Apr 142019
 
 April 14, 2019  Posted by at 9:39 am Finance Tagged with: , , , , , , , , , , ,  


Edward Hopper The Sheridan Theatre 1937

 

Draghi Worries About Fate Of Fed’s Independence (MW)
The Most Splendid Housing Bubbles in Canada Deflate (WS)
UK Tories Face European Elections Drubbing (Ind.)
Corbyn Told To Promise Final Say Referendum (Ind.)
It’s The UK Political System, Not Just MPs, That Is Failing (G.)
UK Media, MPs Unveil Latest Assange Deception (Cook)
American Values: Embassies Are For Chopping Up Journalists (McDonald)
Assange Is In The Dock, But Investigative Journalism Is On Trial (Crikey)
The Obvious Dirty Dealings Behind Julian Assange’s Arrest (OG)
Anonymous Attacks Continue Against Ecuadorian Government Websites (Cassandra)

 

 

Independence from what? Reality?

Draghi Worries About Fate Of Fed’s Independence (MW)

Concerns about central-bank independence are on the rise.Take, for example, the cover of this week’s edition of the Economist. And while not solely a U.S. concern, a steady stream of complaints by President Donald Trump about the Federal Reserve’s earlier string of interest-rate hikes and his announcement he would nominate Stephen Moore and Herman Cain — both widely criticized as unqualified and likely to act at the behest of the White house on policy decisions — to the central bank’s governing board have sparked fears the central bank’s policy independence could be at risk. (Four Republican senators have said they would vote against Cain if he were formally put forward, likely sinking his chances.)

On Saturday, European Central Bank President Mario Draghi appeared to take notice: ‘I’m certainly worried about central bank independence in other countries, especially…in the most important jurisdiction in the world.’ Draghi’s remarks, as reported by Reuters, came at a news conference at the spring meetings of the IMF and World Bank in Washington. They also marked a rare instance of a central banker opining about the operations of a foreign central bank. “If the central bank is not independent, then people may well think that monetary policy decisions follow political advice rather than objective assessment of the economic outlook,” said Draghi.

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Amid all the loud news, both Canada and Australia are slipping fast.

The Most Splendid Housing Bubbles in Canada Deflate (WS)

Canada’s housing markets barely dipped during the Financial Crisis when US housing markets ran into deep trouble, causing the Mortgage Crisis that begat all kinds of other crises. Canadian homeowners and banks watched the mess from across the border and shook their heads. But now, after an 18-year housing boom, the downturn has arrived in Vancouver and Toronto, among the formerly hottest housing bubbles in the world.


The Teranet-National Bank House Price Index tracks single-family house prices, based on “sales pairs,” similar to the S&P CoreLogic Case Shiller index for US housing markets. It compares the sales price of a house in the current month to the prior sale of the same house years earlier. Using “sales pairs” eliminates the issues that affect median-price indices. But the median-price data for Vancouver is a lot more disconcerting than the Teranet data. So let’s compare how Vancouver’s housing bubble stacks up against the legendary but now also deflating housing bubble in San Francisco.

House prices in the Greater Toronto Area fell 0.3% in March from February and are down 4.3% from the peak in July 2017, the steepest 20-month decline since May 2009. From January 2002 through the peak in July 2017, the index soared 218% — meaning that house prices more than tripled. But that pales compared to Vancouver, where house prices more than quadrupled. I converted this Teranet index for Toronto house prices to “percent-change since January 2002” and overlaid the insane mind-boggling housing bubble in the San Francisco Bay Area, and it shows just how majestic the 18-year Toronto housing bubble has been:

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European elections in Britain do seem surreal.

UK Tories Face European Elections Drubbing (Ind.)

The Conservatives are facing a humiliating defeat at the European elections next month after support for the party slumped to its lowest level since 2013, according to a new poll. The survey shows the Tories on just 28 per cent when it comes to general election voting intention – a four-point fall which leaves them trailing Labour on 32. When voters were asked which party they will vote for at the European elections, Theresa May’s party languished on 16 per cent, eight points behind Labour on 24. In a clear sign support for the Conservatives is crumbling over the failure to deliver Brexit, 56 per cent of people who voted to leave at the 2016 referendum said they would back Ukip or Nigel Farage’s newly formed Brexit Party during next month’s vote.


The Brexit Party is on 15 per cent, while Ukip stands at 14 per cent when it comes to European voting intention, the YouGov poll for The Times indicated. By comparison, the Lib Dems and the Greens are both on 8 per cent, while Change UK has 7 per cent support. No 10 is still hoping to get a deal through parliament in time to avoid participation in the European elections on 23 May. But the UK is formally on track to hold the poll, having informed the EU authorities ahead of Friday’s deadline that it would be taking part. Boris Johnson’s backers have suggested he may not even campaign on behalf of his party next month in an effort to show his displeasure at the UK’s involvement. “Boris won’t campaign in European elections. He believes the prospect of the UK fielding candidates is utterly preposterous,” a source told The Times.

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Something only a small group wants. But then, that’s true of all Brexit issues and ‘solutions’.

Corbyn Told To Promise Final Say Referendum (Ind.)

Jeremy Corbyn is under intense pressure from within his shadow cabinet to give a strong commitment to a new Brexit referendum as part of Labour’s European election campaign offer. A string of senior shadow ministers are advocating a new public vote, alongside MPs from the left and right of the party, buoyed by a groundswell of support from the membership. The Independent understands Labour is now beginning the process of drawing up its manifesto with those wanting to give the public a final say on Brexit pushing the leader to make a strong bid for the Remain vote on polling day. Mr Corbyn’s team is currently engaged in talks with the Conservatives in an effort to find a Brexit compromise deal that can enjoy majority support in the House of Commons, with a referendum having been discussed during the negotiations.


The leader’s office emphasised that decisions on the manifesto were yet to be discussed, with the party simultaneously defending its majorities against the pro-Remain Change UK party run by Labour defectors and Nigel Farage’s new Brexit Party. One shadow cabinet source told The Independent: “We can’t credibly agree to any deal unless there is a confirmatory referendum attached to it. “We should be telling people about that, the support is there to be had.” The European elections are set to become a rerun of the 2016 referendum campaign with parties positioning themselves along the Brexit spectrum from Leave to Remain.

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Party before country.

It’s The UK Political System, Not Just MPs, That Is Failing (G.)

Brexit has prompted a recurring nightmare among an increasingly incredulous population: our very own Groundhog Day. Two weeks after the EU granted us an 11th-hour extension to prevent us crashing out without a deal, we are back in exactly the same position. The only thing standing between us and next Friday’s cliff edge is the hope the EU gifts us another extension. Meanwhile, the political turmoil engulfing the country worsens, the two main parties increasingly consumed by division and disarray and the political leadership we so desperately need to avert crisis as elusive as ever. It’s hard to believe that the Westminster model of democracy was one prized by constitutional theorists for the stability it purportedly delivers. As the stakes get higher, our political system has proved less and less capable of delivering a resolution to the gridlock that has infected Westminster.

Brexit has been a story of the favouring of party management over the national interest. From the very beginning, Theresa May’s approach to Brexit – from her premature decision to trigger article 50 to her red lines on freedom of movement and the customs union – has been driven not by a strategy to unite the country in the wake of a divisive referendum but to keep her Brexit ultras on side. Only now it has become clear that there are MPs in her party so fanatically dogmatic that they would rather hold out for no deal than vote for her deal has she opened compromise talks with Labour. But Labour emerged from the talks on Friday complaining that no changes to the political declaration were on offer, suggesting that this move may have been more about trying to lay blame for any further delay on the opposition.

Labour’s strategy has been no less determined by party interest. Jeremy Corbyn has kept a position of barely credible ambiguity for as long as possible to avoid alienating any of its voters. Labour has maintained the charade that it could deliver a Brexit deal that delivers all the benefits of EU membership with none of costs. And Labour has failed to provide any leadership support for a confirmatory referendum on any Brexit deal, with the shadow cabinet split on the issue. Time is running out for Labour to decide once and for all whether it will properly swing its weight behind a referendum. Thanks to the mess the Tories are in, Corbyn is in a position of power, if he only chooses to use it.

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Another excellent essay from Jonathan Cook.

UK Media, MPs Unveil Latest Assange Deception (Cook)

[..] the public conversation in the UK, sympathetically reported by the Guardian, supposedly Britain’s only major liberal news outlet, is going to be about who has first dibs on Assange. Here’s the first paragraph of the Guardian front-page article: “Political pressure is mounting on [Home Secretary] Sajid Javid to prioritise action that would allow Julian Assange to be extradited to Sweden, amid concerns that US charges relating to Wikileaks’ activities risked overshadowing longstanding allegations of rape.” So the concern is not that Assange is facing rendition to the US, it is that the US claim might “overshadow” an outstanding legal case in Sweden. The 70 MPs who signed the letter to Javid hope to kill two birds with one stone.

First, they are legitimising the discourse of the Trump administration. This is no longer about an illegitimate US extradition request on Assange we should all be loudly protesting. It is a competition between two legal claims, and a debate about which one should find legal remedy first. It weighs a woman’s sexual assault allegation against Assange and Wikileaks’ exposure of war crimes committed by the US military in Iraq and Afghanistan. It suggests that both are in the same category, that they are similar potential crimes. But there should only be one response to the US extradition claim on Assange. That it is entirely illegitimate. No debate. Anything less, any equivocation is to collude in the Trump administration’s narrative. The Swedish claim, if it is revived, is an entirely separate matter.

[..] In another article on Assange on Friday, the Guardian – echoing a common media refrain – reported as fact a demonstrably false claim: “Assange initially took refuge in the Ecuadorian embassy to avoid extradition to Sweden.” There could be no possible reason for its reporters to make this elementary mistake other than that the Guardian is still waging its long-running campaign against Assange, the information revolution he represents and the challenge he poses to the corporate media of which the Guardian is a key part.

[..] Assange was previously wanted for questioning, and has never been charged with anything. If the Swedish extradition request is revived, it will be so that he can be questioned about those allegations. I should also point out, as almost no one else is, that Assange did not “flee” questioning. He offered Swedish prosecutors to question him at the embassy. Even though questioning overseas in extradition cases is common – Sweden has done it dozens of times – Sweden repeatedly refused in Assange’s case, leading the Swedish appeal court to criticise the prosecutors. When he was finally questioned after four years of delays, Swedish prosecutors violated his rights by refusing access to his Swedish lawyer.

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First amendment anyone?

American Values: Embassies Are For Chopping Up Journalists (McDonald)

202310Fair-minded people across the world have rightly condemned the US-ordered arrest of Julian Assange. However, few have noted how it fits part of a pattern of American hypocrisy when it comes to the treatment of journalists. Only six months ago, Jamal Khashoggi was murdered and hacked to pieces by Saudi agents at the kingdom’s consulate in Istanbul. He was a columnist at the Washington Post and editor-in-chief of the Al-Arab News Channel, known for his sharp criticism of the illegal US-backed Saudi war on Yemen. Despite a CIA conclusion that Crown Prince Mohammed bin Salman ordered the gruesome assassination, President Donald Trump stood by his ally and no meaningful sanctions or penalties were directed towards Riyadh.


Turkey itself remains a NATO member, and close US partner, despite holding more journalists behind bars than any other nation on earth. This figure stood at 68, at the end of last year, around one-quarter of the global total of 251. Now we have the indictment of Assange, which seeks to criminalize basic functions of journalism. For instance, keeping sources anonymous or deleting records of conversations. Indeed, it also appears to be a breach of America’s own First Amendment. He has been targeted by Washington for exposing evidence of appalling atrocities, carried out by the US military, in Iraq and Afghanistan. And, as a result, Assange sought sanctuary in the small London embassy of Ecuador. What followed was relentless pressure on Quito to reverse the asylum it granted the Wikileaks founder and it culminated in his arrest.

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“That would forestall extradition for long enough for Jeremy Corbyn to become PM, at which point extradition would be refused. But it may be just all screaming chaos.”

Assange Is In The Dock, But Investigative Journalism Is On Trial (Crikey)

Team Assange had a defence on the jumping bail thing: “Your honour, my client had a reasonable fear that from remand he would be extradited to the US.” That was received reasonably. “Also that the previous presiding judge Lady Arbuthnot, did not recuse herself …” That was not. “You had ample time to raise this issue, and now you are traducing the reputation of a fine judge…” Snow went on. I thought of Peter Cook’s great monologue of the summing-up of the Jeremy Thorpe trial: “You have ruined the reputation of one of the most pretty defendants.” Once Assange had been found guilty of skipping bail, it got even weirder. “Your situation is a product of your narcissism,” said the magistrate clearly riled. He did not want the situation of Justice Lady Arbuthnot further explored. I am happy to do so.


Lady Arbuthnot, who ruled on the lawfulness of Assange’s continued criminalisation in the UK in 2015, is the wife of Lord Arbuthnot, a Conservative who has held multiple defence industry posts over the last two decades. This sally got short shrift, but it seemed to me intended to do so. Although when I asked a member of the legal team how it had all gone, they said “well, you saw that shit show in there”. So perhaps not. Assange is now on remand awaiting sentencing for the fleeing bail charge — the Magistrates Court having transferred it to the Crown Court, so a larger maximum sentence of 12 months instead of six, can be awarded. Is that a plan too? That would forestall extradition for long enough for Jeremy Corbyn to become PM, at which point extradition would be refused. But it may be just all screaming chaos.

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“Of course, the idea that Moreno is handling the economy brilliantly, but somehow also needs over $10 billion dollars in loans is never addressed.”

The Obvious Dirty Dealings Behind Julian Assange’s Arrest (OG)

The US has been planning to have Julian Assange handed over for a longtime, that much is obvious. Mike Pence, the Vice President, was visiting Ecuador last year, notionally to discuss the Venezuela situation, and trade. But it was fairly obvious at the time, and even more so now, that they were discussing the details of Assange being handed over to UK authorities, and eventually extradited to the US. “Trade”, indeed. In terms of quid pro quo, the situation is clear-cut – In February, Ecuador got a $4.2 BILLION loan approved by the International Monetary Fund (amongst other pay-outs). Reuters reported on February 19th of this year:

“Ecuador has reached a $4.2 billion staff-level financing deal with the IMF, President Lenin Moreno said on Wednesday, as the Andean country grapples with a large fiscal deficit and heavy external debt. The country will also receive $6 billion in loans from multilateral institutions including the World Bank, the Inter-American Development Bank, and the CAF Andean development bank…” So, less than 2 months ago, it was announced Ecuador was going to receive over 10 billion dollars of loans. Where all that money will eventually end up is anyone’s guess, it certainly isn’t being spent on infrastructure or state enterprise: “Moreno has begun to implement an austerity plan that includes layoffs of workers at state-owned companies and cuts to gasoline subsidies, also plans to find a private operator for state-run telecoms company CNT and other state-owned firms.”

President Moreno has already been the subject of numerous corruption accusations. So these “loans”, nominally for “[creating] work opportunities for those who have not yet found something stable”, could more realistically be described as “a pay-off”. More than just money, Lenin Moreno has been gifted something all insecure third-world leaders crave: Western approval. The Economist ran a story on April 12th, the day after Assange was arrested, praising Lenin Moreno’s economic policies, and blaming the previous administration for the “mess” that Moreno has to clear up. (Of course, the idea that Moreno is handling the economy brilliantly, but somehow also needs over $10 billion dollars in loans is never addressed. A tiny logical contradiction compared with the nonsense the MSM dish-up on a daily basis).

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Expect it to be used against Assange.

Anonymous Attacks Continue Against Ecuadorian Government Websites (Cassandra)

Over 30 websites belonging to the Ecuadorian government are now offline — some of them defaced — in protest of the arrest of WikiLeaks founder Julian Assange. The hackers are calling their efforts #OpEcuador, and are also promoting #OpUS and #OpUK. The United States and United Kingdom have not yet been hit with any cyber attacks, that we know of. It is important to note that none of this was directed by WikiLeaks or Assange himself. Supporters are acting on their own with the attacks. A data dump from the hackers warns that “Ecuador Government websites has been taken #Offline with 1 Direct attack. There are few most important websites that’s still down at this time. If some of their servers comes up again, we will fire again to take them down!”

Websites that have been hit include the Central bank of Ecuador, their Ministry of Interior, the Ecuadorian Assembly in UK and the main website for the Government of Ecuador — mot of which had been down for over twelve hours by Saturday evening. The hackers primarily appear to be speaking and coordinating in Spanish — though one of the data dumps was in Indonesia. A Twitter account belonging to the hackers stated that if the websites come back online they will “burn their servers.” The hacking group also called for other supporters to join them.


An InfoSec expert and Assange supporter who has been monitoring the situation told the Gateway Pundit that he is concerned that the attacks will be used against Assange by the media. “My opinion is that it’s deserved karma, but it could enable the anti-Assange media to divert attention away from Julian’s value to journalism by wrongly associating him with reckless hacktivism culture.” He also expressed concern about there being collateral damage within the large data dumps that are being posted online. Other supporters expressed similar concerns, though many still agreed that the attacks are warranted.

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Sep 192014
 
 September 19, 2014  Posted by at 3:25 pm Finance Tagged with: , , , , ,  


Christopher Helin Star auto on steep grade, San Francisco 1922

The quote of the day today must be this one from Belgian EU Trade Commissioner Karel De Gucht in the aftermath of the Scottish rejection of independence: A Europe driven by self-determination of peoples … is ungovernable … ”

I don’t think he understands the implications of what he says, and I’m quite sure he completely misses out on the mastodont sized problem he – quite accurately despite himself- describes.

Which is something along the lines of ‘Europeans should stop wanting to make their own decisions, because that makes it hard for us in Brussels to make those decisions for them’.

There are precious few voices in Brussels who view the EU project with a critical eye. Except for Nigel Farage and perhaps one or two others, they’re all convinced that the EU is an entity that does good, in the same way that people who work for the IMF, the World Bank and NATO – just to name a few – do.

And democratic values and proceedings can be pesky little nuisances in these ‘greater power for the greater good’ visions of society. After all, it was newly elected EU head Jean-Claude Juncker himself who stated a few years back that “When it becomes serious, you have to lie.” That, too, like De Gucht’s comment above, is a way to pervert democracy.

The people working at the EU, and most politicians in European capitals and elsewhere in the world, don’t understand the spirit of their time. Moreover, they don’t think they need to, because they’re convinced they can mold that spirit as they see fit.

The overriding idea is that there can be no question that centralized power is beneficial, and the more of it there is, the better it gets. And it’s admittedly true that more power will flow to Brussels as time goes by, i’s a process built into the entire very structure. But that doesn’t make it a good thing.

To date, there are no major parties in Europe where eurosceptics are elected to major positions; the system is quite foolproof when it comes to that. The rise of Beppe Grillo’s M5S, France’s Front National, and UKIP in Britain, are still no more than nuisances to the EU elite. As long as they can be kept out of their respective countries’ governments, all will be well, is the feeling.

And Brussels by now has plenty experience in influencing how governments are formed. It has inserted plenty technocrats in southern Europe, and played a questionable role in Kiev. From where they’re sitting, time is on their side, and they’re working hard to establish, for instance, a full banking union. Once that is done, the way back gets much harder, or so is their line of thinking.

But as I said, they don’t understand their time. They’ve fallen way behind the curve, and no, they can’t mold how people feel about the world they live in. They’re behind the curve because they refuse to accept the new economic reality that Europe not only faces, but is deeply mired in.

If they would accept that reality, their project would start to look very different, and certainly not grand, or modern, beneficial or benign. But why should they have such worries if absolutely everyone around them is absolutely convinced that the recovery is just around the corner?

Not even the Scots doubt that. That’s not why they wanted independence. For Yes! campaign leader Alex Salmond, it was about increasing wealth, not about making your own decisions in times of less wealth. Nigel Farage wants Britain out of the EU because he thinks that would make it richer.

The only one in politics – in his own way – that I know who doubts this mirage is Italy’s Grillo. And while the Italian economy is sinking further beyond salvation, ECB head Mario Draghi is jockeying for position to become Italy’s next leader, once PM Renzi has been tarred and feathered. No matter how deep their country sinks, they’ll do anything to keep any fundamental change from taking place. Never doubt the model.

A nice twist on all this is provided by Giovanni Dalla-Valle, an activist for Venetian independence, in an interview with RT:

In your opinion, how will the EU react to Veneto independency? Will they be interested in a new state in the union?

