more than 2% Thursday afternoon at one point to a fresh high for the year. U.S. markets are closed for trading Friday for the Easter holiday. The recent spike in fear comes just as geopolitical risk heats up. The Pentagon said Thursday U.S. military forces dropped the largest non-nuclear bomb in Afghanistan, the first time the so-called mother of all bombs has ever been used in combat. U.S. stocks fell, with the S&P 500 and DJIA closed at two-month lows Thursday. “I’d say it’s probably more of a Trump trade [reversing] than the geopolitics, but going forward I think the geopolitics is the topic the market is focusing on,” said Andres Jaime at Barclays.

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Good argument: A foreign-buyer’s tax can be refunded to individuals to the extent they pay income taxes..

The Ethical Case For Taxing Foreign Home Buyers (Gordon)

Foreign capital is playing an important role in the real estate markets of Toronto and Vancouver, and has for some time. As political leaders debate its impact and possible policy measures to alleviate its attendant issues, it is important to think clearly about the ethics of foreign ownership. Predictably, those who want to stymie or avoid policy action in this area have alluded to “xenophobia” to deter critics. Even some well-intentioned people have given credence to these claims. Yet curtailing or taxing foreign ownership is not xenophobic, especially if policy is properly designed. Xenophobia is the irrational or unjustified fear of foreigners. Concerns about the impact of foreign ownership are about flows of money, not people, and they are certainly justified in Toronto and Vancouver.

Foreign ownership raises two main ethical problems. First, those who buy based on foreign income or wealth often have access to money in ways that are unavailable to local residents. This means that locals are potentially put into disadvantageous, or unfair, competition for real estate where they live. Second, people who buy property based on foreign income or wealth may not have contributed much in Canadian taxes, which is largely what makes the property so valuable in the first place. Canadian real estate has become an attractive place to stash international money for a variety of reasons – we don’t effectively enforce money laundering regulations, we have relatively low property-tax rates and the enforcement of capital gains taxes has been lax. But real estate in Canada is ultimately attractive because of the country’s stable institutions, its public infrastructure and its social cohesion.

These latter things are paid for, or fostered by, taxes collected from Canadians – income taxes in particular. At a minimum, then, Canadians should have preferential access to property ownership, since they are paying for what makes it so valuable. It is precisely for these reasons that we see nothing ethically problematic about charging foreign students more in tuition at Canadian universities. Residential property is no different. Concerns around foreign ownership are especially potent when money is arriving from societies where corruption is widespread, and when foreign money is playing a significant role in driving up prices. Both apply in the cases of Toronto and Vancouver.

[..] We can then better design a foreign-buyer’s tax, which is needed to calm Toronto’s frenzied market. A foreign-buyer’s tax can be refunded to individuals to the extent they pay income taxes – the amount they pay in the three years following a purchase, for instance. This makes it clear that the tax need not discourage entrepreneurial talent from abroad, as claimed by Toronto Mayor John Tory. This understanding of the issue also leads straightforwardly into the proposal by many economists in British Columbia, including my colleague Rhys Kesselman. Provincial governments should introduce an annual property surtax on expensive homes that can be offset by income taxes paid, while exempting seniors with sustained CPP contribution records. This continuous surtax would powerfully target foreign ownership, and would thereby reconnect the local housing market to the local labour market.

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I’ll believe it when I see it. Nobody wants to see the economy crash, they’ll stick with loose lending standards to prevent it.

UK Banks Crack Down On Credit Card Lending After Borrowing Binge (Tel.)

Britain’s credit card binge could be at an end as banks tighten up controls on consumer debt. Borrowing growth hit rates of more than 10pc over the past year, a pace not seen since the boom years before the financial crisis, but now banks are touching the brakes. The Bank of England has warned that a consumer debt could be more of a risk to banks than mortgage lending, should there be an economic downturn. Fierce competition to win new customers has led banks to offer more credit to customers with increasingly long interest-free periods.But banks have started tightening lending criteria for credit card applicants in a move of an intensity not seen since the depths of the financial crisis in 2008 and 2009.

A net balance of 33pc of lenders expect to tighten standards in the coming three-month period, according to Bank of England data. When unsecured loans are also included, a net balance of 27pc plan to scrutinise applications more closely. There was also a fall in the number of credit card applications approved in the first quarter of the year, and banks expect the number to remain roughly steady in the coming quarter. By contrast credit scoring criteria for secured loans, such as mortgages, is holding broadly steady. “The recent rapid growth in consumer credit could principally represent a risk to lenders if accompanied by weaker underwriting standards,” warned the Bank of England’s Financial Policy Committee this month.

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After first praising it.

