Jul 282019
 
 July 28, 2019  Posted by at 9:25 am Finance Tagged with: , , , , , , , , , , ,  


Pablo Picasso Portrait of Dora Maar 1937

 

UK Top Civil Servant Urged To Block Dominic Cummings Appointment (Ind.)
Johnson’s Key Adviser Dominic Cummings Must Face Sanctions, Demand MPs (G.)
UK To Ramp Up Funding For No-Deal Brexit Preparations (R.)
Ex-Chancellor Hammond Plots With Labour To Kill Johnson’s No-Deal Brexit (G.)
China Retreats Globally (F.)
How Close Is China To A Financial Crisis? (F.)
FAA Let Boeing Sign Its Own Safety Certifications On 737 MAX (ZH)
Tanker Seizures and Resurgent Imperialism (Craig Murray)
Hong Kong Protesters Defy Police Again On Sunday (AFP)
Alaskan Glaciers Melting 100 Times Faster Than Previously Thought (NatGeo)

 

 

The name Cummings dominates the news. In the US there’s Elijah Cummings, attacks on whom by Trump are making the word ‘racist’ popular again in the Dems camp suddenly. In the UK it’s Dominic Cummings, Boris Johnson’s key adviser, who draws the ire of MPs.

As I wrote a few days ago, Boris bringing in Dominic Cummings can only mean elections. Because that’s what he’s good at, and he wouldn’t come in for other reasons. Another aspect is Cummings doesn’t play second fiddle. He’s got the key to no. 10 now. So not only does the UK have its second unelected PM in a row, the PM has handed power to someone in the shadows. To ensure Brexit.

UK Top Civil Servant Urged To Block Dominic Cummings Appointment (Ind.)

The head of the civil service has been urged to block the appointment of Brexit mastermind Dominic Cummings to a senior Downing Street role. Boris Johnson’s decision to invite Mr Cummings to become a key No 10 adviser has sent shockwaves through Westminster, coming only months after he was found in contempt of parliament for refusing to give evidence to the Commons fake news inquiry. The move also sparked fears among Tory moderates about the new prime minister’s Brexit approach, as Mr Cummings was the architect of Vote Leave’s Take Back Control slogan and the pledge to claw back £350m a week from the EU for the NHS. The Liberal Democrats have written to Sir Mark Sedwill, the UK’s most senior mandarin, urging him to intervene as they warned the news should “send shivers down the spines” of the British public.

Layla Moran MP argued the Brexiteer’s conduct fell short of necessary Whitehall standards due to his admonishment for contempt and his involvement in Vote Leave’s “misleading” campaign about NHS funds. She also pointed to the decision by Mr Cummings to leak a confidential Digital, Culture, Media and Sport Committee report, when he reportedly declared “f*** the charlatans embargo” before posting the document on his personal blog. Ms Moran told The Independent: “The appointment of Dominic Cummings should send shivers down the spines of UK citizens. This is a man who has peddled lies and flouted the truth for sheer, cynical political gain. “The dark arts that he proffers should have no place in government, and no place in Downing Street.

[..] Mr Cummings is respected among Brexiteers as being instrumental to the success of the 2016 referendum campaign, but his vocal criticism of MPs and civil servants has ruffled feathers. Since the referendum, Mr Cummings has described Brexit as a “train wreck”, and said triggering Article 50 too early was like “putting a gun in your mouth and pulling the trigger”. He also branded David Davis, the former Brexit secretary, “thick as mince and lazy as a toad”, and described the Tory European Research Group as “useful idiots for Remain”.

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Just as I said a few days ago: “In his new role at Downing Street Cummings appears to be getting Johnson on an election footing..”

Johnson’s Key Adviser Dominic Cummings Must Face Sanctions, Demand MPs (G.)

Prominent MPs on the committee investigating fake news and disinformation want Boris Johnson’s aide Dominic Cummings, who has been found in contempt of parliament, to face sanctions in his new role at the heart of government. These could include docking his salary, denying him a security pass and putting pressure on the prime minister to force him to give evidence to parliament. Johnson’s decision to appoint Cummings as a key adviser outraged many MPs because it came less than four months after parliament unanimously passed a motion, tabled by the government, to censure him for failing to testify at the fake news inquiry. Some also have concerns about his role as mastermind of the Brexit campaign. The official Vote Leave group has been found to have broken electoral law and referred to the police.

“This is someone who campaigned to take back control for parliament, and yet has decided the only person who shouldn’t be accountable to parliament is him,” said MP Sarah Wollaston, who has left the Tory party and sits as an independent. “What does that say about the prime minister’s attitude to parliament? It’s a terrible error of judgment.” Wollaston admitted there was no mechanism to enforce motions holding individuals in contempt of parliament. But members of the committee that originally summoned Cummings to give evidence say they want to recall him again, and have suggested a range of sanctions. “We need to demand that he attends to give evidence and call on Boris Johnson [to ensure] that he does attend. We would expect the prime minister to fully support our call for evidence,” said Jo Stevens, one of the MPs on the committee.

She also suggested any decision to give him a security pass should be closely scrutinised. “Everyone who works in parliament has to go through a very stringent security procedure. How can someone who oversaw a campaign that is the subject of a serious criminal investigation pass that test? He will have access not just to parliament but to the inner sanctum of No 10. There are obvious and serious security implications to that.” [..] In his new role at Downing Street Cummings appears to be getting Johnson on an election footing; the Conservative party Facebook page has fielded hundreds of ads since his appointment. Although they are spending relatively small amounts, the range of ads allow them to test voters’ responses and gather data on those who do interact with the advertisements.

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Don’t think one billion will do much. Especially if it’s spent on PR campaigns.