GDV: I suspect that Italy is bankrupt. So there will be an interest at some point for Europe to have a very productive and rich region like Veneto becoming a state, becoming a nation; it is a bit similar to what is happening to Bayern [Bavaria] or other areas with an independent spirit like Flanders or Catalonia… Basically, a nation that can actually help Europe, because it has got a GDP which is higher than in Romania, Hungary, for example, rather than have Italy, which is going bankrupt.

I must admit, I’m greatly amused by the notion that at some point Brussels may start encouraging separatists to move for independence, provided they live in rich regions. But it would be a political maze set in a quagmire, and it at least seems much easier for the EU to try make it impossible for anyone to secede.

Which would not work, since it’s against the spirit of our time, but Brussels doesn’t know that. Or recognize it. Still, that attitude is bound to run into huge legal complications, and that makes it look like a mere play for time.

Spain’s Mariano Rajoy this morning once again reiterated his point that a Catalunya referendum violates the Spanish constitution. But it’s exactly that constitution which the Catalans want to get rid of. So they prepare a law in their own parliament that says it’s legal. An exercise in circle jerk absurdity. If Brussels sides with Rajoy, it itself violates the UN charter that all people have the right to self-determination. And so does Rajoy himself, of course, constitution or not.

The Wall Street Journal suggests that the prospect and promise of a smooth Velvet Divorce transition into independence, while maintaining EU membership and other perks, may tempt European regions to go for it. But the EU can’t stand up to its biggest members, Spain, Italy, France, Germany, no matter how desolate some of their economies may be or become.

I had hoped that Scotland would have pulled the trigger on this, not even specifically because of the Scottish situation, but because the timing is (was) exactly right (though few will see that), and because it would have been a lightning rod example across Europe of how these things can move in a peaceful, civilized, and dignified. Not a minor point in any sense.

I fear things may proceed in different, – much – less friendly, ways now, but that won’t stop the call and desire for freedom. Neither freedom from the countries some regions are now part of, nor from the EU itself. The deteriorating economic situation makes that inevitable.

The spirit of our time is determined by decreasing wealth (not just decreasing growth, growth is long gone), and in that mindset de-centralization is as unavoidable as any force of nature. We would all do well to accept and recognize that.

But who am I kidding? Most of us won’t do nothing of the kind until those biblical (or is that another book?) 100,000 frogs start falling from the sky. We ourselves don’t grasp the spirit of our time.

EU Relief At Scotland’s “No” Tinged With Fear Of Nationalism (Reuters)

European Union and NATO officials expressed undisguised relief on Friday at Scotland’s clear vote against independence from Britain, but some fretted that the genie of separatism may be out of the bottle in Europe. EU partners had mostly kept quiet in the run-up to Thursday’s referendum, lest their fears of a break-up of the United Kingdom leading to contagion elsewhere in Europe be seized upon as interference. But as soon as the Scottish “No” was secure, they voiced satisfaction and drew consequences for their own countries, for the 28-nation EU and for the Western alliance. NATO Secretary-General Anders Fogh Rasmussen congratulated British Prime Minister David Cameron and said he was sure the United Kingdom would continue to play a leading role in keeping the U.S.-led defence alliance strong.

Spain’s two mainstream national parties welcomed the outcome as showing that the northwestern region of Catalonia, expected to announce bitterly opposed plans on Friday for its own independence referendum, would be better off staying in Spain. In Brussels, the European Commission said the Scottish vote was good for a “united, open and stronger Europe” – a veiled message that EU officials hope the outcome will strengthen chances of Britain voting to stay in the bloc in a promised referendum in 2017. “The European Commission welcomes the fact that during the debate over the past years, the Scottish government and the Scottish people have repeatedly reaffirmed their European commitment,” Commission President Jose Manuel Barroso said.

Belgian EU Trade Commissioner Karel De Gucht, whose native Flanders region is in thrall to a growing nationalist movement, said a Scottish split would have been “cataclysmic” for Europe, triggering a domino effect across the continent. “If it had happened in Scotland, I think it would have been a political landslide on the scale of the break-up of the Soviet Union,” said De Gucht, a liberal who does not support demands from some of his fellow Flemings for their own state. “A Europe driven by self-determination of peoples … is ungovernable because you’d have dozens of entities but areas of policy for which you need unanimity or a very large majority,” he said, adding that “parts of former countries” might behave in very nationalistic ways.

Read more …

European Integration Emboldens Europe’s Separatists (WSJ)

Scotland’s referendum has galvanized national movements across Europe. The irony is that this has been made possible in part by the European Union, for decades the driver of economic and political integration across a once war-torn continent. In the past week, Edinburgh has been like a magnet for politicians across Europe who regard their regions as nations. Representatives from Wales, the Basque Country, Flanders, Catalonia, Galicia, Corsica, Sardinia and Friesland visited the Scottish capital. They have been emboldened in part by the safety net that the EU is perceived to offer to small countries. The institution that was created to make national borders irrelevant may perversely play a role in creating new ones.

Even as voters in many European countries register growing dissatisfaction with the EU, membership offers smaller nationalities the hope of separation with a minimum of disruption. Today, “separatism has a spring in its step,” says Charles Grant, director of the London-based Centre for European Reform. Europe’s borders have already fractured in the last 20 years. With the exception of Czechoslovakia, which split in 1993, these changes have been born out of the violent breakup of the former Yugoslavia. What is seducing nationalists these days is what Michael Desch, professor of political science at the University of Notre Dame, calls the prospect of Velvet Divorce: a gentle segue into an independent state while preserving membership of institutions like the EU and the North Atlantic Treaty Organization and retaining the same currency.

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Madrid Ready To Fight As Catalonia ‘Legalizes’ Vote (Local.es)

Spain’s central government will hold an extraordinary cabinet meeting on Saturday or Sunday if Catalonia’s regional parliament approves the “consultation” law on the referendum on Friday, a move it hopes will make a possible independence vote more legal. Although Catalan daily La Vanguardia has reported that Catalan president Artur Mas will not call the November 9th referendum on self-rule immediately after the “consultation” bill is passed, Madrid wants to have its appeal for the State Council and Constitutional Court ready as soon as possible. With this document, Spain’s ruling right-wing Popular Party hopes to strengthen its position vis-à-vis what it considers an attack on the country’s constitution. On the other hand, Artur Mas hopes the “consultation” bill expected to be passed by landslide in the Catalan parliament on Friday will make the November vote legal in the face of very strong opposition by the PP.

“Everyone in Europe thinks that these processes are hugely negative, financially and economically,” Spanish PM Mariano Rajoy told the Spanish parliament on Wednesday with regard to Scotland and Catalonia’s independence bids. Now that Scottish voters decisively voted to stay in the United Kingdom, the uncertainty over when Artus Mas will take his next step to Catalonia’s independence referendum has been magnified. “Today we approve the law, then we go over it and correct it, once it’s published the law comes into force and the President (Artur Mas) can sign the decree for the referendum,” Catalan parliamentary secretary Josep Rull told Spanish radio station RNE. Even though Mas has assured pro-separatist Catalans that the vote will be held, he has also hinted that the referendum may be cancelled if it doesn’t have the “full democratic guarantees” of Spain’s Constitutional Court.

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‘Independent Veneto Can Help EU’ (RT)

The EU would be interested in having independent Veneto because its GDP is higher than Romania’s or Hungary’s, while Italy is going bankrupt, Giovanni Dalla-Valle, an activist for Venetian independence, told RT.

RT: Recently we’re hearing about the willingness of different European regions to become independent. Why does the Veneto region, which is currently part of Italy, want to become independent from Italy?

Giovanni Dalla-Valle: They have got 4,000 years of history, they have never really accepted going under the rule of Italy. The original plebiscite in 1866 was a kind of cheat widely recognized. Then they suffered a lot because they are one of the areas that are most productive in Italy. They produce 140 billion euros of GDP per year and they have got provinces like Piacenza, Treviso that export as much as Portugal and Greece together. However, they are not treated fairly by Rome. They have got taxation that now has reached levels of nearly 70 percent of income for a corporation, for a company…They can`t cope anymore with this extreme level of exploitation that they get from the central government.

RT: What is Veneto uniqueness all about?

GDV: I guess all Italian peninsulas have got plenty of different people with different histories, very fascinating glorious histories. Italy has always been a group of different peoples; it has never been really a united nation. I think Veneto has got this pride about the Serenissima, the Republic of St. Marc that with more than 1,000 years of history were known internationally for being of a high level of civilization mainly in cultural, commercial, artistic aspects and exporting culture all over the world.

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Why keep up the pretense?

Fresh Week Of Woes For France, Downgrade Looms (CNBC)

It’s been a difficult week for French president, Francois Hollande, and it might get worse as rumors and analysts suggest the country’s debt rating is about to be cut. Earlier this week, France’s reshuffled government got off to a shaky start after narrowly winning a confidence vote on key economic reforms, marked by growing discontent from Socialist ranks. And on Thursday, the president faced hundreds of journalists during his bi-annual press conference, once again overshadowed by his private life following the release of his former partner’s tell-all book “Thank You For This Moment”. To add a final nail in this week’s coffin, the French Opinion newspaper reported on Thursday that the government had been notified that credit rating agency Moody’s would downgrade the country’s rating; a report the government swiftly denied.

If Moody’s does downgrade its rating of France – to AA2 from AA1 – it will catch up with the other major credit ratings agencies S&P and Fitch who both downgraded their ratings in November and July 2013 respectively. A downgrade “would be warranted”, Jennifer McKeown, senior European economist at Capital Economics told CNBC. For Francois Cabau, European economist at Barclays, a Moody’s rating cut wouldn’t come as a surprise, “particularly in light of recent events”. France’s attempts to contain and bring its public deficit down to levels agreed by Brussels have repeatedly failed. The French finance minister, Michel Spain, announced on September 10 that the country would break its fiscal promise to bring deficit at or below 3% of gross domestic product by 2015. “With growth and inflation weak, the deficit reduction we are planning for 2015 will be limited with a deficit around 4.3% of gross domestic product in 2015 and coming under the three% threshold in 2017,” Sapin said at the time.

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Ouch!

US Housing Starts Drop 14.4%, Multi-Family Units Plunge 31.5% (Zero Hedge)

One look at the August housing starts and permits data, and one will wonder just how is it possible that yesterday NAHB homebuilder confidence rose to a 9 year high, when according to the US Department of Commerce both Housing Start and Permits tumbled in the past month, with the housing “leading indicator” that is Permits sliding 5.6% from 1040K to 998K, and declining sequentially in every region of the US, with double digit drops in the Northeast and the Midwest, while Housing Starts tumbled by 14.4% from 1117K, to only 956K, wildly missing Wall Street expectations of “only” a 5.2% drop to 1037K.

But while single-family units remained roughly flat in their depressed state, which hasn’t moved much if at all since the start of 2013, it was multi-family units that were the most volatile on the margin once again, dropping from 396K to 343K, or 13.4% for permits, and a whopping 31.5% for starts. While one can doubt the veracity of such volatile data, one thing is clear: Wall Street is having trouble with clearing multi-family housing, which also means that builders are confused whether to start new multi-family units or just dump the whole theme, now that the PE firms are leaving the own-to-rent business entirely.

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Endless nothing: banks don’t want to borrow at 0.15%, not if they have to lend out the money.

ECB Throws a Party, Nobody Shows Up (Bloomberg)

European Central Bank President Mario Draghi is a smart guy, with a career including stints at Goldman Sachs, the World Bank and the Bank for International Settlements. So there must be a reason he has created a bank-lending program that not many banks want to borrow from, and an asset-backed bond purchase program that I can’t find a single market participant to applaud. Here’s my take on Draghi’s tactics. He would like to unleash a full quantitative-easing program echoing the Federal Reserve and the Bank of England, but he can’t get it past the Bundesbank. By inching that way, however, with increasingly QE-style programs that are doomed to fail, he’s engaged in a slow Machiavellian seduction that will lead the German central bank into acquiescence. The ECB held the first of its so-called targeted longer-term refinancing operations today. Banks in the euro region borrowed just 82.6 billion euros ($106.5 billion) from the newfangled facility, falling short of the 100 billion euros to 300 billion euros predicted by economists in a Bloomberg survey.

The program is designed to funnel cash into the banking system, which in turn should make its way into the economy and boost investment, jobs and growth. European banks, however, are about to undergo scrutiny of the health of their balance sheets, with reviews of their asset quality and their liquidity coverage ratios. In the absence of companies beating down your door for loans, you would have to be a brave (or foolish) bank treasurer to play fast and loose with your balance sheet, no matter how generous the ECB’s lending terms. Draghi said in August that he was hoping commercial banks might line up for as much as 850 billion euros from the TLTRO cash trough. Earlier this month, he said the ECB wanted to “steer the size of our balance sheet toward the dimensions it used to have at the beginning of 2012,” meaning as much as 1 trillion euros in new assets. Today’s results suggest that might be a hard slog.

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European Central Bank Gets Another Shove Toward QE (MarketWatch)

Try again, Mario. Eurozone banks turned up their nose Thursday at a new round of cheap, four-year loans provided by the European Central Bank. Known as targeted long-term refinancing operations, or TLTROs, banks borrowed just 82.6 billion euros ($16.9 billion) from the new facility. Anything below 100 billion euros was going to be viewed as a disappointment. The loans were announced in June alongside rate cuts and were touted by European Central Bank President Mario Draghi as a tool aimed at encouraging banks to use the cheap liquidity to provide loans to companies, alleviating a long-running credit crunch that has remained a drag on the region’s economic recovery. So why didn’t the banks take it up? There are some good reasons, and analysts stress that the outcome wasn’t completely surprising. The ECB’s tough bank stress tests – the Asset Quality Review – are due next month, which may have discouraged banks from adding to their balance sheets.

“No wonder banks are keeping their balance sheets as clean as possible and not engaging as anything that either makes them look like they are lending to risky borrowers, or that they are desperate and need cheap funds from the ECB to keep afloat,” said Kathleen Brooks, research director at Forex.com in London. “Thus, the ECB could have shot itself in the foot with the timing of this auction.” Thursday’s auction isn’t the last word. There are several more operations, and banks may be more eager to take advantage of the funds once the tests are complete. The ECB is also preparing to purchase asset-backed securities in coming weeks, as well, a form of lightweight quantitative easing that Draghi and company also hope will boost activity and help stave off the threat of deflation. But the bottom line may be that the ECB, which has continued to see its balance sheet shrink, will continue to feel pressure to eventually pull out all the stops.

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Are Stock And Bond Traders Really Reading Fed Differently? (MarketWatch)

Bond traders look at Janet Yellen and see a central bank chief ready to raise rates next year at a slightly faster pace than previously imagined, while stock investors supposedly see a dove, more worried about a weak job recovery. In reality, the diverging market reactions are partly due to a question of timing. “From an equity perspective, the Fed is reacting to better economic data, which in theory should be better for stocks,” said Anthony Valeri, senior vice president of fixed-income research at LPL Financial. “Yes, the stock market gets nervous when the Fed hikes rates or gets close to hiking rates, but it’s still a long ways away,” and the language in the statement was balanced enough to reassure equity investors.

It’s a different story for bonds, which are directly affected by Fed rate hikes, particularly at the short end of the curve, he noted. Moreover, bond traders came into the Fed meeting already pricing in far less aggressive rate hikes than the Federal Open Market Committee had projected in its forecasts, known as the dot plot. In fact, even after the bond selloff, Treasurys are still well behind the Fed, which expects a Fed funds rate around 60 basis points higher than the 0.75% level predicted by Fed funds futures, he said. Bond market participants appeared to take the Federal Reserve’s Wednesday statement, and Fed Chairwoman Janet Yellen’s subsequent news conference, as a warning that rates may rise a little faster than had been anticipated when they come. Bonds extended their drop Thursday, pushing the yield on the 10-year Treasury note to its highest level since early July.

Stocks, meanwhile, rallied, with strategists offering the explanation that investors were comforted by the Federal Open Market Committee’s decision to maintain its pledge to keep rates low for a “considerable time,” while also emphasizing a “significant underutilization of labor resources.” Stocks resumed their march to the upside in Thursday’s session, propelling the Dow and the S&P 500 into record territory. Bank of America Merrill Lynch credit strategist Hans Mikkelsen said the divergence between bonds and “risk assets,” including equities, reflects the ability of the Fed, and Yellen in particular, to “masterfully” guide interest rates higher while simultaneously lowering rate-related uncertainty.

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Ans they knew it too.

China Fines GlaxoSmithKline $489 Million, Jails Executives (Reuters)

A court in Changsha has also sentenced Mark Reilly, the former head of GSK in China, and other GSK executives to between two and four years in jail, Xinhua added. The verdict, handed out behind closed doors in a single-day trial according to Xinhua, is the culmination of a Chinese probe into the British drug maker which Chinese authorities made public in July last year. Chinese police said then that the firm had funnelled up to 3 billion yuan to travel agencies to facilitate bribes to doctors and officials.

GSK said in a statement on their website on Friday that the activities by the firm’s China unit were a “clear breach” of GSK’s governance and compliance procedures. “Reaching a conclusion in the investigation of our Chinese business is important, but this has been a deeply disappointing matter for GSK. We have and will continue to learn from this,” GSK CEO, Andrew Witty, said in the statement.

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Anything for a bank.

US Regulators Weigh Delay for Separating Banks’ Swaps Units (Bloomberg)

U.S. banks may get another year to shift some swaps trading from their government-insured units as regulators respond to demands to give them more time, according to two people familiar with the talks. A delay until July 2016 in applying the Dodd-Frank Act separation requirement is being weighed in discussions between bank lobbyists and officials from the Federal Reserve and Office of the Comptroller of the Currency, according to the people, who requested anonymity to talk about the matter. The provision was included in the 2010 law as a way to shield taxpayers from the kind of risky trading that helped fuel the 2008 credit crisis. Groups representing JPMorgan, Citigroup and Bank of America say the deadline should be delayed while rules are being completed.

Separating swaps units from banking operations is “one of the most important provisions of Dodd-Frank, and one of the ones the big banks fear the most,” Art Wilmarth, a George Washington University law professor, said in an interview. “They get huge cost advantages — including margin advantages — if they keep them inside the bank,” he said. Six years after the worst financial crisis since the Great Depression, the lobbying underscores the banking industry’s persistence in fighting rules crafted to prevent a repeat of 2008, when taxpayers rescued AIG after billions of dollars in losses at a swaps-trading unit. The industry groups have won concessions on Volcker Rule limits on banks’ proprietary trading and filed lawsuits that have delayed rules at the Securities and Exchange Commission and Commodity Futures Trading Commission.

Dodd-Frank requires banks to move certain equity, commodity and non-cleared credit swaps outside of bank units with deposit insurance and access to the Fed’s discount window. Blanche Lincoln, a former U.S. senator who led the Agriculture Committee in the run-up to the regulatory overhaul, sponsored the swaps provision. It originally applied to more types of derivatives before being scaled back amid objections from bank lobbyists, then-Fed Chairman Ben S. Bernanke and former Federal Deposit Insurance Corp. Chairman Sheila Bair. As a result, the banks don’t have to remove interest-rate swaps, the largest part of the market.

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Word! I’ve said this a 1000 times: “if you want to pursue idiots like the Fed doing crazy policies, and if you think you can get out in time, go for it.”

“Stocks Are More Crash-Prone Than Ever”: Fleckenstein (Zero Hedge)

Infamous short-seller Bill Fleckenstein left a CNBC anchor questioning her faith in the status quo in this brief interview. As she pestered him with questions about ‘missing out on the rally’, Fleckenstein snapped back “so what? I don’t care, it doesn’t matter” asking rhetorically “when the market declines, how fast will it all be taken away from you?” Fleckenstein warned “I don’t think we will get through October without some accident,” adding that “the stock market is more crash-prone than ever.” When pressed again about sitting on the sidelines, Fleckenstein rebukes, “if you want to pursue idiots like the Fed doing crazy policies, and if you think you can get out in time, go for it. I don’t want to try to do that.” As CNBC notes, some traders might regret missing out on what may go down in history books as the bull market of a lifetime, but “I’m not kicking myself,” he said. “I don’t care, it doesn’t matter.” “I don’t have to play every day,” he added.

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There ain’t none.