CIA Director Brands Wikileaks A ‘Hostile Intelligence Service’ (G.)

Mike Pompeo, the director of the CIA, has branded WikiLeaks a “hostile intelligence service,” saying it threatens democratic nations and joins hands with dictators. In his first public remarks since becoming chief of the US spy agency in February, Pompeo focused on the group and other leakers of classified information like Edward Snowden as one of the key threats facing the United States. “WikiLeaks walks like a hostile intelligence service and talks like a hostile intelligence service. It has encouraged its followers to find jobs at CIA in order to obtain intelligence… And it overwhelmingly focuses on the United States, while seeking support from anti-democratic countries and organisations,” said Pompeo. “It is time to call out WikiLeaks for what it really is – a non-state hostile intelligence service often abetted by state actors like Russia.”

[..] Last month, WikiLeaks embarrassed the CIA and damaged its operations by releasing a large number of files and computer code from the agency’s top secret hacking operations. The data showed how the CIA exploits vulnerabilities in popular computer and networking hardware and software to gather intelligence. Counterintelligence investigators continue to try to find out who stole the files and handed them to WikiLeaks. Assange meanwhile criticized the US agency for not telling the tech industry and authorities about those vulnerabilities so they can be fixed. Pompeo said Assange portrays himself as a crusader but in fact helps enemies of the United States, including aiding Russia’s interference in last year’s presidential election.

“Assange and his ilk make common cause with dictators today. Yes, they try unsuccessfully to cloak themselves and their actions in the language of liberty and privacy; in reality, however, they champion nothing but their own celebrity. Their currency is clickbait; their moral compass, nonexistent.” However, Pompeo did not comment on how Trump has previously lavished praise on Assange for the information he has made public. Nor did Pompeo mention that he himself had cited and linked to WikiLeaks in a tweet attacking the Democratic Party. Pompeo at the time was a Republican congressman and member of the House Intelligence Committee. The CIA declined to comment on that.

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Translation: get it done.

‘US Will Keep ‘Open Mind’ On Any IMF Aid To Greece’ (AFP)

The US government will keep an “open mind” on any new loan package from the IMF for debt-burdened Greece, a senior US Treasury official said Thursday. Despite criticism of international organizations by the Trump administration, the comments allay concerns that US Treasury Secretary Steven Mnuchin could veto any large new aid package for Athens. “We’re looking for the Europeans to help Greece to resolve its economic problems, and we think the IMF can play a supportive role,” the official told reporters. “And we’ll look at any potential future agreement with an open mind.” IMF chief Christine Lagarde on Wednesday said Greece and its eurozone creditors have made progress towards a new loan package that includes debt relief, but that is something the fund has been saying for months without a final deal.

Greece last week accepted a tough set of reforms demanded by its eurozone creditors in hopes of securing a new loan in time to avert a looming debt default in July, although it still must finalize the details. Athens has been deadlocked for months over reforms, and budget targets, which has put the IMF and EU at loggerheads over the need for debt relief in order to ensure an economic recovery, and the government’s ability to repay its loans. The eurozone is under heavy pressure to end the feud in order to avert a chaotic default and inflicting damage on an already stalled Greek recovery. Greece has about €7 billion in debt repayments due in July. All the key officials involved in the talks are expected to be in Washington next week to attend the IMF and World Bank annual meetings.

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We waste. That’s what we’re good at.

American Energy Use, In One Diagram (Vox)

Every year, Lawrence Livermore National Laboratory LLNL produces a new energy flow chart showing the sources of US energy, what it’s used for, and how much of it is wasted. If you’ve never seen it before, it’s a bit of a mind-blower. Behold US energy in 2016: So much information in so little space! (It’s worth zooming in on a larger version.)

[..] a British thermal unit (BTU) is a standard unit of energy — the heat required to raise the temperature of a pound of water by 1 degree Fahrenheit. If you prefer the metric system, a BTU is about 1055 joules of energy. A “quad” is one quadrillion (a thousand trillion) BTUs. [..] a few things equivalent to a quad: 8,007,000,000 gallons (US) of gasoline, 293,071,000,000 kilowatt-hours (kWh), 36,000,000 metric tons of coal The US consumed 97.3 quads in 2016, an amount that has stayed roughly steady (within a quad or so) since 2000.