UK To Ramp Up Funding For No-Deal Brexit Preparations (R.)

New British finance minister Sajid Javid plans to announce spending of around 1 billion pounds to make sure the country is properly prepared for a possible no-deal Brexit in October, a newspaper reported. Javid told the Sunday Telegraph he would overhaul the British Treasury’s approach to Brexit, starting with “significant extra funding” announcements in the coming days to get Britain fully ready to leave the European Union on Oct. 31, with or without a deal. The extra spending would include financing a major public information campaign for individuals and businesses.


The Sunday Telegraph also quoted Javid as saying he had plans for 500 new Border Force officers and possible new infrastructure around the country’s ports. Javid’s predecessor Philip Hammond, who opposed leaving the EU without a transition deal, was accused by Brexit supporters of failing to spend enough money to get Britain ready for a no-deal Brexit, undermining its negotiating position with Brussels.

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BIG fight coming up.

Ex-Chancellor Hammond Plots With Labour To Kill Johnson’s No-Deal Brexit (G.)

The former Tory chancellor Philip Hammond held private talks with Labour’s Brexit spokesman Keir Starmer shortly before Boris Johnson entered Downing Street last Wednesday, to plot cross-party moves aimed at preventing the new prime minister agreeing to a no-deal Brexit. The meeting in the House of Commons – which took place shortly after Hammond had resigned from the government – is evidence of the fierce backlash Johnson faces from MPs of all parties if he tries to defy parliament and take the UK out of the EU without an agreement on 31 October.

It is understood that the former political opponents Hammond and Starmer agreed to work together through the summer recess with other leading parliamentarians who oppose no deal, including former Tory ministers Oliver Letwin and Dominic Grieve, to thrash out how best to use parliamentary votes to torpedo no deal. On Saturday night Starmer confirmed that Johnson’s arrival in No 10 had spurred more cross-party discussions at high levels involving senior Tories sacked by Johnson, or who chose to resign, as opponents of no deal prepared a cross-party counter-offensive against his new hard-Brexit cabinet and government.

“The political direction of travel under Boris Johnson is clear,” said Starmer, “and so it is more important than ever that we build a strong cross-party alliance to stop a no-deal Brexit. “That work will intensify over the summer, before parliament resumes in September.” The plans being hatched include amending Brexit-related legislation that has to pass through parliament before the UK can leave the EU in a way that would force the Johnson to ask for a further extension to the UK’s membership if no Brexit agreement has been reached by early October. A “last resort” option is for Hammond and other Tory Remainers to vote for a no-confidence motion in their own government if no deal still appears on the cards.

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Written a lot about this. China doesn’t have the foreign reserves to let its people spend freely across the world. That was true even before the trade war. When are the Chinese tourists going to disappear from western streets?

China Retreats Globally (F.)

China has retreated globally – not from its artificial islands in the South China Sea but economically and financially. It seems just yesterday that the Middle Kingdom, as China calls itself, resembled an unstoppable juggernaut, cutting constructions contracts and buying properties all over the world. That is no longer the case. Trade war with the United States bears much of the blame (or gets the credit, depending on one’s perspective), but even if Washington and Beijing were to sign a deal tomorrow, China would not regain its old momentum. Official Ministry of Finance (MOF) figures, not surprisingly, offer a soothing picture of moderate decline, but private sources tell a much more dramatic story.

According to the American Enterprise Institute’s well-regarded China Global Investment Tracker (CGIT), Chinese overseas investments of all kinds in the first half of this year averaged only $27.5 billion, half the rate averaged during the same time in 2018 and barely a quarter the rate of 2017’s first half. This year’s figures are lower than any time since 2008. Construction contracts, largely in the third world as part of China’s Belt and Road initiative, have fallen off, too, but less dramatically. China clearly has become much less engaged with the world than it was. Two things have caused this retreat. One is a growing hostility among host countries toward Chinese investment. Especially developed countries, the US in particular, have balked over the Chinese practice of extracting technology.

Suspicions along these lines have held up approvals for Chinese purchases and other direct flows of funds. Some familiar with Chinese practice have gone a step further. The European Chamber of Commerce has warned against developing a dependence on China and Chinese funds. This combination of concerns and suspicions have centered primarily on China’s huge state owned enterprises and less on private Chinese investment. But if private investment has fallen off less dramatically, this growing reluctance in the West has had its effect there, too. More significant is China’s relative shortage of hard currency. Despite Beijing’s efforts to make the yuan a global currency, it is little used in currency transactions – no more than 2% of the total in fact – and so is of little use in overseas purchases.

Meanwhile the trade war with the United States has already begun to cut into Beijing’s supplies of foreign exchange. Beijing actually anticipated the problem and in 2017 and began to ration foreign exchange even before the White House added any tariffs. The first major investment declines occurred in late 2018, when the While House first imposed 10% tariffs on a range of Chinese products. The next drop coincided with this past spring’s increased tensions. To be sure, Beijing’s foreign exchange hoard remains huge, but officials are wary of how rapidly it has shrunk, falling some 25% from almost $4 trillion at its peak in 2014 to barely over $3 trillion during the first half of this year. Beijing’s rationing of these financial resources has affected the state-owned sector in particular. Private companies have a greater willingness and ability to borrow hard currencies abroad.

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Dangerously close.

How Close Is China To A Financial Crisis? (F.)

China haters have been waiting for a financial crisis out of China since at least the early 2000s. Each and every time, the People’s Bank of China’s plunge protection team or the central planners in Beijing would throw buckets of ice water on their heads. This time might be different. This time they are dealing with a trade war. Most investment banks have some proprietary model that gives their fund managers a gauge on crises. For Nomura Securities, no country is flashing red more than China. “China has the second-highest number of flashing early warning indicators after Hong Kong,” says Rob Subbaraman, an Asia economist for Nomura in Singapore.