Why Global Growth Is So Disappointing (Epsilon)

There is one great mystery in the high falutin’ circles of the Fed, ECB, and IMF today. Why is global growth so disappointing? There are different variations on this theme – why aren’t businesses investing more? why aren’t banks lending more? – but it’s all one basic question. First the Fed, then the BOJ, and now the ECB have taken superheroic efforts to inflate financial asset prices in order to bridge the gap between the output shock of 2008 and a resumption of normal economic growth. They’ve done their part. Why hasn’t the rest of the world joined the party? The thinking was that leaving capital markets to their own devices in the aftermath of the Great Recession could result in a deflationary equilibrium, which is macroeconomic-speak for falling into a well, breaking your leg, at night, alone. It’s the worst possible outcome.

So the decision was made to buy trillions of dollars in assets, forcing all of us to take on more risk with our money than we would otherwise prefer, and to jawbone the markets (excuse me … “employ communication policy”) to leverage those trillions still further. All this in order to buy time for the global economic engine to rev back up and allow private investment activity to take over for temporary government investment activity. It was a brilliant plan, and as emergency intervention it worked like a charm. QE1 (and even more importantly TLGP) saved the world. The intended behavioral effect on markets and market participants succeeded beyond Bernanke et al’s wildest dreams, such that now the Fed finds itself in the odd position of trying to talk down the dominant Narrative of Central Bank Omnipotence. But for some reason the global economic engine never kicked back in.

The answer? We must do more. We must try harder. And so we got QE2. And QE3. And Abenomics. And now Draghinomics. We got what we always get in the aftermath of a global economic crisis – a temporary government policy intervention transformed into a permanent government social insurance program. But the engine still hasn’t kicked in. So now villains must be found. Now we must root out the counter-revolutionaries and Trotskyites and Lin Biao-ists and assorted enemies of progress. Because if the plan is brilliant but it’s not working, then obviously someone is blocking the plan. The structural villains per Stanley Fischer (who is rapidly becoming a more powerful Narrative voice and Missionary than Janet Yellen): housing, fiscal policy, and the European economic slow-down. Or if you’ll allow me to translate the Fed-speak: consumers, Republicans, and Germany. These are the counter-revolutionaries per the central bank apparatchiks. If only everyone would just spend more, why then our theories would succeed grandly.

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Grandma‘s dementia setting in?

Janet Yellen Believes You Can Get Rich By Going Into Debt (Phoenix)

Janet Yellen’s latest talk was very telling. The title of her talk was: “The Importance of Asset Building for Low and Middle Income Households”. The title alone is very telling. Fed policies under Bernanke and Yellen have proven absymal at creating jobs or boosting incomes. The only thing the Fed has done is push housing and stock (asset) prices higher. Thus, for Yellen, the means of improving one’s lot in life has nothing to do with obtaining a higher paying job. The best way to move up in life is to own stocks… or a house… or preferably both. This is how the Fed thinks: in terms of asset prices and leverage. These are items that only the top 0.1% of Americans really benefit from. Indeed, the Fed’s very policies (low interest rates, plenty of liquidity) benefit the wealthiest the most because these individuals can use their wealth as collateral in order to leverage up and benefit from rising asset prices.

This is the very strategy Larry Ellison has been using for years to live beyond his even ample means: The multi-millionaire or billionaire can leverage up to invest in real estate or stocks… the average american cannot. Indeed, over 95% of Americans cannot buy a home in cash. So buying a home means going deeply in to debt, not generating wealth. Indeed, the only way of building wealth through real estate for most Americans would be if you bought a home and the home’s price increased substantially to the point that selling would actually turn a profit beyond closing costs, taxes (both capital gains and property taxes for the duration of your inhabiting the home), and moving. This means: 1) home prices have to increase dramatically, 2) you have to have a LOT of variables work out in your favor. The fact Yellen believes in this stuff is telling. You won’t hear the Fed talk about incomes or jobs because the Fed has no clue how to create either. But asset prices are easy to boost… just spent $3 trillion and you’ll get a roaring stock market.

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It’s all junk.

Highly Indebted Chinese Firms Face Off With Ratings Agencies (Reuters)

Chinese companies hounded by debt obligations accrued over the past few years are grappling with a new adversary at what is a very inconvenient time: global ratings agencies. Standard & Poor’s and Fitch Ratings have slashed more ratings of Chinese companies in 2014 than a year earlier as towering debts weigh on corporate bottom-lines. The thumbs-down from the agencies will make it harder – and more costly – for companies to borrow at a time when their cash flows are taking a hit from a weakened economy. Analysts say big companies backed by the Chinese government are less likely to be at risk than smaller, independent firms that had binged on the easy credit springing from a round of government stimulus in 2008-2009.

On Monday, S&P cut the ratings of China Shanshui Cement and Guangzhou R&F Properties by a notch, plunging them deeper into junk status. Last week, fellow rating agency Moody’s downgraded steelmaker China Oriental, already wallowing in non-investment territory, also by a notch. “When the economy is deleveraging and credit is not growing as fast as before, they need extra cash to repay debt instead of refinancing it in the market, thereby creating pressure on balance sheets and in some cases on the ratings,” said Moody’s analyst Ivan Chung. Data released over the weekend showed factory output grew at its slackest pace in six years in August, stoking fears that China’s economy was sliding deeper into a downturn. Analysts say the steel, metals, chemicals sectors and real estate developers in some cities will find it difficult to raise cash as excess capacity heaps pressure on their credit profiles.

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Nomura doesn’t look terribly smart in this.

Unsecured Loan, Missing CEO Add Red Flags To China Lending (Reuters)

Nomura Holdings and co-lenders spent nine months poring over the books, sizing up management and even checking out the factory floor at China’s Ultrasonic AG before deciding in August to give the Frankfurt-listed shoemaker a $60 million unsecured credit facility. The loan was unsecured in keeping with regulations in China at the time it was structured. Nomura, a Japanese bank, and its partner banks, however, felt they had done their homework. But within weeks, the 3-year loan had been drawn down in full and two of Ultrasonic’s top executives had disappeared – leaving the lenders in a situation that should ring alarm bells for foreign bankers exposed to China. “You couldn’t get onshore security for offshore loans,” said a person involved in the loan negotiations. “It was a common risk in offshore borrowing for Chinese companies.” The affair is a reminder for offshore banks of the risk of lending to small and mid-sized Chinese firms which have long struggled to access credit.

Local banks are more inclined to lend to larger, more established companies as economic growth slows, forcing smaller firms to seek expensive loans in the less-regulated shadow banking industry or from offshore lenders. Asia-Pacific banks had about $1.2 trillion worth of China-related exposure at the end of last year, including bank and non-bank lending, latest Fitch Ratings data show. “These mid-sized companies are getting hit the hardest by the slight slowdown in the economy, and that’s having an impact on how they view the future …,” said Kent Kedl, Shanghai-based managing director for Greater China and North Asia at consultancy Control Risks. “This isn’t to say that mid-sized companies have any more innately corrupt people in them than do large companies, but large companies can weather storms a little easier.”

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Big shift.

Steel Industry On Life-Support As China Economy Slows (Reuters)

Subsidies accounted for four-fifths of the profits reported by Chinese steel companies in the first half of this year, a dramatic increase in reliance on state support that illustrates starkly the industrial weakness that is an increasing drag on the economy. The headwinds faced by China’s massive steel sector – falling profit margins and growing dependence on handouts – are shared by other key industrial and infrastructure-related sectors, including aluminium, cement and coal. A Reuters analysis of first-half financial statements from 77 listed Chinese steel, aluminium and cement companies revealed a sharp deterioration in profitability. For the first half of 2013, subsidies accounted for 22% of total profits posted by China’s listed steel mills, and reached 47% in the full year. In the first six months of 2014, the figure jumped to 80%, and, even then, the sector’s profit margin halved to just 0.3%.

The performance of the steel sector, which has been a major driver of China’s growth, underlines the massive challenge facing President Xi Jinping as Beijing tries to wean the economy off its dependence on external demand and investment spending. Data out at the start of the week showed China factory output grew at the weakest pace in nearly six years in August, raising fears that the economy may be at risk of a sharp slowdown unless Beijing implements fresh stimulus measures. The company statements also show rising accounts receivable – the accounting term for money owed by customers – in a sign that more Chinese manufacturers are falling behind on their payments as growth falters, posing an additional problem for firms with high credit costs and financing difficulties. Chinese leaders have repeatedly said they would use a period of anticipated slower growth to implement structural reform.

Growth was at its weakest in 18 months in the first quarter, but the level of support still being poured into companies suggests the re-tooling of the economy has a long way to go. A total of 2,235 firms, or 88% of Chinese listed companies, received government subsidies totaling 32.2 billion yuan ($5.24 billion) in the first half of 2014, according to data from information provider ChinaScope. Most of the subsidies – largely from local governments – were channeled to the steel, cement and property sector in the form of cash, tax rebates or support for loan repayments. The reasons given ranged from research and development to support for government environmental priorities. “There isn’t a lot of innovation happening in sectors such as steel or aluminium,” said Professor Wen Laicheng at Central University of Finance and Economics in Beijing. “The subsidies are clearly a lifeline to help the companies get through these tough times.”

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Vacuum cleaners, gay porn, bacon-flvored ice cream, we need to latch onto anything we can find.

UK Retail Sales Boosted By Vacuum Cleaners (CNBC)

U.K. retail sales were up in 0.4% in August compared to the previous month and gained almost 4% year-on-year, with consumers flocking to buy high-powered vacuum cleaners ahead of an EU ban. The annual increase is now the 17th month of consecutive year-on-year growth according to data from the Office of National Statistics (ONS), which described the current retail climate as “one of growth.” Sales of household goods surged in August, jumping 12.7% when compared with the previous year. The ONS said it was the largest year-on-year increase since October 2001.

Furniture stores were the main contributor, seeing growth of over 23% when compared to the same period last year, making it the largest jump in sales in 26 years when records began in 1988. Electrical appliance stores also added to the increase in sales, with retailers suggesting consumers were rushing to buy high-powered vacuum cleaners before EU energy saving regulations came into force at the end of August. From 1 September, companies in the EU were banned from making or importing vacuum cleaners above 1600 watts. The recently introduced rules are part of the EU’s energy efficiency directive, designed to help tackle climate change.

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Assange Says ‘Google A Privatized Version Of The NSA’ (RT)

WikiLeaks founder Julian Assange equated Google with the National Security Agency and GCHQ, saying the tech giant has become “a privatized version of the NSA,” as it collects, stores, and indexes people’s data. He made his remarks to BBC and Sky News. “Google’s business model is the spy. It makes more than 80 percent of its money by collecting information about people, pooling it together, storing it, indexing it, building profiles of people to predict their interests and behavior, and then selling those profiles principally to advertisers, but also others,” Assange told BBC. “So the result is that Google, in terms of how it works, its actual practice, is almost identical to the National Security Agency or GCHQ,” the whistleblower argued.

Google has been working with the NSA “in terms of contracts since at least 2002,” Assange told Sky News. “They are formally listed as part of the defense industrial base since 2009. They have been engaged with the Prism system, where nearly all information collected by Google is available to the NSA,” Assange said. “At the institutional level, Google is deeply involved in US foreign policy.” Google has tricked people into believing that it is “a playful, humane organization” and not a “big, bad US corporation,” Assange told BBC. “But in fact it has become just that…it is now arguably the most influential commercial organization.” “Google has now spread to every country, every single person, who has access to the internet,” he reminded.

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Chinas potential shale is in mountainous regions.

Gas Hungry China Cuts Shale Goal By 50% (RT)

China has halved its 2020 goal for shale gas production. The country faces challenges ranging from difficult geology to shortage of technology in the area meant to quench its ever-growing energy needs. The country is only starting mass production of shale gas, which drastically changed the energy landscape in the US in recent years, with the extraction of 200 million cubic meters annually. In 2012, when Chinese shale gas production was virtually non-existent, Beijing eyed an ambitious goal of 60-80 billion cubic meters (bcm) by 2020, but the latest plans from the Ministry of Land and Resources on Wednesday lowered it to more conservative 30 bcm. A higher figure is possible, but conditional. “China aims to pump at least 30 billion cubic meters of shale gas by 2020. With proper drilling technology, output can increase to 40 to 60 billion cubic meters,” Che Changbo, deputy director of the ministry’s geological exploration department, said at a news conference in Beijing.

Short-term prospects for shale gas production are more optimistic, according to the ministry. It will surpass the old government 2015 target of 6.5 bcm next year and hit 15 bcm in 2017. China has carved out 54 shale gas blocks spanning 170,000 sq km. Producers have drilled 400 wells, including 130 horizontal. The ministry said the economies of scale and localization of drilling technology are making shale gas more commercially attractive in China. The cost of one well has fallen from 100 million yuan to 50 to 70 million yuan, while the drill time dropped from 150 days to between 46 and 70 days. But the industry is still hurdled by several problems, including complex geology, shortage of advanced technology and skilled personnel and regulation barriers. There is also the dominating position of two state-owned giants, PetroChina and Sinopec, which enjoy a privileged access to fields discouraging private investment.

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Big chnage in projections.

World Population To Hit 11 Billion In 2100, 70% Chance Of Ever More (Guardian)

The world’s population is now odds-on to swell ever-higher for the rest of the century, posing grave challenges for food supplies, healthcare and social cohesion. A ground-breaking analysis released on Thursday shows there is a 70% chance that the number of people on the planet will rise continuously from 7bn today to 11bn in 2100. The work overturns 20 years of consensus that global population, and the stresses it brings, will peak by 2050 at about 9bn people. “The previous projections said this problem was going to go away so it took the focus off the population issue,” said Prof Adrian Raftery, at the University of Washington, who led the international research team. “There is now a strong argument that population should return to the top of the international agenda. Population is the driver of just about everything else and rapid population growth can exacerbate all kinds of challenges.”

Lack of healthcare, poverty, pollution and rising unrest and crime are all problems linked to booming populations, he said. “Population policy has been abandoned in recent decades. It is barely mentioned in discussions on sustainability or development such as the UN-led sustainable development goals,” said Simon Ross, chief executive of Population Matters, a thinktank supported by naturalist Sir David Attenborough and scientist James Lovelock. “The significance of the new work is that it provides greater certainty. Specifically, it is highly likely that, given current policies, the world population will be between 40-75% larger than today in the lifetime of many of today’s children and will still be growing at that point,” Ross said. Many widely-accepted analyses of global problems, such as the Intergovernmental Panel on Climate Change’s assessment of global warming, assume a population peak by 2050.

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“There’s a hard stop here.”

Exxon, Rosneft Halt Arctic Oil Well Drilling on Sanctions (Bloomberg)

Exxon Mobil and Rosneft halted drilling on an offshore oil well intended as the first step in unlocking billions of barrels of crude in Russia’s remote Arctic, according to people familiar with the project. Work stopped just a few days after the U.S. and European Union barred companies from helping Russia exploit Arctic, deep-water or shale-oil fields, said three people with knowledge of the rig’s operations who asked not to be named since they weren’t authorized to speak about the project. The U.S. sanctions, meant to punish Russia for escalating tensions in Ukraine, gave American companies until Sept. 26 to stop all restricted drilling and testing services.

Exxon, Rosneft and Seadrill Ltd. North Atlantic Drilling unit are under the gun to finish or temporarily seal the $700 million well off Russia’s northern coast before the sanctions deadline, said Chris Kettenmann, chief energy strategist at Prime Executions Inc., a brokerage firm in New York. With just eight days left before sanctions require Exxon to stop all Arctic work with its Russian partner Rosneft, the project probably is on hold until next year at the earliest, he said. “This has been one of the most-watched wells in the industry, so this is a huge deal,” said Kettenmann, who has a sell rating on Exxon’s shares. “There’s a hard stop here.”

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Sep 172014
 
 September 17, 2014  Posted by at 7:18 pm Finance Tagged with: , , ,  


Esther Bubley The gas behind the gun, Columbus, Ohio Sep 1943

I want to start off by expressing my deeply felt admiration and gratitude for the way the Scots and Brits alike have made the run-up to the September 18 referendum a peaceful and civil affair. It’s not at all hard to imagine how this could have been very different.

Hats off to y’all for that. And may it be an example for future independence referendums elsewhere. It should, the entire world should feel profoundly indebted to you for this. The reason why will soon become clear as other peoples pursue their rights to independence.

It’s precisely because there’s so much pressure from incumbent politicians and political-industrial power blocks to keep existing larger entities intact, that they should be broken. Because in the end that is all there is: the question(s) of power, and of losing – some of – it. Of power and money.

And those are simply and plainly the wrong questions. These are not the things that should guide our decisions. If you vote either Yes! or No! in Scotland tomorrow because you think your choice will make you richer, you’re on the wrong track. Not everything in life is about money.

Nobody should want their leaders to be driven by a desire, even hunger, for power. Our leaders should be motivated by the best interests of their people, their voters, not by their own personal interests. That may sound naive, given what our societies, and the international bonds and ties they have forged, have turned into, but that only means we must repair those societies, and the ties with others. And make sure we pick our leaders for the right reasons next time around.

As I write this, Obama is addressing US troops in Tampa, telling them how important they are to the nation and all that. And the first image that evokes is of how the US treats its army veterans. US troops are disposable, they’re cannon fodder, no matter what this or that president says. US soldiers are disposable pawns in a power game.

Earlier today Spanish PM Mariano Rajoy ‘threatened’ the Scots Yes! voters that it will take years before their independent nation could join the EU. Mr. Rajoy has no business talking about Scotland’s referendum. He does so anyway, solely to scare off the Catalans from holding their own referendum. Mr. Rajoy wants power. That’s why he is where he is.

The Catalans should break free from Spain if only because of that. The entire western world is stuck and lost in power bonds and systems that may once have been useful, but have been contorted into something entirely different from the ideals they once stood for, and now do unspeakable damage to us.

This is no longer the world of the 1960’s or 70’s or 80’s. And though it may be understandable that it’s hard for people to see that, and to leave behind the picture of the world they grew up in, it’s no less true. Clinging onto a picture, and a model, that’s died and gone, can be hugely destructive.

Our political and economic model is well and truly broken. All that’s been keeping our nation states, and the organizations they have signed up to, alive over the past 3 or 4 decades, is the – seemingly – never-ending growth of additional debt. This is a very crucial point I think you should lock into your memory and never forget as long as you live: in our growth driven and obsessed economic model there’s only one thing left that actually grows, and that is our debt.

The only way our present leaders can even imagine boosting economic growth – against the tides – is by heaping more debt upon the already, certainly by historical standards, flabbergasting levels of it.

Why would anyone want to remain part of that model, in which, moreover, many if not most of the important decisions affecting their lives are taken by distant others, if they have a choice not to? The only people who choose to do that are those who don’t understand what happens to them and the world around them.

Scottish friends and readers have been telling me over the past fortnight that Yes! leader Alex Salmond is not a fine guy, and that he may well bring a lot of destruction to the country if he gets his way. That he of all people is your typical money and power guy.

But I think of him as an instrument. Salmond can’t possibly be worse than David Cameron is for Scotland (and the UK as a whole). And once the vote is in, Salmond will be replaced soon enough if he screws up the job. And at least the Scots will be free to make their own decisions, which includes getting rid of Salmond. It’s called freedom, liberty. Something you should never take for granted.

The UK, US, EU, NATO, they’re all organizations that no longer serve any purpose other than to make sure their leaders retain the national and supra-national power they have accumulated. And these leaders have their finger on the trigger. Not just when it comes to guns, but also when it comes to economics.

The Scottish referendum shows all of us that there is a peaceful way to get rid of those fingers on the trigger. A potentially invaluable lesson. If we care to learn.

Because the economic model we built our world on and around has failed, gone bankrupt and died, we need another model. But instead all we do is try to resuscitate the corpse. As if change as a function of time passing is somehow inherently wrong, and we should instead cling and hang and hold on to what once was with all we can.

But if we choose to try and hold on what has gone, we choose to keep in place the very model that has already failed. Which is not in our interest, but in that of the leaders who’ve presided over the failed model and won’t give up.

Scotland should vote Yes! on September 18 to show us the way. It won’t be all smooth and pretty and hosannah from day 1 if Yes! wins, but Scotland will figure it all out down the line. By themselves. That is the key: they’ll do it by themselves. As every nation, people, culture should be able to do.

That’s why it’s important that the Scots vote Yes! Not just for themselves, though they have plenty reasons to, but to set an example for Europe – and the world – of how these things can and should be done. Because without such an example, Catalunya threatens to turn into a battlefield, and we shouldn’t allow it to. Let alone all the hundreds of other regions around the globe.

Scotland, you have much more to gain than you have to lose. And so do a billion people or so elsewhere.

