Oct 112018
 
 October 11, 2018  Posted by at 1:22 pm Finance Tagged with: , , , , , , , , , , , ,  


Pieter Bruegel the Elder The Triumph of Death 1562

 

Finally financial ‘markets’ go through a substantial dip, which Steve Mnuchin claims is just temporary and Donald Trump says is caused by the fact that the Fed is ‘loco’. Mnuchin may well be right, but it won’t be because he knows something you don’t.

And Trump is certainly right, but in reality the Fed has been loco for many years, so why be surprised if it acts crazy now? The reason Mnuchin and a million other ‘experts’ may be right without realizing it is that the Fed has been crazy enough to kill the financial markets.

Or at least killed what made the markets functional, and beneficial to society. And that may well be exactly what Jay Powell is trying to repair, but he may well not be aware of that either. Looked at from a ‘benign’ angle, Powell is perhaps raising rates so people can regain insight into what they’re buying.

The pre-Powell Fed pushed up asset prices (don’t let’s say ‘values’) to such heights nobody has any insight anymore into what anything is truly worth. And in what was formerly known as the financial markets that was not important, because what were formerly known as investors were making heaps of money regardless.

Surely they must all have known that this wouldn’t continue?! That it’s just a matter of timing, of knowing when it would end? Oh, but that’s not really possible, is it, without the very price discovery process the Fed successfully strangulated?

Still, there must also be tons of people left thinking the Fed can kick that can six times to the moon and back, or sixty. If only because they’ve never bothered to think about price discovery, and what role it plays in the very ‘markets’ they volunteer to spend their money in.

And along those same lines, many acknowledge housing bubbles in Sydney and Vancouver but think the US has learned its lesson a decade ago. And the loco Fed plays its role there too: mortgage rates have been ultra-low, enticing the last left batch of greater fools not mortally wounded by the last fire to jump in this time. Wolf Richter’s Case-Shiller graph says plenty in that regard:

 

 

But of course things tend back to normalcy, and it doesn’t take all the overleveraged stock- and home buyers longing for price discovery; it takes just a few to get the engine started. And then everyone will be along for the ride. So from that angle Jay Powell looks anything but crazy raising rates, we just can’t be sure if he knows what the consequences will be.

Not that it matters all that much what he does or does not know. What was formerly the market is like a pendulum swung so far out of balance that it costs ever more effort and money to keep it from moving towards equilibrium, and that process has only one possible outcome.

For mortgage rates, it looks something like this, and to make anyone able to buy any home at all higher rates will of necessity mean lower prices. You can’t, nobody can, not the Fed or the government can, keep that pendulum away from its tendency towards equilibrium forever.

 

 

For stocks it looks much the same. So why try, you’d think?! To prevent incumbents and ruling classes from being exposed as swimming naked, that’s why. They invented a way to make the entire nation swim naked, thinking they’d never be found out because the water levels were so high.

Whether yesterday’s 831-point Dow dip is temporary or not is of little interest. Much more important is that the entire asset prices situation is temporary. It doesn’t matter if the Fed pumps $1, $10, or $100 trillion into what once were markets, in the end it all comes down to how many people can pay how much money for the assets.

And since there is never an unending supply of greater fools, we know where this is going. The easy money and low rates and asset purchases at central banks and stock buybacks by companies can and will result only in more profits and more wealth for a few, and sheer endlessly less for the many.

Inequality in the US has now reached such extremities that the country’s AAA rating threatens to be taken away –as Moody’s indicated-; the government has so many people it must support financially (or let perish) that its financial position comes under pressure. Which is, again, negative for the many, for the few; they don’t care about that rating.

Yes, too many people are on some form of welfare in America. And Washington would love to throw many of them off of it. The many have no representation on Capitol Hill anymore. Just about any senator and congress(wo)man is a millionaire or certainly well-off.

 

How can the country get its rating back, or at least not lose it due to its increasing inequality? There seem to be two ways: let the 80 million now on welfare die by the side of the road, or provide them with jobs that allow them a fruitful life. That may sound like socialism or something, but it’s really the exact opposite.

It’s not the government’s role to give people jobs, but it is its role to make sure conditions are in place for the private sector to provide them. Trump’s ‘trade wars’ look crazy to many, but the intent is to get jobs back to the US. But there is much more.

America was once prosperous. What changed?

Here’s one thing: In what was -arguably?- America’s wealthiest time as a nation, the post-World War II period, income taxes for the richest were as high as 90% (1952: 92%); they were slowly brought down towards 70%. Only when Ronald Reagan took over in 1980 did they really fall (1982: 50%). This was ‘justified’ by lowering the highest income bracket (1982: $85,600, it had been between $200,000 and $400,000 for years).

In 1988, the top rate plunged to 28%, and the highest bracket to $29,750. Today, the top rate is 39.6% and the high bracket $400,000. In a graph, the consequences look like this:

 

 

The corporate tax rate, meanwhile, pulled this one, and don’t get started on tax havens etc.:

 

 

And that situation has led to a huge financial crisis, to the Fed going crazy and handing out trillions to the exact wrong part of society, those who already have a lot of money, and the result has been an absolute disaster, at least for the country; not so much for its elites.

But as even Moody’s now recognizes, you can’t run an AAA-rated country on elites alone. Despite the crazy Fed trillions, the US has achieved negative growth (imagine where it would be without):

 

 

Something must be done. Problem is, with only those millionaires in charge in the House and Senate, the likelihood of boosting income tax levels up to where they were when America was most prosperous is extremely low. And Trump’s tariffs are not on their own going to bring back the jobs; they can’t rebuild the lost infrastructure, for one thing.

Something must be done, and it’s entirely unclear what, or rather, who’s going to do it. The Democrats have nothing, or nothing but frustrated millionaires and Bernie Sanders. The GOP has only Trump. None of these people are going to vote to double their income taxes.

Much of what needs to be done will be classified as socialism, ridiculed and thrown out the window, even if the country was anything but socialist under Eisenhower and Kennedy, during its -at least economic- Golden Age.

It’s a nice puzzle, isn’t it? Well, maybe not so nice after all.

 

 

Oct 112018
 
 October 11, 2018  Posted by at 9:19 am Finance Tagged with: , , , , , , , , , , , ,  


Pablo Picasso Bather 1908

 

Dow Tumbles 830 Points In One Day, Trump Says The Fed Has ‘Gone Crazy’ (MW)
World Stock Markets Dive As Trump Attacks ‘Crazy’ US Rate Hikes (G.)
Tech Stocks Have Their Worst Day Since August 2011 (CNBC)
“Rising Inequality” Could Impact America’s AAA Credit Rating (SH)
How Will 6% Mortgage Rates Deal with Housing Bubble 2? (WS)
Brexit Deal Within Reach If May Agrees On Customs Union, Says Barnier (G.)
Hysteria Over the Italian Budget Is Wrong-Headed (Costantini)
Trump Campaign Claims Wikileaks Not Liable For Releasing Hacked Emails (G.)
Acropolis To Close In One-Day Strike Over Privatisation Fears (G.)
Trump Will Be The Last ‘Pure Human’ Leader – Scott Adams (Y!)
Judge Moves To Allow Monsanto New Trial After $289m Cancer Verdict (G.)
HSBC Issues Dire Warning On Antibiotics Resistance (BI)
Historic Climate Litigation Result Stands After Dutch Court Victory (CE)

 

 

Low volatility anyone?

Dow Tumbles 830 Points In One Day, Trump Says The Fed Has ‘Gone Crazy’ (MW)

‘I think the Fed is making a mistake. It’s so tight, I think the Fed has gone crazy’. That is the view that President Donald Trump shared of the Federal Reserve on Wednesday in the wake of a virtual bloodbath on Wall Street that resulted in the worst daily decline for the Dow Jones Industrial Average and the S&P 500 since both U.S. equity benchmarks tumbled into correction territory back in early February. The Nasdaq, meanwhile, suffered its ugliest day since U.K. voters coalesced around a market-disrupting plan to exit from the European Union’s trade bloc back in June 2016.

In all, it was a withering session for an administration that has closely watched stock-market performance and views it, at least partly, as a gauge of the success of its economic policies, including corporate tax cuts and deregulation. However, those efforts, Trump says, are imperiled by the policies of the Fed, which has raised interest rates three times this year and has signaled its intention to do so a fourth time before year-end. IMF managing director Christine Lagarde dismissed Trump’s comments Thursday. “I would not associate Jay Powell with craziness,” she told CNBC at the IMF and World Bank annual meetings in Bali, Indonesia.

Read more …

Everything’s going down. ‘Investors’ are jittery.

World Stock Markets Dive As Trump Attacks ‘Crazy’ US Rate Hikes (G.)

A jittery, volatile week on global financial markets has burst into a frenzy of selling, triggered by heavy losses on Wall Street and comments by Donald Trump describing US interest rate hikes as “crazy”. The Nikkei index in Tokyo was down by 4.25% on Thursday afternoon, while in Hong Kong the index was down 3.9% and Shanghai was at its lowest mark for four years after a plunge of 4.15%. In Sydney the benchmark S&P/ASX200 index closed down 2.74%, slipping below the 6,000-point mark for the first time since early June. European markets were braced for more losses with the FTSE100 in London poised to fall almost 2% and close to dropping down below 7,000 points for the first time since March.

The rout was triggered by a fall of more than 800 points in the Dow Jones industrial average on Wall Street on Wednesday. It was the worst drop in eight months and was led by sharp declines in technology stocks. Despite a booming US economy, low inflation and low unemployment, investors are concerned about rising bond yields that have been drawing money out of the stock market, and rising US interest rates. “It’s a bit of a bloodbath,” said Ed Campbell, senior portfolio manager at QMA, the asset management branch of Prudential Financial in New York. “It’s primarily the cumulative effect of interest rate moves over the past five days and news reports about trade impacting companies.”

[..] The Chinese yuan slipped against the dollar again on Thursday as Beijing tries to mitigate the impact of US tariffs. But it was the only currency across the region that was feeling the pressure from higher bond yields as the Australian dollar slipped under US71c. “The yuan has already weakened significantly, to offset the tariffs announced so far,” said Alan Ruskin, Deutsche’s global head of G10 FX strategy in Sydney. “Further weakness could exacerbate concerns of a self-fulfilling flight of capital, and a loss of control.”

Read more …

Most overvalued sinks fastest.

Tech Stocks Have Their Worst Day Since August 2011 (CNBC)

Technology stocks got clobbered on Wednesday, suffering their worst day in more than seven years, as concerns over rising interest rates punished the overall market, particularly shares of companies that have been the best performers. The S&P 500 Information Technology Index closed at $1,220.62, down 4.8 percent, marking the biggest decline since August 18, 2011, when the index dropped 5.3 percent. All 65 members of the index fell. The broader S&P 500 dropped by 3.3 percent and the Dow Jones Industrial Average tumbled 3.2 percent. The tech sector includes the largest companies by market cap in the U.S. and those that have been the biggest contributors to the extended rally. Shares of Apple, Microsoft and Amazon are up sharply for the year as investors bet they will continue to deliver strong earnings growth and take market share.

Read more …

“The wider the income gap becomes, the more the government will have to spend in order to support lower-income households.”

“Rising Inequality” Could Impact America’s AAA Credit Rating (SH)

“Since 1995, the top 10% of US income earners have experienced an overall median net worth increase of close to 200%, while the bottom 40% of income earners have seen a decline. There has been a particularly sharp increase in wealth and income inequality ratios since the global financial crisis,” Moody’s noted in a report released on Monday. “The global financial crisis exacerbated the effects of these trends by disproportionately affecting poorer overleveraged households and by reducing the mobility of households with negative home equity and, oftentimes, negative net wealth as a result,” says Moody’s Vice President William Foster. “Wealthier households with a higher concentration of equity market holdings in retirement savings plans and personal portfolio investments have disproportionately benefited from the significant gains in the US and global stock markets since the global financial crisis.”

In turn, that rising inequality “will exacerbate already material fiscal challenges on the horizon,” Moody’s continued. “Should inequality go unaddressed, social tensions will continue to rise, leading to a more fractious political landscape that increases political risk, and with it a less predictable policy environment.” But it’s not just about taxes, either. Everything from globalization, automation, technological advancements requiring advanced job skills, elevated premium on education and the increasing costs associated with education have played a role in widening inequality. So what does it mean for the U.S.’ AAA rating? According to Moody’s Vice President William Foster, the widening gap between rich and poor is a threat, but the U.S. government, of course, has other aspects supporting the rating—at least in the medium term (2-5 years). Chief among them is the debt denominated in dollars.

Still, Moody’s cites rising inequality as the U.S.’ weakest rating factor. Why? It’s simple math: The wider the income gap becomes, the more the government will have to spend in order to support lower-income households. These costs, Moody’s notes, “are unlikely to be offset by revenue raising measures following recent tax cuts”. At the end of the day, even though the economy is chugging along nicely—nicely enough, in fact, for everyone to ignore rising inequality that will contribute to widening fiscal deficits and a growing debt burden.

Read more …

Timebomb.

How Will 6% Mortgage Rates Deal with Housing Bubble 2? (WS)

What many in 2016 thought would never happen again is now reality. It finally happened – a line in the sand has been breached. The average interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) and a 20% down-payment did what people had thought in 2016 we’d never see again: It breached 5%. It hit 5.05%, to be precise, for the week ending October 5, according to the Mortgage Bankers Association (MBA) this morning. This is the highest average rate since January 5, 2010 (chart via Investing.com):

This is likely not the pain-threshold for the housing market, though it is already putting pressure on it at the margin, with some potential buyers being scared off and other potential buyers finding the inflated home prices of today with the current mortgage rates outside their range of affordability. As interest rates have risen, some potential buyers have fallen by the wayside – though not a huge number just yet. But 6% will likely be the pain threshold, in my estimates. It will block a considerable number of potential buyers from buying at current prices. Home prices would have to fall first.

If the maximum a household can afford is a mortgage payment of $1,720 a month, they can finance $320,000 over 30 years with a 5% fixed rate mortgage. But if the mortgage rate rises to 6%, they’re maxed out at $287,000. In other words, the price they can afford would drop by about 10% if the rate rises by 1 percentage point. This principle goes for all budget-constrained buyers. And 6% has moved into view. This is still historically low. It would take rates back to December 2008, when the Fed was kicking off its first round of QE to repress long-term rates and inflate asset prices. Beyond that are the now unimaginably high rates of 7% and 8%:

Mortgage rates move more or less in tandem with the 10-year Treasury yield, but are higher. The spread between the MBA’s average 30-year fixed mortgage rate and the 10-year yield runs around 1.5 to 2.0 percentage points over time. With today’s 10-year yield at 3.22%, the spread is 1.83 percentage points.

[..] This new mortgage rate environment is meeting home prices across the US that have surged over the past years. Affordability issues, already tough to deal with at 4% and 4.5% and even tougher to deal with at 5%, are going to be much tougher at 6%.

Read more …

Barnier knows that the DUP and hardliners won’t accept.

Brexit Deal Within Reach If May Agrees On Customs Union, Says Barnier (G.)

Michel Barnier has claimed a Brexit deal could be within reach by next Wednesday but warned the prime minister that only by abandoning a key red line and agreeing to a customs union can impediments on trade between Northern Ireland and the rest of the UK be avoided. The British government would have to give up on its plans for free-trade deals with China and the US under such an agreement, the EU’s chief negotiator insisted, but otherwise a customs and regulatory border within the territory of the UK will have to be erected.

The EU’s contentious proposal for avoiding a hard border on the island of Ireland after Brexit is for Northern Ireland to, in effect, stay in the customs union and remain under single market regulations, while the rest of the UK withdraws. In a speech in Brussels, Barnier reiterated his rejection of the counter-proposals hammered out by the cabinet at Chequers, which Theresa May insists is the only deal that respects both the referendum result and the constitutional integrity of the UK by ensuring “frictionless” trade and no hard border.

The prime minister’s plan for a common rulebook on goods and a customs arrangement that meant the UK could avoid border checks, while allowing the country to sign its own bespoke trade deals, would give British companies “a huge competitive edge” and be “counter to our very foundations”, Barnier said. He instead encouraged Britain to make a final push in the talks, offering to launch “around 10 negotiations running in parallel” from April 2019 on an EU-UK trade deal, if agreement can be found now on the Irish border issue and the principles of a Canada-style free trade deal.

Read more …

Why the EU-Italy feud will be fierce.

Hysteria Over the Italian Budget Is Wrong-Headed (Costantini)

Even the moderate face of the coalition, the Italian Premier Giuseppe Conte, stepped up to question the priorities of the European Commission, the Bank of Italy, and the IMF: He assured that his government remains committed to containing the public debt and maintaining fiscal stability, but claimed that goal is impossible to achieve without economic development. The minister for European affairs, economist Paolo Savona, said that, in fact, a higher deficit-to-GDP ratio than 2.4% would be helpful. The heated reactions to the new fiscal plan are unjustified. In fact, the estimated targets that the new fiscal plan would (minimally) breach are unreliable and based on wrong macroeconomic principles.

Moreover, despite accusations of profligacy, Italy has in fact been running large primary surpluses (the budget balance minus interest payments), and will keep doing so even if the government confirms its plans. If anything should be of “serious concern,” it is the fact that the country continues down the road of austerity, which has proven to be contractionary; it has locked the country into stagnation and exposed its banking system to still more stress. With public investments at historically low levels, unemployment still above the 2008 rate in all regions, and a youth unemployment rate above 30%, it is hard not to see a strong case for fiscal stimulus.

Read more …

It’s all about Russiagate and Mueller’s indictment of ‘Russian hackers’. All nonsense. Free Assange and let him provide the evidence.

Trump Campaign Claims Wikileaks Not Liable For Releasing Hacked Emails (G.)

The Trump campaign argued in a legal filing that Wikileaks could not be held liable for publishing emails that were stolen by Russian hackers ahead of the 2016 US election because the website was simply serving as a passive publishing platform on behalf of a third party, in the same way as Google or Facebook. Questions about Wikileaks’ publication of thousands of hacked emails, which it allegedly obtained following a plot by Russian military intelligence to steal the emails from Hillary Clinton’s presidential campaign and the Democratic party, are at the heart of Robert Mueller’s criminal investigation into possible collusion between the Trump campaign and the Kremlin.

The campaign also said in a legal filing that any alleged agreement between the Trump campaign and Wikileaks to publish the emails could not have been a “conspiracy” because Wikileaks’ decision to release the stolen emails was not an illegal act. The court filing was written in response to a civil lawsuit brought against the Trump campaign by two of Hillary Clinton’s donors and a former employee of the Democratic party. The Trump campaign’s surprising defence of Wikileaks marks a stark departure from official US policy, which has condemned the website for frequently targeting the US government and for publishing thousands of classified documents about covert policies.

[..] Analysts say the legal filing is also significant because it hints at how officials in the Trump White House or individuals who served on the campaign may eventually seek to defend themselves against any criminal charges alleging that they conspired with Wikileaks to release the emails. The legal arguments suggest the Trump White House would argue Wikileaks was not criminally liable for the release of the emails and that it therefore would not be a criminal conspiracy to work with the website on their release. The filing also makes the case that, under the campaign’s first amendment right to free speech, it had the right to publish information – even if it was stolen – as long as it did not participate in the theft of the emails. The hacked materials were a matter of “significant public concern”, the filing said.

Read more …

They need to move well beyond one day to get attention. And whoever signed those secret deals (Tsipras, Troika!) needs their day in court.

Acropolis To Close In One-Day Strike Over Privatisation Fears (G.)