Months of protests against an stalled prisoner extradition bill with China have turned into protests against the Hong Kong government, with the very real possibility of the U.S. doing away with its special trade relationship with Hong Kong. If that ever happened, the Hong Kong dollar would no longer be a de facto source of U.S. dollars for mainland China, assuming Washington included Hong Kong in its mainland China tariff regime. Chinese policymakers need to guard against a renewed build-up of financial stability risks, Subbaraman says. Out of 60 early warning indicators flashing on Nomura’s Cassandra risk assessment program, Hong Kong has 49 covered. China has 25. The U.S. has precisely zero.

Cassandra has reliably signaled around two thirds of the past 50 financial crises in a sample of 30 emerging market and advanced countries, including the U.S., since the early 1990s, Nomura says. Casandra looks at five early warning indicators, including debt-service ratio gap (DSR) with a particular country’s historic average; joint credit and real property price gaps with the average; joint credit and real effective exchange rate (REER) gaps; joint DSR and REER gaps; and finally, a combination of all three credit indicators above. The predefined thresholds of pain-points for a country are set in a way that the early warning indicators flash when one of those thresholds is breached. That means a crisis is likely to hit within three years.

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No surprise there. But that model is over.

FAA Let Boeing Sign Its Own Safety Certifications On 737 MAX (ZH)

Thanks to a ‘broken regulatory process,’ the Federal Aviation Administration has been passing off routine oversight tasks to manufacturers for years. In the case of the beleagured 737 Max, however, the plane was so advanced that the regulator “handed nearly complete control to Boeing,” which was able to sign off on its own safety certificates, according to the New York Times. The lack of regulatory oversight meant that the FAA had no clue how Boeing’s automated anti-stall system, known as MCAS, worked. In fact, “regulators had never independently assessed the risks of the dangerous software” when they issued a 2017 approval for the plane.

“The company performed its own assessments of the system, which were not stress-tested by the regulator. Turnover at the agency left two relatively inexperienced engineers overseeing Boeing’s early work on the system. The F.A.A. eventually handed over responsibility for approval of MCAS to the manufacturer. After that, Boeing didn’t have to share the details of the system with the two agency engineers. They weren’t aware of its intricacies, according to two people with knowledge of the matter.” -New York Times.

During the late stages of the Max’s development, Boeing engineers decided to increase the plane’s reliance on MCAS to fly smoothly. Unfortunately, a new version of the system relied on a single sensor which could malfunction and push the plane into a nosedive. Boeing never submitted a formal assessment of the MCAS system following its upgrade – which wasn’t required by FAA rules. An agency official claims that an engineering test pilot was familiar with the changes, however his job was to evaluate its effect on how the plane flew – not on its safety. The jet was eventually certified as safe to fly, and the FAA required very little pilot training until the second Max crashed less than five months after the first.

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There are very clear laws that forbid seizure of tankers. Give them all back.

Tanker Seizures and Resurgent Imperialism (Craig Murray)

[The] UN Convention which is one of the base blocks of international law [..] does not state that the right to transit through straits can be subject to any sanctions regime which the coastal state chooses to impose; indeed it is clearly worded to preclude such coastal state activity. Nor can it be overridden by any regional grouping of which the coastal state is a member. Jeremy Hunt’s statement to parliament that the Iranian tanker had “freely navigated into UK territorial waters” was irrelevant in law and he must have known that. The whole point of passage through straits is that it is by definition through territorial waters, but the coastal state is not permitted to interfere with navigation.

It is therefore irrelevant whether, as claimed by the government of the UK and their puppets in Gibraltar, the tanker was intending to breach EU sanctions by delivering oil to Syria. There is a very strong argument that the EU sanctions are being wilfully misinterpreted by the UK, but ultimately that makes no difference. Even if the EU does have sanctions seeking to preclude an Iranian ship from delivering Venezuelan oil to Syria, the EU or its member states have absolutely no right to impede the passage of an Iranian ship through the Strait of Gibraltar in enforcement of those sanctions. Anymore than Iran could declare sanctions against Saudi oil being delivered to Europe and close the Straits of Hormuz to such shipping, or Indonesia could declare sanctions on EU goods going to Australia and close the Malacca Strait, or Russia could declare sanctions on goods going to Ukraine and close the Strait of Kerch.

[..] I was for three years the Head of the Maritime Section of the Foreign and Commonwealth Office. I was Alternate Head of the UK Delegation to the UN Preparatory Commission on the UN Convention on the Law of the Sea. I both negotiated, and drafted parts of, the Protocol that enabled the Convention to come into force. I was the Head of the FCO Section of the Embargo Surveillance Centre and responsible for giving real time political and legal clearance, 24 hours a day, for naval boarding operations in the Gulf to enforce a UN mandated embargo. There are very few people alive who combine both my practical experience and theoretical knowledge of precisely the subject here discussed.

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“..leaving pools of blood in the same concourse where the suspected triads had attacked the previous weekend.”

Hong Kong Protesters Defy Police Again On Sunday (AFP)

Thousands of pro-democracy protesters defied a police ban and began marching through Hong Kong on Sunday, a day after riot police fired rubber bullets and tear gas in the latest violent confrontation to plunge the financial hub deeper into crisis. Huge crowds gathered in the heart of the city’s commercial district on Sunday afternoon, after police gave permission for a static protest in a park but banned a proposed march through the city. Yet protesters soon spilled into the streets outside the park and began marching in spite of the ban, ratcheting up the likelihood of renewed clashes. “I feel so conflicted, seeing young people sacrifice their future for Hong Kong,” a 22-year-old student protester called Marcus told AFP, breaking into tears.