When you’re in that voting booth tomorrow, think Braveheart and Robert the Bruce, and everyone who lost live and limbs fighting for Scotland in your proud past. The world needs you to pave the way. And you need that way yourselves.

It’s a new world out there, and even if you don’t fully see that, you can play a huge role in making others see it. Moreover, the old world no longer holds any promises for you.

We’re just getting started.

One In 10 Americans’ Paychecks Get Seized To Pay Off Debts (MarketWatch)

One in 10 Americans between the ages of 35 and 44 had money seized from a paycheck and sent off to pay a debt last year, a new report finds. More than one-third of those wage garnishments were for student and consumer loans, like credit card or medical bill debt, according to the payroll processor ADP, which analyzed data for 13 million employees for the first study of its kind. The data comes as American credit card debt hits post-recession highs, with the average household’s balance at about $6,802. And one in three Americans is dogged by collections, or debts more than 180 days past due, for credit card balances, child-support, medical or utility bills. For most people, garnished wages went toward child support (41.5%). After student and consumer loans (35.4%), workers’ pay was also docked to pay off tax debts (18.3%) and bankruptcies (4.9%).

Those who earned $25,000 to $40,000 had their wages garnished for consumer debts more often than child support. The data suggest a relationship between blue-collar jobs and pay seizures. “The employees living paycheck to paycheck are often hit with these garnishments,” says Julie Farraj, vice president of ADP wage garnishment services. [..] The wage-docking process was meant to curb cases where people would avoid paying off debts by transferring their assets to a third party and pleading poverty. Federal law limits the weekly amount that employers can withhold from someone’s paycheck, protecting 75% of someone’s disposable earnings or about 30 hours a week of pay at the federal minimum wage — whichever is greater. Disposable income is the money left after deductions like taxes, Social Security and retirement contributions.

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‘ … more government debt per capita than Greece, Portugal, Italy, Ireland or Spain”

US Debt Grows By More Than $1 Trillion In Past 12 Months (Snyder)

The idea that the Obama administration has the budget deficit under control is a complete and total lie. According to the U.S. Treasury, the federal government has officially run a deficit of 589 billion dollars for the first 11 months of fiscal year 2014. But this number is just for public consumption and it relies on accounting tricks which massively understate how much debt is actually being accumulated. If you want to know what the real budget deficit is, all you have to do is go to a U.S. Treasury website which calculates the U.S. national debt to the penny. On September 30th, 2013 the U.S. national debt was sitting at $16,738,183,526,697.32. As I write this, the U.S. national debt is sitting at $17,742,108,970,073.37. That means that the U.S. national debt has actually grown by more than a trillion dollars in less than 12 months. We continue to wildly run up debt as if there is no tomorrow, and by doing so we are destroying the future of this nation.

• The U.S. national debt has increased by more than $7 trillion dollars since Barack Obama has been in the White House. By the time Obama’s second term is over, we will have accumulated about as much new debt under his leadership than we did under all of the other U.S. presidents in all of U.S. history combined.

• The United States already has more government debt per capita than Greece, Portugal, Italy, Ireland or Spain.

• In August, the average rate of interest on the government’s marketable debt was 2.028%. In January 2000, the average rate of interest on the government’s marketable debt was 6.620%. If we got back to that level today, we would be paying well over a trillion dollars a year just in interest on the national debt.

• At this point the U.S. government has accumulated more than $200 trillion of unfunded liabilities that will need to be paid in future years.

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Risk on. Get out!

Citigroup Embraces Derivatives as Deals Soar (Bloomberg)

Citigroup is diving deeper into derivatives. In the past five years, the firm that took the largest U.S. bank bailout of the financial crisis increased the total amount of derivatives on its books by 69%, surpassing most U.S. peers and closing the gap with the market leader, JPMorgan. At the end of June, Citigroup had $62 trillion of open contracts, up from $37 trillion in June 2009, company filings show. JPMorgan trimmed its holdings 14% to $68 trillion. Citigroup is expanding as regulators try to rein in instruments that helped fuel the 2008 credit contraction. The third-largest U.S. lender has amassed the largest stockpile of interest-rate swaps, a type of derivative that can swing in value when central banks raise rates. More than 92% of the bank’s derivatives don’t trade on exchanges, making it harder for regulators to spot dangers in the market.

“Risk-taking is in their DNA,” said Arthur Wilmarth, a law professor at George Washington University, who wrote a 2013 paper describing failures that led New York-based Citigroup to seek a $45 billion bailout and more than $300 billion in asset guarantees during the crisis. Even taking the winning side of a derivative carries a risk the other party can’t pay, he said. It’s “basically a speculative trading business.” Derivatives typically require parties to make payments to each other based on the value of underlying stocks, bonds, commodities or interest rates. Airlines and farmers use the contracts to offset price swings for fuel, vegetables and meat. Bond buyers rely on them to insure against defaults, and some investors use them to speculate.

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Swap swap swap.

Bill Gross Used $45 Billion Derivatives to Lift Fund Gain (Bloomberg)

Bill Gross is relying on derivatives rather than Janet Yellen to raise his returns on government bonds. The co-founder of Pacific Investment Management Co. sold most of the $48 billion of U.S. Treasuries held by his $221.6 billion Pimco Total Return Fund in the second quarter, replacing them with about $45 billion of futures, according to an August filing. The contracts require small up-front payments, freeing up money for Gross to invest in higher-yielding securities including Brazilian, Spanish and Italian debt.

“They are taking the cash and buying all these peripheral bonds that have a lot of spread on them relative to Treasuries,” said Erik Schiller, a Newark, New Jersey-based senior money manager at Prudential Fixed Income, referring to bonds issued by European countries other than France and Germany. “It is levering their fund.” Pimco in May said that interest rates in the U.S. will remain lower than they had been before the financial crisis, as the economy enters a “new neutral” characterized by global growth converging toward lower, more stable speeds. The Newport Beach, California-based firm is recommending that clients consider strategies implemented with futures, options and swaps to lift subpar returns.

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No, really!

High-Risk, High-Leverage Credit Suisse Loans Draw Fed Scrutiny (WSJ)

Credit Suisse is under fire from U.S. regulators over concerns the bank isn’t heeding warnings to stop making loans regulators see as risky, according to a person familiar with the matter. The Swiss bank in recent weeks received a letter from the Federal Reserve demanding the bank immediately address problems with its underwriting and sale of leveraged loans, or high-interest-rate loans used by private-equity firms and others to finance purchases of companies, among other uses. The letter to Credit Suisse, known as a Matters Requiring Immediate Attention, found problems with the bank’s adherence to guidance issued last year, warning banks to avoid deals that included too much debt or too few protections for the lenders in case of a default, according to the person familiar with the matter.

The Fed’s letter to Credit Suisse comes as regulators, some of whom have been taken aback by the lack of response to their guidance, are preparing to take tougher action against firms that don’t follow Washington’s marching orders, according to people familiar with the matter. It is unclear if other banks beyond Credit Suisse have received such a letter. Officials at the Fed and the Office of the Comptroller of the Currency are using private communications with banks to rein in relaxed underwriting and debt-laden deals, according to people familiar with the matter. People familiar with regulators’ thinking said they plan to take action on a firm-by-firm basis when they see compliance problems.

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Ha!

Investors Lose Big As Head Of Russia’s No.1 Holding Under House Arrest (RT)

Russia’s largest publicly traded holding company AFK Sistema has lost about 37% of its value in Moscow by midday, after boss Vladimir Yevtushenkov was put under house arrest for alleged money laundering late Tuesday. Investors have seen the price of their shares plummeting, with billions of dollars wiped off the company’s value. Shares in Sistema, a company which Yevtushenkov controls and manages, fell by 37% on the Moscow Exchange at 13.00, Moscow Time, which means the company has seen its capitalization lose an estimated $3.55 billion. In the first half hour of Wednesday trading it was down 28%. Sistema controls Russia’s largest mobile phone operator MTS, the oil company Bashneft as well as other lucrative assets. MTS was down 8% and Bashneft lost 23.5% on the Moscow Exchange.

Vladimir Yevtushenkov’s net worth is estimated by Russia’s Forbes magazine at $9 billion, making him the 15th richest man in the country. Russia’s investigative committee accused the billionaire of acquiring shares in oil producer Bashneft, in the Russian province of Bashkiria, by “criminal means.” Sistema insists the deal was “legal and transparent.” “The company is fully cooperating with the investigation and intends to use all legal means to defend its position,” an official press release said Wednesday. Dmitry Peskov, the press secretary to President Putin, denied any allegations that Yevtushenkov’s arrest was politically motivated. “Any attempts to add political context to this issue don’t have the right to exist,” as ITAR-TASS quotes Peskov denouncing attempts by some experts to draw a parallel with the Yukos case.

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It’ll keep on cutting.

Knife-Edge Scottish Vote Cuts Deep Divide (CNBC)

One of Scotland’s most influential chief executives, Martin Gilbert, says the debate over Scottish independence has become so bitter that whatever the outcome, either Scotland or the United Kingdom will become deeply divided. In Edinburgh, most people on the streets are in the “yes” camp as passions intensify ahead of Thursday’s vote. The polls remain as tight as ever. The latest survey carried out by the Scottish Daily Mail found 48% of Scots (excluding those who said they were undecided) would vote in favor of independence, while 52% would vote against. In one popular hair salon, women have apparently come to blows, leading stylists to refuse to admit their voting preference to customers. The problem, according to the Aberdeen Asset Management boss, is that people don’t know what to believe from the campaign, and that has fueled distrust and over-the-top behavior.

It seems the knives are also coming out in London, with growing criticism of the better together campaign. This could become particularly tricky for U.K. Prime Minister David Cameron. The head of the British business lobby group CBI, John Cridland, says business bosses were forced to speak out in recent days after politicians bungled the “no” campaign so much so that they have totally failed to connect with the Scottish people. On Tuesday night, First Minister of Scotland Alex Salmond seemed in ebullient mood in one of his final TV interviews, declaring that Scotland had invented the very idea of the modern world and after independence would become more influential on the global stage. He also played down Westminster’s last-ditch attempts to keep the union together by promising more devolution and powers for Scottish parliament. Although Gilbert claims to be neutral, he argues that there is little reality to fears that Scotland risks a flight of capital – up to £17 billion has already gone by some estimates.

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Selling England by the pound.

Millions Of Banknotes Sent To Scotland For Yes Win Bank Runs (Independent)

Britain’s banks have been quietly moving millions of banknotes north of the border to cope with any surge in demand by Scots to withdraw cash in the event of a Yes vote in Thursday’s independence referendum, it has emerged. Sources told The Independent the moves have been taking place over the past week or so in order to make sure ATMs do not run out on Friday in the event of a panic reaction to a “yes” vote. There have been some suggestions that people will want to move their money to English banks in the event of an independence vote.

Bankers stressed there has been no sign yet of any increase in the amount of withdrawals from deposit accounts or ATMs, stressing that there was no need because the Bank of England has pledged to stand behind all accounts for at least 18 months in the event of a “yes” vote. However, concerns about how safe is their cash still linger. It was this that led to RBS and Lloyds last week to reassure customers that they would be moving their registration addresses south of the border. As a result, part of the banks’ contingency plans has been to ship more cash to secure locations in Scotland in readiness to keep up with the potential increase in demand. Sources at major banks said they had been issuing clear instructions to their Scottish branches to reassure customers there was no reason to panic.

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Dominoes.

China Property Trusts Pull Support as Default Risks Rise (Bloomberg)

Property trusts are funneling the least amount of money into Chinese developers in almost five years as maturing debt balloons, escalating default concerns. Issuance of trusts for real-estate projects, which target wealthy individuals, slid to 30 billion yuan ($4.9 billion) this quarter from 67.8 billion yuan in the three months to June 30, the least since the start of 2010, data from research firm Use Trust show. Borrowing costs are rising as developers face $9.1 billion in bonds and loans maturing by year-end. Hubei Fuxin Science & Technology Co. sold AA rated securities with a 9.2% coupon Aug. 26, above the 6.38% average yield for similar-rated notes.

Cash from operations are also facing a squeeze as home sales fell 10.9% in the first eight months of the year in the world’s second-largest economy, which is forecast by the government to expand at the slowest pace in 24 years. Standard & Poor’s sees a risk that a developer may default in the coming 12 months, highlighting weak earnings at Renhe Commercial Holdings Co. and Glorious Property Holdings Ltd. “Given the bad housing sales, fewer trust companies are willing to help property companies raise money,” said Li Ning, a bond analyst in Shanghai at Haitong Securities Co., the nation’s second-biggest brokerage. “Default risks are rising rapidly before so much debt is due next quarter.”

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Stealth QE.

China Joins ECB in Adding Stimulus as Fed Scales Back (Bloomberg)

China’s central bank joined its European counterpart in boosting liquidity to address weakening growth, underscoring a divergence in direction among the world’s biggest economies as the U.S. reduces stimulus. The People’s Bank of China is injecting 500 billion yuan ($81 billion) into the nation’s largest banks, according to a government official familiar with the matter, signaling the deepest concern yet with an economic slowdown. Federal Reserve Chair Janet Yellen will announce another $10 billion cut to its monthly bond purchases after this week’s meeting, economists forecast, as she steers toward gradual interest-rate increases. China’s credit expansion builds on targeted measures to shore up growth while stopping short of broad-based stimulus seen in the U.S. in the wake of the global financial crisis and still being pushed in Europe and Japan. By attaching a three-month term to its injection, China is taking a step down that path while maintaining control of a process designed to fuel demand for credit in an already debt-laden economy.

“It’s like quantitative easing with Chinese characteristics,” said Louis Kuijs, Royal Bank of Scotland Group Plc’s chief Greater China economist in Hong Kong, who formerly worked at the World Bank. “The threat is that growth is slowing down below the comfort level of policy makers and that will then also warrant further easing steps.” The PBOC will funnel 100 billion yuan each to the five biggest banks for a three-month period, said the official, who asked not to be identified because the measure hasn’t been formally announced. “It shows China’s monetary policy is leaning toward easing, and the easing stance may last throughout next year,” said Hua Changchun, a China economist at Nomura Holdings Inc. in Hong Kong. The lack of an official announcement shows that the PBOC “doesn’t want to send a strong signal” of policy easing, Hua said.

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He needs to go.

Hollande’s Narrow Confidence Win Flags Looming Budget Battle (Bloomberg)

President Francois Hollande’s shrinking parliamentary backing suggests his government is losing control over economic policy and flags a looming battle over France’s 2015 budget. Prime Minister Manuel Valls won a confidence vote by 25 votes yesterday with the backing of just 269 lawmakers, robbed of an absolute majority of 289 by abstaining rebel members of parliament in his own camp. In a confidence vote on April 8, Valls obtained the support of 306 lawmakers. The result shows how Hollande’s authority has been weakened by a stalled economy and record-low popularity halfway into his five-year term. Socialist lawmakers who avoided bringing down the government yesterday also warned that they will keep the Hollande administration on a short leash.

“We didn’t give the government a blank check,” Socialist Karin Berger said after yesterday’s vote. “The push to change policy will come in the budget debate. What is crucial is that the government ensure investment.” The problem for Hollande and Valls is that they are squeezed between demands from their base to bolster the economy with stimulus spending and insistence from France’s European partners that the country stick to the bloc’s fiscal rules. Finance Minister Michel Sapin said last week that the budget deficit would rise in 2014 for the first time in five years and barely improve in 2015. The shortfall will be 4.4% of gross domestic product this year, instead of the 3.8% France had promised in April. Next year it will be 4.3%, instead of the 3% originally planned. Sapin will present an official budget to cabinet Oct. 1 and has a deadline of Oct. 15 of filing the tax and spending plans with the European Commission in Brussels.

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Mayhem in the streets of Paris.

Sarkozy Poised For Comeback As France’s Socialists Suffer (CNBC)

France’s former conservative president, Nicolas Sarkozy, is likely to announce his return to politics as early as this week following the very narrow victory for the struggling socialist government in a confidence vote, political analysts predict. Sarkozy now stands a decent chance in the 2017 presidential election, as the current French government’s popularity has reached record lows. However analysts have warned that corruption probes surrounding Sarkozy could stymie his chances.In a crucial confidence vote in parliament on Tuesday evening, French Prime Minister Manuel Valls scraped through after deputies in the National Assembly voted 269 to 244 in favor of the government’s policies. Valls urged parliament to embrace more business-friendly reforms, asking why France should be the only large country that doesn’t help businesses.

He has proposed a €50 billion ($64.8 billion) cut in public spending that will fund €40 billion in tax breaks for companies, with the unveiling of the government’s full 2015 budget set for October 1. Incoming European economic and financial commissioner and former French finance minister Pierre Moscovici said it was a “necessity” the pro-reform agenda found confidence. “It is up to this government to work at cutting public expenses because that is a necessity – to work on helping the businesses to invest because it’s the only way to create growth and jobs. And to enforce structural reforms that are needed for the French economy, that is a tough job,” he told CNBC. The government’s attempted shift to more pro-business policies follows the decision to oust far the leftwing economy minister Arnaud Montebourg, replacing him with former Rothschild banker Emmanuel Macron.

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IMF accuses Kiev, but zero follow-up.

Ukraine Currency At Record Low As IMF Blasts “Gross Abuses” (Zero Hedge)

Despite celebrations of de-escalations and truce in US equity markets (by asset-gathering commission-takers), the situation continues to go from bad to worse in the nation almost forgotten now that ISIS is stealing American headlines. The Hryvnia plunged 7.5% this morning – its biggest single-day drop on record – following the release of a scathing IMF letter and devaluation warnings from BofA. The IMF blasted Ukraine’s “premature emission of extra money,” and demanded it “immediately halt these gross abuses,” as BofA warns of risk of “10-20% devaluation” in the next year is high given reserves are at a “critical level.” UAH plunges 7.5% to record lows this morning…

BofA’s warning of the potential for a Hyrvnia devaluation: “Central bank may have to further deplete FX reserves, now near “critical level” of $15b, Bank of America Merrill Lynch economist Vadim Khramov says in report. Natural gas purchases for winter to widen current-account deficit. We see risks of 10%-20% hryvnia devaluation from the current level within a year”

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War coming up. Congrats, Victoria Nuland!

Luhansk Wants to Introduce Ruble as National Currency (RIA)

The self-proclaimed Luhansk People’s Republic (LPR) wants to switch from Ukrainian hryvna to Russian ruble as the local currency in the future, LPR leader Igor Plotnitsky said Tuesday. “Of course, we want ruble [as currency], but a lot of issues still remain, including political ones. So far, we are using hryvna. But I don’t think it will stay for long,” Plotnitsky told reporters, adding that the country has yet to solve a number of economic and financial problems, including the establishment of a banking system. On September 10, Ukrainian President Petro Poroshenko said he had introduced “a bill about temporary self-administration in separate districts of the Donetsk and Luhansk regions,” intended “to ensure the peaceful return of these regions under the sovereignty of Ukraine.” He ruled out “any kind of federalization or secession” for the two regions.

Prime Minister of the Donetsk People’s Republic (DPR) Alexander Zakharchenko said that the self-proclaimed republics will seek independence anyway, adding that the point of the Minsk talks protocol concerning the special status is not final. LPR spokesman said the self-proclaimed people’s republics of Donetsk and Luhansk have no interest in the presidential bill on their status within Ukraine. DPR and LPR announced their independence in May, refusing to acknowledge the legitimacy of the newly-instated Ukrainian government that came to power after the February 22 coup.

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What a useless fight this has become.

Argentina Slams US For Using ‘D’ Word (Reuters)

Argentina called in the United States’ top diplomat in the country on Tuesday to express its “deep indignation” over a local newspaper interview in which he made reference the South American country’s latest debt default. Argentina missed a coupon payment on its restructured sovereign bonds in July after a U.S. judge ordered that $539 million deposited by Buenos Aires with an intermediary bank and intended for bondholders not be paid out. Pointing to the fact that the government tried to make the payment, Argentina denies being in default. U.S. chargé d’affaires in Argentina Kevin Sullivan nonetheless told local newspaper Clarin that “it is important that Argentina get out of default” in an interview published on Monday. Outside of government circles, the term default is commonly used in Argentina to describe the missed July payment.