Striking trade unionists in Greece are forcing the shutdown of the country’s prime ancient sites, including the Acropolis, in a one-day protest over privatisation fears. The 24-hour walkout on Thursday is expected to close the majority of Greece’s 275 archaeological sites, monuments and museums, which generate about €100m in revenue, mostly from ticket sales, every year. “We are doing this to protest the prospect of any of these sites being exploited by foreign funds,” said Grigoris Vafiadis, the head of the association of culture ministry employees. “Every day we are discovering that monuments have been transferred to the privatisation fund set up at the request of [bailout] lenders. No country in the world, for whatever reason, has mortgaged its cultural heritage.”

The sites, which protestors say include Knossos on Crete, are believed to have been placed on a list of properties overseen by a superfund established in 2016 with the express purpose of managing state assets for the next 99 years. The body, which also handles state asset sales, was part of the price the debt-burdened country had to pay to keep default at bay and remain in the eurozone. Vafiadis, whose union represents more than 3,000 cultural ministry officials, mostly in the Greater Attica region surrounding Athens and central Greece, said sites were listed in the superfund by code. “It’s a long process to work out what the codes refer to on the land registry. For all we know, they might even include the Acropolis which is not just Greek but a world heritage site and should never be put in the hands of any foreign fund,” he said.

Read more …

Interesting assessment.

Trump Will Be The Last ‘Pure Human’ Leader – Scott Adams (Y!)

Scott Adams, the creator of the office-themed comic strip “Dilbert,” isn’t laughing about the future of American democracy. Having expressed his admiration for Donald Trump over the past few years, Adams believes the tech industry poses a threat to the president as well as to the country as a whole. “I think President Trump will be the last pure human leader,” Adams told Grant Burningham, host of the Yahoo News podcast “Bots & Ballots.” “Everything after this will be a human and he will be elected, he or she, but the decisions will really come from the algorithm after that.”

The algorithm, Adams said, was the one unleashed on the world by Silicon Valley tech companies that has the power to shape popular opinion that, in turn, will determine how politicians express themselves. “There are people making decisions at the tech companies — the Googles and Twitters and Facebooks. Those decisions get turned into algorithms, and once they’re turned into algorithms, the humans no longer really understand them,” Adams said. Adams has likened Trump’s off-the-cuff communications approach in the 2016 presidential election to a form of hypnosis that helped insulate him from the powers of the algorithm.

“President Trump is unique in that his persuasion skills are greater than the tech companies’. It’s probably the only reason he got elected,” Adams said. “I can imagine no one else who would have beat Hillary Clinton. So, after him, I think if you get in an ordinary politician, and it doesn’t matter which party they’re in, the algorithm will push the voters and the voters will push the politicians and everybody will think they have free will, they will think they made up their own minds. They will think they did their own research, they came up with independent decisions, but we’re no longer in that world.”

Read more …

Monsanto will appeal until the next century.

Judge Moves To Allow Monsanto New Trial After $289m Cancer Verdict (G.)

A California judge has moved to grant the agrochemical company Monsanto a new trial after a landmark jury verdict found its herbicide had caused a man’s terminal cancer. Dewayne “Lee” Johnson, a 46-year-old former groundskeeper, won a $289m award in August in a trial alleging that the popular Roundup weedkiller had made him sick and that Monsanto had failed to warn him of the risks. Monsanto, now owned by Bayer, the German pharmaceutical company, immediately appealed the verdict, which included punitive damages and economic losses and also found that Monsanto had “acted with malice or oppression”.

The San Francisco superior court judge Suzanne Bolanos cited the “insufficiency of the evidence to justify the award for punitive damages” in a tentative written ruling issued before a hearing on Wednesday. She is expected to make a final decision after attorneys submit additional arguments. Monsanto sought to overturn the verdict and has continued to argue that it is safe to use glyphosate, the world’s most widely used herbicide. Glyphosate-based products, including the Roundup and Ranger Pro brands, are now worth billions of dollars in revenues, approved for use on more than 100 crops, and registered in 130 countries. Timothy Litzenburg, one of the attorneys who represented Johnson in the trial, told the Guardian that regardless of the outcome, the original ruling would still have a long-term impact: “There’s been a loud and clear message.”

Read more …

Precautionary principle? Not for Monsanto, not for Big Pharma.

HSBC Issues Dire Warning On Antibiotics Resistance (BI)

According to the global research team at HSBC, the use of antibiotics in meat production could have “devastating” consequences for humanity. When farmers feed antibiotics to their animals, they create antibiotic-resistant bacteria, which can lead to antibiotic-resistant “superbugs” in humans. Over time, this could make it difficult to treat even common infections like strep throat. The report’s authors liken the impact of antibiotic resistance to climate change: The causation may not be immediately clear, but the evidence suggests a catastrophic future. Scientific experts now predict that antibiotic resistance could lead to 10 million deaths annually by 2050, exceeding cancer as one of the most common forms of death worldwide.

While some of this is related to the overprescribing of antibiotics by doctors, it also has to do with the antibiotics that are fed to key sources of produce, such as chickens, cows, and pigs. According to the report, more than half of global antibiotics are used in agriculture rather than medicine. Although China accounts for 60% of the world’s agricultural antibiotics, the US also uses antibiotics in around 70% of its agricultural products. Most of these antibiotics are used in meat production, which has risen by 90% per capita globally since the 1960s. In June, an analysis of more than 47,000 US government lab tests found an increase in the number of pork chops and ground beef that were contaminated with antibiotic-resistant bacteria.

Read more …

Court decides because of “a violation of the European Convention on Human Rights”. If that is true in Holland, it will also be in 26 other countries. Moreover, as Elliot Sherber said in his article in yesterday’s Debt Rattle:

“According to the legal maxim that “the health of the people should be the supreme law” (another type of emergency brake – one cited by jurists, and those contesting coercive power, since antiquity), there is a legal duty to pursue this as well (for, among other things, human health is contingent on the health of its general environment – and freedom from oppression). Indeed, if we are to take this maxim seriously, we must recognize that it implies that conditions that are inimical to health (harmful to the health of the people) must be corrected in order to comply with the “supreme law.”

Historic Climate Litigation Result Stands After Dutch Court Victory (CE)

Climate litigators are celebrating after a second landmark court victory that will hold the Netherlands government to account for greater action on climate change. The Hague Court of Appeal has upheld a historic win for the Urgenda Foundation on behalf of 886 Dutch citizens in their climate case, rejecting the Dutch government’s arguments. A day after the UN IPCC report outlined the urgent climate action needed to restrict global warming to 1.5 degrees, the Dutch court today affirmed that any less than a 25% reduction in carbon emissions by the Netherlands government before 2020 would be a violation of the European Convention on Human Rights. Dutch emissions are currently only 13% lower compared to 1990 levels and have stagnated during the last six years.

The original legal victory by Urgenda inspired a wave of climate lawsuits worldwide, brought by people determined to hold their governments accountable for a lack of climate action. ClientEarth CEO James Thornton said: “Today’s news shows just what a powerful tool climate litigation has become in holding decision-makers to account for their climate inaction. “For a second time now, a Dutch court has ruled that the country’s government has a constitutional duty to protect its citizens from the impacts of climate change and that anything less is a violation of their human rights. “This second victory shows that Dutch judges have been clear about what the government must do now: accept both decisions and refocus its efforts on reducing its carbon emissions by 25% by 2020.

“This is the climate case that started it all, inspiring similar lawsuits worldwide. It has completely changed the debate on climate policy and will inspire people everywhere to use the power of the courts to hold their leaders to account for greater action on climate change.”

Read more …

Sep 092018
 
 September 9, 2018  Posted by at 9:36 am Finance Tagged with: , , , , , , , , , , ,  


Vincent van Gogh A Restaurant at Asnieres 1887

 

The ‘Most Striking Development’ In 40 Years Of The US Economy (BI)
This Insider Betrayal Is A Sorry Precedent (Observer ed.)
Argentina, Turkey, Mexico … Fear Of Contagion Haunts Emerging Markets (G.)
No-Deal Brexit Could Lead To “Military On The Streets” (Ind.)
Brexit Talks At Risk Of Collapse (Ind.)
Bombshell Poll Reveals Heavy Union Backing For Second Brexit Vote (G.)
YouGov Poll Shows Support For A People’s Brexit Vote Is Solid (G.)
Fresh From End Of Bailout, Greek PM Announces Tax Breaks (R.)
Protect Assange From US Extradition, Amnesty International Tells UK (RT)
The Latest Incarnation of Capitalism (Jacobin)
What’s The Biggest Influence On The Way We Think? (G.)

 

 

This is going spectacularly wrong. Somone better stop it.

The ‘Most Striking Development’ In 40 Years Of The US Economy (BI)

French economist Thomas Piketty is one of the world’s leading researchers of global income and wealth inequality, and became well-known in the United States when the English translation of his book “Capital in the 21st Century” became a surprise bestseller. For the past year, Piketty has been speaking about the 2018 World Inequality Report, published by the Paris School of Economics’ World Inequality Lab last December. Piketty coauthored the report alongside Facundo Alvaredo, Lucas Chancel, Emmanuel Saez, and Gabriel Zucman. In his talks in the US, Piketty has paid special attention to the following chart, which shows what he and his coauthors called “perhaps the most striking development in the United States economy over the last four decades.”

The authors write that “the incomes of the top 1% collectively made up 11% of national income in 1980, but now constitute above 20% of national income, while the 20% of US national income that was attributable to the bottom 50% in 1980 has fallen to just 12% today.” Further, “while average pre-tax income for the bottom 50% has stagnated at around $16,000 since 1980, the top 1% has experienced 300% growth in their incomes to approximately $1,340,000 in 2014. This has increased the average earnings differential between the top 1% and the bottom 50% from 27 times in 1980 to 81 times today.”

Read more …

The Guardian/Observer, leading anti-Trump voice, has a piece ‘Unfit for President, but…” Look, just like the NYT, you no longer are a voice, because you’ve spent two years 24/7 denouncing the man with rumors and half-truths -like you did with Corbyn being anti-semite. You can’t now turn around and be a voice for democracy. You’re done.

This Insider Betrayal Is A Sorry Precedent (Observer ed.)

[..] the president’s discomfort, and his detractors’ glee, should not obscure more serious issues raised by this affair and by similarly critical revelations contained in a new exposé by the celebrated Watergate reporter Bob Woodward. Whatever one’s opinion of Trump, it is a matter of concern that unelected, unnamed officials are apparently willing and able to act in ways contrary to an elected president’s stated wishes and calculated to thwart his policies. Trump’s worst instincts must undoubtedly be resisted, as Barack Obama, rejoining the fight last week, has declared. The best way to achieve that, as ever in a democracy, is through public scrutiny and open debate. Every leader needs candid advisers.

But who are these self-described “adults in the room” to clandestinely decide what is in the best interests of the country? Their motives may be sound, but their illicit actions, boasted of publicly, set a worrisome precedent. They have also gifted Trump a golden opportunity to peddle his favourite narrative of an establishment conspiring against him, aided and abetted by media organisations – which he terms “enemies of the people”. Speaking in Montana on Thursday, he seized his chance. “Unelected, deep state operatives who defy the voters to push their own secret agendas are truly a threat to democracy itself,” he declared.

The anonymous writer tried to provide reassurance that things in the White House are not as bad as they seem. Woodward’s new book, Fear, suggests the exact opposite: they are worse. It describes a “Crazytown” of tantrums, endless crises, serial lying, unhinged behaviour, and an administration in a recurring state of nervous breakdown.

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It’s not so much dominoes falling one by one, it’s the USD that crashes down everything.

Argentina, Turkey, Mexico … Fear Of Contagion Haunts Emerging Markets (G.)

In the past six months, some of the world’s fastest-growing economies have found themselves flat on the floor, gasping for breath and, in one case, seeking help from the global financial rescue centre otherwise known as the IMF. Argentina’s $50bn bailout by the Washington-based lender of last resort is the most extreme event so far, but it sits alongside the dramatic collapse of the Turkish lira, a recession in South Africa and dire economic predictions for the Philippines, Indonesia and Mexico. Making matters worse, the US is poised to slap tariffs as high as 25% on as much as $200bn worth of Chinese goods. If the US goes ahead, Beijing has already threatened to retaliate, which would only incense President Donald Trump further.

This tit-for-tat might only end when tariffs are applied to the entire $500bn of Chinese goods imported by America each year. In response, the stock markets of many developing nations have slumped in value, leaving investors to ask themselves whether they are witnessing an emerging-markets meltdown akin to the Asian crisis of 1997: a panic that wrecked the finances of several hedge funds and proved to be an hors d’oeuvre before the dotcom crash of 1999 and the global financial crisis of 2008. Investors have run for safety to such an extent that the MSCI Emerging Markets index, which measures the value of shares in emerging economies, has tumbled by more than 20% since the beginning of the year.

That slump appeared to be over in July, when Turkey and Argentina were seen as being isolated, and more importantly ringfenced, economic trouble spots. But figures last week showing that the US economy is steaming along like a runaway train – underlining the likelihood of more US interest rate rises – have sent the currencies and stock markets of most emerging-market economies tumbling again. Lukman Otunuga, research analyst at currency dealer FXTM, says that a sense of doom is lingering in the financial markets as fears of contagion from the “brutal emerging-market sell-off” rattle investor confidence. “More pain seems to be ahead for emerging markets as the combination of global trade tensions, prospects of higher US interest rates and overall market uncertainty haunt investor attraction,” he says.

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Now we’re talking.

No-Deal Brexit Could Lead To “Military On The Streets” (Ind.)

A no-deal Brexit could lead to the “real possibility” of police calling upon the military to help with civil disorder, a leaked document claims. Contingency plans are being drawn up by police chiefs if there is chaos on the streets due to shortages of goods, food and medicine, The document prepared by the National Police Co-ordination Centre (NPoCC) warns of traffic queues at ports with “unprecedented and overwhelming” disruption to the road network. Concerns around medical supplies could “feed civil disorder”, while a rise in the price of goods could also lead to “widespread protest”, the document obtained by the Sunday Times said.

The potential for a restricted supply of goods raised concerns of “widespread protest which could then escalate into disorder”. It could also trigger a rise in non-Brexit-related acquisitive crime such as theft. The document, set to be considered by the National Police Chiefs’ Council (NPCC) later this month, also sets out concerns of increased data costs, loss of warrant cards and queues at ports and docks around the country. Shadow police minister Louise Haigh lashed out at the Government’s handling of the situation. “This is the nightmare scenario long feared; according to the UK’s most senior police officers a no-deal Brexit could leave Britain on the brink,” she said.

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May keeps pushing the same button after it’s failed 1000 times. The EU won’t give.

Brexit Talks At Risk Of Collapse (Ind.)

Brexit talks are at risk of collapse as a planned EU compromise on the critical question of the Irish border has been branded “unacceptable” by British cabinet ministers. The Independent has learnt that EU officials believe they have struck upon “the only way” to bring the two sides together on the Irish border in a bid to secure a withdrawal agreement later this year. But their proposal has already been outright rejected by at least two cabinet ministers, with one going further and branding the EU’s suggestion “bollocks”. The impasse over the Irish border threatens to bring the talks crashing down with Theresa May’s beleaguered Chequers proposal already lacking support both in Europe and among her own MPs in Westminster.

The Independent now understands that the EU will try to break the deadlock in negotiations by offering the UK a vague political declaration on the future UK-EU relationship in return for a deal on the Irish border. A well-placed Brussels source said: “This may well prove the only way to respect the EU’s red lines and allow Theresa May to win approval for a deal in the UK parliament. “The political declaration holds the key to reaching a deal.” Since the start of Brexit talks Brussels has insisted the UK sign up to a legally binding “backstop”, which would come into play if no arrangement to avoid a hard border in Northern Ireland is found before Brexit day. It would see Northern Ireland effectively remain in the EU’s customs union and single market, creating a customs border down the Irish sea – something both Ms May and her DUP partners say is unacceptable.

[..] The strength of opposition indicates Ms May could face a further round of cabinet resignations if she were to consider agreeing to such a proposal, with Boris Johnson and David Davis having already quit earlier this year. A government spokesman said: “We don’t comment on speculation. The proposals we have put forward for our future relationship would allow both sides to meet our commitments to the people of Northern Ireland in full and we are working hard to get a deal on that basis. “But we are clear the EU backstop proposals are unacceptable.”

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The Tories are thinking: we got rid of unions, didn’t we?

Bombshell Poll Reveals Heavy Union Backing For Second Brexit Vote (G.)

Members of Britain’s three biggest trade unions now support a new referendum on Brexit by a margin of more than two to one, according to a bombshell poll that will cause political shockwaves on the eve of the party conference season. The survey of more than 2,700 members of Unite, Unison and the GMB by YouGov, for the People’s Vote campaign, also finds that a clear majority of members of the three unions now back staying in the EU, believing Brexit will be bad for jobs and living standards. The poll comes as union delegates gather in Manchester for the annual TUC conference, where Brexit will be debated on Monday, and two weeks before the Labour party conference in Liverpool, where delegates are expected to debate and vote on Brexit policy. They will also consider calls to keep open the option of a fresh referendum on any deal Theresa May may strike on the UK’s exit from the EU.

In an interview with the Observer before the poll findings were released, shadow chancellor John McDonnell said his preferred option was still for voters to be offered a say on the government’s handling of Brexit – and any deal brought back from Brussels by May – in a general election. But he said that if Labour was unable to force one in the coming months, he wanted to “keep all options open”, including supporting a new referendum. McDonnell said he was sure there would be a full debate, and votes, on Brexit at the Labour conference. And he went out of his way to praise the People’s Vote campaign, which he said had been very “constructive” and had made clear that its attempts to influence Labour policy should not be seen “as an attack on Jeremy Corbyn or positioning around the leadership. It should be a constructive debate and that is right.”

The poll found that members of Unite, the country’s biggest union, and Labour’s largest financial backer, now support a referendum on the final Brexit deal by 59% to 33% and support staying in the EU by 61% to 35%. GMB’s members support putting the issue back to the people by 56% to 33% and its members want the UK to stay in the EU by 55% to 37%. Unison members back another referendum by 66% to 22% and would opt to stay in the EU by 61% to 35%.

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That second vote will come, or else…

YouGov Poll Shows Support For A People’s Brexit Vote Is Solid (G.)

Thirty years ago this week, Jacques Delors came to Bournemouth to urge Britain’s trade unions to change their stance on Europe. The president of the European commission told TUC delegates that the EU was good for workers’ jobs, workers’ rights and workers’ living standards. It was a decisive moment in the union movement’s relationship with Brussels. This week could be equally decisive for the TUC – perhaps even more so – given the precarious balance of forces at Westminster. And the clear message from YouGov’s poll of more than 2,700 members of the TUC’s three biggest unions is that most trade union members think Brexit is bad for jobs; they want a fresh public vote and the chance to keep the UK in the EU.

Can we be sure that YouGov’s figures are right? Do the people it polled accurately reflect the views of all the members of the three big unions? I recall the same questions being asked when YouGov first showed Jeremy Corbyn well ahead in the race for the Labour leadership three years ago. Nonsense, said the critics. YouGov’s respondents, they claimed, were hopelessly biased towards leftwing activists. When it came to it, Corbyn won by almost precisely the majority reported in the final poll. And the methods YouGov used in the latest union survey are essentially the same as it used in Labour’s leadership election three years ago.