The latest march comes a day after a town near the border with mainland China descended into chaos, as police battled protesters holding another banned rally against suspected pro-government triad gangs who beat up democracy demonstrators there last weekend. Riot police used tear gas throughout the afternoon and evening in Yuen Long after tense standoffs with protesters, some of whom were throwing projectiles and had surrounded a police van. Rubber bullets were fired later in the clashes which ended when officers baton-charged the last remaining demonstrators inside the town’s metro station, leaving pools of blood in the same concourse where the suspected triads had attacked the previous weekend.

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There’s a pattern.

Alaskan Glaciers Melting 100 Times Faster Than Previously Thought (NatGeo)

A new way of measuring how some glaciers melt below the surface of the water has uncovered a surprising realization: Some glaciers are melting a hundred times faster than scientists thought they were. In a new study published today in Science, a team of oceanographers and glaciologists unpeeled a new layer of understanding of tidewater glaciers—glaciers that end in the ocean—and their dynamic processes. “They’ve really discovered that the melt that’s happening is fairly dramatically different from some of the assumptions we’ve had,” says Twila Moon, a glaciologist at the National Snow and Ice Data Center at the University of Colorado-Boulder who was uninvolved with the study. Some of this calving and glacial melt is a normal process that glaciers undergo during seasonal transitions from winter to summer, and even through the summer.


But a warming climate accelerates glacier melting across the globe, potentially through melting across the surface of the glacier, but also through underwater melting. Glaciers can extend hundreds of feet below the surface, explained Ellyn Enderlin, a glaciologist at Boise State University who was not involved with the study. Finding higher rates of submarine melting tells us that “glaciers are a lot more sensitive to ocean change than we’ve even thought.” Understanding the melting processes and calculating the amount of melt accurately is essential for planning for sea level rise. “We are just super jazzed that we can even do this,” says lead author David Sutherland, an oceanographer at the University of Oregon. “We weren’t 100 percent sure it was going to work.”

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The Saffron Goddess (1600 B.C.) is a detail from a Minoan fresco depicting a saffron harvest, Akrotiri, Santorini island, Greece.

 

 

 

 

Nov 302017
 
 November 30, 2017  Posted by at 9:36 am Finance Tagged with: , , , , , , , , , ,  


Roger Viollet Great Paris Flood, Gare Saint-Lazare 1910

 

Goldman Warns Highest Market Valuations Since 1900 Mean Pain Is Coming (BBG)
The Last Time This Happened Was Just Months Before The Great Depression (ZH)
Pecking Order (Ben Hunt)
The Bitcoin Debate: Max Keiser vs. Steve Keen (RT)
Why We Can’t Trust Basic Economic Figures (Qz)
What Americans Spent The Most Money On In The Third Quarter (ZH)
Monetary Imperialism (Michael Hudson)
One In 10 London Families Rely On Food Banks To Survive (Ind.)
Half A Million UK Children Go To School Hungry Every Day (Ind.)
All Is Not Well In The Visegrad Economies (CER)
Pressure On Greece To Scrap Arms Deal With Saudi Arabia (G.)
Greece Moves Hundreds Of Asylum Seekers From Lesvos To Mainland (R.)
Common Pesticide Can Make Migrating Birds Lose Their Way (G.)
‘Shocking’ Rise In Rubbish Washing Up On UK Beaches (G.)
Lobster Found With Pepsi Logo ‘Tattoo’ (G.)

 

 

Bubble, anyone?

Goldman Warns Highest Market Valuations Since 1900 Mean Pain Is Coming (BBG)

A prolonged bull market across stocks, bonds and credit has left a measure of average valuation at the highest since 1900, a condition that at some point is going to translate into pain for investors, according to Goldman Sachs. “It has seldom been the case that equities, bonds and credit have been similarly expensive at the same time, only in the Roaring ’20s and the Golden ’50s,” Goldman Sachs International strategists including Christian Mueller-Glissman wrote in a note this week. “All good things must come to an end” and “there will be a bear market, eventually” they said. As central banks cut back their quantitative easing, pushing up the premiums investors demand to hold longer-dated bonds, returns are “likely to be lower across assets” over the medium term, the analysts said.

A second, less likely, scenario would involve “fast pain.” Stock and bond valuations would both get hit, with the mix depending on whether the trigger involved a negative growth shock, or a growth shock alongside an inflation pick-up. “Elevated valuations increase the risk of draw-downs for the simple reason that there is less buffer to absorb shocks,” the strategists wrote. “The average valuation percentile across equity, bonds and credit in the U.S. is 90%, an all-time high.” A portfolio of 60% S&P 500 Index stocks and 40% 10-year U.S. Treasuries generated a 7.1% inflation-adjusted return since 1985, Goldman calculated – compared with 4.8% over the last century. The tech-bubble implosion and global financial crisis were the two taints to the record.

Low inflation has prevailed in the current period, just as it did alongside economic growth in the 1920s and 1950s, according to the Goldman report. “The worst outcome for 60/40 portfolios is high and rising inflation, which is when both bonds and equities suffer, even outside recessions.” An increase in policy rates triggered by price pressures “remains a key risk for multi-asset portfolios. Duration risk in bond markets is much higher this cycle,” they wrote.

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Bubble? Hell, no.