Sullivan was called into the office of Foreign Minister Hector Timerman on Tuesday after Timerman issued a statement expressing “deep indignation and energetic rejection” of Sullivan’s comments to Clarin. “If this kind of intrusion into the internal affairs of Argentina is repeated, severe measures will be taken,” Timerman’s statement said. Sullivan is Washington’s ranking diplomat in Buenos Aires, as no replacement has been named since its ambassador to Argentina left last year. The U.S. embassy had no comment on the spat with the Argentine government or the Sullivan-Timerman meeting. Debt is a touchy subject in Argentina after millions of people in the middle class were thrown into poverty in 2002 when the government defaulted on about $100 billion in bonds. More than 93% of the bad debt was swapped in 2005 and 2010 for paper offering less than 30 cents on the dollar.

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At least we know who to blame.

IS Seeks ‘Lone Wolves In America’ To Attack Times Square, Las Vegas (Yahoo)

Bomb-making instructions and potential targets for “lone wolves in America” to attack were recently posted to an online message board sympathetic to the Islamic State militant group, also known as ISIS or ISIL, Vocativ reports. The post — entitled “To the lone wolves in America: How to make a bomb in your kitchen, to create scenes of horror in tourist spots and other targets” — suggests targeting popular tourist destinations, such as New York’s Times Square and the Las Vegas Strip, as well as train and subway stations throughout the United States. The instructions appear to be similar to those previously published by the al-Qaida magazine Inspire and reportedly used by the Tsarnaev brothers to build pressure cooker bombs used in their attack on the 2013 Boston Marathon.

The posting appears to be similar to one that surfaced in an online publication last month calling for would-be terrorists to attack Times Square, Las Vegas casinos, oil tankers and military colleges with car bombs. “This is a new world, if you will, or the evolving world of terrorism, and we’re staying ahead of it,” NYPD commissioner Bill Bratton told reporters on Tuesday. “We’ve been focused on it, and I believe that we are as prepared as any entity could be to deal with the threats.” On Monday, New York City Mayor Bill de Blasio, New York Gov. Andrew Cuomo and New Jersey Gov. Chris Christie met with U.S. Homeland Security Secretary Jeh Johnson in Manhattan to discuss ways to secure the metropolitan region from a terror attack. “As New Yorkers, we know our city is the No. 1 terror target,” de Blasio said.

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Hi guys!

Governments Use Weaponized Malware To Spy On Journalists – WikiLeaks (RT)

Journalists and dissidents are under the microscope of intelligence agencies, Wikileaks revealed in its fourth SpyFiles series. A German software company that produces computer intrusion systems has supplied many secret agencies worldwide. The weaponized surveillance malware, popular among intelligence agencies for spying on “journalists, activists and political dissidents,” is produced by FinFisher, a German company. Until late 2013, FinFisher used to be part of the UK-based Gamma Group International, revealed WikiLeaks in the latest published batch of secret documents.

FinFisher’s spyware exploits and monitors systems remotely. It’s capable of intercepting communications and data from OS X, Windows and Linux computers, as well as Android, iOS, BlackBerry, Symbian and Windows Mobile portable devices. Three back-end programs are required for the spy program to operate. FinFisher Relay and FinSpy Proxy programs are FinFisher suite components that route and manage intercepted traffic, redirecting it to the FinSpy Master collection program. The spyware can steal keystrokes, Skype conversations, and even connect to your webcam and watch you in real time. The whistleblower has a list of FinFisher surveillance software buyers. Among the German malware developer’s clients are intelligence agencies and police forces from Australia, Bosnia, Estonia, Hungary, Italy, Mongolia, the Netherlands, Pakistan and Qatar.

According to WikiLeaks’ estimates, FinFisher has already earned about €50 million in sales. “FinFisher continues to operate brazenly from Germany selling weaponized surveillance malware to some of the most abusive regimes in the world,” the founder and editor-in-chief of Wikileaks, Julian Assange, said. Earlier this year, the tapping of Chancellor Angela Merkel’s mobile phone by the American National Security Agency (NSA) created a scandal that rocked the German political establishment: a revelation made thanks to documents exposed by the former NSA contractor and whistleblower Edward Snowden. Yet, despite all this, FinFisher continues its activities in Germany unhindered. “The Merkel government pretends to be concerned about privacy, but its actions speak otherwise. Why does the Merkel government continue to protect FinFisher?” Assange asked.

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Fun!

Chinese Shoe Firm Bosses Vanish With Tens of Millions in Cash (BBC)

Chinese footwear firm Ultrasonic has announced the disappearance of its chief executive and chief operating officer, along with most of its cash. The firm, which is listed in Germany, said that both the men, Qingyong Wu and Minghong Wu, had “apparently left their homes and are not traceable”. At the same time, its cash reserves in China and Hong Kong had been transferred and were “no longer in the company’s range of influence”. Ultrasonic shares immediately fell 79%. The Cologne-based firm said its German holding company still had a “relevant six-figure amount” of money under its control, so it was still able to meet its payment obligations as normal. Ultrasonic’s chief financial officer, Chi Kwong Clifford Chan, and the company’s supervisory board were in talks with authorities and business partners in an effort to clarify matters, the firm said. “As soon as new, reliable facts can be verified, they will be disclosed immediately,” Ultrasonic’s statement on its website concluded.

Ultrasonic specialises in the design, production and sale of shoe soles, sandals, slippers, urban footwear and high-end accessories. With several facilities in the People’s Republic of China, it targets the country’s burgeoning middle class. Ultrasonic had been enjoying steadily rising revenues and profits. Revenues had grown nearly 10% to 163.8m euros (£130.7m) over the last five years, while net income had risen nearly 14% to 35m euros. In 2013, the company had over €100 million of cash reserves. Tuesday’s share price collapse will have wiped about 57m euros off the company’s stock market value. Earlier this year, another Germany-listed Chinese manufacturer, Youbisheng Green Paper, said its chief executive had gone missing without explanation. It later initiated insolvency proceedings.

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Sep 152014
 
 September 15, 2014  Posted by at 5:40 pm Finance Tagged with: , , , ,  


Arthur Rothstein Bathgate Avenue in the Bronx Dec 1936

These are dangerous times. The dangers come from places hardly anybody ever thought to look for them. And that is a danger in itself.

The world has become an amalgamation of centralized blocks of power on the one hand, and a move away from these blocks on the other. The latter happens for good reason. Not that any such reason should be required. The plain and basic human right to, and desire for, freedom and self-governance should be enough. It isn’t, though, as we shall find out soon enough.

The centralized blocks have been able to gather far too much power, politically, socially and militarily, all concentrated in the hands of far too few people. And because we are who we are as a species, once you arrive at that sort of power concentration, it is inevitable that the people who go look for it, and obtain it, are the last ones who should have it. That is, from the point of view of all the rest of us.

It takes a certain mindset to want so much power over others, and if you don’t end up with outright psychopaths holding the reins, you’ll get something very close to it. Nevertheless, on the other hand, the process of increasingly concentrated powers is a natural one.

But then so is the move away from that concentration, the urge to break away from the huge entities and into smaller ones. It’s as yin and yang as it gets. Still, we all understand where the problem lies: those who have accumulated all that power in their few handfuls of hands, will be extremely reluctant to give up even a few crumbs of it.

They will instead look for more and more. Which will clash with the, again, entirely natural movement elsewhere in society towards the dilution of this massive power centralization. And guess who holds the arms, which in today’s setting are the most devastating ones in human history by a factor of a thousand, or a million, or more.

The drive away from condensed power is fed by deteriorating economic circumstances, even if those are not immediately clear to all (just about everyone’s still talking about, and believing in, a ‘recovery’).

The power blocks have served their purpose, which was the concentration of wealth, and have now overstayed their welcome. This is most evident in blocks such as NATO and the EU, but it applies just as much to the US, China and the Russian empire.

Our choices then are clear. We can at this moment choose to prepare a smooth path towards de-centralization, or we can prepare to fight a thousand bloody battles over it. There are no other flavors available.

What is more evident than anything else is that we live in a failed economic model. And recovery from that failure is a mere pipedream. We will need to come up with different answers than that. Before people in America and Europe start dying by the side of the road again. If we wait until they actually do, we’ll be too late.

You will hear from many sides that independence movements such as Scotland’s and Catalunya’s are founded on populist sentiments. But that’s nowhere near the whole story. People have the right to govern themselves, if they so choose. And if you try to stop that, if you let these sentiments fester, without giving them room to breathe, they may indeed well manifest in nasty ways.

If it takes a populist leader to channel the desire for independence, chances are such a leader will emerge. To prevent such things from happening, the ‘free’ world needs to assemble something akin to a blueprint for situations in which peoples express their desire for self-determination.

The absence of such a blueprint equals a surefire way towards trouble, unrest, and worse. It can’t be that 2 million Catalans take to the streets of Barcelona, and old school soldiers issue threats to kill them, or the Madrid government declares the entire movement illegal. ‘It’s against the Spanish constitution’, they proclaim. Well, then it’s high time to change that constitution, because it violates UN charters Spain has signed up to.

Self-determination is not illegal. And that should be expressed very clearly by all nations and all leaders, through the UN, but also in EU and US law, so nobody is in doubt any longer, and the path towards independence is clear for everyone to see.

The main problem of course is: how do you make a change such as this happen when all incumbents, all those who hold power, are on one side of the divide?

We could start off by realizing that presenting de-centralization as some sort of ideological drive misses the point entirely. What we’re looking at is a wholly natural sequence of events. But nature has no edicts or laws that decide against violence and bloodshed.

That’s where we come in. We can pass international agreements that ban violence against peoples who seek to become independent. Not one inch of it will come easy, but we don’t have much of a choice if we don’t want to live in some kind of ongoing war situation for years to come.

The demise of the communist block has presented a number of examples of de-centralization, some peaceful, some incredibly bloody. There are lessons in there for us to learn.

Scotland is a timely reminder of things to come. It won’t be the last, it’s in fact only the vanguard. The more it become obvious and inescapable that our economies will not recover, because they are too deep in debt and they don’t have sufficient access to cheap fossil fuels anymore, the more the call for independence will gather momentum and volume. And it will be contagious.

We have a narrow window left to regulate the process. Before countries start pulling out of international bodies because these no longer serve a purpose for them. Before the power brokers and holders sense too much threat to their acquired positions, and decide it’s time to call in the cavalry.

There’s no way we can prevent mayhem in every single case, there’ll simply be too many of them, and they will all have their very different and unique characteristics. But we still can do a lot.

Or we can close our eyes and wait for the recovery our masters will keep on promising until they pull the plug on the whole mirage.

OECD Trims Developed World Growth Forecast as Risks Build (BW)

The Organization for Economic Cooperation and Development trimmed its growth forecasts for the biggest developed economies in the face of increasing geopolitical risks and subdued European inflation. Euro-area gross domestic product is now expected to expand 0.8% this year, down from 1.2% in May, while the U.S. will expand 2.1% instead of 2.6%, the Paris-based OECD said today in a report. “The bullishness of financial markets appears at odds with the intensification of several significant risks,” the organization said. “Continued slow growth in the euro area is the most worrying feature of the projections.” The MSCI All Country World Index has gained 6% this year even as conflicts in the Ukraine and the Middle East have intensified and inflation in the euro-area has dipped to a fraction of the European Central Bank’s target rate. The OECD, which advises its 34 member governments on economic policy, urged European officials to learn lessons from Japan where inflation expectations didn’t flag a later descent into deflation.

“The experience of Japan in the 1990s is a reminder that such expectations measures can be poor predictors of the actual future rate of inflation,” the OECD said. “The 6-to-10 year consensus expectations in Japan were similarly near 2% in the early 1990s, failing to foresee the descent into deflation.” The OECD cut its GDP forecasts for Germany, France and Italy to 1.5%, 0.4% and a contraction of 0.4%, respectively. In 2015, those economies will grow 1.5%, 1% and 0.1%, generating growth of 1.1% for the euro area as a whole. Similarly, in Brazil the OECD foresees a weak investment and uncertainty related to looming elections as keeping growth below potential at 0.3% this year and 1.4% in 2015. The outlook for other economies is brighter. The OECD sees Japan expanding 0.9% this year and 1.1% in 2015, while China is on track to grow 7.4% and 7.3%. India, the only major economy to have its growth forecast raised this year, will expand 5.7% in 2014 and 5.9% next year, the OECD said.

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“Nobel prize-winner Lars Peter Hansen described U.S. economic growth as “stunningly sluggish.”

OECD Cuts US Growth Forecast, Warns On Risk Assets (CNBC)

A stuttering recovery in the U.S. and the continued fragility of the euro zone means that risk assets are “mispriced,” the Organization for Economic Cooperation and Development warned on Monday. In its Interim Economic Assessment, the Paris-based research organization became the latest to suggest markets are at risk of a sudden correction, stressing that the current bullishness appeared “at odds” with the “intensification of several significant risks.” The OECD forecast the U.S. would grow by 2.1% this year, down from its May projection of 2.6% growth. For 2015, the group expects the U.S. economy to grow 3.1%, down from earlier estimates of 3.5%. The euro area has also been downgraded from 1.2% growth in May to 0.8% and 1.1% for next year, and the stubbornly slow growth in the region is the most “worrying feature” of the OECD’s projections.

The anticipated tapering of U.S. monetary policy could lead to shifts in international financial flows and sharp exchange rate movements, which could be particularly disruptive for emerging market economies, the OECD noted. “A number of equity markets are reaching record highs, sovereign bond yields in several countries are near all-time lows and implied share price volatility in the United States and Europe is around pre-crisis levels,” it said. “This highlights the possibility that risk is being mispriced and the attendant dangers of a sudden correction.” Speaking to CNBC, economist Robert Shiller warned of pricey valuations in stocks last month and fellow Nobel prize-winner Lars Peter Hansen described U.S. economic growth as “stunningly sluggish.”

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That’s why it’ll come.

BIS Warns Rate Shock Could Spark ‘Damaging Feedback Loops’ (CNBC)

The emerging markets are at risk of “damaging feedback loops” once the world’s central banks start reining in their monetary policy and raise rates, the Bank for International Settlements (BIS) warns. BIS, known as the central bank of central banks and one of the few organizations to foresee the global financial crisis of 2008, believes that non-financial companies from emerging economies have been encouraged to increase leverage and overseas borrowing but might have been left inadequately hedged and susceptible to currency risks. “These factors have increased the risks facing these companies, implying the existence of ‘pockets of risk’ in particular sectors and jurisdictions”, Michael Chui, Ingo Fender and Vladyslav Sushko said in the organization’s new quarterly report released on Sunday. “If these risks were to materialize, adding to broader (emerging market) vulnerabilities, stress on corporate balance sheets could rapidly spill over into other sectors, inflicting losses on the corporate debt holdings of global asset managers, banks and other financial institutions.”

This could be a source of “powerful feedback loops” in the event of an exchange rate or an interest rate shock, the three economists warn. The concerns come after a so-called “taper tantrum” in May 2013, when the minutes of a Federal Reserve policy meeting sparked fears the central bank could start tapering off its $85 billion-a-month bond purchasing program. Emerging market currencies tumbled on the news as investors started to bring their dollars back to the U.S. in anticipation of higher interest rates. This gave a short and sharp insight into what could happen overseas if the yields on U.S. Treasurys suddenly spiked higher, although most expect the normalizing of interest rates to be facilitated at a smooth pace with the Federal Reserve managing market expectations and being alert to financial risks.

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Tech has a booboo.

Record S&P 500 Masks 47% of Nasdaq Mired in Bear Market (Bloomberg)

Beneath the U.S. stock market’s record-setting gains, trouble is stirring. About 47% of stocks in the Nasdaq Composite Index are down at least 20% from their peak in the last 12 months while more than 40% have fallen that much in the Russell 2000 Index and the Bloomberg IPO Index. That contrasts with the Standard & Poor’s 500 Index, which has closed at new highs 33 times in 2014 and where less than 6% of companies are in bear markets, data compiled by Bloomberg show. The divergence shows the appetite for risk is narrowing as the Federal Reserve reins in economic stimulus after a five-year rally that added almost $16 trillion to equity values.

It’s been three years since investors saw a 10% decline in the S&P 500 and they’re starting to avoid companies that will suffer the most when the market stumbles, said Skip Aylesworth, a portfolio manager for Hennessy Funds in Boston. “The small caps have had big runs and tend to get ahead of themselves,” Aylesworth said in a Sept. 10 phone interview. Hennessy Funds oversees about $5 billion. “It’s kind of like the tortoise and the hare, and they’re the hare. But then they get expensive, and when the market corrects, they get whacked.” The proportion of technology companies, small-caps and newly listed stocks stuck in their own personal bear markets has risen from 30% in March 2013, when the overall equity market surpassed its 2007 record. S&P 500 stocks with at least 20% losses have fallen since then, the data show.

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Fool me once …

Draghi’s $3.9 Trillion Ambition May Be a Stretch to Achieve (Bloomberg)

Mario Draghi’s €3 trillion ($3.9 trillion) ambition could be a stretch to achieve. New stimulus measures ranging from long-term loans to asset purchases probably aren’t enough to expand the European Central Bank’s balance sheet back to the size its president would like, Bloomberg’s monthly survey of economists shows. The first gauge of the ECB’s success will come this week when it issues the initial funds under a four-year lending program to banks. Draghi said this month he wants to boost the ECB’s assets to the level seen at the start of 2012, an increase of as much as €1 trillion from current levels. Investors are watching to see whether he’ll take the controversial step of large-scale quantitative easing to get there. “Draghi has put himself into a corner by announcing a quantitative target,” said Elwin de Groot, senior market economist at Rabobank. “As such, we envisage the possibility that if things don’t work out the way it’s hoped they will, the Governing Council may feel compelled to do proper QE after all.”

The ECB will allot the first funds under its so-called targeted longer-term refinancing operations on Sept. 18. The median estimate in the survey is that banks will receive €150 billion. Predictions ranged from €100 billion to €300 billion. The operation comes shortly before the end of the ECB’s Comprehensive Assessment of lenders’ balance sheets, aimed at ensuring the soundness of banks’ health. The results of the review, including a stress test, will be published next month and the ECB will start as euro-area bank supervisor in November. The ultimate value of the TLTROs, which run through 2016, and programs to buy asset-backed securities and covered bonds will be €985 billion, the Bloomberg survey shows. Against that, almost €350 billion of outstanding three-year loans made by the ECB to banks at the height of the euro-area debt crisis will mature and must be repaid by early next year. That would leave the three stimulus measures adding about a net €635 billion, well below the amount Draghi’s balance-sheet target implies.

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Get ready to get rich, Europe!

Draghi Prods Euro Area to Ready Ground for Economic Boost (Bloomberg)

Mario Draghi is about to give the euro-area economy a jump-start. He’s asking the currency bloc’s leaders to make sure they’re in gear. Over the next six weeks, the ECB will be rolling out measures that could begin to restore the central bank’s balance sheet to the levels it had at the height of the sovereign debt crisis. At a Sept. 12-13 meeting of finance ministers in Milan, he told them his efforts would have limited impact if they didn’t make their economies ready to absorb it. With the TLTRO liquidity scheme that starts on Sept. 18, an asset-purchase plan targeted at easing access to credit next month, and the potentially cathartic end to a year-long bank health review coming before November, Draghi’s ECB is increasing the intensity of its economic support. Political leaders are beginning to follow suit.

“The new measures together with the TLTROs will have a sizable impact on our balance sheet, which is expected to move toward the size it used to have at the beginning of 2012,” Draghi told reporters on Sept. 12. “No matter what the monetary and even fiscal stimulus has been decided, we won’t see much growth coming from these measures only if there are no serious structural reforms.” Draghi arrived in Milan with political will for those reforms at risk. While there are some stirrings of fiscal stimulus that could boost growth, such as a 300 billion-euro ($389 billion) plan floated by incoming EU Commission President Jean-Claude Juncker, governments are dragging their feet on measures to make the economy more efficient. Last week France and Italy were both scolded by the EU for their lack of progress.

“We need to accelerate the implementation of our ambitious structural reform agenda,” said Jeroen Dijsselbloem, the Dutch finance minister who leads meetings of euro-area finance chiefs. “We cannot solely rely on monetary policy, but need the appropriate policy mix.” In response, finance ministers said they will “take stock” of the need to reduce the tax burden on labor when discussing member states’ draft budgets in November.

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Scots Aren’t the Only Angry Bunch (Bloomberg)

This week’s referendum in Scotland could result in the U.K. losing almost one-third of its landmass, and 8% of its population, and, very likely, its present prime minister. In a summer rich with shocks, the breakup of a United Nations Security Council member suddenly seems more likely than the long-predicted fracturing of Iraq. Most people I spoke with when traveling through Scotland last month expected the battle for independence waged by the Scottish Nationalist Party to have been lost. Recent opinion polls, however, show that almost half of Scottish voters hope to break free of their London masters on Thursday. Their disaffection was not the work of a day. It has been in the making for at least three decades. Jason Cowley, editor of Britain’s leading political weekly, the New Statesman, correctly points out that Britain’s Conservative prime minister in the 1980s, Margaret Thatcher, did more for Scottish independence with her regime of privatization, deregulation and unfair taxation than any Scottish nationalist.