It’s not that trade union members are indulging in gesture politics or ideological breast-beating. They are worried about the impact of Brexit on jobs, taxes, living standards and the NHS. They fear a Brexit Britain would find it harder to sell products and services abroad. Their attitudes to immigration are especially significant. In the 2016 referendum, one of the arguments for Brexit was that immigrant workers were undercutting the pay of low-paid British workers. Brexit, so the argument ran, would allow Britain to stop this. As a result, there would be more, and better-paid, jobs for British workers.

Many Unite, Unison and GMB members earn below-average wages. They might be expected to support that part of the Brexit agenda. They don’t. Overwhelming majorities, ranging from 74% to 85%, want EU citizens either to have complete freedom of movement to come to the UK, or the freedom to settle here if they have a job or university place lined up.

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Tsipras is trying to create the impression that he decides and is bold. He has no say at all.

Fresh From End Of Bailout, Greek PM Announces Tax Breaks (R.)

Greek Prime Minister Alexis Tsipras on Saturday unveiled plans for tax cuts and pledged spending to heal years of painful austerity, less than a month after Greece emerged from a bailout program financed by its EU partners and the IMF. Tsipras, who faces elections in about a year’s time, used a keynote policy speech in the northern city of Thessaloniki to announce a spending spree that he said would help fix the ills of years of belt-tightening, and help boost growth. But he said Athens was also committed to sticking to the fiscal targets and reforms promised to its lenders. Greece has agreed to maintain an annual primary budget surplus – which excludes debt servicing costs – of 3.5 percent of GDP up to 2022.

So far, it has outperformed on fiscal goals and the economy has returned to growth. “We will not allow Greece to revert to the era of deficits and fiscal derailment,” he told an audience of officials, diplomats and businessmen. He said would beat its primary surplus target again this year and, following a debt relief deal in June, he could “safely plan its post-bailout future”. Government officials have put this year’s fiscal room at 800 million euros. Tsipras promised a phased reduction of corporate tax to 25 percent from 29 percent from next year, as well as an average 30 percent reduction in a deeply unpopular annual property tax on homeowners, rising to 50 percent for low earners.

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Amnesty’s Aussie branch. Timing?!

Protect Assange From US Extradition, Amnesty International Tells UK (RT)

Amnesty International has backed calls to not extradite WikiLeaks founder Julian Assange to the United States, arguing that this would put his human rights at serious risk of abuse. The statement, issued Friday by the group’s Australian branch, backed Assange’s lawyers and supporters’ claim that if he is sent to the US, “he would face a real risk of serious human rights violations due to his work with WikiLeaks.” Amnesty said that Assange could face several human rights violations in the event that he is extradited to the US, including: violation of his right to freedom of expression; right to liberty; right to life if the death penalty were sought; and being held in conditions that would violate his right to humane treatment.

While Amnesty said it took “no position” on Ecuador’s decision to grant, and then withdraw, Assange’s diplomatic asylum, it did call on the UK government to recognize the “need for international protection vis-a-vis the USA” in relation to the whistleblower’s case. Amnesty has joined several other humanitarian organizations by backing Assange and denouncing any extradition attempt. These include the UN Human Rights office, Human Rights Watch, and the Inter-American Court of Human Rights.

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How cheap money saved and doomed the world at the same time.

The Latest Incarnation of Capitalism (Jacobin)

Financialization — “the increasing importance of financial markets, financial motives, financial institutions, and financial elites in the operation of the economy” — is a process that began in the 1980s with the removal of barriers to capital mobility. Global capital flows rose from about 5 percent of world GDP in the mid-1990s to about 20 percent in 2007. This is about three times faster than world trade flows. Increases in capital mobility helped facilitate the emergence of large imbalances between creditor countries with large current account surpluses and debtors with large current account deficits. According to textbook economic theory, these imbalances should be self-correcting.

When a country runs a deficit, currency is flowing out of the country. If this currency does not return in the form of capital inflows, the resulting increase in supply will exert downward pressure on the currency. A less valuable currency makes your exports cheaper to international consumers and should therefore increase demand for those exports. Played out over the scale of the global economy, this should lead to equilibrium. In the lead-up to the crisis, the fact that this equilibrium was not forthcoming puzzled some economists. Deficit countries should have been experiencing large currency depreciations, given the size of their current account deficits. These depreciations should, in turn, then have increased the competitiveness of their goods.

Ben Bernanke, then chairman of the Fed, accused a number of emerging economies of “hoarding” savings to protect themselves from future crises, preventing the global economy from reaching equilibrium. In fact, deficit countries were able to maintain strong currencies because, even though there was relatively little demand for their goods, there was strong demand for their assets — particularly financial assets. The main reason for the high demand for UK and US assets was the financial deregulation undertaken by neoliberal governments in these states in the 1980s, which facilitated a dramatic expansion in the provision of private credit to individuals, businesses, and financial institutions.

In the UK, consumer debt — primarily composed of mortgage lending — reached 148 percent of household disposable incomes in 2008, the highest it has ever been. While UK banks’ lending to the non-financial economy rose 50 percent between 2005-8, their lending to other financial institutions rose by 260 percent. Capital from the rest of the world flowed into banks in the UK and the US, which were generating significant returns from this lending.

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Google shapes are thought and we have no idea.

What’s The Biggest Influence On The Way We Think? (G.)

Google search is in a different league from earlier tools, and so the consequences of being dependent on it are more serious and far-reaching – for two inter-related reasons. The first is that it can influence what you think you know and shape the way you think because it knows more about you than you realise. And secondly, it’s not a passive tool that you own and control, but the property of a huge corporation that has acquired strange – and in some ways unprecedented – powers. Ten years ago, Nicholas Carr published a striking article – “Is Google Making Us Stupid?” – in the Atlantic. The title was misleading because the thrust of the piece was actually about how the internet might be messing with our brains, and in that sense Carr was using Google as a proxy for the technology in general.

Which is a pity because there are plenty of important questions to be asked about Google’s impact on the way we think. Its search results, for example, are heavily influenced by how many websites it finds that are supposedly relevant to a query. Sometimes, that’s fine. But sometimes it’s toxic – yet many people think it provides the “truth”. And because people’s search queries can sometimes be very revealing, the company knows more about people’s innermost secrets, fears and fantasies than even their friends or partners. We ask Google questions that we would not breathe to any living soul.

So Google, as philosopher Benjamin Curtis points out, is anything but a passive cognitive tool. Its current offerings, boosted by machine learning algorithms, are increasingly suggestive. Its Maps not only provide navigational help but give us “personalised location suggestions that it thinks will interest us”. Gmail makes helpful suggestions about what to type in a reply and Google News highlights stories that it believes we will find interesting. “All of this,” says Curtis, “removes the very need to think and make decisions for ourselves.” It “fills gaps in our cognitive processes, and so fills gaps in our minds”.

In two short decades, therefore, Google has gone from being a geeky delight to something that influences the way we think. All of which brings to mind something that John Culkin, a buddy of Marshall McLuhan, said many years ago: “We shape our tools and then our tools shape us.” Amen to that. And you can Google him to check the quote.

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May 042018
 
 May 4, 2018  Posted by at 8:32 am Finance Tagged with: , , , , , , , , , , , , , ,  


Herri met de Bles c1510-after 1555 Saint Jerome medidating

 

Fed’s QE Unwind Accelerates Sharply (WS)
The Root of It All (Batnick)
Tesla Is A Zombie Company (F.)
With No Letup In Home Prices, The California Exodus Surges (MW)
Demand For US Soybeans Remains Strong Despite China (CNBC)
US Charges VW Ex-CEO With Conspiracy And Fraud (G.)
Mueller’s Questions for Trump Show Folly of Special-Counsel Appointments (NR)
Why We Need To Be Propagandized For Our Own Good (CJ)
Neocons Form Brand New Russia-Bashing ‘Think’ Tank (RI)
UK Pushes To Strengthen Anti-Russia Alliance (G.)
Nobel Prize For Literature Postponed Amid Swedish Academy Turmoil (BBC)
Jacinda Ardern Pledges Shelter For All Homeless People Within Four Weeks (G.)

 

 

As most voices seem convinced QT would be madness.

Fed’s QE Unwind Accelerates Sharply (WS)

The QE Unwind is ramping up toward cruising speed. The Fed’s balance sheet for the week ending May 2, released this afternoon, shows a total drop of $104 billion since the beginning of the QE Unwind in October – to the lowest level since June 11, 2014. During the years and iterations of QE, the Fed acquired $3.4 trillion in Treasury securities and mortgage-backed securities. The mortgages underlying those MBS are guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. The “balance sheet normalization,” as the Fed calls it, was nudged into motion last October. But the pace accelerates every quarter until it reaches up to $50 billion a month in Q4 this year.

This would trim the balance sheet by up to $420 billion this year, and by up to $600 billion in 2019 and every year going forward, until the Fed considers the balance sheet to be adequately “normalized” — or until something big breaks, whichever comes first. [..] The balance of Treasury securities fell by $17.6 billion in April. This is up 60% from March, when $11 billion “rolled off.” Since the beginning of the QE-Unwind, $70 billion in Treasuries “rolled off.” Now at $2,395 billion, the balance of Treasuries has hit the lowest level since June 18, 2014.

[..] Residential MBS are different from regular bonds. Holders receive principal payments on a regular basis as the underlying mortgages are paid down or are paid off. At maturity, the remaining principal is paid off. Over the years, to keep the MBS balance from declining, the New York Fed’s Open Market Operations (OMO) has been continually buying MBS. But settlement of those trades occurs two to three months later. The Fed books the trades on an as-settled basis. The time lag between the trade and settlement causes the large weekly fluctuations on the Fed’s balance sheet. And it also delays when MBS that “rolled off” actually disappear from the balance sheet.

[..] Total assets on the Fed’s balance sheet dropped by $30 billion in April, and by $104 billion since the beginning of the QE-Unwind, to $4,356 billion. This is the lowest since June 11, 2014. Note that total assets are now down by $160 billion from the peak in January 2015:

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“The poor stay poor, the rich get rich. That’s how it goes. Everybody knows.”

The Root of It All (Batnick)

Steven Pinker wrote, “In almost every year from 1992 through 2015, an era in which the rate of violent crime plummeted, a majority of Americans told pollsters that crime was rising. In late 2015, large majorities in eleven developed countries said that “the world is getting worse.” But crime isn’t rising, and the world is objectively getting better. And while life is improving at the macro level, at the micro level, people aren’t feeling so great. So what gives? We tend to expect the worst as a way to insulate ourselves from disappointment. Life is not about good or bad, it’s about better or worse, so if things don’t turn out as bad as we imagine, we’re pleasantly surprised. If you were asked to think about how your life could improve, a few things might come to mind.

But imagine how your life could get worse, and a barrage of negative possibilities fills your brain. The risk and reward of every day life is asymmetrical. This is why being a pessimist feels safe and being an optimist feels reckless. [..] While the news certainly isn’t doing anyone any favors, there are legitimate reasons why people don’t feel like things are getting better. For too many, they aren’t. The chart below shows the change in real income since 1980. This chart is the root of all the negative things facing our society. People in the top 20% saw their income increase by 60%. People in the bottom 20% saw their income rise by just 5% over the same time. As Leonard Cohen said, “The poor stay poor, the rich get rich. That’s how it goes. Everybody knows.”

Real income increased 38% from 1980-2016, or just 0.87% per year, and 70% of that increase went to people in the top 20%. Things are better, especially around the world, but in our country, way too many people are getting left behind. Extreme poverty is collapsing, but relative poverty is exploding, and everything in life is relative. If things don’t feel better than they were two hundred years ago, it’s because people compare themselves to their neighbors, not to their ancestors.

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As simple as that.

Tesla Is A Zombie Company (F.)

Tesla’s quarter was terrible from a financial perspective, as I had expected. The controlling figure I use, operating cash flow (operating loss plus depreciation minus capital expenditures,) was reported as -$836 million in the quarter, which very nearly approximates one quarter of 2017’s full year cash outflow of $3.4 billion. Things are not improving at Tesla from a financial perspective, and the second quarter is likely to be just as bad as the first. For the third consecutive quarter, Tesla posted negative EBITDA (-$180 million) and if this were any other company, there would be an active death watch on the Street. Tesla’s bonds have dropped sharply in today’s trading, now quoted at 87 cents on the dollar.

This is not surprising given that Tesla is not even remotely close to earning enough profit to cover its interest expense, which management estimated would be $160 million in the second quarter. Tesla added $346 million to its now $10 billion debt pile in the quarter, and the management’s weasel-worded projection of “positive net income excluding non-cash stock based compensation in Q3 and Q4” would still leave Tesla short of covering its debt service costs, by my calculations. So, from a financial perspective, Tesla is a zombie company. There is simply no justification for Tesla’s current market capitalization of $47.2 billion, and the market eventually figures these things out. It’s actually been a slow burn for Tesla shares, not a plummet, but that can be just as painful.

On September 12, 2014, Teslashares closed at $279.20 and the Nasdaq Composite closed at 4567.60. As of this writing, Tesla is trading at $279.04 and the Nasdaq is trading at 7011.00. So that’s where the value destruction Musk has wrought is evident. His shares are down slightly in a period in which his peer companies have collectively risen 53.5%.

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Housing bubbles break communities.

With No Letup In Home Prices, The California Exodus Surges (MW)

Over a million more people moved out of California from 2006 to 2016 than moved in, according to a new report, due mainly to the high cost of housing that hits lower-income people the hardest. “A strong economy can also be dysfunctional,” noted the report, a project of Next 10 and Beacon Economics. Housing costs are much higher in California than in other states, yet wages for workers in the lower income brackets aren’t. And the state attracts more highly-educated high-earners who can afford pricey homes. There are many reasons for the housing crunch, but the lack of new construction may be the most significant.

According to the report, from 2008 to 2017, an average of 24.7 new housing permits were filed for every 100 new residents in California. That’s well below the national average of 43.1 permits per 100 people. If this trend persists, the researchers argued, analysts forecast the state will be about 3 million homes short by 2025. California homeowners spend an average of 21.9% of their income on housing costs, the 49th worst in the nation, while renters spend 32.8%, the 48th worst. The median rent statewide in 2016 was $1,375, which is 40.2% higher than the national average. And the median home price was — wait for it — more than double that of the national average.

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Globally, supple has a hard time keeping up with demand. Everybody involved knows this.

Demand For US Soybeans Remains Strong Despite China (CNBC)

Demand for U.S. soybeans remains strong, regardless of worries China could target the crop in retaliation over Trump administration tariffs. China has canceled several shipments of U.S. soybeans in the last month, raising questions over whether the country is taking preemptive action against the U.S. by reducing purchases. But analysts say the reduction is a minor amount and is not that surprising from a seasonal perspective. The “U.S. accounts for 37 percent of total soybean exports throughout the world. Beyond Brazil, there’s really nobody else,” said Rich Nelson, director of research at Allendale, an agricultural market research and trading firm. “Despite the trade concerns, there’s really nobody else. You’re just simply not going to have a massive decline in U.S. soybean exports,” he said.

Chinese cancellations of U.S. soybean orders for the week ended April 26 resulted in a decline of 133,700 metric tons in net sales to China, USDA Foreign Agricultural Service data showed Thursday. But 66,000 metric tons of those soybeans were sent to Vietnam instead, the data showed. Meanwhile, the U.S. sold 82,700 metric tons of soybeans in new sales to Mexico, 68,800 to Taiwan, 60,000 to Argentina and 52,600 to the Netherlands. Although Argentina is the third-largest exporter of soybeans, a severe drought has reduced production by 7 million tons to 40 million, according to USDA estimates. “That just goes to show we’re not dependent on China for soybean exports,” said Michael Stumo, head of Coalition for a Prosperous America, a nonprofit representing the interests of those in manufacturing, agriculture and labor unions.

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Germany doesn’t extradite its citizens.

US Charges VW Ex-CEO With Conspiracy And Fraud (G.)

US authorities have charged Volkswagen’s former chief executive officer Martin Winterkorn with conspiracy and wire fraud in relation to the car company’s efforts to cheat on US diesel emissions tests. Winterkorn, who resigned in 2015 as the scandal was revealed, conspired to defraud the US and violate the Clean Air Act, federal laws designed to control air pollution, according to an indictment unsealed on Thursday in a Michigan federal court. Five other VW executives were also charged in the indictment. He becomes the highest-ranking executive to be charged over “dieselgate” – a scheme where VW used software to trick government emissions testers.

“The indictment unsealed today alleges that Volkswagen’s scheme to cheat its legal requirements went all the way to the top of the company,” said US attorney general Jeff Sessions. “These are serious allegations and we’ll prosecute this case to the full extent of the law.” When news of the scheme broke Winterkorn said he was “stunned that misconduct on such a scale was possible in the Volkswagen Group”. He denied any knowledge of the scandal – which was used to evade pollution limits on nearly 600,000 diesel vehicles. Last December, Oliver Schmidt, a senior Volkswagen executive, was jailed for seven years and fined $400,000 for his part in the scheme. Schmidt, who had returned to Germany, was arrested while on holiday in Florida. VW pleaded guilty as a corporation in March, agreeing to pay a record $4.3bn in fines.

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“If Bob Mueller wants that kind of control over the executive branch, he should run for president. Otherwise, he is an inferior executive official who has been given a limited license — ultimately, by the chief executive — to investigate crime. If he doesn’t have an obvious crime, he has no business inventing one, much less probing his superior’s judgment. He should stand down.”

Mueller’s Questions for Trump Show Folly of Special-Counsel Appointments (NR)

I am assuming the authenticity of the questions that Special Counsel Robert Mueller reportedly wants to ask President Trump. The questions indicate that, after a year of his own investigation and two years of FBI investigation, the prosecutor lacks evidence of a crime. Yet he seeks to probe the chief executive’s motives and thought processes regarding exercises of presidential power that were lawful, regardless of one’s view of their wisdom. If Bob Mueller wants that kind of control over the executive branch, he should run for president. Otherwise, he is an inferior executive official who has been given a limited license — ultimately, by the chief executive — to investigate crime. If he doesn’t have an obvious crime, he has no business inventing one, much less probing his superior’s judgment. He should stand down.

The questions, reported by the New York Times, underscore that the special counsel is a pernicious institution. Trump should decline the interview. More to the point, the Justice Department should not permit Mueller to seek to interrogate the president on so paltry and presumptuous a showing.

When should a president be subject to criminal investigation? It is a bedrock principle that no one is above the law. The Framers made clear that this includes the president. But, like everything else, bedrock principles do not exist in a vacuum. They vie with other principles. Two competing considerations are especially significant here. First, our law-enforcement system is based on prosecutorial discretion. Under this principle, the desirability of prosecuting even a palpable violation of law must be balanced against other societal needs and desires. We trust prosecutors to perform this cost-benefit analysis with modesty about their mission and sensitivity to the disruption their investigations cause.

Second, the president is the most essential official in the world’s most consequential government. That government’s effectiveness is necessarily compromised if the president is under the cloud of an investigation. Not only are the president’s personal credibility and capability diminished; such an investigation discourages talented people from serving in an administration, further undermining good governance. The country is inexorably harmed because a suspect administration’s capacity to execute the laws and pursue the interests of the United States is undermined.

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Caitlin Johnstone on the Atlantic Council.