The Last Time This Happened Was Just Months Before The Great Depression (ZH)

As Goldman observes: “we are closing in on the longest 60/40 bull market in history – there has been no 10% drawdown in real terms since 2009. A passive long-only balanced portfolio has delivered attractive risk-adjusted returns since the 90s. A favourable ‘Goldilocks’ macro backdrop, supported by the ‘Great Moderation’ and the central bank put, has boosted returns in both equities and bonds. However, after the recent ‘bull market in everything’, valuations across assets are as expensive as they have been this century, which reduces the potential for returns and diversification in balanced portfolios. Some more statistics: “We are nearing the longest bull market for balanced equity/bond portfolios in over a century – a simple 60/40 portfolio (60% S&P 500, 40% US 10-year bonds) has not had a drawdown of more than 10% since the GFC trough (8.7 years) and has delivered a 143% return (11% p.a.) since then.”

And when was the last time a balance portfolio had such a tremendous return? Goldman answers again: “The longest run has been during the Roaring 20s, ending with the Great Depression. The second longest run was the post-war ‘Golden age’ in the 50s – the 90s Boom has been in third place but is now fourth, after the current run. In other words, one would have to go back to some time in early 1929 to be looking at the kind of returns that a balanced “60/40” portfolio is generating today. In fact, the current period of staggering returns without a 10% total drawdown is now 8.7 years. How long was the comparable period in the 1928s? 9.1 years. Which means that if history is any guide, the second great depression is just around the corner.

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If we can agree that trickle down is just a ruse invented to trick the gullible, we should also agree that any and all QE is robbery in plain daylight.

Pecking Order (Ben Hunt)

Step One in the Pecking Order Lie is to promote a narrative of trickle-down economics — that making the rich even richer is a good thing for the non-rich. This is exactly what Ben Bernanke is saying here, that the Fed’s extraordinary efforts to prop up the stock market aren’t just good for the rich, but will be good for everyone once the “wealth effect” kicks in and the rich start spending their money. Whenever someone uses the phrase “wealth effect”, they are promoting a trickle-down narrative. How does trickle-down monetary policy work? By spending TRILLIONS of dollars to buy financial assets, the world’s central banks have inflated the prices of ALL financial assets, EVERYWHERE in the world. This is not a secret plan. This is not a hidden agenda. This is the avowed purpose of what central bankers call Large Scale Asset Purchases (LSAPs).

The goal is to force us to “reach for yield”. The goal is to force us to buy more and more risky assets (stocks) at higher and higher prices. The Fed is trying to make the stock market go up. And they’re succeeding. Here’s a great chart from TCW showing how this works. The orange line is the growth rate of the US economy. The blue line is the growth rate of how rich we are. By tripling the stock market, the Fed has made us much richer than our economy has grown … SOOO much richer than our economy has grown. But the goodies of a trebled stock market aren’t evenly distributed. Who owns stocks? If we’re talking about households, leaving aside pension funds and endowments and other institutional investors, it’s the rich, mostly. And that household share of the Central Bankers’ Bubble doesn’t increase linearly with wealth, but exponentially, meaning that the really rich own a lot more stocks than the merely rich, so the really rich have gotten a lot richer than the merely rich.

Here’s a chart from Deutsche Bank showing the impact (it’s a year old, so the effect is even more pronounced today with the stock market 20% higher). Thirty years ago, the non-rich (the bottom 90% of American households by income) owned 35% of American household wealth. Today they own about 22%. Forty years ago, the really rich (the top 1/10th of 1% of American households by income) owned about 7% of American household wealth. Today they, too, own about 22%. Moreover, the gains of the really rich have mirrored the losses of the non-rich, which means that the well-off and merely rich (the remaining 9.9% of American households) haven’t seen much of a change one way or another.

Now this shift in relative wealth of the non-rich and the really rich didn’t start with the Central Bankers’ Bubble and its narrative of trickle-down wealth effects from monetary policy. It started roughly in 1980 with the Reagan narrative of trickle-down wealth effects from fiscal policy. And before we make overly facile comparisons with the 1920s and 1930s, this chart isn’t taking into account pensions and social security and other safety net features of the modern semi-sorta-welfare state. So I don’t know how historically abnormal today’s level of significant wealth inequality might be, whether it’s Louis XVI level inequality or simply robber baron level inequality. But I know that it IS.

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Love Max (as does Steve), but he doesn’t look good here. You don’t enter a discussion with Steve Keen without even trying to listen. And I remember Max pushing silver the same way he does bitcoin.

The Bitcoin Debate: Max Keiser vs. Steve Keen (RT)

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Netherlands as a (quasi-) legal money launderer.

Why We Can’t Trust Basic Economic Figures (Qz)

Donald Trump doesn’t know what he’s talking about when he decries America’s trade deficits with countries around the world—and that’s not his fault. None of us do. Thanks to offshoring practices like those revealed in the Paradise and Panama Papers, global investment figures are “a big black hole,” says Daniel Haberly, an economic geographer at the University of Sussex. “We don’t really know what the world economy actually looks like. That’s the big burning question for me. We have this picture of what it looks like on paper but in reality it’s probably something completely different.” Look no further than the UK for an example of how crazy investment statistics are. The first name on its list of top foreign direct investors doesn’t surprise—it’s the world’s biggest economy, the United States.

Second place, however, isn’t such a behemoth. According to British government stats, the Netherlands supposedly shoveled £139.8 billion ($186 billion), 28% of its GDP, into the UK in 2015. Anglo-Dutch ties run long and deep, but can a country of just 17 million people really be investing so much cash into Britain alone? Quite simply, no. The Netherlands is not just a smallish European trading nation—it’s also one of the world’s biggest conduits for cash going to and from tax havens. When the British government broke down its FDI statistics this year (chapter 6), it realized that only 34.5% of that money actually came from the Netherlands; much of the rest being from European subsidiaries of big US companies or… from British companies rerouting their money.

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The US political system failing to tackle healthcare, with a ton of examples how to do it across the world, tells you all you need to know about how morally bankrupt it is.