By some estimates, the deindustrialization that Thatcher presided over had more devastating effects in Scotland than in England. That’s why Thatcher’s Conservative Party is almost extinct in Scotland, and its current leaders, David Cameron, George Osborne and Boris Johnson, evoke a visceral hostility and scorn. This isn’t just class hatred for privately educated and plummy-accented Tories, or for the axis of Eton College, Rupert Murdoch’s News International and the City of London that they embody. Many Scots are unhappy, too, with the City-obsessed Labour Party, which under Tony Blair, Thatcher’s self-proclaimed heir, placed itself in the avant garde of marketization, initiating among other things the privatization of the National Health Service. Recriminations have now erupted in England as financial markets finally register the prospect of Scotland’s secession. But blaming Cameron, who fecklessly called the referendum and limited it to a binary choice, obscures the fact that the Scottish mutiny is part of a larger worldwide trend.

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Yes, but …

Alex Salmond: No Neverendum For Scotland (NS)

One question that has risen with increasing frequency, as the Scottish independence polls have narrowed, is whether a narrow No on Thursday would result in a second referendum in the near future. With the SNP expected to remain the dominant force at Holyrood, the potential exists for a “neverendum” (the term coined by Canadian writer Josh Freed to describe the repeated votes on Quebec’s status). But asked this morning on The Andrew Marr Show, whether “if it’s a No vote by a whisker”, he could come back for another “in a few years’ time”, Alex Salmond said that it was still his view that the result would stand for “a generation.” He said: “By that what I mean is that, if you remember the previous constitutional referendum in Scotland [on devolution], there was one in 1979 and then the next one was in 1997. That’s what I mean by a generation. In my opinion, and it is just my opinion, this is a once in a generation opportunity. ”

Asked whether he could pledge that “Alex Salmond will not bring back another referendum if you don’t win this one”, he added: “Well, that’s my view. In my view this is a once in a generation, perhaps even once in a lifetime opportunity for Scotland.” But as Salmond, who will turn 60 this year, was careful to state, this is just his view. Nicola Sturgeon, the 44-year-old deputy first minister, who has emerged more clearly than ever as his heir-in-waiting during the campaign, has suggested that another referendum could be held within 15 years (a generation is usually defined as 25 years). As Harry recently noted on our new May 2015 site, the nationalists’ demographic advantage means that they would be in a strong position to win a second vote. The possibility of a neverendum is one that Alistair Darling is understandably keen to forestall. He told Marr: “The one point that I do actually agree with Alex Salmond is that I think with Thursday we’ve got to decide this for a generation. I don’t know anybody who actually wants to go through another two-and-a-half year referendum.”

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Blah.

World Waits For White Smoke From The Fed (Reuters)

The U.S. Federal Reserve may give clearer hints on when it will hike the cost of borrowing in the United States in the coming week, as struggling Europe braces for a tight vote in Scotland on whether to leave the United Kingdom. As the U.S. economy picks up pace, its central bank is inching closer to raising interest rates, a move that will send ripples across the globe. In the euro zone, however, the European Central Bank is moving in the opposite direction in a desperate bid to rekindle growth and inflation. The United States is shaking off the hangover from a financial crisis that hammered Europe and even knocked mighty China off its stride. But the U.S. rebound, thanks in large part to cheap Fed money, now means Federal Reserve Chair Janet Yellen will have to decide when to pare back this support.

Further hints as to when the first U.S. rate hike in more than eight years will happen could come on Wednesday in a statement after the bank’s governors meet. “It does seem like a done deal that it is going to increase interest rates,” said Paul Dales of economics consultancy Capital Economics. “We are going into a new phase where the Fed is trying to bring things back to normal. It can send reverberations around the world economy.” Choosing when to increase the cost of borrowing in the world’s biggest economy – a move expected next year – is a delicate balancing act. Yellen and others will be trying to work out how to keep the economic recovery on a steady keel without stopping it before the effects of the upswing lead to higher wages.

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“92% of millennials who don’t already own a home do not plan on buying one in the future. Ever.”

California Home Sales Collapse, Prices Hit Wall (WolfStreet)

This must be part of the explanation why home sales in the expensive parts of California, which is where most people live, are collapsing: according to a Harris Poll on behalf of electronic broker Redfin, 92% of millennials who don’t already own a home do not plan on buying one in the future. Ever. These people, now between 25 and 34, are in their peak home-buying age. They’re the much sought-after first-time buyers. They’re the foundation of the market. But not this generation. Homeownership rate among them, according to the Commerce Department, already plunged from 41% in 2008 to 36% currently; as opposed to 65% for all Americans. These folks are not “pent-up demand” accumulating on the sidelines, as the wishful thinkers have proclaimed. “Millennials who flock straight from college to San Francisco and other expensive cities are making a choice to spend their income on quadruple-digit rents and eight-dollar gourmet hot dogs from trendy food trucks,” explained Redfin San Francisco agent Mark Colwell.

“This means they’re not saving for a down payment, further removing them from the housing market.” So Redfin checked Census data to find the 20 Zip codes in the country with the highest population of educated millennials. Median household income in these neighborhoods is 50% higher than in all ZIP codes. Median home prices are on average $255,000 higher as well. And the average down payment for homes in these neighborhoods is $80,000. A down payment that is out of reach for most millennials. A new report about consumer finances by the Federal Reserve shows that the median family headed by a millennial earned $35,509 in 2013 dollars, 6% less than their counterparts in the Fed’s first survey of this type in 1989. Actually, median households headed by someone under 55 also made less than their predecessors in 1989 (this is what inflation does to real wages; FOMC members who’re clamoring for more, or any, inflation should read these reports from other corners of the Fed).

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Yup.

ECB’s Securities Purchases A Risk For Taxpayers: German Central Banker (CNBC)

European taxpayers should not be left accountable for the securities that form part of the European Central Bank’s (ECB) new asset-purchase program, Jens Weidmann, the president of the Deutsche Bundesbank has told CNBC. The central bank is about to embark on the purchase of asset-backed securities (ABS) in an attempt to boost the region’s economy and boost inflation. This means euro zone banks would sell the ECB their loans and other types of credit that have been packaged together. The ECB has said that it would only purchase less risky “senior” tranches of securitized debts and loans, but also wants to purchase riskier “mezzanine” tranches which are deemed to be more effective. These riskier tranches would require public guarantees, according to ECB President Mario Draghi, which is the stumbling block for Weidmann, who is also a member of the ECB’s Governing Council.

“I am more skeptical about these initiatives which rely on purchasing ABSs and transferring risk from banks’ balance sheets to the taxpayer,” he told CNBC in Milan on Saturday. ABS became infamous in the latter part of the last decade when the complex bundles of securities were believed to have played a key role in the global financial crash of 2008. In a speech last week Draghi said the “senior” tranches of ABS can be considered high-quality assets. He cited data from the Association of Financial Markets in Europe which estimated that only 0.12% of European residential mortgage-backed securities left outstanding in mid-2007 had defaulted since that date. Weidmann told CNBC that the revival of the ABS market can be beneficial to the economy, adding that it “liberates liquidity and liberates capital in the banks’ balance sheet.”

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With the kind of personal debt the Swedes have, such turmoil may not end well.

Election Throws Sweden Into Turmoil as Nationalists Advance (Bloomberg)

Sweden’s election threw the nation’s political establishment into turmoil as backing for the anti-immigration Sweden Democrats more than doubled, leaving the largest Nordic economy facing a hung parliament. The three-party Social Democratic opposition led by Stefan Loefven won 43.7%, versus 39.3% for the four-party government of Prime Minister Fredrik Reinfeldt, with all the votes counted. The Sweden Democrats garnered 12.9% to become the third largest party. The result, which sent the krona lower, marks an end to eight years of rule by Reinfeldt’s conservative-led coalition, which delivered successive rounds of tax cuts without adding to Sweden’s debt.

The premier said he will hand in his resignation today as the responsibility of forming a new government falls to the Social Democrats, which won the most votes. “We have a new unique parliamentary situation in Sweden,” Loefven said at an election-night party. He vowed to keep the Sweden Democrats from influence, opening the doors to government parties to “put the interest of Sweden first.” Traders and investors have been bracing themselves for market turbulence amid signs the election would fail to produce a clear winner.

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Boom boom.

Australians Face Repayment Shock on High-Risk Mortgages (Bloomberg)

Sydney mortgage broker Luke Gardiner, who started his business just last year, is already overwhelmed with customers. “There has not been a slow period in the last 12 months,” said the broker, whose Gardiner Financial Services Pty arranged more than A$5 million ($4.5 million) in mortgages in both June and July, about A$1 million more than in May. “I’ve been waiting for a break, but it hasn’t come.” Driving the growth is demand for high-risk mortgages such as interest-only loans and financing to buy rental properties. That’s setting the stage for a jump in mortgage delinquencies when interest rates increase from record lows, Moody’s Investors Service said this month. The easier terms are fueling housing demand, boosting prices 11% in major cities in August from a year earlier. “There has been an advent of higher-risk lending,” said Nader Naeimi, head of dynamic asset allocation at Sydney-based AMP Capital Investors Ltd., which manages about A$144 billion. The regulator “hasn’t been able to curb it.”

The Australian Prudential Regulation Authority in May warned of growing evidence of “lending with higher risk characteristics.” It issued draft guidelines urging lenders to assess whether borrowers were capable of repaying mortgages at higher interest rates. It also asked banks to conduct regular stress tests on its loan books to determine the impact of rising unemployment, interest rates and falling property prices. Interest-only mortgages jumped to 43% of all new home lending in the three months through June 30, and credit to buy rental properties climbed to 38%, both record highs, according to APRA data starting in the first quarter of 2008. “The higher proportion of investment and interest-only lending suggests that APRA’s efforts have not slowed a broad increase in higher-risk exposures,” Ilya Serov, senior credit officer at Moody’s, wrote in a Sept. 1 report.

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Time to go, François.

France Braces For A ‘Tough Autumn’ (CNBC)

With all the sound and fury coming from the debate over the future of Scotland, the tough choices facing France appears to have slipped off the radar. A confidence vote on Prime Minister Manuel Valls’ new cabinet, scheduled for Tuesday, equally has the potential to shake up markets, analysts warn. President Francois Hollande announced the shake-up of his cabinet at the end of August – a upheaval that saw left-leaning Economy Minister Arnaud Montebourg depart. This attempt to regain a handle on power by the embattled President, who is currently under fire following the publication of a headline-grabbing memoir by his former partner which claimed he didn’t like poor people, may yet backfire. While the government is expected to pass through, there are likely to be a few key abstentions from members of Hollande’s Socialist Party (PS), which will emphasize the fragility of the government as it tries to push through economic reforms. “The vote is likely to display the growing rift inside the PS,” Antonio Barroso, senior vice president at Teneo Intelligence, wrote in a research note Monday.

It could even lead to the dissolution of the government, he warned, as he forecast a “tough autumn” for the country’s government. “It is likely that rogue deputies will continue to defy Valls in the coming months, with the 2015 budget being the first major test that the PM will face in the coming weeks,” Barroso wrote. Hollande’s budget is increasingly worrying to investors. The French economy, as measured in gross domestic product, is forecast to grow 0.4% on average this year and 1% in 2015 by the government. At the same time, inflation is expected to remain low and the government is planning to cut expenditure, but not increase taxes. This will mean that the public deficit to GDP ratio will rise to 4.4% this year, according to Barclays economists’ calculations, and that France will not hit the 3% public deficit to GDP target until 2017 – which could get it in trouble with its European Union partners.

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China can lie with the best.

Li’s Options Narrow as China Growth Slowdown Deepens (Bloomberg)

Chinese Premier Li Keqiang’s options have narrowed: stimulate or miss his 2014 growth target. The weakest industrial-output expansion since the global financial crisis, and moderating investment and retail sales growth shown in data released Sept. 13, underscore the risks of a deepening economic slowdown led by a slumping property market. Stocks, metals and currencies including the Australian dollar fell as analysts cut their forecasts for 2014 growth. “This is a pretty important wakeup call that they need to do more,” said Helen Qiao, chief Greater China economist at Morgan Stanley in Hong Kong. “The government is trying very hard to reach this particular target rate, which will not necessarily be mission impossible if they roll out more easing measures starting from now. The risk is they could underestimate how much more easing tools they need.”

The slowdown in August economic data that included a second straight decline in imports and a 40% drop in the broadest measure of new credit will test Li’s resolve to avoid stronger monetary stimulus to meet his 7.5% goal. An unprecedented lending spree from 2009 to 2013 led to a surge in debt on a scale that’s triggered banking crises in other economies, according to the International Monetary Fund, underscoring the premier’s reluctance to open the spigot. Growth in gross domestic product may slip to 6.5% to 7% in the third quarter if September numbers are also weak, Australia & New Zealand Banking Group analysts estimate, down from 7.5% in the April-June period. A monthly GDP tracker compiled by Bloomberg shows the economy expanding 6.3% in August from a year earlier, down from 7.4% in July. Royal Bank of Scotland cut its forecast for China’s 2014 economic growth to 7.2% from 7.6%, citing weak momentum indicated by the August data.

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That should read: they will.

Bad Loans Could Bust China (Bloomberg)

The risk of what Nobel laureate Paul Krugman calls “Japanification” – a semi-permanent economic funk – has haunted China for at least a couple years now. Last week a Bank of America Merrill Lynch report again asked, “Will China Repeat Japan’s Experience?” Let’s dispense with the suspense: Yes, China very likely will. And the outcome will have far more serious global implications than Krugman’s main worry, which focuses on the chances of stagnation in Europe. China’s “severely under-capitalized financial system,” “imbalanced growth” and chronic “overcapacity” all remind Merrill Lynch analysts Naoki Kamiyama and David Cui of Japan in 1992, when its bubble troubles first began to paralyze the economy. China is even more reliant on exports than Japan was in the 1990s, and its all-important property market now “may be tipping over.”

Most worrying is the shaky banking sector. What concerns Kamiyama and Cui is the lack of bold action in Beijing at a time when the scale of Chinese bad debt may be higher than Japan’s ever was; they believe non-performing loan ratios are “significantly into double-digit” territory. In the first half of this year, the analysts estimate, commercial banks had to book larger non-performing loan liabilities than for all of 2013. Mind you, this comes even as the government claims financial imbalances are being addressed. As recently as July, total social financing, a proxy for debt, was still growing by almost 1% y-o-y, a rate well above China’s nominal GDP growth.

In other words, China has spent much of this year adding to its debt and credit bubbles – not curbing them. If this were 1992, China could simply force state-owned banks and enterprises to rein in excesses and ride out the resulting modest hit to gross domestic product. But China passed the point of no return after the crash of Lehman Brothers in 2008, when it unleashed a $652 billion stimulus package, followed by untold smaller ones since. The moves put China, in the words of New York hedge-fund manager James Chanos, on a “treadmill to hell.” If Beijing were to attempt a broad credit shakeout now, virtually every sector of the economy would suffer. The risks of social unrest would soar.

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Somone get rid of these clowns.

Kiev Threatens To Restart Nuclear Weapons Program (RT)

Kiev’s promise to restart its nuclear weapons program if it doesn’t get enough support from the West is completely insane, be it real or just an empty threat, political commentator Daniel Patrick Welch told RT. “If we cannot protect Ukraine today, if the world doesn’t help us, we will have to go back to the development of nuclear weapons, which will protect us from Russia,” Ukrainian Defense Minister Valery Geletey said in an interview with Ukrainian TV, also claiming that NATO members have already started supplying Kiev with conventional weapons.

RT: Is the prospect of a nuclear Ukraine something to be concerned about?

Daniel Patrick Welch: You know, your guess is as good as mine. I think what it shows first and foremost is that the inmates are fully in charge of the asylum here. This is a completely insane threat. If it is real then it is suicidal. And if it is a threat then it is petulant. In the same briefing Geletey mentioned that arms were starting to come in from their new friends in the NATO alliance. So it really is just a matter of watching, and speaks of the fragility of this truce. There is nothing there. These people in Kiev are desperate to keep the war on Russia going at all possible costs.

RT: And Ukraine’s neighboring countries, what do they have to say about that?

DPW: Well, I think slowly, I mean these people, some of them – Slovakia, to some extent the Czechs, Hungary, are creeping out of under the jackboot of American control. The Americans obviously put them up to everything they say. They know in advance. They know exactly what he is going to say. Now the Eastern European bordering states have to be realizing that they have backed a really bad horse in this race. And I can’t imagine that this isn’t seen as something incredibly destabilizing and dangerous.

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Then again, Kiev has lied about everything lese.

Kiev Says NATO Members Have Started Supplying Weapons (RT)

NATO member states have started supplying weapons to Ukraine, the country’s Defense Minister said on TV. His comments came a few days after a similar statement by a Ukrainian presidential aide sparked a diplomatic scandal and a rash of denials. In an interview with Channel 5, Ukrainian Defense Minister Valery Geletey said that he had held verbal consultations with the defense ministers of the “leading countries of the world, those that can help us, and they heard us. We have the supply of arms under way.” “This process has begun, and I feel that this is exactly the way we need to go,” the minister said. Ukrainian President Petro Poroshenko, who attended the Sept. 4-5 NATO summit in Wales, announced that he had negotiated direct modern weapons supplies with a number of NATO member states.

Poroshenko claimed that some of the NATO member states said during bilateral consultations they are ready to supply Ukraine with lethal and non-lethal arms, including “high precision weapons,” as well as with medical equipment. NATO has had repeatedly said that the alliance is not going to supply any weapons or military equipment to Ukraine. At the same time, NATO Secretary-General Anders Fogh Rasmussen said that the alliance would not interfere if member states made decisions of their own regarding arms supply to Ukraine. When Poroshenko’s aide Yury Lutsenko wrote on his Facebook page that the US, along with France, Italy, Poland and Norway, would supply modern weapons to Ukraine, the news prompted all the countries mentioned in Lutsenko’s post to say they had no information about supplies.

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What a stupid denial this is.

Glenn Greenwald Accuses New Zealand PM Over Spying Claims (Guardian)

An already tumultuous New Zealand election campaign took another dramatic turn less than a week before polling day when the prime minister, John Key, responded angrily to claims by the American journalist Glenn Greenwald that he had been “deceiving the public” over assurances on spying. Greenwald, who is visiting New Zealand at the invitation of the German internet entrepreneur Kim Dotcom, says he will produce documents provided by the NSA whistleblower Edward Snowden that prove the New Zealand government approved mass surveillance of its residents by the Government Communications Security Bureau (GCSB), New Zealand’s equivalent of the NSA. Dotcom, who is sought for extradition from New Zealand by the US on copyright charges relating to his now defunct Megaupload file-storage site, is hosting an event in Auckland on Monday called The Moment of Truth, which doubles as a rally for the Dotcom-founded Internet party.

Greenwald has promised to produce his evidence at the event, while Dotcom is pledging to show further links between Key and Hollywood relating to his own case. Adding to the spectacle, Julian Assange is expected to beam in via video link from the Ecuadorian embassy in London, while Dotcom has hinted that Snowden may also appear on the big screen from Moscow. In media interviews, Key has repeatedly dismissed Greenwald as “Dotcom’s little henchman”. Speaking on TVNZ’s Q+A programme, he acknowledged that the government had in 2012 considered a “mass cyber-protection” proposal, which he said was “really a Norton antivirus at a very high level”, but rejected it. Greenwald, he argued, would therefore have seen incomplete material. “This is what happens when you hack in to illegal information, when you wander down to New Zealand six days before an election trying to do Dotcom’s bidding – what happens is you get half the story,” said Key.

He said he was ready to declassify secret documents to support his argument. “There is no ambiguity here. There is no and there never has been any mass surveillance.” Greenwald responded by saying: “I absolutely stand by everything I’ve said.” He told 3 News: “They did far more than look at the idea; they adopted the idea and took steps to make it a reality.” He added: “I’ve done reporting of surveillance all over the world and a lot of governments haven’t liked what I’ve said, but I’ve never seen a head of government lose their dignity and get down in the mud and start chucking names to discredit the journalist in order to discredit the journalism.”