Why We Need To Be Propagandized For Our Own Good (CJ)

I sometimes try to get establishment loyalists to explain to me exactly why we’re all meant to be terrified of this “Russian propaganda” thing they keep carrying on about. What is the threat, specifically? That it makes the public less willing to go to war with Russia and its allies? That it makes us less trusting of lying, torturing, coup-staging intelligence agencies? Does accidentally catching a glimpse of that green RT logo turn you to stone like Medusa, or melt your face like in Raiders of the Lost Ark? “Well, it makes us lose trust in our institutions,” is the most common reply. Okay. So? Where’s the threat there? We know for a fact that we’ve been lied to by those institutions. Iraq isn’t just something we imagined. We should be skeptical of claims made by western governments, intelligence agencies and mass media. How specifically is that skepticism dangerous?

Trying to get answers to such questions from rank-and-file empire loyalists is like pulling teeth, and they are equally lacking in the mass media who are constantly sounding the alarm about Russian propaganda. All I see are stories about Russia funding environmentalists (the horror!), giving a voice to civil rights activists (oh noes!), and retweeting articles supportive of Jeremy Corbyn (think of the children!). At its very most dramatic, this horrifying, dangerous epidemic of Russian propaganda is telling westerners to be skeptical of what they’re being told about the Skripal poisoning and the alleged Douma gas attack, both of which do happen to have some very significant causes for skepticism.

When you try to get down to the brass tacks of the actual argument being made and demand specific details about the specific threats we’re meant to be worried about, there aren’t any to be found. Nobody’s been able to tell me what specifically is so dangerous about westerners being exposed to the Russian side of international debates, or of Russians giving a platform to one or both sides of an American domestic debate. Even if every single one of the allegations about Russian bots and disinformation are true (and they aren’t), where is the actual clear and present danger? No one can say. No one, that is, except the Atlantic Council.

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The entire MSM can’t get the job done?!

Neocons Form Brand New Russia-Bashing ‘Think’ Tank (RI)

A group of neocon heartthrobs have banded together with an eclectic array of Russiagaters to form a visionary organization committed to protecting Western democracy. You can also pre-order their book, according to their website. Chaired by pompous chess wizard turned Kremlinologist Garry Kasparov, the brand-new Renew Democracy Initiative (RDI) is the latest three-letter-initialism non-profit devoted to “the defense of democratic freedom and prosperity.” The trailblazing think tank has already sent shockwaves through Washington, DC and every European capital. Celebrated war cheerleader Max Boot, who serves on RDI’s board of directors, announced the creation of this highly original organization in a Washington Post op-ed.

Interestingly, the unveiling started with a laundry list of 10 other groups that are already “protesting Trump and championing democracy.” So why does the world need RDI, then? Because RDI is different – some might even say “special.” Unlike the dozens of other well-financed bastions of status-quo thinking, RDI aims to “unite both the center-left and center-right” by promoting “liberty, democracy and sanity in an age of discord.” And where will this much-needed sanity come from? From RDI’s all-star team of important intellectuals and free thinkers, of course – some of whom just happen to be really tight with the other 10 groups mentioned in Boot’s WaPo piece. Dear Mr. Boot: does fighting Putin with the Committee to Investigate Russia allow enough spare time to fight Putin with the Renew Democracy Initiative? Curious minds want to know.

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It’s contagious.

UK Pushes To Strengthen Anti-Russia Alliance (G.)

The UK will use a series of international summits this year to call for a comprehensive strategy to combat Russian disinformation and urge a rethink over traditional diplomatic dialogue with Moscow, following the Kremlin’s aggressive campaign of denials over the use of chemical weapons in the UK and Syria. British diplomats plan to use four major summits this year – the G7, the G20, Nato and the European Union – to try to deepen the alliance against Russia hastily built by the Foreign Office after the poisoning of the former Russian double agent Sergei Skripal in Salisbury in March. “The foreign secretary regards Russia’s response to Douma and Salisbury as a turning point and thinks there is international support to do more,” a Whitehall official said.

“The areas the UK are most likely to pursue are countering Russian disinformation and finding a mechanism to enforce accountability for the use of chemical weapons.” Former Foreign Office officials admit that an institutional reluctance to call out Russia once permeated British diplomatic thinking, but say that after the poisoning of Skripal and his daughter, Yulia, that attitude is evaporating. A cross-party alliance in parliament has developed which sees the question of Russian corruption no longer through the prism of finance, but instead as a security and foreign policy threat, requiring fresh sanctions even if this causes short-term economic damage to the UK.

[..] For some old hands in the Foreign Office with deep experience of Russia, however, demonising Russia is a disastrous strategy. Sir Anthony Brenton, the British ambassador to Russia between 2004 and 2008, insists a fruitful common agenda with Moscow on issues such as nuclear disarmament, Islamist terrorism and cyberwarfare is still possible. “What on earth was her majesty’s foreign secretary doing comparing the Russian World Cup with Hitler’s 1936 Olympics?” he asked. “If you are looking for a single statement really calculated to infuriate the Russians there it is, or indeed the defence secretary telling Russia to shut up. Elementary diplomacy goes a long way with the Russians and we need to get back to that.

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Still feels like a weird story.

Nobel Prize For Literature Postponed Amid Swedish Academy Turmoil (BBC)

The organisation that decides the Nobel Prize for Literature has said it will not announce an award this year, after it was engulfed in a scandal over sexual assault allegations. The Swedish Academy has been in crisis over its handling of allegations against the husband of a member. She has since quit, as have the academy’s head and four other members. The academy says it will now announce the 2018 winner along with the 2019 winner next year.

The scandal is the biggest to hit the prize since it was first awarded in 1901. The academy said the decision had been made due to a lack of public confidence. Some academy members had argued that the prize should proceed to protect the tradition, but others said the institution was in no state to present the award. Apart from six years during the world wars, there has been only one year when the prize was not awarded. No worthy winner was found in 1935.

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You go girl. The only right thing to do.

Jacinda Ardern Pledges Shelter For All Homeless People Within Four Weeks (G.)

The New Zealand government has promised to get the country’s homeless population off the streets and into shelter in time for winter. In a joint announcement on Friday, housing minister Phil Twyford and prime minister Jacinda Ardern announced a NZ$100m emergency housing package to tackle the ballooning problem. An estimated 40,000 people live in cars, tents and garages amid a chronic housing shortage in the nation of 4.7 million people. “We’re pulling out all the stops to support people in need and urgently increase housing supply this winter,” said housing minister Phil Twyford. “Our government will make sure everyone is helped to find warm, dry housing this winter.”

With winter starting on 1 June in the southern hemisphere, less than four weeks away, the government has put out an urgent call for anyone with additional accommodation that may be suitable to house homeless people. Seasonal worker accommodation such as shearers quarters, private rental properties, motor camps and maraes (Maori meeting houses) would all be considered. New Zealand has the highest rates of homelessness in the OECD, with more than 40,000 people living on the streets, in emergency housing or in substandard conditions. Per capita New Zealand’s homeless population is almost twice as bad as Australia, which is placed third on the list. More than half of New Zealand’s homeless population live in Auckland but it is also growing in smaller cities such as Rotorua, Tauranga, Queenstown and Wellington.

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Dec 172017
 
 December 17, 2017  Posted by at 10:31 am Finance Tagged with: , , , , , , , ,  


Russell Lee Shasta Dam under construction. Shasta County, California 1942

 

Zombie Corporations: 10% Of Global Companies Depend On Cheap Money (Mish)
America’s Inequality Machine Is Sending the Dow Soaring (BBG)
“Dark Money” Runs the World (Nomi Prins)
‘There’s No Life Here’: A Journey Into Britain’s Precarious Future (O.)
Brexit: Britons Now Back Remain Over Leave By 10 Points (Ind.)
Call Off Brexit Bullies Or Face Defeat, Conservative Peers Tell May (G.)
Metlife Says It Failed To Pay Some Pensions, Flags Hit To Reserves (R.)
EU Banks Told to Get Crisis-Ready by Removing Wind-Down Hurdles (BBG)
Humans At Maximum Limits For Height, Lifespan And Physical Performance (SD)

 

 

Only 10? You sure?

Zombie Corporations: 10% Of Global Companies Depend On Cheap Money (Mish)

10% of corporations survive only because central banks have kept real interest rates negative. The BIS defines Zombie firms as those with a ratio of earnings before interest and taxes to interest expenses below one, with the firm aged 10 years or more. In simple terms, Zombies are those firms that could not survive without a flow of cheap financing. The chart shows the median share of zombie firms across AU, BE, CA, CH, DE, DK, ES, FR, GB, IT, JP, NL, SE and US. According to the BIS Quarterly Report one out of ten corporations in emerging and advanced countries is a “Zombie”. Let’s dive into the report for more details.

The inability to come to grips with the financial cycle has been a key reason for the unsatisfactory performance of the global economy and limited room for policy manoeuvre. Since 2007, productivity growth has slowed in both advanced economies and EMEs. One potential factor behind this decline is a persistent misallocation of capital and labour, as reflected by the growing share of unprofitable firms. Indeed, the share of zombie firms – whose interest expenses exceed earnings before interest and taxes – has increased significantly despite unusually low levels of interest rates. Over the past 10 years, there has been a close positive correlation between the growth of corporate credit and investment.

A build-up of corporate debt has financed investment in many economies, particularly in EMEs, including high investment rates in China. Turning financial cycles in these economies could therefore weigh on investment. As with consumption, the level of debt can affect investment. Rising interest rates would push up debt service burdens in countries with high corporate debt. Moreover, in EMEs with large shares of such debt in foreign currency, domestic currency depreciation could hurt investment. As mentioned before, an appreciation of funding currencies, mainly the US dollar, increases debt burdens where currency mismatches are present and tightens financial conditions (the exchange rate risktaking channel).

Empirical evidence suggests that a depreciation of EME currencies against the US dollar dampens investment significantly, offsetting to a large extent the positive impact of higher net exports. For the above reasons, I believe the end of the global recovery is at hand. And when the next bust happens, the last thing central banks will be doing is raising interest rates.

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How to define the Fed.

America’s Inequality Machine Is Sending the Dow Soaring (BBG)

The Great Recession is a speck in the rear-view mirror for America’s financial markets. They’ve advanced far beyond pre-crisis levels. In fact, Goldman Sachs says you can go back a century before 2008, and still not find a “bull market in everything” like today’s. If the real economy had roared back the same way, Donald Trump might not be president. Instead, it’s been a grind. While unemployment is near a two-decade low, wages have grown slowly by past standards. They’re nowhere near keeping pace with the asset-price surge. Elected on a promise of better jobs and pay, Trump is about to pull the most powerful lever any government has for firing up the economy: fiscal policy. By slashing taxes on corporate profits, its authors say, the Republican plan will unleash the animal spirits of American business – and everyone will benefit.

A rising tide does lift all boats – but nowadays, in the U.S., not equally. Under both parties, recoveries have become increasingly lopsided. The current one has helped millions of people find work; it’s also benefited asset-owners far more than people who trade their labor for a paycheck. Income distribution, already the most unequal in the developed world, is getting worse. And that’s starting to influence everything from America’s spending habits to its elections. “The story of our time is polarization – by party, by class and by income,” said Mark Spindel, founder and chief investment officer at Potomac River Capital in Washington, and co-author of a 2017 book about the Federal Reserve. “I don’t see anything in the tax bill to make that any better.’’

The Fed’s post-2008 toolkit included massive purchases of financial assets, which supported a liftoff on the markets but took time to trickle through to the real economy. Trump’s tax critics say his plan will have a similar effect, because companies will spend the windfall on share buybacks or dividends, instead of job-creating investments. Plenty of executives say that’s exactly what they’ll do. Bank of America’s most recent buyback program totals $18 billion. Chairman Brian Moynihan championed the tax proposal this month. “It’s good for corporate America, and it’s good for us,” he said.

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Same thing: inequality machine.

“Dark Money” Runs the World (Nomi Prins)

Dark money is the #1 secret life force of today’s rigged financial markets. It drives whole markets up and down. It’s the reason for today’s financial bubbles. On Wall Street, knowledge of and access to dark money means trillions of dollars per year flowing in and around global stock, bond and derivatives markets. I learned this firsthand from my career on Wall Street. My first full year working on Wall Street was in 1987. I wasn’t talking about “dark money” or central bank collusion back then. I was just starting out. Eventually, I would uncover how the dark money system works… how it has corrupted our financial system… and encouraged greed to the point of crisis like in 2008. When I moved abroad to create and run the analytics department at Bear Stearns London as senior managing director, I got my first look at how dark money flows and its effects cross borders.

The “dark money” comes from central banks. In essence, central banks “print” money or electronically fabricate money by buying bonds or stocks. They use other tools like adjusting interest rate policy and currency agreements with other central banks to pump liquidity into the financial system. That dark money goes to the biggest private banks and financial institutions first. From there, it spreads out in seemingly infinite directions affecting different financial assets in different ways. Yet these dark money flows stretch around the world according to a pattern of power, influence and, of course, wealth for select groups. To be a part of the dark money elite means to have control over many. How elite is a matter of degree. These is not built upon conspiracy theories. To the contrary, alliances make perfect sense and operate publicly.

Even better, their exclusive dealings and the consequences that follow are foreseeable — but only if you understand how the system works and follow the dark money flows. It’s easy to see how this dark money affects the stock market at a high level, because we can monitor its constant movement. Here’s the smoking gun:

The red line shows you how much “dark money” the Federal Reserve has printed since 2008. The gray line shows you the S&P 500. They move together — more dark money drives the market higher. Much higher. There are dark money charts from around the world, just like the one I showed you for the Federal Reserve and U.S. stock market. Look at this “dark money” chart from Japan, for example:

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Time for a change.

‘There’s No Life Here’: A Journey Into Britain’s Precarious Future (O.)

Ebbw Vale is the largest town in the county of Blaenau Gwent. This autumn the county was found to be the cheapest place to buy a home in England and Wales (averaging £777 per sq m in 2016, compared with £19,439 for the most expensive, London’s Kensington and Chelsea). It offers the second-lowest mean salary in Britain, and its GCSE results are the worst in Wales. Five food banks operate within an area of about 42 square miles. People here are struggling economically and physically. It’s a grim irony that an area encompassing the former constituency of Aneurin Bevan, architect of the National Health Service, should today be facing a quietly unfolding health crisis. Some 12% of working-age residents receive government support for disability or incapacity – twice the national average.

Life expectancy for both men and women is among the lowest in England and Wales. Out of a population of 60,000, one in every six adults is being prescribed an antidepressant, according to NHS data from 2013. “GPs haven’t got time to listen, to talk to people, to find out what’s going on. They’ve got that five- or 10-minute slot, somebody’s in tears, they’re saying they’re depressed,” Tara Johnstone tells me at the Phoenix Project, the publicly funded drop-in centre where she works in nearby Brynmawr. It’s run by a local charity, Torfaen and Blaenau Gwent Mind, and people come to chat about their problems: anxiety, depression, illness, bereavement. Most stories revolve around the same theme. “It’s lack of work,” explains Trish Richards, another Phoenix staff member. “I’ve had people come to me on zero-hours contracts. They don’t know where they are from one week to the next. Can’t plan. Can’t even plan to go to the dentist in case they get called in to work.”

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The shift is only just starting. Incompetence will rule 2018 in Britain.

Brexit: Britons Now Back Remain Over Leave By 10 Points (Ind.)

The British public has swung behind staying in the EU by its largest margin since the referendum, with those backing Remain outstripping Leavers by ten points, a new poll has revealed. The exclusive survey for The Independent by BMG Research showed 51% now back remaining in the union, while 41% want Brexit. Once “don’t knows” were encouraged to choose one way or the other, or excluded, the Remain lead rises to 11 points. Either way, it is the biggest gap since the June 2016 vote. It comes as leading political figures write in The Independent tomorrow about whether the country needs a further referendum to decide on Brexit, once terms of departure are known.

Michael Heseltine, Peter Mandelson, Gina Miller and Vince Cable call for a rethink, while Leave campaign mastermind Matthew Elliott and Conservatives James Cleverly and Suella Fernandes demand Brexit is seen through. Last week again underlined the difficulties of withdrawal, after the EU set out terms for a Brexit transition period that will likely be unacceptable to leading Conservative Eurosceptics. Theresa May also suffered a damaging defeat in the Commons while trying to pass her key piece of Brexit legislation, before being forced to make a major concession to avoid further embarrassment next week. Amid the furore, the latest poll indicates British voters have slowly but steadily been turning their backs on Brexit.

When a weighted sample of some 1,400 people were asked: “Should the United Kingdom remain a member of the European Union, or leave the European Union?” – 51% backed Remain, and 41% backed Leave. 7% said “don’t know” and 1% refused to answer. After “don’t knows” were either pushed for an answer or otherwise excluded, 55.5% backed Remain and 44.5 backed Leave. Polling since this time last year appears to demonstrate a clear trend; Leave enjoyed a lead last December which gradually shrank, before turning into a lead for Remain in the month of the general election, that has since grown.

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Pretty soon the only thing left will be dividing lines.

Call Off Brexit Bullies Or Face Defeat, Conservative Peers Tell May (G.)

Theresa May was warned on Sunday by Tory peers that she will face a string of parliamentary defeats over Europe in the House of Lords if she tries to “bully” members of the second chamber into backing an extreme form of Brexit. After 11 Conservative MPs joined opposition parties to inflict a humiliating loss on the government last week, Tory grandees are warning that the spirit of rebellion will spread to the Lords unless May shows she respects parliament and decisively rejects those with “extreme views” in her own party. Writing in the Observer, two Tory peers, the former pensions minister Ros Altmann and Patience Wheatcroft, a former editor of the Sunday Telegraph, say they are appalled at the insults heaped by hardline Brexiters on MPs who voted with their consciences, and at the “strong-arm” tactics of the Tory whips.

They say it is vital to democracy that parliamentarians be given the right to assess the Brexit deal on behalf of the British people without being threatened or bullied, and suggest that the aggression of Tory party managers has helped create a “toxic atmosphere”, not only in parliament but across the UK. Altmann and Wheatcroft write: “The resulting appalling insults from Brexiters, calls for expulsion from the party, and even death threats, are worrying symptoms of the toxic atmosphere which has been created in our country.” They add: “There are many moderate Conservatives in both Houses of Parliament who are deeply concerned that some in our party are so desperate to leave the EU, with or without a deal, that they believe any cost is justified to bring Brexit. They maintain ‘freedom is priceless’ but this extreme view does not reflect public opinion.”

The two peers say Conservative members of the House of Lords, in which there was a large pro-Remain majority, will not take kindly to being told by the Tory whips and the executive what to think about Brexit and how to vote. “Mindful of the monumental importance for future generations of getting Brexit right, the Lords is unlikely to be receptive to bullying over a restricted timetable or vigorous whipping to toe the party line,” they say. “The people voted to ‘take back control’ but that has to mean control by parliament, not a small group with extreme views or an executive that will brook no challenge. It is parliament that must have the final say on whether the deal that is negotiated for breaking away from the EU … is in the UK’s best interests.”

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The shape of things to come.

Metlife Says It Failed To Pay Some Pensions, Flags Hit To Reserves (R.)

Metlife failed to pay pensions to potentially tens of thousands of people and will have to strengthen its reserves because of the costs of finding and repaying them, the New York insurer said. Metlife said in a filing on Friday that it believed the group missing out on the payments represented less than 5 percent of about 600,000 people who receive benefits from the company via its retirement business. Those affected generally have average benefits of less than $150 a month, it said. When taken, however, the increase to reserves could be material to Metlife’s financial results. The insurer said it would provide further disclosure on its fourth-quarter earnings call and in its annual report for 2017. MetLife did not say how many years of missing income was owed. The people who missed out on the payments have changed jobs, relocated or are otherwise unreachable based on currently available information, the company said, adding that it was widening its search efforts and making better use of technology.