What Americans Spent The Most Money On In The Third Quarter (ZH)

One month ago, when the BEA released its first estimate of the hurricane-impacted economy during the third quarter (which came in at a stronger than expected 3.0%) we were surprised to report that according to the Department of Commerce, in the third quarter the biggest driver of marginal spending was car sales (technically Motor Vehicles and Parts), which increased by $15.6 billion to $463.5 billion. Which, as we said at the time and considering recent US and global automakers data, was paradoxical in light of the ongoing decline in overall sales in the second half of 2017, and it was far too early to expect the post-hurricane spending spree. It was also surprising because as Americans splurged on cars, they pulled back on gasoline purchases, which was the single biggest detractor to spending, subtracting a marginal $3.5 billion in PCE, to $283.6 billion.

In any case, we concluded by saying that “we now await for the revisions to this initial estimate over the coming two months, because something tells us that the auto spending spree will be thoroughly revised well lower.” One month later, when the BEA released its second Q3 GDP estimate, it appears we were right: the contribution from motor vehicles was indeed revised lower, but not nearly as dramatically as we expected, only from a marginal increase of $15.6 million to $13.5 million. And yet, many other line items did see a downward revision, which means that something had to increase sharply to compensate for the downward revisions among other spending components.

Sure enough, something did: the old faithful “plug” which has saved the US economy every quarter for the past 4 years: Healthcare, or as it is better known, Obamacare, because with Trump failing to repeal Obama’s signature health law, it means that Healthcare will merrily “contribute to GDP” for years to come, by being the single biggest marginal spending item for the foreseeable future.

Finally, for a comparison of how dramatically the contribution of “Healthcare” was revised higher, here is a chart showing side by side the change in spending among all key line items. One can almost hear the orders “from above” to make GDP 3% or higher at any cost when looking at this chart.

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Must. Read. Like anything Hudson.

Monetary Imperialism (Michael Hudson)

In theory, the global financial system is supposed to help every country gain. Mainstream teaching of international finance, trade and “foreign aid” (defined simply as any government credit) depicts an almost utopian system uplifting all countries, not stripping their assets and imposing austerity. The reality since World War I is that the United States has taken the lead in shaping the international financial system to promote gains for its own bankers, farm exporters, its oil and gas sector, and buyers of foreign resources – and most of all, to collect on debts owed to it. Each time this global system has broken down over the past century, the major destabilizing force has been American over-reach and the drive by its bankers and bondholders for short-term gains.

The dollar-centered financial system is leaving more industrial as well as Third World countries debt-strapped. Its three institutional pillars – the IMF, World Bank and World Trade Organization – have imposed monetary, fiscal and financial dependency, most recently by the post-Soviet Baltics, Greece and the rest of southern Europe. The resulting strains are now reaching the point where they are breaking apart the arrangements put in place after World War II. The most destructive fiction of international finance is that all debts can be paid, and indeed should be paid, even when this tears economies apart by forcing them into austerity – to save bondholders, not labor and industry. Yet European countries, and especially Germany, have shied from pressing for a more balanced global economy that would foster growth for all countries and avoid the current economic slowdown and debt deflation.

After World War I the U.S. Government deviated from what had been traditional European policy – forgiving military support costs among the victors. U.S. officials demanded payment for the arms shipped to its Allies in the years before America entered the Great War in 1917. The Allies turned to Germany for reparations to pay these debts. Headed by John Maynard Keynes, British diplomats sought to clean their hands of responsibility for the consequences by promising that all the money they received from Germany would simply be forwarded to the U.S. Treasury. The sums were so unpayably high that Germany was driven into austerity and collapse. The nation suffered hyperinflation as the Reichsbank printed marks to throw onto the foreign exchange also were pushed into financial collapse. The debt deflation was much like that of Third World debtors a generation ago, and today’s southern European PIIGS (Portugal, Ireland, Italy, Greece and Spain).

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Medieval third world.

One In 10 London Families Rely On Food Banks To Survive (Ind.)

One in 10 London families are relying on charity handouts to eat and food banks are facing unprecedented strain in the run-up to Christmas, new figures reveal. One in four London parents worry about being able to afford to feed their children, the research found, while almost one in five have to choose between heating their homes or feeding their family. The exclusive poll, conducted by Kellogg’s to mark the start of The Independent and Evening Standard Help a Hungry Child campaign, exposed the devastating choices facing parents around the country as food banks struggle to keep up with growing demand. At least 146,798 three-day emergency parcels were handed out by Trussell Trust foodbanks in December 2016, a 47% spike compared to the average for the overall 2016/17 financial year, according to the charity.

Children accounted for 61,093 of those affected. Now the charity is warning 2017 could herald an even higher increase, following a 13% surge in food bank usage during the first six months of this year. The figures are revealed as a Labour MP urges the Government to accurately measure the number of people going hungry with a food insecurity bill. Emma Lewell-Buck, a member of the All-Party Parliamentary Group on Hunger, will present the cost-neutral bill to the Commons on Wednesday. It will ask the Government to incorporate questions about how often people go without food into national surveys. She called rising food bank usage a “massive dereliction of state duty” and is urging Theresa May to take urgent action to recognise the scale of the problem.

“They have to admit what everybody already knows that the levels of hunger are far higher than we have realised,” she said. “It is the duty of the state, there is no way food banks should have filled the gap left by the welfare state that this Government has created.” She added: “Now food banks are becoming a pillar of the welfare state and they should not be and they should never have been.” The South Shields MP said getting a measure on the true scale of the numbers going hungry would force the Government into taking a more proactive stance in tackling hunger.

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Talk about a failed society…

Half A Million UK Children Go To School Hungry Every Day (Ind.)