Perhaps the most striking feature of the spaghetti diagram — what everyone notices the first time they see it — is the enormous amount of “rejected” energy. Not just some, but almost two-thirds of the potential energy embedded in our energy sources ended up wasted in 2016. (And note that some scholars think LLNL is being too optimistic, and that the US is not even 31% efficient but more like 13%.) What’s more, the US economy is trending less and less efficient over time. Here’s the spaghetti diagram from 1970 (LLNL has been at this a long time):

Back then, we only wasted half our energy! It’s important to put this waste in context. It is not mainly about personal behavior or inefficient energy end use — keeping cars idling or leaving the lights on, that kind of thing. That’s a part of it, but at a deeper level, waste is all about system design. The decline in overall efficiency in the US economy mainly has to do with the increasing role of inefficient energy systems. Specifically, the years since 1970 have seen a substantial increase in electricity consumption and private vehicles for transportation, two energy services that are particularly inefficient. (Electricity wastes two-thirds of its primary energy; transportation wastes about three-quarters.)

There is loss inherent in any system that converts raw materials to usable energy, or transports or uses energy, of course. That follows from the second law of thermodynamics. And it’s true both narrowly (a car is an energy system) and broadly (a city is an energy system). It’s not possible to achieve perfect efficiency, or anything close to it. But surely we can do better than 31%! Sixty-six quads is a truly mind-boggling amount of energy to vent into the atmosphere for no good purpose. It really highlights the enormous potential of better-designed systems — especially better electricity and transport systems, along with better urban systems (i.e., cities) — to contribute to the country’s carbon reduction goals. We could double our energy use, with no increase in carbon emissions, just by halving our energy waste.

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I like this, and it’s high time energy became a part of economic modeling; Steve Keen is working on it too. BUT: to understand today’s predicaments, you have to look -seperately- at what has happened in financial markets. The debt binge was not a result of what went on with energy; it stood -and stands- on and by itself.

Macroscale Modeling Linking Energy and Debt (King)

What if you realized that the fundamental economic framework of macroeconomics is insufficient to inform our most pressing concerns? The world is dynamic, in constant change, yet most economic models (even the most widely used “dynamic” model) lack fundamental feedbacks that govern long-term trends (e.g., regarding role of energy) and make assumptions that prevent the ability to describe important real-world phenomena (e.g., financial-induced recessions). Monetary models of finance and debt often assume that natural resources (energy, food, materials) and technology are not constraints on the economy. Energy scenario models often assume that economic growth, finance and debt will not be constraints on energy investment.


Energy and food costs have declined since industrialization, but no longer

These assumptions must be eliminated, and the modeling concepts must be integrated if we are to properly interpret the post-2008 macroeconomic situation: unprecedented low interest rates, high consumer and private debt, high asset valuations, and energy and food costs that are no longer declining. As we attempt to understand newer and more numerous options (e.g., electric cars, renewables, information) regarding energy system evolution, it is paramount to have internally consistent macro-scale models that take a systems approach that tracks flows and interdependencies among debt, employment, profits, wages, and biophysical quantities (e.g., natural resources and population). There is a tremendous research need to develop a framework to describe our contemporary and future macroeconomic situation that is consistent with both biophysical and economic principles. Unfortunately, this fundamental integration does not underpin our current thinking.


U.S. consumer costs of fundamental needs (energy, food, housing, transport) are no longer declining

• Debt is money.

• Money is created when commercial banks lend money to businesses, not when the U.S. Treasury prints money or when Federal Reserve Bank lowers interest rates. Those government and Fed actions are reactions to the creation or destruction of money (e.g., paying back loans) within the real economy.

• Businesses seek new loans when economic opportunities are present. Thus, a growing economy can support more debt.

• Economic opportunities are present when consumers have disposable income to spend (and when innovative technologies supplant old technologies, thus lowering prices, and enabling growth).

• Consumers have more money to spend when core needs (e.g., food, energy, housing) are getting cheaper relative to incomes. Thus, if these core needs are no longer getting cheaper, this is an indication of the lack of income growth to support business investment. In turn banks stop lending because there are fewer viable business opportunities.

• The conclusion is that without decreasing food and energy costs to consumers, real incomes do not rise.

• This is a viable explanation of the post-2008 economy, but one ignored by practically all policy makers, economists, and advisors!

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Frontex is a disaster.

Refugee Rescue Group Accuses EU Border Agency Of Plotting Against Them (AFP)

A Spanish group which has been rescuing migrants in the Mediterranean since 2016 accused the EU’s border control agency Frontex on Wednesday of plotting to discredit private aid organisations in order to put off donors. Allegations by Frontex that donor-funded rescue vessels may have colluded with traffickers at the end of last year prompted Italian prosecutors to begin an informal investigation into their funding sources. “The declarations by Frontex and political authorities are intended to discredit our actions and erode our donors’ trust,” said Proactiva Open Arms head Riccardo Gatti. “They are trying to say that we support the smuggling or the traffickers themselves,” he said. In a report cited in December by the Financial Times daily, Frontex raised the possibility that traffickers were putting migrants out to sea in collusion with the private ships that recover them and bring them to Italy “like taxis”.