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Are we really to believe Europe will stand up against its most powerful banks?

EU Banks Told to Get Crisis-Ready by Removing Wind-Down Hurdles (BBG)

Big euro-area lenders face a choice; clean up the complicated corporate structures that make them difficult to wind down in a crisis, or watch Elke Koenig do it for them. Koenig, head of the Brussels-based Single Resolution Board, said in an interview that streamlining banks’ architecture and ensuring they can fund their own demise without taxpayers’ help will be priorities in the year ahead. “You have banks where you end with something that looks more like a spider web than a clean structure,” Koenig said. The message that those banks will receive is: “Please tidy up,” she said. The SRB is part of the EU’s efforts to end the problem of too-big-to-fail banks. In 2018, it will adopt resolution plans for nearly all of the 140-odd lenders within its remit, then start to identify “substantive impediments” to orderly wind-down.

Under EU law, when the SRB finds such obstacles, it sends a report to the bank, which must respond within four months on how it plans to fix the problem. If the SRB isn’t satisfied, it can instruct the supervisor to impose a range of measures on the bank, including issuing loss-absorbing liabilities, altering its legal or operational structures and selling assets. This task assumed greater importance earlier this year when the the European Commission withdrew a bill that could have forced major banks such as Deutsche Bank and BNP Paribas to split their trading and retail operations. Finance Watch, a public-interest watchdog, has said that without that bill, it’s “squarely” on authorities like the SRB to make sure systemically important banks can be wound down in an orderly manner.

Koenig accepts that the SRB is responsible for making sure banks have resolvable structures. “That’s clearly on us,” she said. “And it’s something that needs to be addressed swiftly.” “The ideal structure for me is one where you can with confidence isolate certain functions to keep them up and running in case something unforeseen happens,” Koenig said. “I would not try to differentiate between investment banking functions and retail banking functions, but think about it this way: If you need to separate businesses, are you producing a viable set of companies? Can you really separate them in a timely manner?”

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But we were going to implant robots into ourselves… When will we learn that it’s the limits that set us free?

Humans At Maximum Limits For Height, Lifespan And Physical Performance (SD)

Humans may have reached their maximum limits for height, lifespan and physical performance. A recent review suggests humans have biological limitations, and that anthropogenic impacts on the environment – including climate change – could have a deleterious effect on these limits. Published in Frontiers in Physiology, this review is the first of its kind spanning 120 years worth of historical information, while considering the effects of both genetic and environmental parameters. Despite stories that with each generation we will live longer and longer, this review suggests there may be a maximum threshold to our biological limits that we cannot exceed. A transdisciplinary research team from across France studied trends emerging from historical records, concluding that there appears to be a plateau in the maximum biological limits for humans’ height, age and physical abilities.

“These traits no longer increase, despite further continuous nutritional, medical, and scientific progress. This suggests that modern societies have allowed our species to reach its limits. We are the first generation to become aware of this” explains Professor Jean-François Toussaint from Paris Descartes University, France. Rather than continually improving, we will see a shift in the proportion of the population reaching the previously recorded maximum limits. Examples of the effects of these plateaus will be evidenced with increasingly less sport records being broken and more people reaching but not exceeding the present highest life expectancy. However, when researchers considered how environmental and genetic limitations combined may affect the ability for us to reach these upper limits, our effect on the environment was found to play a key role.

“This will be one of the biggest challenges of this century as the added pressure from anthropogenic activities will be responsible for damaging effects on human health and the environment.” Prof. Toussaint predicts. “The current declines in human capacities we can see today are a sign that environmental changes, including climate, are already contributing to the increasing constraints we now have to consider.” “Observing decreasing tendencies may provide an early signal that something has changed but not for the better. Human height has decreased in the last decade in some African countries; this suggests some societies are no longer able to provide sufficient nutrition for each of their children and maintain the health of their younger inhabitants,” Prof. Toussaint explains.

To avoid us being the cause of our own decline, the researchers hope their findings will encourage policymakers to focus on strategies for increasing quality of life and maximize the proportion of the population that can reach these maximum biological limits. “Now that we know the limits of the human species, this can act as a clear goal for nations to ensure that human capacities reach their highest possible values for most of the population. With escalating environmental constraints, this may cost increasingly more energy and investment in order to balance the rising ecosystem pressures. However, if successful, we then should observe an incremental rise in mean values of height, lifespan and most human biomarkers.” Prof. Toussaint warns however, “The utmost challenge is now to maintain these indices at high levels.”

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Dec 102017
 
 December 10, 2017  Posted by at 10:22 am Finance Tagged with: , , , , , , , , , ,  


Robert Frank Motorama, Los Angeles 1956

 

Peak Fantasy Time (David Stockman)
Deflation Remains Biggest Threat As Lofty Stock Markets Head Into 2018 (F.)
Global Powers Lobby To Stop Special Brexit Deal For UK (G.)
The US Media Yesterday Suffered its Most Humiliating Debacle in Ages (GG)
Principles of Political Economy: The Opening Lines (Steve Keen)
Half A Salary, Half A Job, Half A Life (K.)
Erdogan, Tsipras Strike Secret Deal On Refugees (K.)
Refugee Arrivals in Greece Offset Decongestion Efforts (K.)
Super Rich Shown To Have Grown Out Of Ancient Farming (G.)
India Gov. Files Suits Against Monsanto et al Over Bollworm Cotton Attack (VoI)

 

 

Politics is the entertainment division of the military industrial complex.
-Frank Zappa

The decline in quality of jobs -and compensation- is as horrible as the jobs reports’ attempts at hiding that decline.

Peak Fantasy Time (David Stockman)

If you want to know why both Wall Street and Washington are so delusional about America’s baleful economic predicament, just consider this morsel from today’s Wall Street Journal on the purportedly awesome November jobs report. “Wages rose just 2.5% from a year earlier in November—near the same lackluster pace maintained since late 2015, despite a much lower unemployment rate. But in a positive sign for Americans’ incomes, the average work week increased by about 6 minutes to 34.5 hours in November…. November marked the 86th straight month employers added to payrolls.” Whoopee! Six whole minutes added to a work week that has been shrinking for decades owing to the relentlessly deteriorating quality mix of the “jobs” counted by the BLS establishment survey.

In fact, even by that dubious measure, the work week is still shorter than it was at the December 2007 pre-crisis peak (33.8) and well below its 2000 peak level. The reason isn’t hard to figure: The US economy is generating fewer and fewer goods producing jobs where the work week averages 40.5 hours and weekly pay equates to $58,400 annually and far more bar, hotel and restaurant jobs, where the work week averages just 26.1 hours and weekly pay equates to only $21,000 annually. In other words, the ballyhoed headline averages are essentially meaningless noise because the BLS counts all jobs equal – that is, a 10-hour per week gig at the minimum wage at McDonald’s weighs the same as a 45 hour per week (with overtime) job at the Caterpillar plant in Peoria that pays $80,000 annually in wages and benefits.

In fact, what has been the weakest expansion in history by far may now be finally running out of gas. During the last several weeks the pace of US treasury payroll tax collections has actually dropped sharply – and it is ultimately Uncle Sam’s collection box which gives the most accurate, concurrent reading on the state of the US economy. Some 20 million employers do not tend to send in withholding receipts for the kind of phantom seasonally maladjusted, imputed and trend-modeled jobs which populate the BLS reports.

Yet we we are not close to having recovered the 4.3 million goods producing jobs lost in the Great Recession; 40% of them are still AWOL – meaning they are not likely to be recovered before the next recession hits. Stated differently, the US economy has been shedding high paying goods producing jobs ever since they peaked at 25 million way back in 1980. Indeed, we are still not even close to the 24.6 million figure which was posted at the turn of the century.

By contrast, the count of leisure and hospitality jobs( bars, hotels and restaurants), or what we have dubbed the “Bread and Circuses Economy” keeps growing steadily, thereby filling up the empty space where good jobs have vacated the BLS headline total. Thus, when goods-producing jobs peaked at 25 million back in 1980, there were only 6.7 million jobs in leisure and hospitality. Today that sector employs 16.0 million part-time, low-pay workers..

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“.. the Fed has erroneously predicted 2% inflation for 66 months and continues to tell us that the low levels of inflation are “transitory.“

Deflation Remains Biggest Threat As Lofty Stock Markets Head Into 2018 (F.)

In the two weeks running up to the passage of the Senate’s version of the tax bill, the equity markets moved significantly depending on how any particular Republican senator intended on voting. Then, when the Senate finally passed the bill on the next business day, markets made new intra-day record highs, but then reversed course. Given the current sky-high market valuation levels, the tax benefits are already priced in. Economist David Rosenberg examined market reaction to the five major tax bills of the last 70 years. He found that, on average, the S&P 500 rises 14.3% (median 18.9%) in the year leading up to the passage of the tax legislation. In the year following, on average, the index falls 7.5% (median 13.1%). It could be he is on to something.

If it has been historically easy money that has propelled the U.S. and every other major stock market to record heights over the past few years, then it is noteworthy that the last 12 moves from the world’s central banks have been tightening moves. We know that the Fed is certain to tighten next week at its December 12-13 meeting. This, despite the fact that the Fed’s governing board is deeply divided on the outlook for interest rates and inflation. According to their own minutes, some Fed-governing members continue to hold to the academic view that the Phillips curve (i.e., inflation always rises when the unemployment rate is low) is alive and well. Under this view, inflation is just around the corner and the Fed had better be pre-emptive, lest inflation get ahead of them.

The other view is that today’s economy exhibits behaviors that are significantly different from those that dominated the 60+ years of post-WWII America, and that inflation is no longer the threat it used to be. In fact, deflation may be a bigger threat, especially given the high and rising debt levels. Regular readers know that I have espoused the latter viewpoint. I have pointed out several times that the Fed has erroneously predicted 2% inflation for 66 months and continues to tell us that the low levels of inflation are “transitory.” Fed Chair-Elect Powell espoused this viewpoint in his confirmation hearing, so, there is not much hope that they Fed will back off.

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US, Canada et al don’t want any special treatment for Britain. But that’s not their decision.

Global Powers Lobby To Stop Special Brexit Deal For UK (G.)

Theresa May’s hopes of securing a unique post-Brexit trade deal with the EU were under threat on Saturday night as Brussels said it was coming under international pressure to deny Britain special treatment. After a week that saw May reach a deal with the EU that will allow Brexit talks to move forward on to future trade relations, EU officials insisted a bespoke deal more favourable to the UK than other non-EU nations was out of the question. One EU source close to the talks said: “We have been approached by a number of [non-member] countries expressing concerns and making it clear that it would constitute a major problem for them if suddenly the UK were to get better terms than they get.”

The official said that once the UK is out of the single market and customs union in March 2019, there could be no replication of the terms of the current trading relationship, or anything close to it, and no special treatment. “It is not just an indication of some strange rigid principle. It is because things won’t work,” he said. “First and foremost we need to stick to this balance of rights and obligations, otherwise we will be undermining our own customs union and single market. Second, we cannot upset relations with other third countries,” the official said. “If we were to give the UK a very lopsided deal, then the other partners with whom we have been engaging and who entered into balanced agreements would come back and question those agreements.”

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Julian Assange on Twitter: “Is the fake news story about @WikiLeaks yesterday the worst since Iraq? It’s a serious question. Three outlets, CNN, NBC and ABC all independently “confirmed” the same false information. Has there previously been a serious triple origin fake news story? i.e not just re-reporting.”

The US Media Yesterday Suffered its Most Humiliating Debacle in Ages (GG)

Friday was one of the most embarrassing days for the U.S. media in quite a long time. The humiliation orgy was kicked off by CNN, with MSNBC and CBS close behind, with countless pundits, commentators and operatives joining the party throughout the day. By the end of the day, it was clear that several of the nation’s largest and most influential news outlets had spread an explosive but completely false news story to millions of people, while refusing to provide any explanation of how it happened. The spectacle began on Friday morning at 11:00 am EST, when the Most Trusted Name in News™ spent 12 straight minutes on air flamboyantly hyping an exclusive bombshell report that seemed to prove that WikiLeaks, last September, had secretly offered the Trump campaign, even Donald Trump himself, special access to the DNC emails before they were published on the internet.

As CNN sees the world, this would prove collusion between the Trump family and WikiLeaks and, more importantly, between Trump and Russia, since the U.S. intelligence community regards WikiLeaks as an “arm of Russian intelligence,” and therefore, so does the U.S. media. This entire revelation was based on an email which CNN strongly implied it had exclusively obtained and had in its possession. The email was sent by someone named “Michael J. Erickson” – someone nobody had heard of previously and whom CNN could not identify – to Donald Trump, Jr., offering a decryption key and access to DNC emails that WikiLeaks had “uploaded.”

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Steve is busy introducing economics to energy. Another thing the entire field entirely overlooked.

Principles of Political Economy: The Opening Lines (Steve Keen)

Labor without Energy is a Corpse; Capital without Energy is a Statue

Economics went astray from the very first sentence of Adam Smith’s Wealth of Nations in 1776: “The annual labour of every nation”, Smith asserted, “is the fund which originally supplies it with all the necessaries and conveniences of life which it annually consumes, and which consist always, either in the immediate produce of that labour, or in what is purchased with that produce from other nations.” This paragraph mimicked the structure, and even the cadence (though not the brevity), of the opening sentence of Richard Cantillon’s 1730 treatise Essai sur la Nature du Commerce en Général (which Smith read). However, Smith made one crucial substitution: he asserted that “Labor … is the fund” from which our wealth springs, whereas Cantillon asserted that it was Land:

“Land”, Cantillon began, “is the source or matter from which all wealth is drawn; man’s labor provides the form for its production, and wealth in itself is nothing but the food, conveniences, and pleasures of life.” (21) Both these assertions are strictly false. The true source of the wealth that humanity has generated from production is neither Labor nor Land, but the Energy that humanity’s production systems harness and turn into useful work (now known as “Exergy”). However, Smith’s assertion is irredeemably false, whereas Cantillon’s merely needs generalization to make it consistent with the fundamental laws of the universe known as the Laws of Thermodynamics. These Laws are still poorly known by economists, which in part explains why economic theory has managed to be in conflict with them for so long. Illustrating why this is so, and why it is crucial, will take time, and effort on your part too to understand them (if you do not already).

But the fact that no theory that contradicts them can be taken seriously, was stated eloquently by the physicist Arthur Eddington in his 1928 book for lay readers The Nature of the Physical World: The law that entropy always increases—the second law of thermodynamics—holds, I think, the supreme position among the laws of Nature. If someone points out to you that your pet theory of the universe is in disagreement with Maxwell’s equations—then so much the worse for Maxwell’s equations. If it is found to be contradicted by observations—well, these experimentalists do bungle things sometimes. But if your theory is found to be against the second law of thermodynamics I can give you no hope; there is nothing for it but to collapse in deepest humiliation. (37)

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Life in Greece. Every day gets worse.

Half A Salary, Half A Job, Half A Life (K.)

Two in three Greeks fail to pay their bills on time, mainly because they don’t have the money. Three in 10 private sector workers, meanwhile, work part time and get paid a salary of 407.15 euros a month, on average. The first case puts Greece at the top of the list of EU countries in terms of citizens that don’t keep up with their bills, according to the European Consumer Payment Report 2017, with the main reason being the lack of money. In the rest of Europe, the main causes of delays are simple absentmindedness or forgetfulness. The second case is something entirely different. In one sense, it can be interpreted as a reduction in unemployment, which dropped to 20.5% in September. Basically, unemployment falls as part-time work rises, with 30.6% of employees in the private sector working such jobs.

Is this something to be glad about? Should we welcome it as an improvement in the country’s economy? Flexible forms of labor that bring in a pittance of a salary strengthen the ranks of the nouveau pauvre, but at the same time bring down unemployment – albeit dragging down every index that points to a normal life along with it. This is the new normal. But how can 400 euros a month possibly be considered normal? We are beyond the viral videos of the first months of the crisis, of frenzied officials claiming that children were fainting of hunger at school, of images of people rummaging through trash cans looking for food, of pensioners falling over each other for a bag of free potatoes and other such dramatic scenes, real or contrived, that appeared on screens all over the world, and which the present government is quick to claim no longer exist.

Today, some really “lucky” Greeks are insured and have a daily wage of 51 euros, adding up to 1,193 euros a month. But the majority, the less fortunate – yet still fortunate enough to have a job – need to make do with 400 euros a month. It is a conundrum that requires a good deal of math. This month you’ll pay the water bill but not the electricity, you’ll limit your purchases to the bare essentials and you’ll adapt your diet to your budget. What’s left after that? A constant knot in your stomach that you have to learn to put up with. You won’t faint in the street, but each day will be a struggle. You will die a little bit inside, but this is not a measurable reaction and the indices don’t care. Neither does the government, whose slogan when it was in the opposition was that there are real people behind the data. Now the only number it cares to talk about is the shrinking unemployment rate.[..]

The line that defines normal is constantly being shifted and with it the definition of poverty.

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Erdogan was in Greece the past week and tried to stir up as much shit as he could. Refugees remain his main weapon.

Erdogan, Tsipras Strike Secret Deal On Refugees (K.)

As pressure due to overcrowding continues to build at reception centers for migrants on the islands of the eastern Aegean, Turkish President Recep Tayyip Erdogan accepted a request by Prime Minister Alexis Tsipras that Turkey take back migrants from the Greek mainland as well as the islands, Kathimerini understands. During a joint press conference with Erdogan on Thursday, Tsipras declared that “new measures have been agreed for cooperation in the context of the European Union-Turkey agreement,” referring to a deal signed between Ankara and Brussels in March 2016 to curb human trafficking across the Aegean. Tsipras’s comments spurred much speculation about what those measures might be. It appears that they would involve triggering the return of migrants to Turkey, a process that has largely halted as new arrivals often lodge applications for asylum, a lengthy process.

Thousands of migrants, particularly those deemed to be the most vulnerable such as children, pregnant women and the elderly, have already been transferred from cramped facilities on the islands to the mainland. But conditions remain overcrowded at the island camps amid a constant stream of new arrivals from neighboring Turkey. What remains unclear is whether officials in Brussels have approved the deal; as it stands, it would basically undermine the basis of last year’s EU-Ankara agreement, according to which migrants should remain on the islands until a decision has been reached on their status (whether they are considered to belong to vulnerable groups meriting priority treatment, to be granted asylum etc). In recent comments, Dutch Ambassador in Athens Caspar Veldkamp expressed concerns about the prospects of mass relocations to the mainland if returns are not being made to Turkey, noting that this could undermine the EU-Turkey deal and encourage human smugglers rather than averting them.

For the leftist-led government, however, moving migrants from cramped facilities to mainland camps would appease those in the party concerned about inhumane conditions on the islands. As winter looms, and hundreds of migrants continue to live in tents around the reception centers, Migration Minister Yiannis Mouzalas has conceded that he could not rule out the risk of people dying from hypothermia. In an interview with Der Spiegel that was published on Friday, Mouzalas said that authorities were making preparations to ensure that island camps are ready to deal with plunging temperatures. Everything should be in place by December 15, he said. “The key though is the number of new arrivals,” he said, adding that if there is no large increase in numbers “then we are well prepared.” Authorities might reserve some rooms at local hotels if necessary, he said.

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Haven’t heard this one before, and it feels like an ominous sign: “Migration Minister Yiannis Mouzalas told Germany’s Spiegel Online that he cannot guarantee that no one will die in the camps with the onset of winter.”