When money is tight eight-year-old Emma’s parents are forced to send their daughter to school, tummy rumbling, without any breakfast. In the evening, she fills up on plain pasta or reduced microwave meals – cheap food her parents can afford. Emma says she often feels too tired to concentrate on her schoolwork. The situation Emma lives with is the devastating reality faced by the 500,000 children across the UK who go to school hungry each day. Eight million people in Britain – the world’s sixth largest economy – are living in food poverty, according to the United Nations (UN). And an estimated 870,000 children in England may be going to bed hungry each night because their parents are unable to provide the meals they need.

But not eating isn’t the only problem – access to nourishing and nutrient-filled food is simply out of reach for thousands of families living on the breadline, with far-reaching consequences for too many of Britain’s children. Dr George Grimble, a medical scientist at University College London, said the situation was “disastrous” for developing children, resulting in malnourishment, obesity and squandered potential. “When people are in poverty they are forced to buy the cheapest foods – filling but nutrient-lacking food,” Dr Grimble told The Independent. “Food poverty in the community overlays to a large extent on disease malnutrition.” More than 60% of paediatricians believe food insecurity contributed to the ill health among children they treat, according to a 2017 survey by the Royal College of Paediatricians and Child Health.

The harrowing hunger stats sit juxtaposed with the fact 100 million tons of food is wasted each year across the EU. More than 400 million meals’ worth of edible food was sent to landfill in 2016 which could have been redistributed to feed hungry people across Britain, according to the Government’s waste advisory body, Wrap.

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“..succumbed to populists..” is too easy a cop-out. These countries will define Europe going forward.

All Is Not Well In The Visegrad Economies (CER)

On the face of it, the Visegrad countries – the Czech Republic, Hungary, Poland and Slovakia – are doing well economically. The data for GDP per head suggest a gradual convergence in living standards with Western Europe. They continue to attract a disproportionate share of inward investment in EU manufacturing, and their integration into EU-wide supply chains helps to explain why they are now collectively Germany’s most important trade partner, ahead of China and the US. But the political situation across the Visegrad is anything but rosy. Voters in all four countries have succumbed to populists. The reasons for this populism are complex, but economics probably provides a bigger part of the explanation than the positive headline numbers suggest.

In 2016, GDP per head in the Visegrad four (adjusted for price differences) ranged from 64% of eurozone levels in Poland to 82% in the Czech Republic. The Czech Republic, Slovakia and Poland have experienced significant convergence in GDP per head with the eurozone over the last ten years (though it should be noted that the dire performance of the eurozone economy over that period was a major reason for this). But what matters to the average person is not GDP growth, but personal income growth, and hence living standards. And here the Visegrad picture is less reassuring. In 2016 worker ‘compensation’ (wages and salaries and other benefits) ranged from just 50% of the eurozone’s in Hungary to 59% in the Czech Republic. And the rate of convergence of compensation with the eurozone average has been slower than the rate of convergence of GDP.

Growth in consumption across the Visegrad countries has lagged behind growth in GDP, resulting in a sharp fall in consumption as a share of overall spending. This has happened in nearly all developed economies over the last decade, but the scale of the decline in all four Visegrad economies has been much greater. Average households have not seen enough of the fruits of economic growth. Those rewards have gone disproportionately to the owners of capital, and in these countries, that tends to mean foreigners. In the Czech Republic, Hungary, and Slovakia, the most important sectors are largely or wholly foreign-owned. The Polish economy is much bigger and more diversified than the other three, but the level of foreign ownership is still very high.

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How about the pressure on US, France, UK?

Pressure On Greece To Scrap Arms Deal With Saudi Arabia (G.)

The Greek government has announced it will abide by any EU embargo on Saudi Arabia as it faces criticism over a controversial arms deal, including from its own MPs. As cracks appeared in the leftist-led coalition over the €66m weapons agreement with the kingdom, the administration’s spokesman said Athens would apply the law “by the letter” if EU sanctions were announced. “We are waiting to see the decisions of the European parliament and will act accordingly,” said Dimitris Tzannakopoulos. “The process is frozen.” Mounting tensions within the ruling Syriza party have matched international condemnation of the agreement by human rights groups. Amnesty International has said the munitions could end up being used by the Gulf state in its war against neighbouring Yemen, where civilian populations have borne the brunt of the conflict.

“[We] call on Greece to immediately rescind the sale and transfer of military equipment to Saudi Arabia and to refuse approval of the transport of every type of conventional weapons, ammunitions and war material to point of conflicts in Yemen,” the rights group said. Prominent members of the ruling Syriza party have questioned the morality of selling arms to Saudi Arabia, and on Tuesday the Greek parliament’s military procurements committee also hinted it may scrap the deal. “Greece is a hub of stability, peace and friendship in the greater region and that is what it should be exporting,” the former deputy European affairs minister Nikos Xydakis told the Guardian. “There is no need for this [deal] to go through and frankly when we’re talking about €66m, not €66bn, it isn’t worth the trouble. It’s not the sort of money that will save Greece.”

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Whose initiative? Brussels, Berlin?

Greece Moves Hundreds Of Asylum Seekers From Lesvos To Mainland (R.)

Greek authorities on Thursday said they have moved a few hundred asylum seekers from the island of Lesvos to the mainland in an effort to ease overcrowding in its camps. Thousands of asylum seekers have become stranded on Lesbos and four other islands close to Turkey since the European Union agreed a deal with Ankara in March 2016 to shut down the route through Greece. “I came to heaven from hell,” said 30-year old Mohammad Firuz, who lived for two months in a state-run camp in Lesvos.