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One of the world’s oldest living species …

Wild Chinese Sturgeon On Brink Of Extinction In Polluted Yangtze River (AFP)

The fish has survived for 140m years but failed to reproduce last year according to Chinese researchers The wild Chinese sturgeon is at risk of extinction after none of the rare fish were detected reproducing naturally in the polluted and crowded Yangtze river last year. One of the world’s oldest living species, the wild Chinese sturgeon is thought to have existed for more than 140m years but has seen its numbers crash as China’s economic boom has brought pollution, dams and boat traffic along the world’s third-longest river. For the first time since researchers began keeping records 32 years ago, there was no natural reproduction of wild Chinese sturgeon in 2013, according to a report published by the Chinese Academy of Fishery Sciences. No eggs were found to have been laid by wild sturgeons in an area in central China’s Hubei province, and no young sturgeons were found swimming along the Yangtze toward the sea in August, the month when they typically do so.

“No natural reproduction means that the sturgeons would not expand its population and without protection, they might risk extinction,” Wei Qiwei, an investigator with the academy, told China’s official Xinhua news agency on Saturday. The fish is classed as “critically endangered” on the International Union for the Conservation of Nature’s “red list” of threatened species, just one level ahead of “extinct in the wild”. Only around 100 of the sturgeon remain, Wei said, compared with several thousand in the 1980s. Chinese authorities have built dozens of dams – including the world’s largest, the Three Gorges – along the Yangtze river, which campaigners say have led to environmental degradation and disrupted the habitats of a range of endangered species. Many sturgeon have also been killed, injured by ship propellers or after becoming tangled in fishermen’s nets.

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Sep 092014
 
 September 9, 2014  Posted by at 9:49 pm Finance Tagged with: , , , ,  


Matson Photo Service Palmyra (Tadmur, Syria). The Turkish castle. Kala’at Ibn Na’an 1935

Got a mail from a friend in Scotland late last night that got me thinking. “Unfortunately, using Ireland as a model of fracture, we may start blowing up each other.” I’ve been reading a lot lately, in between all the other things, about Scotland, as should be obvious from my essay (Jim Kunstler tells me I can use that word) yesterday, Please Scotland, Blow Up The EU, and sometime today a thought crept up on me that has me wondering how ugly this thing is going to get. I think it can get very bad.

What I get from it all is that if anything is going to win this for the independence side, it must be the arrogance the London government has exhibited. That alone could seal the deal. But now of course London has belatedly woken up. Even David Cameron is scheduled to – finally – visit Scotland in the course of the contest. And if push comes to shove, they’ll throw in a royal baby. Or a Queen. Mark my words.

Cameron’s visit is funny in that he never thought it necessary until now because he thought he would win no matter what until a few days ago, and also funny because he must easily be the least popular person in all of Scotland, so a visit is a substantial risk. He had his bellboy Alistair King do a TV debate recently, and King flunked that thing so badly he may have single-handedly propelled the Yes side into the lead.

The knifes are being sharpened and soon they will be drawn – there’s only 9 days left. Question is, who will end up hurt? Bank of England Governor Mark Carney picked today of all days, 9 days before the referendum, to at last get more specific about his rate hike plan: it’s going to be early 2015. Because the UK economy is doing so great…

Only, wages will have to rise, and that will have to happen through British workers ‘earning’ pay hikes by ‘boosting their productivity and skills’. These workers have about 6 months to do that. You’re pulling my leg here, right, Mark? In any case, it seems obvious that Canadian Carney will be used as a tool against the Scottish independence movement. That’s just more arrogance.

Carney also spoke out directly on Scotland, saying there can’t be a currency union between the Scots and the Brits. Oh yeah, that should scare ’em!

The pound sterling is falling, but that doesn’t mean much. What does is that the entire financial world, of which the City is a large part, was caught on the wrong foot as much as the UK government. And both will now, until September 18, pull all the stops to cover their – potential – losses. With all means at their disposition. Some of which will be brutal, or at least appear to be.

Billions of dollars have already been lost in just a few days, since everybody realized the UK may actually split up. Many more billions will be lost in the coming week, as measures of volatility go through the roof. Neither the Yes side nor the No side have gone into this thing terribly prepared; there are a zillion questions surrounding the independence issue that won’t be solved before the vote takes place. Passports, currencies, central banks, monetary unions, there’s too much even to mention.

Somewhere, emanating from the old crypts and burrows in which Britain was founded, I fear a hideous force may emerge to crush the Scottish people’s desire for self-determination, if only because that desire is a major threat to some very rich and powerful entities who found themselves as unprepared as Downing Street 10.

I don’t know if, as my friend fears (though he’s much closer to the action than I am, so who am I to speak), it will lead to people blowing up each other, but then also, who am I to rule that out? The UN charter on self-determination looks good on paper and in theory, but when reality comes knocking, there’s mostly not much left of the lofty ideals and intentions, or is that just me, Catalunya?

Still, there’s an added dimension in Scotland: the fact that the City of London is the number 1,2 or 3 (take your pick) most important finance center on the planet. If and when anybody rattles that kind of cage, other forces come into play. It’s no longer about politics, but about money (and no, I’m not too think to see how the two are linked).

So I hold my breath and my prayers for both my Scottish and my British friends – and I happen to have lots of them – and I hope this is not going to get completely out of hand. The reasons I think it may get out of hand regardless is that 1) there is not one side that was ever prepared for the situation in which they find themselves today and 2) there is an enormous supra-national interest that resides in the UK financial world which is in a semi panic mode about how much money can be lost not just because of a UK break-up, but because of the uncertainty surrounding that potential break-up.

And there’s something in all of that which is definitely scary. London, and the Queen, will do all they can not to lose part of their ’empire’. The City of London will do even more not to lose a substantial part of their wealth. And this time around I don’t think they properly hedged their bets: the surge of the Yes side is as close to a black swan as we, and the City of London, have seen.

Bank of England Governor Mark Carney Signals Spring Rate Rise (WSJ)

The Bank of England will likely meet its inflation and jobs goals if it starts to raise its benchmark interest rate early next year, Gov. Mark Carney said Tuesday in his clearest statement yet on the probable timing of a first move toward unwinding crisis-era stimulus. In a speech to labor union members in Liverpool, Mr. Carney said the rate at which wages rise over coming months will be key to the exact timing of the first move, and repeated his assurance that a rise in the benchmark rate will be “gradual and limited.” Mr. Carney said the U.K.’s economic recovery has “exceeded all expectations” and “has momentum.” Against that background he said the time for interest rates to “normalize” is nearing, and that in recent months the decision on whether to raise or leave policy unchanged “has become more balanced.” Most investors expect the BOE to raise its benchmark interest rate from a 320-year low of 0.5% in the first quarter of 2015, and Mr. Carney appeared to validate that expectation.

“Our latest forecasts show that, if interest rates were to follow the path expected by markets—that is, beginning to increase by the Spring and thereafter rising very gradually—inflation would settle at around 2% by the end of the forecast and a further 1.2 million jobs would have been created,” he said. “In other words, we would achieve our mandate.” Should it raise its benchmark interest rate early next year, the BOE would likely become the first major central bank to start to remove the unprecedented levels of stimulus provided to the economy since the financial crisis struck in late 2008. The U.S. Federal Reserve is expected to start to raise its key rate later in the year, while the European Central Bank Thursday provided additional stimulus in the form of rate cuts and new bond buying programs. With the Japanese economy struggling to recover from an April hike in the sales tax, the Bank of Japan may yet provide more stimulus.

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And counting.

Billions Of Pounds Wiped Off Value Of Scottish-Linked Firms (Guardian)

Billions of pounds were wiped off the value of companies with Scottish links and the pound was pummelled as markets took fright at the increasing prospect of Scotland voting next week to break away from the United Kingdom. Investors on Monday dumped companies with exposure to Scotland, including the Royal Bank of Scotland and Lloyds Banking Group, which owns Bank of Scotland. They also ditched sterling, which at one point fell to its lowest level against the dollar for 10 months. “Be afraid, be very afraid,” Deutsche Bank analysts warned its clients after the Sunday Times YouGov poll had showed a small lead for the yes campaign.

American Nobel prize-winning economist Paul Krugman echoed the analysts’ view, warning Scotland it was unsafe to vote yes while uncertainty about the country’s currency remained. “If Scottish voters really believe that it’s safe to become a country without a currency, they have been badly misled,” Krugman wrote in the New York Times. “The risks of going it alone are huge. You may think that Scotland can become another Canada, but it’s all too likely that it would end up becoming Spain without the sunshine.” Elsewhere, a leading City banking expert warned that companies and individuals were likely to withdraw their cash from banks if the vote was in favour of a split from the union, while another economist warned independence could “easily derail the UK recovery”.

Initially almost £4.8bn was wiped off the stock-market value of companies with exposure to Scotland. As well as RBS and Lloyds, companies to be hit included engineering group Weir, insurer Standard Life, fund manager Aberdeen Asset Management and energy company SSE. By the end of trading the losses had been pared back to £2.6bn after RBS kickstarted the sale of its US arm. The taxpayer remains heavily exposed to Lloyds and RBS, which are both registered in Scotland, following the 2008 bailouts. The mood among City professionals has changed markedly in recent days: the FTSE 100 hit a 14-year high last week and until recently there had been concerns about a strong pound hurting exports. The blue chip index slipped back to 6,834 on Monday while the currency is weakening.

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Word.

Ex-Chief Economist Stark: ECB Is Turning Into European ‘Bad Bank’ (Reuters)

The European Central Bank is turning into a European “bad bank” by loading up on bundled-up loans, and its record-low interest rates will not do anything to promote lending in the euro zone, former ECB chief economist Juergen Stark said. Stark, a former ECB executive board member and an arch-hawk, quit the bank in 2011 to protest its policies. Now he says the September rates cut would be “ridiculous, if the matter was not so serious”. The ECB cut its main interest rate to 0.05 percent on Thursday and pledged to buy asset-backed securities (ABS) on top of its four-year loan offer, or TLTROs, in a fresh attempt to ward off deflation and stimulate the euro zone economy. “The ECB is taking enormous risks onto its balance sheet with the purchases of ABS – of whatever quality – and is turning itself into a European bad bank,” Stark wrote in a guest column for the German newspaper Handelsblatt, which is to be published on Tuesday.

He said the rate cut could be seen as a “symbolic” move, if it had not been driven for the first time by a pursuit of an exchange rate target. Its goal was a targeted weakening of the euro exchange rate, he said, which had been demanded repeatedly by French and Italian politicians. “Zero-interest-rates will, however, not produce a single euro in additional lending, and this inefficiency will in the long term among other things further undermine the ECB reputation,” Stark wrote in his piece. The ECB has said many times that it does not have an exchange rate policy target but aims only for price stability. His comments come after an ally of German Chancellor Angela Merkel in a rare public attack, criticised the ECB’s ABS programme, saying it would scare Germans.

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In lieu of QE.

Germany, France Push $400 Billion EU Investment Program (Bloomberg)

Germany and France are poised to take the first step toward a European investment program, as the euro area’s two biggest economies seek to resolve differences and spur growth without resorting to stimulus spending, government officials said. The proposals, which enlist the European Investment Bank for loans to companies, aim to pave the way for a €300 billion ($388 billion) investment plan outlined in July, according to three euro-area government officials who asked not to be named because the document is in draft form. Germany and France plan to present the initiative at a meeting of European finance ministers in Milan, Italy on Sept. 12. Germany’s emerging endorsement marks an attempt to shift the debate away from austerity and acknowledge the European Central Bank’s efforts to prod governments into action to combat low inflation and a weak economic outlook.

It’s also intended to deter ECB President Mario Draghi from resorting to purchases of sovereign bonds and asset-backed securities to increase bank lending, a move viewed with anxiety in Germany. Draghi “threw the kitchen sink” at German Chancellor Angela Merkel, Jacob Funk Kirkegaard, a senior fellow at the Peterson Institute for International Economics in Washington, said in an interview after the ECB’s policy decisions on Sept. 4. “Draghi’s message was plain: my back’s to the wall — do something to push fiscal stimulus now or watch me buy bonds.” With Merkel opposed to fiscal stimulus, German backing requires avoiding pledges of cash and any suggestion that pressure on France and Italy to make their economies more competitive is easing, one official said.

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And that took 8 weeks?!

MH17 Broke Up In Mid-air Due To External Damage – Dutch Prelim. Report (RT)

The MH17 crash was a result of structural damage caused by a large number of high-energy objects that struck the Boeing from the outside, the preliminary report into the Malaysia Airlines disaster in Ukraine said. “Flight MH17 with a Boeing 777-200 operated by Malaysia Airlines broke up in the air probably as the result of structural damage caused by a large number of high-energy objects that penetrated the aircraft from outside,” the Dutch Safety Board said in its preliminary report. Dutch investigators added that “there are no indications” that the tragedy was triggered “by a technical fault or by actions of the crew.” [..] The plane was “split into pieces during flight,” the investigators said, based on the analysis of the pattern of wreckage on the ground.

The Dutch investigators said that “available images show that the pieces of wreckage were pierced in numerous places.” The report emphasizes that investigators haven’t yet had the chance to recover the components for forensic investigation. However, the photos taken from the wreckage “indicated that the material around the holes was deformed in a manner consistent with being punctured by high-energy objects,” the report said. “The characteristics of the material deformation around the puncture holes appear to indicate that the objects originated from the outside the fuselage.” The fact that the plane was damaged from the outside “also explains the abrupt end to the data registration on the recorders, the simultaneous loss of contact with air traffic control and the aircraft’s disappearance from radar,” the report says.

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So why not blame Kiev for spreading lies?

Hagel ‘Not Aware’ Of Secret Deal To Supply Kiev With Lethal Weapons (RT)

US Defense Secretary Chuck Hagel said he was not aware of a secret deal to supply Ukraine with lethal weapons. His words contradict earlier statements by an aide to President Petro Poroshenko that the US is backing Kiev’s military with arms. “I’m not aware of any kind of a secret deal that was made in Wales about supplying lethal weapons to the Ukrainians,” Hagel told journalists on a visit to Turkey’s capital, Ankara. Earlier, Poroshenko aide Yury Lutsenko wrote on his Facebook page that the US, along with France, Italy, Poland and Norway, will supply modern weapons to Ukraine. The agreements were reached at the Sept. 4-5 NATO summit in Wales, Lutsenko wrote, adding that the West will also send military advisers to Ukraine. However, Hagel later denied the report Sunday, saying that Washington has not made an offer of “lethal assistance” to Ukraine.

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Brussels is a pool of fools.

Here’s Why Europe Launched The ‘Nuclear Option’ Against Russia (Zero Hedge)

Europe’s leaders, we assume under pressure from Washington, appear to be making a big weather-related bet with their taxpayers’ lives this winter. As they unleash funding sanctions on Russia’s big energy producers, Europe has pumped a record volume of natural gas into underground inventories in an effort to ‘outlast’ Russia and mitigate any Napoleonic “Winter War” scenario. The plan appears to be to starve Russian energy firms of cashflow – as flows to Europe are already plunging – and remove their funding ability, potentially forcing severe hardship on Russia’s key economic drivers. As Bloomberg reports,

Europe’s reliance on Russian natural gas shipments via Ukraine is declining after the region pumped a record volume of the fuel into underground inventories, minimizing the risk of shortages during the coming winter. [..] Natural gas flows from Russia to the EU haven’t been affected in the current crisis. Storage sites in Slovakia, which had to seek emergency imports after its supplies were cut in 2009, were 92 percent full on Sept. 4, according to Gas Infrastructure Europe.

So Europe is stocking-up – which makes perfect sense – just in case Russia pulls the plug… but has now taken the situation to “11” on the Spinal Tap amplifier of escalating tensions by planning sanctions on Russia’s energy providers.

The plan appears clear:
• stock-up now (to survive the winter)…
• starve Russian firms of cashflow (thanks to stockpiles)…
• cut off their funding source (sanctions)…
• force Putin’s economy into a tailspin…
• Putin folds and it all ends happily ever after

There appear to be 3 problems with this plan…

1) What if the weather is considerably colder than normal this winter? (i.e. they need more supply)
2) Russia has already committed to supporting the sanctioned firms (and we would hardly be shocked if China chipped in)
3) What happens in Spring? German industrials need energy?

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Finland Wants EU to Go Slow on Russia Sanctions (WSJ)

Finland thinks the European Union should wait in implementing its new economic sanctions against Russia, Finland’s prime minister said Monday. The EU launched on Monday the process to adopt formally a set of new measures that will slightly stiffen the EU’s response to Russia for its role in the Ukraine crisis. The new sanctions were adopted by the EU members including Finland on Monday, but the actual timing for their implementation was left to be decided later, Finland’s Prime Minister Alexander Stubb told Finnish media at a press briefing in Helsinki shortly after 1900 local time (1600 GMT).

“Finland in general isn’t of the opinion that now is the right time [for the sanctions],” Mr. Stubb said, adding that EU diplomats were negotiating in Brussels on Monday night over when the sanctions would actually be put into force. To come into force the sanctions have to be entered in the EU’s official journal, “but there are still discussions at which stage [the sanctions] will be published in the official journal,” Mr. Stubb said. Mr. Stubb said the schedule for implementing the new sanctions has been “fast and challenging” because Russia and Ukraine have made progress in their negotiations aimed at putting a stop on fighting in eastern Ukraine. Finland shares a 1,300-kilometer land border with Russia and has profited from tourism and trade with its huge eastern neighbor. In the past during the Ukraine crisis Finland has been among the EU members that have had reservations about ramping up economic pressure on Russia.

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Stand down Shinzo, stand down please …

The Wrath of Abenomics Crushes Japanese Consumers (WolfStreet)

Abenomics soothsayers and apologists are worried: the August debacle is hard to explain away, even for them. It just sits there, a nagging, dark reality. In April, after the broad-based consumption-tax hike from 5% to 8% had taken effect, retail sales collapsed 20% from March. Total vehicle sales collapsed 56% to the worst level since December 2012, and December is usually the worst month of the year in Japan. April was terrible. It was much worse than feared by the Abenomics soothsayers and apologists. But the shock didn’t last long, and soon the soothsayers and apologists were at it again. In May, car sales were worse than a year earlier, but not much worse (-1.2%); and in June, car sales were actually a smidgen better (+0.4%) than a year earlier, and hopes were being propagated that this would all somehow work out.

But in July sales dropped 2.5% year over year, and other data points were going to heck as well. Then August happened. In August, vehicle sales as measured by registrations swooned, according to the Japan Automobile Manufacturers Association. All categories were down: sales of new cars, including minis (cars with tiny 500cc engines) plunged 9.4% year over year to 281,326 units; sales of new trucks of all sizes, including minis dropped 7.2% to 51,165 units. And total vehicles sales, retail and commercial, cars, trucks, and buses plunged 9% to 333,471 units. It was worse even than that terrible April, though in recent years, August had been better than April. It was worse even than December 2012. It was the lowest level since August 2011, the time when the consequences of the Great East Japan Earthquake and tsunami that had killed over 19,000 people were still paralyzing Japanese commerce, and when countless aftershocks were still rattling buildings and nerves on a daily basis.

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Line of the day: ” … the Fed’s policies have rewarded financial engineering at the expense of job creation … ”

There Are Still 1.4 Million Fewer Full-Time US Jobs Than In 2008 (Lee Adler)

Let’s cut to the chase: There were 1,446,000 fewer people working full time in August 2014 than in August 2008, according to the Bureau of Labor Statistics household survey (CPS). That’s after an increase of 210,000 full-time jobs in August. That’s the actual count, not the seasonally adjusted abstraction. So we have to compare that with past Augusts to get an idea if its any good or not. August is a swing month, sometimes up, sometimes down. The average change over the prior 10 years, which included a couple of ugly years in the recession, was -63,000. So this number wasn’t bad. It was slightly better than August of last year and 2012, but come on…. It’s still 1.4 million below 2008? In 2008, the economy was in full collapse mode. The Fed has expanded its balance sheet by $3.7 trillion since August 2008 and there are fewer full-time jobs now than then? Remind me again what that $3.7 trillion has bought! Since August 2009, near the bottom of the recession, the US economy has added 6.25 million full-time jobs, a 5.5% increase.