Prosecutors then publicly wondered at the amount of money being spent, though they stopped short of opening a formal probe. “We feel there’s someone who wants to put a spoke in our wheels, though we do not really know who is behind it,” Gatti said. The organization said it had nothing to hide. “We have 35,000 donors. Some are well known – like Pep Guardiola, the current manager of Manchester City – others are anonymous,” said Oscar Camps, Proactiva Open Arms director. He said the group had so far received €2.2 million euros in donations for an op in the Med that costs between €5,000 and €6,000 a day. Pro-Activa Open Arms also heavily criticized a deal signed in February between Italy and Libya which purportedly hopes to stem the flow of migrants from the coast of North Africa to Italy.

Gatti said the deal was made with only part of the 1,700 militias he said control Libya and would therefore be ineffective. Human rights watchers have also warned the accord would put the lives of those fleeing persecution and war in greater danger. “Everything is controlled by the militias in Libya, even the coast guard, and 30 percent of the financial flows in the country come from human trafficking,” he said. The deal is in doubt after it was suspended in March by Tripoli’s Court of Appeal. Nearly 25,000 migrants have been pulled to safety and brought to Italy since the beginning of the year in a sharp increase in arrivals.

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Happy Easter.

At Least 97 Migrants Missing As Boat Sinks Off Libya (AFP)

At least 97 migrants were missing after their boat sank on Thursday off the Libyan coast, a navy spokesman said. Survivors said the missing include 15 women and five children, General Ayoub Qassem told AFP. He said the Libyan coastguard had rescued a further 23 migrants of various African nationalities just under 10 kilometres (6 miles) off the coast of Tripoli. The boat’s hull was completely destroyed and the survivors, all men, were found clinging to a flotation device, he said. Those who had disappeared were “probably dead”, but bad weather had so far prevented the recovery of their bodies, Qassem added. An AFP photographer said survivors had been given food and medical care at Tripoli port before being transferred to a migrant centre east of the capital.

Six years since the revolution that toppled dictator Moamer Kadhafi, Libya has become a key departure point for migrants risking their lives to cross the Mediterranean to Europe. Hailing mainly from sub-Saharan countries, most of the migrants board boats operated by people traffickers in western Libya, and make for the Italian island of Lampedusa 300 km away. Since the beginning of this year, at least 590 migrants have died or gone missing along the Libyan coast, the International Organization for Migration said in late March. In the absence of an army or regular police force in Libya, several militias act as coastguards but are often themselves accused of complicity or even involvement in the lucrative people-smuggling business. More than 24,000 migrants arrived in Italy from Libya during the first three months of the year, up from 18,000 during the same period last year, according to the UN High Commissioner for Refugees.

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Easter feel good.

The Ultimate Lovebird (DM)

A stork has melted hearts in Croatia by flying to the same rooftop every year for 14 years – to be reunited with its crippled partner. The faithful bird, called Klepetan, has returned once again to the village of Slavonski Brod in east Croatia after a 5,000 mile migration. He spends his winters alone in South Africa because his disabled partner Malena cannot fly properly after being shot by a hunter in 1993. Malena had been found lying by the side the road by schoolteacher Stjepan Vokic, who fixed her wing and kept her in his home for years before helping her to build a nest on his roof. After placing her there, she was spotted by Klepetan 14 years ago. And now every year they are reunited in the spring. Klepetan keeps a very strict timetable, usually arriving back at the same time on the same day in March to be welcomed by locals.

But this year he was running six days late, causing panic among local media and fans of the stork couple. Such is the popularity of the pair that there is even a live feed on the main square in the capital Zagreb showing the two storks. There was huge excitement when stork-watchers saw what they thought was Klepetan circling over the nest, and then coming in to land. But the new arrival turned out to be a different stork that was attempting to woo Malena. She quickly attacked him and drove him off and continued to wait for Klepetan. Stjepan Vokic, whose roof the couple nest on, said: ‘She was pretty clear about the message, I doubt he will be back again.’ Vokic has taken care of Malena since she was first injured by hunters and says that she – like her partner – is now part of the family.

During the winter, Vokic keeps her inside the house, and then lets her go to the roof each spring where she patiently waits for her partner. This year, Malena made a rare flight and the couple were reportedly inseparable for hours. She does have the ability to make very short flights but her wing has not healed well enough for her to make the trip to Africa, or even to properly feed herself. Every summer, the pair bring up chicks, with Klepetan leading their flying lessons in preparation for the trip south in summer. The oldest recorded living stork was 39. Locals are hopeful the couple’s long relationship will continue for years to come.

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