Firuz was among 300 people, many of them women and children, aboard a ferry that reached the port of Piraeus early on Thursday morning. The asylum seekers would be taken to camps and apartments in the mainland, authorities said. Lesvos is now hosting some 8,500 asylum-seekers, nearly three times the capacity of state-run facilities. Violence often breaks out, mainly over delays in asylum procedures and poor living standards. Lesvos residents went on strike earlier this month to protest against European policies they say have turned it into a “prison” for migrants and refugees.

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This is just too nuts. Ban the shit.

Common Pesticide Can Make Migrating Birds Lose Their Way (G.)

The world’s most widely used insecticide may cause migrating songbirds to lose their sense of direction and suffer drastic weight loss, according to new research. The work is significant because it is the first direct evidence that neonicotinoids can harm songbirds and their migration, and it adds to small but growing research suggesting the pesticides may damage wildlife far beyond bees and other insects. Farmland birds have declined drastically in North America and Europe in recent decades and pesticides have long been suspected as playing a role. The first evidence for a link came in 2014 when a study in the Netherlands found that bird populations fell most sharply in the areas where neonicotinoid pollution was highest, with starlings, tree sparrows and swallows among the most affected.

“The reason our new study is special is this is not a correlation – it is actual experimental evidence,” said Prof Christy Morrissey, at the University of Saskatchewan in Canada, who said the results shocked her. “The effects were really dramatic. We didn’t anticipate the acute toxicity, because the levels [of neonicotinoid] we gave them were so low. Three neonicotinoids were banned from use on flowering crops in the European Union in 2013 due to unacceptable risks to bees and other pollinators and a total outdoor ban is being considered. Canada is also considering a total ban. Neonicotinoids now pollute the environment across the world and pressure is growing to slash pesticide use, which research shows would not reduce food production on almost all farms.

The new research, published in the peer-reviewed journal Scientific Reports, analysed the effect of the neonicotinoid imidacloprid on white-crowned sparrows that migrate from the southern US and Mexico to northern Canada in summer. Birds were given doses equivalent to less than a single corn seed and within hours became weak, developed stomach problems and stopped eating. They quickly lost 17-25% of their weight, depending on the dose, and were unable to identify the northward direction of their migration. “Basically, these birds became lost,” said Morrissey. Control birds that were not exposed to the insecticide were unaffected.

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Again: ban the shit.

‘Shocking’ Rise In Rubbish Washing Up On UK Beaches (G.)

The rubbish washing up on the UK’s beaches is continuing to increase, rising by 10% in 2017, the Marine Conservation Society’s (MCS) annual beach clean has revealed. Much of the waste is plastic, leading the MCS to call on the government to urgently introduce a charge on single-use plastic items, such as straws, cups and cutlery. The chancellor, Philip Hammond, recently announced the government is considering such action. About 12m tonnes of plastic litter enters the oceans every year, killing millions of marine animals. People are also believed to be inadvertently eating the plastic, potentially contaminated with toxic chemicals, via seafood. The MCS beach clean in September saw 7,000 volunteers scour 340 beaches and collect an average of 718 pieces of rubbish every 100 metres.

The survey uses a standard methodology and data from the last decade and shows a rising tide of litter along the coast. Most of the litter is small, unidentifiable fragments of plastic, broken down in the sea from larger objects and often mistaken for food by fish and birds. But 20% of the rubbish is packaging from “on the go” food and drink, such as cups, bottles, cutlery, stirrers and sandwich packets. “Our beach clean evidence shows a shocking rise in the amount of litter this year,” said Sandy Luk, MCS chief executive. “Our oceans are choking in plastic. We urgently need a levy on single-use plastic as a first step.” “We are concerned we are continuing on this upwards trend,” said Lizzie Prior, beach and river clean project officer at the MCS. “Plastic never goes away – it does not decompose. It just goes to smaller and smaller pieces and becomes much more harmful for our marine environment.”

She said the tax on plastic bags introduced in 2015, which has seen their use drop by 85%, had a rapid impact, with the number of bags found on beaches down by 40% since 2014. “It is really fantastic to see that small charge completely changed people’s behaviour,” she said. “A levy [on other single use plastic] would be a fantastic next step.”

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Any day now, McDonald’s will start beaming ads onto the surface of the moon.

Lobster Found With Pepsi Logo ‘Tattoo’ (G.)

Concerns over debris littering the world’s oceans are back in the spotlight after a Canadian fishing crew found a lobster with the blue and red Pepsi logo imprinted on its claw. Trapped in the waters off Grand Manan, New Brunswick, the lobster had been loaded onto a crate to have its claws banded when Karissa Lindstrand came across it. Lindstrand, who drinks as many as 12 cans of Pepsi a day, quickly spotted the resemblance. “I was like: ‘Oh, that’s a Pepsi can,’” she said. On closer look, it seemed more like a tattoo on the claw. “It looked like it was a print put right on the lobster claw.” Neither she or any of the crew had seen anything like it. More than a week after the find, debate has swirled over how it might have come to be: some believe the lobster might have grown around a can that ended up at the bottom of the ocean.

Others speculate that part of a Pepsi box somehow become stuck on the lobster. Lindstrand disputes these theories. The image on the claw was pixelated, she said, suggesting it couldn’t have come from a can. And the image on a Pepsi box is far too large to be what she saw on the claw. The logo looked like it came from a printed picture, but paper would have deteriorated in the ocean. “I’m still trying to wrap my brain around what exactly it was,” she said. The find comes amid growing concerns over the amount of debris accumulating in the world’s oceans. Between 5m and 13m tonnes of plastic leak into the world’s oceans each year to be ingested by sea birds, fish and other organisms, leading the record-breaking sailor Dame Ellen MacArthur to warn that by 2050 the sea could have more plastic in it than fish, by weight.

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