Refugee Arrivals in Greece Offset Decongestion Efforts (K.)

The effort to improve the living conditions of refugees and migrants stranded at overcrowded reception centers on the eastern Aegean islands of Lesvos, Chios and Samos by transferring some of them to the mainland will fail to yield the desired result as long as flows from Turkey continue. In its latest report, the UNHCR said that 17,764 people were transferred from the islands to the mainland in the period from July 2016 to November 2017. UNHCR sources clarified, however, that the number of those removed from the islands is significantly higher than the official figure. Many of the people who have completed the necessary procedures or are deemed to be vulnerable, and as such are allowed to depart for the mainland, do so at their own cost, the same sources said.

They also reckoned that in 2016 around 40% of transfers were conducted by the UNHCR but the%age rose to 80% in 2017 after a request by the Migration Policy Ministry. At the same time, however, in the period between early April 2016, when Ankara and Brussels reached a deal to limit migrant flows into Europe, until late November, some 48,600 people arrived in Greece. In November, 3,800 people arrived on the Greek islands from Turkey, while 2,128 asylum seekers were transferred to the mainland in the same month. The Migration Policy Ministry on Saturday dismissed rumors on Chios that there are plans for the immediate removal of some 1,000 people from the Vial hotspot. It said that removals will take place gradually.

Meanwhile, Migration Minister Yiannis Mouzalas told Germany’s Spiegel Online that he cannot guarantee that no one will die in the camps with the onset of winter. “What we can do,” he said, “is try the utmost to prevent death.” Moreover, the German newspaper Bild said that an increasing number of refugees in Greece are trying to get to other European Union countries using forged passports.

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There are multiple pieces coming out lately that prove the obvious: once mankind started gathering surpluses, hierarchies developed, and so did inequality.

Super Rich Shown To Have Grown Out Of Ancient Farming (G.)

To measure relative wealth in a society, the team worked with archaeologists studying 62 different societies in Europe, Asia and North America. Some of these were up to 10,000 years old and included digs in ancient Babylonia, Catalhoyuk (now in Turkey) and Pompeii. Researchers analysed the sizes of houses at these sites and used these as indicators of the variations of wealth that existed there at any one time. “House size gives a very good indication of wealth,” said Smith. This point was backed by Kohler. “We consider house size to be a proxy for wealth.” The figures produced by these analyses provided the team with an indication of a particular society’s wealth. The greater the diversity in house size, the greater the inequality. In turn this disparity was measured using a system based on the Gini coefficient.

“Gini coefficients range from zero for societies in which each person has exactly the same amount of wealth to a society in which a single person owns the resources of an entire society. Such a society would have a Gini coefficient of one,” Kohler said. The team found that ancient farming societies had an inequality with a coefficient of around 0.35. That is a higher level of inequality than the level that is likely to have existed in earlier millennia when humans lived as hunter gatherers and shared many resources. “However, this inequality among these, the first farmers, is an awful lot less than the inequality you find in the US today,” said Kohler. “Here we have a Gini coefficient of around 0.8 today.” In the ancient farms of the New World, inequality stayed more or less the same. However, in Eurasia it started to climb over time until it reached levels of around 0.6 a few thousand years ago. This rise coincides with the introduction of oxen and horses and their exploitation in the ploughing of fields.

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More. Monsanto. Mayhem.

India Gov. Files Suits Against Monsanto et al Over Bollworm Cotton Attack (VoI)

The Maharashtra government on Friday announced that it would file police complaints against seed companies like Monsanto, which supplied seeds of BT Cotton, the crops from which were destroyed in a large-scale bollworm attack. Maharashtra’s Revenue Minister Chandrakant Patil said on Friday more than 70% of the cotton crop in Vidarbha has been destroyed due to the bollworm attack. He added that companies like Monsanto had provided the BT Cotton seeds with the promise that they were immune to attacks by the pest. The Vasantrao Naik Shetkari Swavalamban Mission, a state government body, has estimated that the output of cotton in Maharashtra would fall to 43.10 lakh quintal as compared to 78.61 quintals in December 2016.

The opposition parties are however demanding that the Maharashtra government pay compensation to cotton farmers on the lines of the ongoing farm loan waiver extended to cultivators. The Nationalist Congress Party is demanding that the government provide a compensation of Rs 25,000 per hectare for farmers whose crop has been destroyed in the bollworm attack. NCP leader Dhananjay Munde said his party would hold protests in the cotton-growing areas of Vidarbha to force the government raise compesation to farmers. With the opposition parties likely to paralyse the state legislature during the Winter Session to be held in Nagpur from Monday, Chief Ministre Devendra Fadnavis’s government on Friday asked revenue officials to carry out panchnama of crops destroyed in the bollwork attack. “We are working on a compensation package for farmers,” Patil told reporters.

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Politics is the entertainment division of the military industrial complex.
-Frank Zappa

 

Nov 262017
 
 November 26, 2017  Posted by at 9:55 am Finance Tagged with: , , , , , , , , , ,  


Gallica Great Paris Flood 1910

 

The World’s Twin Asset Bubbles Could Collapse Under Their Own Weight (Filia)
Atlas Stumbles – Inequality And Macroeconomics At A Crossroads (DDMB)
Europeans Still Love Paying Cash, Even if They Don’t Know It (BBG)
Echoes of Weimar Republic as Germans Lose Knack Of Coalition-Building (G.)
EU Demands In Next Round Of Talks Set To Enrage Cabinet Brexiteers (Ind.)
Catalan Leader Doubles Down on Independence Pledge (BBG)
The End of the Age of Benevolence (Marion)
Greeks Cutting Down On Food Due To Overtaxation (K.)
Libya Navy Says Over 30 Migrants Dead, 200 Rescued Off Coast (AFP)
Mexico’s Vast New Ocean Reserve To Protect ‘Galapagos of North America’ (G.)

 

 

Very interesting transcript of a MacroVoices talk with fund manager Francesco Filia. It doesn’t really fit into the Debt Rattle format, so go to Zero Hedge to read it all.

The World’s Twin Asset Bubbles Could Collapse Under Their Own Weight (Filia)

I think the equity bubble is quite uncontroversial, is quite unambiguous. There are a lot of different valuation metrics for those that care to look into them. They’ve been valid for over a hundred years of modern financial markets. And this time is no different in that respect. There are the usual metrics that the valuation guys are looking at, like financial assets to disposable income that shows that this market is way more expensive than at any point in history including the big dot com bubble and the Lehman moment in 2007-2008. But there are other metrics like the Buffett Indicator (market cap on GDP), the median debt on total assets, the corporate debt to GDP, the price on sales, the price to book, enterprise value on sales, enterprise value on EBITDA – there are a number of different metrics. They all convene that this is a market bubble that has not been seen before in history.

But we at Fasanara, we developed our own indicator just to try to add something to what was available already. And we started with one of the most famous of all the indicators in this respect, which is the Shiller adjusted PE ratio, or the CAPE ratio. This is the most famous of them. Professor Shiller got a Nobel Prize in 2013 for it. And for his studies on market inefficiencies and for the ability to infer future expected returns from valuation metrics such as the Shiller PE. And, based on the Shiller PE, what it does is simply to compare current prices to not spot earnings of foreign earnings, but a more reliable measure of the average of the last ten years and adjusted for inflation. So the average of the last ten years of real earnings. And on the basis of this index, we find out that the market is as expensive and just a little bit less expensive than it was in 1929 during the Great Depression, the peak of the market before the biggest collapse in equity prices ever seen, and the year 2000. So just slightly cheaper than the year 2000.

What we do is an evolution of the Hussman PE ratio (which is taken from the Shiller ratio) which is to compare – kind of putting all in the basket. So we put the peak earnings as opposed to average earnings, and for peak earnings we really mean the peak. We take the two top quarters over the last 40 quarters. So we cannot really be seen as being any more generous to the current markets, we take the two peak quarters of the last 40 quarters. And then what we do is we compare these peak earnings to potential growth, or trend growth. Because the point here is that what you pay in terms of stocks, should compare, not just to the past or the earnings of proposition, but also to the overall economy generally. Because if the overall economy has a lower potential growth you should be expecting to be able to pay less in terms of multiples than otherwise. The overall economy has a big correlation to earnings and to profit margins, so you should expect the potential growth rate of the economy to be quite relevant when it comes to PE multiples.

There can be a catalyst. Or there can be no catalyst. If you talk about catalysts, I could argue that can be inflation, for example. At the moment, we have seen that inflation resurfaced. We have seen some tightness in the job market. It has not translated yet into wages growth and therefore inflation. But we could just be about to see that. And, in that case, rates would rise and they would provoke as a catalyst the kind of downfall that we expect. Or the catalyst could be political. A lot of quantitative easing is being created and it is benefiting only the top 1% of the population. And it is resulting in this so-called income inequality concept.

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“Crap in, crap out? That’s how we make policy?”

Atlas Stumbles – Inequality And Macroeconomics At A Crossroads (DDMB)

Here’s a news flash: “We don’t want a boom-bust situation.” If you’ll pardon the cynicism, Janet Yellen has chosen now, the twilight of her time at the Fed to discover the words and wisdom of Ludwig Von Mises, father of the Austrian economic school of thought, detractor of the perils of malinvestment? Now?? More to the point, it’s a real trick to not want something we’ve had for over 30 years. As for being flummoxed on stubbornly low inflation, as Yellen contends, that in 2017 inflation is “more of a mystery” than ever, allow an outtake from Fed Up to shed some light. For the record, Janet Yellen was in attendance at the 2014 Federal Open Market Committee (FOMC) meeting at which the following scene took place.

“Anything but bashful at his first FOMC meeting, Governor (Stanley) Fischer asked why the Fed relied on the core personal consumption expenditure (PCE) measure of inflation. Fischer said he lived his life by the Consumer Price Index (CPI), as did his children. In his opinion, the only realistic measures of inflation were the CPI and the Dallas Fed Trimmed Mean PCE. (I bet Fisher got a kick out of that, since this relatively young metric had been nurtured under his leadership.) One brave Fed staffer explained that the models the Fed used to set interest rates wouldn’t function if they didn’t use PCE. The no-nonsense Bullard jumped in. “Let me get this straight,” Bullard said, according to a Fed official who was present. “Crap in, crap out? That’s how we make policy?” It’s the model. It’s broken and it has been for years. Stop using it. Mystery solved. Next?

On this Fed Meeting Minutes Wednesday, now that we can safely speak of the end of the Yellen (Greenspan, Bernanke) mega-era, could we please petition Jay Powell and the new regime to stop doctoring the minutes from FOMC meetings in an effort to herald honest and true ‘transparency’ in future Fed communique? After all, it was Yellen herself who brazenly called for manipulating the minutes, in recorded Fed transcripts, no less. She had this to say at the December 2008 meeting at which policymakers voted to take the fed funds rate to the zero bound: “We could also consider using the FOMC minutes to provide quantitative information on our expectations.” Could ‘we’ not instead?

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What you call a leading title. Of course they know. Cashless doesn’t work in Germany at all. Think that’s just some weird coincidence?

Europeans Still Love Paying Cash, Even if They Don’t Know It (BBG)

Digital currencies may be getting all the buzz these days, but notes and coins still reign supreme in most of Europe. Cash made up around 79% of everyday payments across the euro area last year, according to a ECB study. Almost a quarter of consumers also kept some cash at home as a precaution, and 20% said they had a high-denomination note – €200 ($237) or €500 – in their possession in the year before the survey was conducted. As the study notes, the results “challenge the perception that cash is rapidly being replaced by cashless means of payment.” The picture differs across the 19 member states though. Cash is most dominant in southern Europe, Germany, Austria and Slovenia, where it in accounts for 80% of all payment transactions at point-of-sale.

That figures drops to 45-54% in the Netherlands, Estonia and Finland. The study also found that many people don’t actually know their own payment habits. When asked how they prefer to pay, a larger share of respondents said card, not cash. That may be because nearly two-thirds of all transactions are below €15, the report said. Purchases of coffee and lottery tickets don’t stick in the mind as much as, say, a new pair of shoes. The experience of some countries shows how things can change though. While contactless cards accounted for just 1% of payments across the euro area in 2016, the figure was almost 10% for the tech-savvy Netherlands. The authors of the study say that the small size of contactless payments – 81% of transactions are below €25 – give the technology great potential.

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Power blocks fall apart all over. Germany better be careful. Merkel’s wounded, and she’s all they’ve known for 12 years.

Echoes of Weimar Republic as Germans Lose Knack Of Coalition-Building (G.)

For years, German politics were both mocked and admired for being too uneventful to the point of tedium. Only recently the lack of drama inside the reconstructed Reichstag’s circular plenary chamber led to calls for a more confrontational, Westminster-style approach. But as old geopolitical certainties have crumbled over the past 18 months, Berlin’s consensual, unexcitable style of policymaking has won new admirers. The collapse of talks to form the next coalition government have exposed Angela Merkel’s diminished authority. Many are now beginning to wonder if the division wrought on Britain and the US by Brexit and Donald Trump has also descended on Europe’s biggest economy.

With Merkel’s last coalition partners, the Social Democratic party (SPD) and the Free Democrats (FDP), more eager on parliamentary opposition than on government posts, and an already ultra-oppositional Alternative für Deutschland hoping to receive a further boost from the political standstill, commentators in Germany have started to evoke the darkest days of the Weimar Republic, when short-lived minority governments ruled by emergency decrees. “Like in Weimar, the federal republic is now a multiparty system in which extreme parties have begun to paralyse the working of the parliamentary democracy,” wrote Stephen Szabo, an expert on US-German relations.

“Germany’s obsession with stability was largely a result of reforms aimed at avoiding the mistakes of the Weimar Republic,” said Anthony Glees, a historian at the University of Buckingham. “In spite of a proportional vote system, a 5% threshold for smaller parties guaranteed that postwar Germany was for decades a two-party state, where the power would lie safely in the centre.” With polls for possible fresh elections next year predicting that both Merkel’s Christian Democratic Union and the SDP could drop below 30% while support for the FDP, the AfD, the Greens and the Left party continues to grow, Glees said, “that system is now biting Germany in the leg”.

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A bitter divorce lurks.

EU Demands In Next Round Of Talks Set To Enrage Cabinet Brexiteers (Ind.)

EU negotiators are already laying the groundwork to hit the UK with demands in the next stage of Brexit talks that are unacceptable to key figures in Theresa May’s Cabinet, The Independent can reveal. Leaked documents show chief EU negotiator Michel Barnier wants to make giving the UK a good transition deal conditional on Britain’s “automatic” acceptance of new Brussels regulations during the likely two-year period after March 2019. The plan, set out to EU leaders behind closed doors, would leave the UK with no say over rules it accepts during the transition and is likely to enrage Brexiteers in the Cabinet like Boris Johnson, Michael Gove and Liam Fox, who are determined 2019 should be the last year Britain takes new rules from Brussels.

[..] The papers consist of a presentation, drawn up by Mr Barnier for the EU27’s representatives, in which he says any UK transition out of the EU must involve the “automatic application in the UK of new EU rules post-30 March 2019”. The chief negotiator is clear Britain would have “no institutional rights, no presence in the institutions” and “no voting rights” under his plan, meaning the UK would end up following rules made in the interests of the remaining member states and even incorporating them into British law with no control of how they are formed. Any potential conflict over the transition has yet to surface because the EU has said it will not discuss future arrangements on that or trade until the three withdrawal issues have made “sufficient progress”. But the leak shows the direction the bloc is taking behind the scenes and indicates probable obstacles to agreement in future rounds of talks.

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Will Rajoy ban the independence parties altogether?

Catalan Leader Doubles Down on Independence Pledge (BBG)

Ousted Catalan President Carles Puigdemont pitched his candidacy ahead of next month’s regional election, doubling down on his pledge to make the region an independent state. Puigdemont, who maintains he’s the legitimate regional president after being sacked by the central government, will lead a new platform under the banner of Together for Catalonia. He said on Saturday a victory at the polls on Dec. 21 would serve to ratify his mandate and send a signal to the European Union, which has repeatedly sided with the government of Mariano Rajoy against unilateral attempts for independence. “The people of Catalonia have shown the world we have the capacity and the will to become an independent state,” Puigdemont told an audience in Bruges, Belgium, where he’s been staying since declaring independence last month.

“On Dec. 21, we must ratify that.” The independence movement is trying to reshape its message after the Rajoy administration invoked unprecedented constitutional powers to oust the regional government and take direct control of the wealthy region. The Madrid government acted after the ill-fated independence declaration that led thousands of local companies move their registered address. Puigdemont remains in Belgium awaiting a court decision to execute a European arrest order from a Spanish judge on charges of rebellion that could see him jailed for as long as 30 years. He blamed authorities in Madrid for limiting his ability to campaign. Rajoy’s administration has accused him of fleeing the nation to escape legal responsibilities.

Catalonia Deputy President Oriol Junqueras and half the ousted regional cabinet remain in prison, pending trial on the same charges unless a judge opts to release them. The question remains whether they’ll be able to campaign if the Supreme Court, which is handling the case, finds sufficient grounds to order their release while the investigation continues.

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“..we have reached peak denial in our civilization and whether we like it or not reality is about to make a come back.”

The End of the Age of Benevolence (Marion)

Some evenings I sit on the sofa in the family room with my teenage daughter and watch a TV program with her. I leave the choice of the show to her, it matters little to me, and when she finds something she likes she sits next to me, puts her head on my shoulder, and snuggles up for the hour it takes to watch whatever it is she’s chosen. It’s our time. Occasionally we’ll sneak in another twenty or thirty minutes to the objection of her mother but I like my time with her so I put up with the raised eyebrows and the, “She’s got school tomorrow,” scoldings. It’s important to me that she knows I love her, that I want to spend time with her and that she feels safe when she is with me. Someday, when she is a grown woman I want her to find a man that will take care of her and protect her like I do. I expect no less from a suitor and neither should she.

There will be women who read this who will object to my stance. They will say, “She doesn’t need a man to feel safe or validated or content,” but I would disagree. When she gets older she’ll need a good man, not just any man, and that’s as true today as much as it was ten years, twenty years, fifty years, one hundred years and even one thousand years ago. And it will become even more so as time goes on. Indeed, we have reached peak denial in our civilization and whether we like it or not reality is about to make a come back. The freedom that we have enjoyed in the west and the modern democracies that have sprung forth from our evolving and enlightened philosophies over the past few hundred years are not a given. Granted, they are preferable outcomes given our natural state but politically speaking they are an anomaly in the history of mankind and not the norm.

As such, democracy and the systems, social structures and institutions that have grown up around them are grossly misunderstood by the vast majority of the western world. Most of the people living in the west today have been raised to believe that democracy is a moral system of governance and that it is our gift to the rest of mankind. But democracy is not an inherently moral system nor is it a guarantor of linear, progressive political growth. At its root democracy is quite simple. It is the exercise of political power by the majority over the minority. It is the power to choose in matters of politics. This, of course, begs the question: to choose what? Since choices in general (and political ones are no exception) can be either good or bad, in this case, both for the individual and the body politic, then it follows that democracy is neither.

It is nothing more than a tool for decision making where the majority holds the power to make decisions that affect everyone, either for better or for worse. Democracy is, therefore, a reflection of the character of the people who exercise it. Additionally, democracy is also the use of soft force. That is, the minority bends to the will of the majority on political matters and the apparatus of the state is responsible for carrying out its demands. The minority consents, willingly or unwillingly not because violence is present but because, by the state’s presence, it is implied. More importantly, though, democracy is a luxury that is preceded by benevolence but does not necessarily guarantee its continuance or creation if forgotten.