That amounts to $588,000 in Fed QE per added full time job. But that’s ok. It’s been great for bankers, securities brokers, and hedge funds. While the number of full time jobs increased 5.5%, stock prices soared 175%. It’s all good! Or not. I have argued for a long time that the Fed’s policies have rewarded financial engineering at the expense of job creation. The Fed has made it profitable for corporations to borrow free money to buy back the stock options that they issue to their executives rather than investing in expanding their businesses and creating jobs. The Fed’s policies have enabled corporate executives and their financial enablers to conduct a massive skimming of the US economy and wealth transfer at the expense of everybody else. By promoting this behavior, not only has Fed policy been ineffective in stimulating real growth, it has been a moral outrage, decimating the middle class and robbing the elderly of their life savings as they’re forced to consume principal.

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Stand down François, stand down please.

Hollande Hits Rock Bottom In Poll : 85% of French Oppose 2nd Term (RT)

A poll in France has revealed 85% of the population does not want President Francois Hollande to seek a second term in 2017. His approval ratings have hit an all-time low, with just 13% of those asked saying he is doing a good job. The survey was conducted by IFOP for the French weekly La Journal Du Dimanche and it made uncomfortable reading for Hollande. Fifty% of those polled did not think that the French president was delivering on his promises. Unemployment is approaching a record high and is currently over 10%. However, the under fire president has no plans to quit, saying at the recent NATO summit in Cardiff that he will not step down and will stay in office until his term runs out in 2017. His approval rating of just 13% makes him the most unpopular French president since the Second World War, in another poll conducted by TNS-Sofres. Lambasted for his failure to get the economy up and running, his misery was compounded when a former partner published a tell-all book.

Valerie Trierweiler described the 60 year-old as being dismissive of the poor, which contradicts his status as a socialist president. “With the release of every new poll, I watched him disintegrate,” Trierweiler wrote. “He needs to find someone to blame for the drop. It could never be him, so it had to be others and me.” Hollande has lost many of his core supporters from the left of the political spectrum, and has also suffered from discontent within his own cabinet. In late August, the French government was dissolved despite having being formed just 4 months earlier. They quit after ministers slammed President Francois Hollande’s plans for taxation and cuts, while also being critical of Germany’s austerity program. Led by former economics minister, Arnaud Montebourg, they chastised Hollande for being fixed on high taxes and spending cuts, who they say should have be looking to cut taxes so as to increase spending power and help revive the economy.

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The miracle is gone.

Brazil’s ‘New Middle Class’ Turns On President Rousseff (Reuters)

The streets of Jardim São Luis, a poor and violent neighborhood near the edge of São Paulo, have not been this quiet in years. And that is exactly why Valeria Rocha is so worried. Arms folded, she scans the racks of baby clothes in her small store before flicking a glance towards the empty sidewalk. “Just a year ago this area used to be packed with shoppers but nowadays it’s all empty, my store included,” she said. After a decade of economic growth and welfare policies that lifted more than 30 million Brazilians out of poverty, Jardim São Luis and other tough neighborhoods across Brazil had high hopes for the future. But a faltering economy and mounting frustration over poor public services are dimming the outlook for Brazil’s “new middle class.”

As that happens, leftist President Dilma Rousseff is watching a once-loyal base – and her chances of re-election next month – slip away. Her main rival, environmentalist Marina Silva, has surged in the polls and is favored to win a likely second-round runoff against Rousseff. Last month, 13 of 14 people interviewed in Jardim São Luis said they were sure they would not vote for Rousseff, but could not point to a clear alternative. Just a week later, after the first televised debate between the candidates, 8 of 10 people interviewed said they had already decided to vote for Silva or would strongly consider it. The other two were still unsure. Silva, who grew up poor on a rubber plantation, has emerged as the anti-establishment candidate in this campaign. Within three weeks of entering the race late following the death of her party’s original candidate, she is in striking distance of becoming the first Afro-Brazilian woman to lead Brazil.

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Sure.

FX Traders Said to Be Surprised by Scope of BOE Probe (Bloomberg)

Foreign-exchange traders interviewed as part of the Bank of England’s probe into whether its staff knew of currency-rate rigging have expressed surprise at the narrow scope of the questioning focused on one meeting, according to people with knowledge of the inquiry. The U.K. central bank called for an investigation after a senior trader turned over notes of an April 2012 meeting in which BOE officials were said to have told dealers it wasn’t improper to share impending customer orders with counterparts at other firms, a practice at the heart of a global probe into alleged manipulation. The BOE said at the time its review would be broader than that one meeting and examine whether staff knew of wrongdoing between July 2005 and December 2013.

Anthony Grabiner, the lawyer leading the probe, has questioned at least two traders in recent weeks, according to the people, who asked not to be identified because the matter is private. His questions were largely confined to what they recalled of the April 2012 meeting, they said. The people said the traders agreed to appear voluntarily, thinking they could discuss how they and other dealers operated without risking self-incrimination. Both said they were taken aback at how narrow Grabiner’s questions were and had prepared for a broader discussion of the rigging allegations. Grabiner, 69, didn’t give any indication whether the traders would be called back or who else would be interviewed, they said.

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Word.

‘Default The Only Solution For The Greek Debt Crisis’ (RT)

Default is highly possible in Greece because it is impossible for the country to repay all its debts, Aris Chatzistefanou, “Debtocracy” filmmaker, told RT. The Greek debt crisis erupted in 2009 and the economy is still struggling to generate growth and reduce high levels of unemployment. Long-term unemployment in Greece will reach almost 27% in 2015, according to an OECD report published on Wednesday. Greece has also seen one of the biggest drops in real wages since the beginning of the crisis, the OECD data shows.

RT: Greece’s debt ratio is much higher that before the crisis began. What is the situation in the country at the moment and how do citizens deal with the crisis?

Aris Chatzistefanou: Greece has become the best example of a country that was invaded by financial institutions of the Central European countries mainly Germany and France. And what they managed to do by imposing strict austerity measures for almost five years now was to increase the debt, not only as a%age of GDP but also as an absolute value. So in 2009 we started with a debt of 115% of GDP and right now just a few days ago we learned that our debt had skyrocketed to 175% of GDP. So it was a nightmare for the Greek people who were bailing out banks from France and Germany while at the same time they were the victims of the huge social genocide. Just to let you know, that in that so-called salvation period, we have lost almost 25% of GDP. And if you ask any historian he will tell you that there is no precedent in time of peace that a country can lose 25%. We are now the champions of unemployment with 30% and almost 60% for the younger people. The average family has lost almost 35% of its purchasing power. It is a real nightmare for the people in Greece.

RT: Is there any possibility of default in Greece in the current situation?

AC: It is highly possible because it is impossible for Greece to repay these debts. As long as they talk about haircuts and renegotiating the debt the problem remains, and that might be a cause for a domino effect in the eurozone. In my opinion default at the moment is the only solution for the debt crisis in Greece. We have seen positive examples in other parts of Europe like Iceland, even Russia, or in Latin America with Ecuador and Argentina where even when they had some problems it was a success story in comparison with what happened in Greece.

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G20 Handed Gloomy Jobs Market Report (Guardian)

There is another gloomy assessment of the world’s jobs market On Tuesday. The International Labour Organisation, the World Bank, and the Organisation for Economic Co-operation and Development (OECD) have produced a labour market update for the G20 employment and labour ministers’ meeting in Melbourne. It highlights “large employment gaps remain in most G20 countries”, the grouping of the world’s biggest developed and emerging market economies. The authors also say that “the quality of employment remains a concern” and that “the deep global financial and economic crisis and slow recovery in many G20 countries has resulted not only in higher unemployment but also in slow and fragile wage gains for G20 workers.” The paper concludes: “Seven years after the onset of the global financial and economic crisis, the economic recovery may be strengthening but remains weak and fragile.

The employment challenges across most G20 countries are still very sizeable both in terms of a persistently large jobs gap and low quality of many available jobs. “The current growth trajectory, if unchanged, will not create enough quality jobs – giving rise to the risk that the jobs gap will remain substantial, underemployment and informal employment will rise, and sluggish growth in wages and incomes will continue to place downward pressure on consumption, living standards and global aggregate demand. Underlining these challenges is the fact that income inequality continues to widen across the G20 countries. “The G20 commitment to boost GDP by more than 2% by 2018 over and above the baseline projections is certainly a welcome step, although it will be important to ensure that this additional growth is job-rich and inclusive.”

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Down the Memory Hole (Jim Kunstler)

The memory hole is working overtime in the USA zeitgeist these days. Shit happens and a week or so later, it unhappens — at least it seems that way as manifested by the front page of The New York Times or the flapping of Anderson Cooper’s gums on CNN. Anyone remember that Malaysian airlines plane that went down in July in Ukraine killing 283 persons? US government officials were jumping up and down trying strenuously to blame Russian Donbass separatists. The trouble was, they had no evidence whatsoever and their exertions were looking ridiculous (making the USA look ridiculous, of course). Last thing we heard, there were questions about two Ukrainian air force jets chasing it, and photos of entry and exit cannon holes in the pilot’s cabin. Recorded communications between the crew and traffic controllers were shoved into storage bin in the Netherlands, never to be made public.

The whole story vanished from the news media like the legendary D.B. Cooper — anyone remember him? — and hasn’t resurfaced since. Anyone remember the outbreak of World War Three in Ukraine two weeks ago? The USA was trying — again, strenuously — to promote the idea of a Russian invasion — minus any evidence of the actual Russian troops, you understand. That didn’t go over so well. All this was occurring, remember, because the USA was determined to make Ukraine a NATO member, contrary to explicit agreements reached with Russia following the collapse of the Soviet Union to not expand NATO eastward. Anyway, there was no Russian invasion and the US State Department and the White House were left holding a pig in a poke that nobody wanted to buy. End of story, as Tony Soprano liked to say.

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Australia Gives Up on Australia as Investment Dwindles (Bloomberg)

Australia’s biggest companies are giving up on growth. Investment by businesses in the benchmark stock index will probably slip below rising dividend payouts within two years, according to data compiled by Bloomberg. Wesfarmers Ltd., the country’s biggest private-sector employer with operations spanning retail, mining and manufacturing, returned a record A$2.75 billion ($2.58 billion) to shareholders last year. Reserve Bank of Australia Governor Glenn Stevens, who slashed borrowing costs to a record low, is relying on companies to recover their “animal spirits” and take risks to reignite the economy. Yet firms grappling with an overvalued currency and high costs that leave them unable to compete in export markets are opting to play it safe.

“Only a large real depreciation of the Australian dollar will change this reality,” said Ross Garnaut, a professor of economics at Melbourne University and former economic adviser to Prime Minister Bob Hawke. “Capital spending in the traded goods and services industries is catastrophically weak because few investments look profitable in the current cost and exchange rate environment.” The pattern is repeated across industries, slowing growth in an economy where the unemployment rate exceeded the U.S. level in July for the first time since 2007, and company profits dropped in the second quarter by the most in five years. Australia, which has expanded for 23 years, is losing its developed-world-beating status as the mining investment boom that powered it through the global financial crisis wanes.

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Ongoing story.

Drillers Piling Up More Debt Than Oil Hunting Fortunes in Shale (Bloomberg)

A decade into a shale boom that has made fracking a household word and Wilson a rich man, drillers are propping up the dream of U.S. energy independence with a mountain of debt. As oil production hits a 28-year high, investors and politicians are buying into the vision of a domestic energy renaissance. Companies are paying a steep price for the gains. Like Halcon, most are spending money faster than they make it, an average of $1.17 for every dollar earned in the 12 months ended on June 30. Only seven of the U.S.-listed firms in Bloomberg Intelligence’s E&P index made more money in that time than it cost them to keep drilling. (Results for two companies included only the first six months of 2014.) These companies are plugging cash shortfalls with junk-rated debt. They owed $190.2 billion at the end of June, up from $140.2 billion at the end of 2011. (Six of the 60 companies that didn’t have records available for the full period weren’t included.)

Standard & Poor’s rates the debt of 41 of the companies, including Halcon’s, below investment grade, meaning some pension funds and insurance companies aren’t allowed to invest in them. S&P grades Halcon’s bonds CCC+, which the rating company describes as vulnerable to nonpayment. Money manager Tim Gramatovich sees disaster looming in the industry. “I have lent money to nobody in this space, and I don’t plan to. This thing is absolutely going to blow sky-high,” says Gramatovich, chief investment officer of Peritus Asset Management LLC in Santa Barbara, California. The firm manages investments of about $1 billion, including the debt and equity of oil and gas companies that aren’t drilling shale. Halcon’s recent lousy run shows how quickly a bright future can dim. Like many of its peers, Halcon uses two sets of numbers to describe its outlook. To the U.S. Securities and Exchange Commission, the company reports what’s known as proved reserves.

The SEC requires an annual tally and limits these calculations to what the firm is reasonably certain it can extract from existing wells and other properties scheduled to be drilled within five years, based on factors such as geology, engineering and historical production. To investors and lenders, Halcon also highlights a much higher figure that it calls resource potential. These estimates, while loosely defined by industry guidelines, don’t follow the SEC rule or timeline. In fact, as Halcon notes, the SEC forbids companies from making resource-potential claims in official reserve reports. The agency doesn’t regulate what companies say at investor conferences, in press releases or on their websites. No one does. Discrepancies between proved reserves and resource potential are common in the industry, and investors can get duped, says Ed Hirs, a managing director at Hillhouse Resources. “There’s a lot of ways to make money in the oil and gas business, and not all of them involve drilling for oil,” he says. “You just drill investors’ pocketbooks. When investors are willing to throw money at you, you can just make money on that. It’s a time-honored tradition.”

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Exponentially is not a good word when it comes to epidemics.

Ebola ‘Spreads Exponentially’ In Liberia, 1000s More Cases Expected (Reuters)

Liberia, the country worst hit by West Africa’s Ebola epidemic, should see thousands of new cases in coming weeks as the virus spreads exponentially, the World Health Organization (WHO) said on Monday. The epidemic, the worst since the disease was discovered in 1976, has killed some 2,100 people in Guinea, Sierra Leone, Liberia and Nigeria and has also spread to Senegal. The WHO believes it will take six to nine months to contain and may infect up to 20,000 people. In Liberia, the disease has already killed 1,089 people – more than half of all deaths reported since March in this regional epidemic. “Transmission of the Ebola virus in Liberia is already intense and the number of new cases is increasing exponentially,” the U.N. agency said in a statement. “The number of new cases is moving far faster than the capacity to manage them in Ebola-specific treatment centers.”

Fourteen of Liberia’s 15 counties have reported confirmed cases. As soon as a new Ebola treatment center is opened, it immediately overflows with patients. “In Monrovia, taxis filled with entire families, of whom some members are thought to be infected with the Ebola virus, crisscross the city, searching for a treatment bed. There are none,” it said. In Montserrado County, which includes the capital Monrovia and is home to more than one million people, a WHO investigative team estimated that 1,000 beds are urgently needed for Ebola patients, the statement said. Motorbike-taxis and regular taxis have become “a hot source” of Ebola transmission. Liberia’s government announced on Monday it was extending a nationwide nighttime curfew imposed last month to curb the spread of the disease. Sierra Leone last week ordered a four-day countrywide “lockdown” starting Sept. 18 as part of tougher efforts to halt the spread of Ebola.

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“20% of the world’s unfrozen surface freshwater”

Lake Baikal, World’s Deepest Body Of Freshwater, Turning Into Swamp (RT)

The world’s oldest and deepest body of freshwater, Lake Baikal, is turning into a swamp, Russian ecologists warn. They say that tons of liquid waste from tourist camps and water transport vehicles is being dumped into the UNESCO-protected lake. One of the natural wonders and the pearl of Russia’s Siberia, Lake Baikal has recently been a source of alarming news, due to an increased number of alien water plants which have formed in the lake waterlogging it, ecologists said at a roundtable discussion recently held in the city of Irkutsk. A recent scientific expedition discovered that 160 tons of liquid waste are produced every season in Baikal’s Chivyrkui Bay, said the head of Baikal Environmental Wave, one of Russia’s first environmental NGOs, according to SIA media outlet. Locals have complained to ecologists that the waste easily drains into the lake, SIA reported. The growing number of tourist camps in the area are unwillingly contributing to the pollution.

The report elaborates that the camps pass on waste to special organizations, but disposal vehicles often don’t reach the facilities and instead end up dumping the waste into Baikal or rivers that flow into the lake. The waste dumped into the lake sparked the growth of water plants such as Spirogyra and Elodea Canadensis, which have never grown there before. Researchers found a significant accumulation of water plants and dead lake mollusks on the northern coast of Lake Baikal, according to report. They monitored the coastline from the mouth of the River Tia to Senogda Bay, finding rotting water plants down the coast. An increased level of pollution was also discovered in Listvenichesky Bay.

(Baikal is a rift lake in the south of Siberia which contains roughly 20% of the world’s unfrozen surface freshwater – the greatest in the world by volume. It is 1,642 meters deep and among the clearest of all lakes. At 25 million years old, it is also thought to be the world’s oldest lake. In addition, a large contributing factor to the contamination of the lake is water transport vehicles. Ships, boats, yachts, and other vessels produce 25,000 tons of liquid waste annually, but only 1,600 of them end up at the proper disposal facilities, according to the head of Baikal Environmental Wave.)

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‘Unparalleled acceleration’ …

Greenhouse Gas Levels Rising At Fastest Rate Since 1984 (BBC)

A surge in atmospheric CO2 saw levels of greenhouse gases reach record levels in 2013, according to new figures. Concentrations of carbon dioxide in the atmosphere between 2012 and 2013 grew at their fastest rate since 1984. The World Meteorological Organisation (WMO) says that it highlights the need for a global climate treaty. But the UK’s energy secretary Ed Davey said that any such agreement might not contain legally binding emissions cuts, as has been previously envisaged. The WMO’s annual Greenhouse Gas Bulletin doesn’t measure emissions from power station smokestacks but instead records how much of the warming gases remain in the atmosphere after the complex interactions that take place between the air, the land and the oceans. It could be that the biosphere is at its limit but we cannot tell that at the moment” About half of all emissions are taken up by the seas, trees and living things.

According to the bulletin, the globally averaged amount of carbon dioxide in the atmosphere reached 396 parts per million (ppm) in 2013, an increase of almost 3ppm over the previous year. “The Greenhouse Gas Bulletin shows that, far from falling, the concentration of carbon dioxide in the atmosphere actually increased last year at the fastest rate for nearly 30 years,” said Michel Jarraud, secretary general of the WMO. Atmospheric CO2 is now at 142% of the levels in 1750, before the start of the industrial revolution. However, global average temperatures have not risen in concert with the sustained growth in CO2, leading to many voices claiming that global warming has paused. “The climate system is not linear, it is not straightforward. It is not necessarily reflected in the temperature in the atmosphere, but if you look at the temperature profile in the ocean, the heat is going in the oceans,” said Oksana Tarasova, chief of the atmospheric research division at the WMO.

The bulletin suggests that in 2013, the increase in CO2 was due not only to increased emissions but also to a reduced carbon uptake by the Earth’s biosphere. The scientists at the WMO are puzzled by this development. That last time there was a reduction in the biosphere’s ability to absorb carbon was 1998, when there was extensive burning of biomass worldwide, coupled with El Nino conditions.

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But who cares about birds, right?

Climate Change Puts Half of North American Birds at Extinction Risk (NatGeo)

Climate change could force more than 300 North American bird species out of most of their current ranges by the end of the century, according to a new study from the National Audubon Society. “Half of the birds of North America are at risk of extinction,” says Gary Langham, Audubon’s chief scientist. That estimate is based on the 314 bird species, out of 588 studied, that could lose more than half of their current geographic range. Nearly 200 of these threatened species may find hospitable conditions elsewhere, but for 126 species there will be nowhere else to go, Audubon estimates in a report released on Monday. Scientists have known for some time that species of all kinds will have to move—and in some cases are already moving—to adapt to the changes wrought by a warming planet. “What’s important about this particular study,” says Joshua Lawler, an ecologist at the University of Washington who was not involved in the study, “is that it’s built with a really solid data set.”

Audubon did not examine all of the more than 800 bird species that can be found in North America, but focused on those for which reliable data were available. The new study combines 30 years of citizen science—bird observations across North America in winter and breeding seasons—with projections of future climate to see where suitable ranges might shift for different species. The citizen science comes from Audubon’s own Christmas Bird Count and the U.S. Geological Survey’s North American Breeding Bird Survey; the climate models are from the Intergovernmental Panel on Climate Change. The results are “deeply worrying,” says Stuart Butchart, head of science for BirdLife International. “They add to a body of studies elsewhere in the world showing that climate change is going to have major impacts. Species are going to have to shift their ranges, and many overall are going to suffer range contraction.”

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