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Tragedy. Entirely unnecessary.

Greeks Cutting Down On Food Due To Overtaxation (K.)

Overtaxation has forced Greeks to cut down on grocery spending, as IRI Hellas researchers have found that supermarket sales in the January-September 2017 period were 6.7% below the level recorded two years earlier and 7.4% below the 2014 level. Consumers have become bargain hunters out of necessity, not only because of the proliferation of special offers at supermarket but also due to the hikes in value-added tax and the special consumption taxes on most everyday products, on top of the direct tax obligations that households have to meet.

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Even more tragic. And just as avoidable.

Libya Navy Says Over 30 Migrants Dead, 200 Rescued Off Coast (AFP)

More than 30 migrants died and 200 were rescued on Saturday after their boats foundered off Libya’s western coast, the Libyan navy said. The coastguard conducted two rescue operations off the city of Garabulli, 60 kilometres (40 miles) east of Tripoli, spokesman Colonel Abu Ajila Abdelbarri said. He added that patrols had found 31 bodies and 60 survivors from one boat, while all 140 passengers had survived in a second boat. “When we arrived at the spot, we found an inflatable dinghy with several people clinging to part of it,” he said. Libyan navy spokesman Ayoub Qassem told AFP that 18 women and three children were among the dead recovered from the sea, while 40 people were missing.

Migrants from Somalia, Ghana, Ethiopia, Nigeria and four from Pakistan were among those rescued. Libyan patrol boat commander Nasser al-Ghammoudi said one of the vessels was three-quarters under water when the coastguard arrived. “We looked for other survivors for more than five hours,” he said. “We were able to rescue one woman after we heard her shouts.” A French NGO, SOS Mediterranee, said later Saturday that it had rescued more than 400 people from a stricken wooden boat in international waters further from the Libyan coast. Other rescue operations were ongoing on Saturday evening, the Italian coastguard told AFP. Italy’s coastguard, which coordinates the rescue effort in international waters, reported that a total of 1,500 people had been saved on Thursday and Friday.

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It’s not that vast, really.

Mexico’s Vast New Ocean Reserve To Protect ‘Galapagos of North America’ (G.)

Mexico’s government has created the largest ocean reserve in North America around a Pacific archipelago regarded as its crown jewel. The measures will help ensure the conservation of marine creatures including whales, giant rays and turtles. The protection zone spans 57,000 sq miles (150,000 sq km) around the Revillagigedo islands, which lie 242 miles (390 km) south-west of the Baja California peninsula. Mexico’s president, Enrique Peña Nieto, announced the decision in a decree that also bans mining and the construction of new hotels on the islands. He said on Saturday that the decree reaffirmed the country’s “commitment to the preservation of the heritage of Mexico and the world”. The four volcanic islands that make up the Revillagigedo archipelago, called the Galapagos of North America, are part of a submerged volcanic mountain range.

The surrounding waters, east of Hawaii, are home to hundreds of species of animals and plants, including rays, humpback whales, sea turtles, lizards and migratory birds. The local ecosystem is central to the lives of some 400 species of fish, sharks and ray that depend on the nutrients drawn up by the ocean. The area is a breeding ground for commercially fished species such as tuna and sierra. However, the various fish populations had suffered, unable to reproduce fast enough for the rate at which they were fished. The creation of a marine reserve is expected to help them to recover, as all fishing activities will now be prohibited. This will be policed by the Mexican navy.

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Oct 222017
 
 October 22, 2017  Posted by at 9:14 am Finance Tagged with: , , , , , , , ,  


Edmund Melzl The Buddhas of Bamiyan in Afghanistan 1958

 

Political Economics (Snider)
Smart Money And Dumb Money Are Moving In Opposite Directions (MW)
Beijing Is The Covert Buyer Of A Quarter Of All Chinese Real Estate (ZH)
The Mathematics of Inequality (TuftsNow)
New Zealand’s New Prime Minister Brands Capitalism A ‘Blatant Failure’ (Ind.)
Euroskeptic Billionaire on Route to Czech Election Victory (BBG)
US Immigrant Population Climbed To Record 43.7 Million In 2016 (F.)
After 54 Years America Deserves To Know Everything (PP)
Into the Cold and Dark (Jim Kunstler)
Google’s Plan To Revolutionise Cities Is A Takeover In All But Name (O.)
Put Drivers In Control (NEF)
“Success, Greeks No Longer Seek Food In Garbage Bins” (KTG)
5 Year Old Syrian Girl Dies In ‘Concentration Camp’ Funded By UK Taxpayers (RT)

 

 

“How can anyone claim the Fed under Yellen or Bernanke performed even minimally well?”

Political Economics (Snider)

The political winds are changing, and the parties themselves are being realigned in different directions (which is not something new; there have been several re-alignments throughout American history even though the two major parties have been entrenched since the 1850’s when Republicans first appeared). Who the next Fed Chair is could tell us something about how far along we are in this evolution. What Krugman wants, meaning, it is safe to assume, what all those like him want, is simple: success. He believes that the central bank has given us exactly that, therefore it is stupid to upset what works.

“In particular, both Bernanke and Yellen responded effectively to a once-in-three-generations economic crisis despite constant heckling from back-seat drivers in Congress and on the political right in general. And their intellectual and moral courage has been completely vindicated by events.” This is right here is the very central point of political difference that is pulling the world slowly apart. Krugman offers no evidence for his assertion, that the Fed has performed admirably and successfully, he just states it as if it was so (a common tactic in the mainstream, the fallacy of authority). Whenever challenged on this contention, the argument will always go back to “jobs saved.”

A worse counterfactual downside is not a rational standard for evaluation in any discipline or context. The only benchmark that should matter is recovery, as any economy facing recession, even an unusually severe one, has to make it back to the prior condition. On that score the Fed has utterly and unambiguously failed. One reason for it is the one thing Economists like Krugman never bring up; the 2008 panic. How can anyone claim the Fed under Yellen or Bernanke performed even minimally well? The very fact that the panic happened at all is a direct indictment on monetary policy and the people who were there during it (you had one job to do!).

[..] The irrational, emotional defense for the ideology is what is driving political upheaval, including Donald Trump’s occupying the White House. To most people, Krugman’s ideas and assertions are nonsense. They don’t have to know anything about QE’s effect on the TBA market and dollar rolls, how exactly McDonald’s was borrowing from FRBNY, or what it was that AIG did that ultimately made the Federal Reserve profits. People know the Fed did a bunch of stuff that didn’t work because they can tell there is something very wrong with the economy.

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Short, long, smart, dumb.

Smart Money And Dumb Money Are Moving In Opposite Directions (MW)

While all seems calm in the U.S. equity markets, with stocks continuing to hit all-time highs, an interesting trend has emerged beneath the surface. Combing through the latest Commitments of Traders report from the Commodity Futures Trading Commission (CFTC), we found that commercial traders (“smart money”) have a record number of short positions in the Dow Jones Industrial Average. At the same time, noncommercial traders (“dumb money”) have a record number of long positions. You may be thinking “one group thinks stocks will go up, and the other thinks stocks will go down. What’s the big deal?” Here’s the big deal. There’s a strong negative correlation between commercial traders’ short positions and the Dow Jones Industrial Average, as the below chart shows. When short positions increase, the DJIA usually falls … perfect timing!

The opposite also is true. When noncommercial traders increase their long positions, the market usually drops shortly thereafter. It seems they have a habit of buying the market at exactly the wrong time.

Given that the “smart money” usually wins this tug of war, let’s focus on the reasons behind their negative outlook for stocks. Here’s some of the reasons professional money managers may be growing cautious about stocks today. Findings from Goldman Sachs Asset Management (GSAM) show that by just about every measure, stocks are expensive today. But it’s not only U.S. stocks that are trading at all-time highs. This chart from Deutsche Bank shows that, in their own words, “we’re in a period of very elevated global asset prices — possibly the most elevated in history.”

Lofty valuations are likely a big factor in Warren Buffett’s and Seth Klarman’s reasoning for holding record levels of cash in their portfolios. In September, Buffett’s Berkshire Hathaway had $99.7 billion in cash on the sidelines. Klarman’s Baupost Group held 42% of its portfolio in cash, the largest single position. So U.S. stocks are expensive by most measures. But they have been expensive for quite some time. High valuations don’t mean a crash is imminent. They do, however, tell us something about future returns.

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Absolutely nuts. But then, the Fed buys mortgage backed securities…

Beijing Is The Covert Buyer Of A Quarter Of All Chinese Real Estate (ZH)

According to a fascinating new WSJ report, China’s housing downturn is likely far worse than meets the eye, as under Beijing’s direction more than 200 cities across China for the last three years have been buying surplus apartments from property developers and moving in families from condemned city blocks and nearby villages. China’s Housing Ministry, which is behind the purchases, said it plans to continue the program through 2020. The strategy, supported by central-government bank lending, has rescued housing developers and lifted the property market, As the WSJ notes, this latest backdoor bailout “It is a sharp illustration of China’s economy under President Xi Jinping and the economic challenges he will face as he renews his 5-year term at a twice-a-decade Communist Party Congress that opens on Wednesday.”

Rosealea Yao from Gavekal Dragonomics, who was also quoted above, wrote that “the government’s creativity in coming up with new ways of supporting the housing market is impressive—but it’s also an indication that it still depends on housing for growth.” While traditionally, China’s government used to build homes for families who lost theirs to development or decay, last year, local governments, from the northeast rust belt to the city of Bengbu with 3.7 million amid the croplands of central Anhui province, spent more than $100 billion to buy housing from developers or subsidize purchases, according to Gavekal Dragonomics. In other words, the reason why China no longer has ghost cities is because the government is buying them in just as concerning, “ghostly” transcations.

The underlying structure is yet another typically-Chinese ponzi scheme: “Underpinning the strategy is a cycle of debt. Cities borrow from state banks for purchases and subsidies, then sell more land to developers to repay the loans. As developers build more housing, they, too, accrue more debt, setting up the state to bail them out again. The burden on the state rises, as does the risk of collapse.” [..] Beijing is now the (covert) marginal buyer of a quarter of all Chinese real estate. That, in itself, is a mindblowing statistic. What is scarier, is that despite this implicit backstop, property sales are once again declining after 30 months of increases. One can only imagine the epic crash that would ensue at this moment, if – for some reason – the government bid were to be pulled, and just how spectacular the ensuing global depression would be as the rug is pulled from below the middle class of the world’s fastest growing economy.

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“..And even if a society does redistribute wealth, if it’s too small an amount, “a partial oligarchy will result..”

The Mathematics of Inequality (TuftsNow)

Seven years ago, the combined wealth of 388 billionaires equaled that of the poorest half of humanity, according to Oxfam International. This past January the equation was even more unbalanced: it took only eight billionaires, marking an unmistakable march toward increased concentration of wealth. Today that number has been reduced to five billionaires. Trying to understand such growing inequality is usually the purview of economists, but Bruce Boghosian, a professor of mathematics, thinks he has found another explanation—and a warning. Using a mathematical model devised to mimic a simplified version of the free market, he and colleagues are finding that, without redistribution, wealth becomes increasingly more concentrated, and inequality grows until almost all assets are held by an extremely small% of people.

“Our work refutes the idea that free markets, by virtually leaving people up to their own devices, will be fair,” he said. “Our model, which is able to explain the form of the actual wealth distribution with remarkable accuracy, also shows that free markets cannot be stable without redistribution mechanisms. The reality is precisely the opposite of what so-called ‘market fundamentalists’ would have us believe.” While economists use math for their models, they seek to show that an economy governed by supply and demand will result in a steady state or equilibrium, while Boghosian’s efforts “don’t try to engineer a supply-demand equilibrium, and we don’t find one,” he said. [..] The model tracks the data with remarkable accuracy, he said. He and his team will soon publish a paper on how it relates to U.S. wealth data from 1989 to 2013.

“We have also begun to apply it to wealth data from the ECB, and so far it seems to work very well for certain European countries as well,” he said [..] It turns out that when agents do well in early transactions, the odds are so increasingly stacked in their favor that—without redistribution from taxes or other wealth-transfer mechanisms—they will get more money, and keep accruing wealth inevitably. “Without redistribution of wealth, our market economy would not be stable,” said Boghosian. “One person would run away with all the wealth, and it would keep going until it came to complete oligarchy.” And even if a society does redistribute wealth, if it’s too small an amount, “a partial oligarchy will result,” Boghosian said.

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Well that’s clear enough.

New Zealand’s New Prime Minister Brands Capitalism A ‘Blatant Failure’ (Ind.)

New Zealand’s new prime minister called capitalism a “blatant failure”, before citing levels of homelessness and low wages as evidence that “the market has failed” her country’s poor. Jacinda Ardern, who is to become the nation’s youngest leader since 1856, said measures used to gauge economic success “have to change” to take into account “people’s ability to actually have a meaningful life”. The 37-year-old will take office next month after the populist New Zealand First party agreed to form a centre-left coalition with her Labour Party. They will be supported by the liberal Greens. New Zealanders had been waiting since 23 September to find out who would govern their country after national elections ended without a clear winner. Ms Ardern has pledged her government will increase the minimum wage, write child poverty reduction targets into law, and build thousands of affordable homes.

In her first full interview since becoming prime minister-elect, she told current affairs programme The Nation that capitalism had “failed our people”. “If you have hundreds of thousands of children living in homes without enough to survive, that’s a blatant failure,” she said. “What else could you describe it as?” Incumbent prime minister Bill English, whose National Party has held power for nine years, has said his party grew the economy and produced increasing budget surpluses which benefited the nation. But Ms Ardern said: “When you have a market economy, it all comes down to whether or not you acknowledge where the market has failed and where intervention is required. Has it failed our people in recent times? Yes. “How can you claim you’ve been successful when you have growth roughly three per cent, but you’ve got the worst homelessness in the developed world?”

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He won by a landslide. An even more far-right and anti-EU party also won. More problems in the heart of the Union.

Euroskeptic Billionaire on Route to Czech Election Victory (BBG)

A Czech billionaire looks set to win parliamentary elections Saturday, overcoming traditional political parties on a pledge to run the state like a business, fight Muslim immigration and oppose deeper integration with the European Union. Andrej Babis, who has drawn comparisons to Donald Trump and Silvio Berlusconi, had a wide lead in opinion polls before two days of voting started Friday. With a chemical, food and media empire employing 34,000 in 18 countries, the Slovak-born businessman – and second-richest Czech – increased his popularity while serving as finance minister before he was fired by his coalition partner, Prime Minister Bohuslav Sobotka. Taking credit for the EU’s lowest unemployment, one of its fastest rates of economic growth, and a budget surplus, Babis has portrayed himself as a competent manager struggling against traditional parties.

That’s lifted his ANO party’s support, while his attacks against Muslim immigration and criticism of the EU have helped fuel the rise of anti-establishment political forces similar to Germany’s AfD and Austria’s Freedom Party. It’s also raised concern that a Babis victory may add another source of tension within the EU, which has clashed with Poland and Hungary over democratic values. “Babis has managed to take advantage of the crisis of traditional parties and offer something new,” Josef Mlejnek, a political scientist at Charles University in Prague, said by phone. “He has depicted his rivals as an incompetent, corrupt bunch and he is presenting himself as the only one who can get things in order.” [..] Sobotka dismissed Babis in May in a conflict over his past business dealings.

The premier’s Social Democrats later teamed up with the opposition to strip the billionaire of his parliamentary immunity from prosecution to make way for an investigation into fraud allegations. Police have since charged Babis, 63, in the case of a 50 million-koruna ($2.3 million) in EU subsidies transferred to his Stork Nest recreation complex. Babis denies wrongdoing and says the allegations are an attempt to sideline him from politics. Despite the scandal, he’s held on to support siphoned from both the Social Democrats and other traditional parties. He has boasted of streamlining government operations and, via a law requiring retailers to link their cash registers to the Finance Ministry, boosting budget revenue and cracking down on tax evasion. At the same time, he’s railed against EU “meddling,” a stance that resonates with voters in the bloc’s most euroskeptic member.

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What about the time when almost all Americans were immigrants?

US Immigrant Population Climbed To Record 43.7 Million In 2016 (F.)

According to new data released by the U.S. Census Bureau, the nation’s immigrant population, both legal and illegal, climbed to a record 43.7 million in July 2016. That’s an increase of half a million since 2015 and 12.6 million since the turn of the century. Immigrants now comprise 13.5% of the U.S. population, roughly one out of eight residents, the highest share in 106 years. The all-time highest immigrant share of the U.S. population was 14.7%, recorded in 1910 when the country had 13.5 million immigrants. According to the Census Bureau, that will be eclipsed by 2030 when the immigrant share reaches 15.8% or 56.9 million people. Up to 2050, the influx is expected to continue its upward trajectory, with the number of immigrants projected to reach 72.3 million and account for an 18.2% share of the population.

Currently, Mexico has the highest share of America’s foreign-born population by far with over 11.5 million people. Despite also being the top sending nation with a grand total of 1.1 million new arrivals between 2010 and 2016, the Mexican-born population has not grown in the past six years due to return migration and natural mortality. During the same time frame, the sending countries with the highest increases were Saudi Arabia (122%), Nepal (86%) and Afghanistan (74%). Out of all states, Texas recorded the greatest numeric increase in immigrants (587,889) between 2010 and 2016, ahead of Florida (578,468) and California (527,234).

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There won’t be much left.

After 54 Years America Deserves To Know Everything (PP)

President of the United States Dwight Eisenhower, a five-star general in the Army before his presidency, upon departing the White House in January 1961, issued a bone-chilling warning about the dangers of the Deep State to President John F. Kennedy before Kennedy took office. Eisenhower warned Kennedy that the “military industrial complex created an imperative for development… It was compelled to create a permanent armaments industry.” Kennedy stood up against the military-industrial complex. Did that lead to Kennedy’s assassination? Did Kennedy’s assassination trigger the Deep State’s birth of a baby vampire squid with tentacles spread throughout many industries? We did have the Warren Commission, but did that commission provide any reasonable explanation as to how President Kennedy was assassinated?

Given what we know today, it’s likely that the truth has been withheld from the American public and the world. For example, doubt remains widespread about the Warren Commission’s conclusions since several trajectory analyses show that one bullet could not have caused all the damage that occurred. Are the CIA and the Deep State colluding to keep this information secret? In one set of recently declassified CIA documents, the American people learned that JFK’s assassination led to the CIA creating the highly derogatory term “conspiracy theory” and “conspiracy theorists”. This was the beginning of Deep State psychological operations used to malign, slander, discredit, and undermine the credibility of anyone who dared to voice dissent towards the government. The CIA called this branch the Clandestine Services unit and its aim was to ruin anyone who wanted to take on the establishment and the military industrial complex.

The military-industrial complex has garnered far too much power in Washington since World War II, and it now presents the biggest threat to democracy and liberty in America. And it has only gotten bigger since George W. Bush entered office and declared “a war on terror”. Just take a look at the stock prices of military-industrial complex participants — they have skyrocketed over 1000% (e.g. Northrop Grumman). The presence of a Deep State became very clear and even more pronounced during the 2016 presidential election cycle, which unearthed Washington’s culture of pay-to-play and cover-ups. This led to the December 2016 proclamation to America by President-elect Trump that he was going to “drain the swamp.” In response, Senate minority leader Chuck Schumer went on The Rachel Maddow Show in January 2017 and delivered the following warning to President Trump: “Let me tell you: You take on the intelligence community—they have six ways from Sunday at getting back at you,”

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“The revolution to come out of this frozen swamp of irresponsibility will be the messiest and most incoherent in world history.”

Into the Cold and Dark (Jim Kunstler)

Many, including yours truly, have expected the distortions and perversions on the money side of life to express themselves in money itself: the dollar. So far, it has only wobbled down about ten percent. This is due perhaps to the calibrated disinformation known as “forward guidance” issued by this country’s central bank, the Federal Reserve, which has been threatening — pretty idly so far — to raise interest rates and shrink down its vault of hoarded securities — a lot of it janky paper left over from the misadventures of 2007-2009. I guess the lesson is that when you have a pervasively false and corrupt financial system, it is always subject to a little additional accounting fraud — until it’s not.

And the next thing you know, you’re sitting in the rubble of what used to be your civilization. The ever more immiserated schnooks who make up the former middle-class know that their lives are crumbling, and may feel that they’re subject to the utterly overwhelming forces of a cruel destiny generated by a leviathan state that hates and despises them. And of course that is exactly why they turned to the Golden Golem of Greatness for salvation. Alas, Mr. Trump has not constructed a coherent strategy for defeating the colossus of fakery that drives the nation ever-deeper toward the cold and dark. He has a talent for distraction and disruption, though, and so far that gave cover to a whole lot of other people in power who have been able to stand around with their hands in their pockets doing nothing about the sinking state of the nation.

Now, the vaudeville act is coming to a spectacular conclusion as the trappings of Halloween go back in the closet and the pulsating, LED-studded Santas go up on the rooftops. Every ceremony of American life seems drained of meaning now, including the machinations of government over the budget and taxes. The revolution to come out of this frozen swamp of irresponsibility will be the messiest and most incoherent in world history. Nobody will have any idea what is going on outside the geo-storm of failure. About the only thing one can say for sure is that the American life which emerges from this maelstrom will not look a whole lot like what we’re living in today. I remain serenely convinced that when it finally passes, the air will be fresh again and the sun will shine, and a lot more people will know what is real and what is not.

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Pay attention.

Google’s Plan To Revolutionise Cities Is A Takeover In All But Name (O.)

Last June Volume, a leading magazine on architecture and design, published an article on the GoogleUrbanism project. Conceived at a renowned design institute in Moscow, the project charts a plausible urban future based on cities acting as important sites for “data extractivism” – the conversion of data harvested from individuals into artificial intelligence technologies, allowing companies such as Alphabet, Google’s parent company, to act as providers of sophisticated and comprehensive services. The cities themselves, the project insisted, would get a share of revenue from the data. Cities surely wouldn’t mind but what about Alphabet? The company does take cities seriously. Its executives have floated the idea of taking some struggling city – Detroit? – and reinventing it around Alphabet services, with no annoying regulations blocking this march of progress.

All of this might have looked counter-intuitive several decades ago, but today, when institutions such as the World Bank preach the virtues of privately run cities and bigwigs in Silicon Valley aspire to build sea-based micronations liberated from conventional bureaucracy, it does not seem so far-fetched. Alphabet already operates many urban services: city maps, real-time traffic information, free wifi (in New York), self-driving cars. In 2015 it launched a dedicated city unit, Sidewalk Labs, run by Daniel Doctoroff, former deputy mayor of New York and a veteran of Wall Street. Doctoroff’s background hints at what the actual Google Urbanism – as opposed to its theoretical formulations – portends: using Alphabet’s data prowess to build profitable alliances with other powerful forces behind contemporary cities, from property developers to institutional investors.

On this view, Google Urbanism is anything but revolutionary. Yes, it thrives on data and sensors, but they only play a secondary role in determining what gets built, why, and at what cost. One might as well call it Blackstone Urbanism – in homage to one of the largest financial players in the property market. [..] Alphabet’s weapons are impressive. Cheap, modular buildings to be assembled quickly; sensors monitoring air quality and building conditions; adaptive traffic lights prioritising pedestrians and cyclists; parking systems directing cars to available slots. Not to mention delivery robots, advanced energy grids, automated waste sorting, and, of course, ubiquitous self-driving cars.

Alphabet essentially wants to be the default platform for other municipal services. Cities, it says, have always been platforms; now they are simply going digital. “The world’s great cities are all hubs of growth and innovation because they leveraged platforms put in place by visionary leaders,” states the proposal. “Rome had aqueducts, London the Underground, Manhattan the street grid.” Toronto, led by its own visionary leaders, will have Alphabet. Amid all this platformaphoria, one could easily forget that the street grid is not typically the property of a private entity, capable of excluding some and indulging others. Would we want Trump Inc to own it? Probably not. So why hurry to give its digital equivalent to Alphabet?

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Sort of the opposite of what Google wants.

Put Drivers In Control (NEF)

Last weekend, Jeremy Corbyn raised an intriguing possibility. “Imagine an Uber,” he said, “run co-operatively by their drivers, collectively controlling their futures, agreeing their own pay and conditions, with profits shared or re-invested.” Many have since dismissed this idea as wishful thinking. First, there is Uber’s undoubted popularity among its users – hundreds of thousands of people signed a petition protesting against Transport for London’s decision not to renew Uber’s licence. Then there is its market dominance, which only ever seems to intensify. How can any rival hope to compete in the increasingly monopolistic world of private hire? Finally there is the factor which underpins both its popularity and its dominance. And that’s its price point. When Uber came on the scene, it undercut other taxi services by a huge margin.

And it appeared to do so by spending vast amounts of venture capital in a bid to achieve global dominance of the market. Any co-operative, driver-owned alternative to Uber has to be competitive on price or it will never break through Uber’s grip on the market. How can they do that without spending vast amounts of capital? Where would that money come from? None of these arguments holds water. At the New Economics Foundation we recently called for ‘Khan’s Cars’, a mutually owned taxi platform for London which would give drivers real control over their working lives while still providing people with the cheap and convenient transport they need. We believe a driver-owned alternative could genuinely compete with Uber on price and convenience, especially if supported by the Mayor of London.

In fact, Uber isn’t as cheap as it seems. The company’s use of surge pricing, which inflates prices during periods of high demand, allows it to present cheaper prices at other times. Partly as a result of this, Uber makes a profit in the UK – suggesting the basic pricing model is financially viable without vast capital resources. So the gap to close isn’t as wide as it may look at first glance. Furthermore, Uber takes between 20-25% of the fares it charges. Khan’s Cars could reduce that %age since it will not have shareholders looking to extract profit.

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Delusionary.

“Success, Greeks No Longer Seek Food In Garbage Bins” (KTG)

“There are no people seeking food in the garbage bins as in 2014,” Culture Minister Elena Kountoura said adding that citizens congratulate the government for its social policies. People are congratulating the government because “in 2014 there were people struggling to have a meal on their table. It is a success that people do not eat from the garbage anymore, “Kountoura from junior coalition partner Independent Greeks claimed speaking to private Skai TV on Saturday morning. “Despite the difficulties, people manage it.” “At least, Greeks are now living in dignity,” she said further adding “we brought growth.” She claimed further that “no minister cuts pensions, no minister introduces taxes.” The Culture Minister said further that “we have ten difficult months ahead” until the Greek program ends in August 2018. She said that also this year was an unprecedented success for the tourism industry saying that “90% of the capacity” was fully booked.

PS no taxes, no pension cuts? I propose, Minister Kountoura to take a fresh look into the 2015 bailout agreement and the additional agreement the coalition government signed last May in order to enable the conclusion of the second review. As for the meals from garbage bins… well… I wonder why neighbors still leave bags with food on the street, bags that quickly disappear. Probably they didn’t hear of the growth and the government success story.

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“Their daughter had just died and they were left there. They had nothing. No visit from a psychiatrist. The mother was silent. They were in shock and the children were saying ‘my sister died – she died just here.’”

5 Year Old Syrian Girl Dies In ‘Concentration Camp’ Funded By UK Taxpayers (RT)

British aid money is propping up a European migrant camp routinely likened to a prison. In just one appalling example, a Syrian girl who survived war, smugglers and the Aegean Sea, died last week in a cold, damp tent in Moria, on the Greek island of Lesbos. She was five. The girl, her parents and her five siblings had been offered a freezing tent in the squalid camp when they arrived in search of safety a week earlier. Her body was discovered last Sunday by her father and pregnant mother, who just hours before were denied extra blankets to keep their daughter warm and given just paracetamol to treat her medical issues. “I crawled inside and the blankets on the floor were wet, it was so cold and dirty and damp,” Daliah, a volunteer and former protection team employee who visited the family, told RT UK.

Their daughter had just died and they were left there. They had nothing. No visit from a psychiatrist. The mother was silent. They were in shock and the children were saying ‘my sister died – she died just here.’ “There was a volunteer there in tears. He told me they just pulled her out like a dog and took her away. There was no dignity.” Following her “unexplained” death, her tiny body was buried without an Islamic funeral and without her mother being present. “She became nothing but a number – she didn’t even get her last respect,” Daliah said. The child, whose parents did not wish to be identified, is yet another victim of the migration crisis Europe has mishandled and misjudged. With grotesque irony, European Union ministers who advocate saving refugees from war zones enjoy worldwide praise for funding camps like these.


The grave of a five-year-old girl who died on Lesbos © Zoie O’Brien / RT

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Sep 292017
 
 September 29, 2017  Posted by at 9:10 am Finance Tagged with: , , , , , , , ,  Comments Off on Debt Rattle September 29 2017


Pablo Picasso Weeping woman 1937

 

US Inequality Near Historic Highs, Wages Stagnant (BI)
UBS Indentifies 8 Cities With Biggest Housing Bubbles (ZH)
Chinese Money Is Still Leaking Into the World’s Housing Markets (BBG)
China’s Bitcoin Market Alive And Well As Traders Defy Crackdown (R.)
China Orders North Korean Companies Active In The Country To Shut Down (BBG)
The Closing Of The Catalan Polling Stations (EI)
French Vineyards Robbed Of Seven Tonnes Of Grapes (AFP)
Schäuble Leaves But Schäuble-ism Lives On (Varoufakis)
Over Half Of All Greek Enterprises Are In The Red (K.)
Surge In Migration To Greece Fuels Misery In Refugee Camps (G.)
China’s Love of Meat Is Driving Global Antibiotic Usage (BBG)
Tropical Forests Don’t Absorb Carbon. They Emit As Much As All US Transit (Q.)

 

 

Economy out of balance.

US Inequality Near Historic Highs, Wages Stagnant (BI)

There is a reason so many Americans feel the economy’s recovery from the Great Recession has not benefited them: It hasn’t. An expansion that began, believe it or not, more than seven years ago has extended a longer-run trend of wage stagnation for the average US worker, despite a sharp drop in the official unemployment rate to 4.4% from an October 2009 peak of 10%. No wonder the recovery seems so lopsided, particularly given economic inequality levels not seen since before the Great Depression. A new report from the Hamilton Project, an economic-policy initiative of the Brookings Institution in Washington, offers a range of startling figures and charts that paints a rather dramatic picture of US economic disparities. “The U.S. economy has experienced long-term real wage stagnation and a persistent lack of economic progress for many workers,” wrote Jay Shambaugh, a White House economist under President Barack Obama who now heads the Hamilton Project.

After adjusting for inflation, wages are just 10% higher in 2017 than they were in 1973, amounting to real annual wage growth of just below 0.2% a year, the report says. [..] One big source of the problem: Starting around the 1970s, US productivity growth began rising much more rapidly than workers’ compensation — meaning the share of growth was accumulating increasingly in corporate profits at the expense of pay. The report attributes this both to the increasing role of technology in the workplace but also to a loss of bargaining power brought on by anti-union labor policies and other wage-suppressing measures. “Changes in worker bargaining power, competition within and across industries, and globalization can all influence the share of output workers receive,” the report said.

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What happened to Auckland?

UBS Indentifies 8 Cities With Biggest Housing Bubbles (ZH)

Two years ago, when UBS looked at the world’s most expensive housing markets, it found that London and Hong Kong were the only two areas exposed to bubble risk. What a difference just a couple of years makes, because in the latest report by UBS wealth Management, which compiles the bank’s Global Real Estate Bubble Index, it found that eight of the world’s largest cities are now subject to a massive speculative housing bubble. And while perpetually low mortgage rates are clearly to blame for the rapid ascent of home prices, Chinese money laundering operations clearly seem to also be playing a role as their favorite markets of Vancouver, Toronto and Sydney all made this year’s list. Bubble risk seems greatest in Toronto, where it has increased significantly in the last year.

Stockholm, Munich, Vancouver, Sydney, London and Hong Kong all remain in risk territory, with Amsterdam joining this group after being overvalued last year. Valuations are stretched in Paris, San Francisco, Los Angeles, Zurich, Frankfurt, Tokyo and Geneva as well. In contrast, property markets in Boston, Singapore, New York and Milan seem fairly valued, while Chicago remains undervalued, just as it was last year. Price bubbles are a regularly recurring phenomenon in property markets. The term “bubble” refers to a substantial and sustained mispricing of an asset, the existence of which cannot be proved unless it bursts. But recurring patterns of property market excesses are observable in the historical data. Typical signs include a decoupling of prices from local incomes and rents, and distortions of the real economy, such as excessive lending and construction activity. The UBS Global Real Estate Bubble Index gauges the risk of a property bubble on the basis of such patterns.

As UBS points out, artificially low interest rates in Europe, for example, have kept mortgage payments below their 10-year average despite real prices surging 30% since 2007. Falling mortgage rates over the last decade have made buying a home vastly more attractive, which increased average willingness to pay for home ownership. In European cities, for example, the annual usage costs for apartments (mortgage interest payments and amortization) are still below their 10-year average, despite real prices escalating 30% since 2007. In Canada and Australia, too, a large part of the negative impact of higher purchase prices on affordability was cushioned by low mortgage rates.

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Xi must watch his reserves.

Chinese Money Is Still Leaking Into the World’s Housing Markets (BBG)

Tighter capital controls have done little to dent the appetite of Chinese buyers who already helped drive prices higher across the globe. While definitive data are hard to come by, real estate brokers including Knight Frank LLP, Savills Plc and domestic firm Shiju report rising purchases of overseas property this year. What’s changed is that the curbs have prompted buyers to look for cheaper homes in smaller cities, making down payments more manageable. Part of the reason for the unhindered overseas purchases could be that authorities have already succeeded in stemming capital outflows after cracking down on the most acquisitive companies. That eases the need to enforce limits on individuals, a more difficult and costly process, said Steven Zhang at Morgan Stanley Huaxin. “It’s a question of cost and benefit,” Zhang said.

Since the start of 2017, Chinese applying for their $50,000-a-year foreign-exchange quotas must sign pledges that the money won’t be used for real estate. Violators face a range of potential sanctions. [..] The impact of the increased currency scrutiny has been on the size rather than the quantity of deals. At real estate portal Juwai.com, the average price of overseas properties Chinese buyers inquired about dropped to just over $292,000 this year from more than $356,000 in 2016. Some buyers are eschewing pricey hubs like New York for less-expensive areas such as Florida and Texas, according to Eric Lam, chief executive of Shiju, the overseas broker unit of Shenzhen World Union Properties. They’re typically spending up to 3 million yuan ($450,000) for U.S. homes, and as much as 2 million yuan for U.K. properties, prices that make for manageable down payments using exchange quotas, Lam said.

Jones Lang LaSalle said it was mainly selling U.K. homes, often below $500,000, and Cushman & Wakefield also highlighted surging Chinese demand for British property after the pound weakened following the Brexit vote. [..] The undimmed appetite suggests Chinese money could continue to put upward pressure on prices, a trend that’s stoked concern among locals in cities from Vancouver to Sydney. Chinese buyers, mainly from the mainland but also from Taiwan and Hong Kong, spent a record $31.7 billion on U.S. residential properties in the year through March 31, remaining the biggest foreign force in the market.

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The crackdown doesn’t come into effect until October.

China’s Bitcoin Market Alive And Well As Traders Defy Crackdown (R.)

Weeks after Beijing banned fundraising through token launches and ordered some bitcoin exchanges to shut, casting a chill over the cryptocurrency industry, traders say that the market is far from dead. While several exchanges have announced that they will close by the end of this month, traders have now moved to buy and sell bitcoin directly with each other on peer-to-peer marketplaces and messenger apps. Industry insiders say some overseas-based initial coin offerings (ICOs) are still being marketed. Although the crackdown has dissuaded large swathes of less-experienced investors from participating in the trade, market participants point to the limits Chinese regulators ultimately face in controlling the industry, where many users are anonymous and difficult to track.

In the short-run, the crackdown has also created an arbitrage opportunity for investors, with the price of bitcoin in China now trading at a discount to overseas exchanges. “They can’t set rules to stop me from investing in what I want to invest in. They say you are protecting me, but as long as I think this is good, they have no way to intervene,” said a Chinese bitcoin investor named Victor, who declined to give his full name citing current sensitivities. [..] “The fact that bitcoin is still being traded is an indication that China isn’t looking to eliminate them, but reposition things in a way to have better control over them,” said Marshall Swatt, the founder of New York-based Coinsetter, a bitcoin exchange acquired by larger peer San Francisco-based Kraken in 2016.

Other Chinese cryptocurrency players said traders were also moving away from using Tencent’s WeChat app, to encrypted messenger app Telegram to avoid regulatory scrutiny. Some said they were still seeing overseas-based ICOs being marketed in China. The Sept. 4 shutdown of ICOs stipulated that Chinese citizens were not allowed to invest in ICOs. Overseas ICOs have been returning money on a voluntary basis.

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That’s going to hurt.

China Orders North Korean Companies Active In The Country To Shut Down (BBG)

China ordered North Korean companies active in the country to shut down as it seeks to implement United Nations’ sanctions against the hermetic regime. Joint ventures between Chinese firms and North Korean entities and individuals will also have to close, according to a statement on the website of China’s Ministry of Commerce Thursday. Companies are required to cease business within 120 days of Sept. 12 – the day after the UN passed new sanctions aimed at punishing North Korea for its latest missile and nuclear tests. Non-profit and non-commercial public utility and infrastructure projects are not subject to the order, the ministry said. The move comes ahead of U.S. Secretary of State Rex Tillerson’s visit to China at the weekend. North Korea is among topics to be discussed with senior Chinese leaders, along with President Donald Trump’s planned trip to the region and trade and investment issues, the State Department said in a statement on Wednesday.

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Please keep the peace.

The Closing Of The Catalan Polling Stations (EI)

As we reported yesterday, the Catalan head prosecutor has instructed the regional police, the Mossos d’Esquadra, to seal the designated polling stations for Sunday’s independence referendum by Friday. This may not be easy. The radical left separatist party CUP is calling for the seals to be broken, and there will be attempts to organise sit-ins at the polling stations before the police comes to seal them, which would force the police to clear the sit-in. As we noted yesterday they are about 2,700 polling stations in a Catalan election, which stretches the police’s ability to cover them all simultaneously. The Mossos have responded officially that they will act proportionately, and that there is a risk that sealing the polling places may lead to public unrest. In addition, they are demanding a court order – not just an instruction from the prosecutor – to seal the polling stations.

The Catalan government says that the police is there to guarantee order so that people can exercise their right to vote, while the Spanish government says the police is there to prevent illegal acts from being carried out. The Catalan premier has convened the region’s public safety board, which includes representatives of the Spanish interior minister who will be in attendance. The interior minister had previously set up security coordination meetings for all the Spanish and Catalan police forces, which the Mossos resent as they result in putting them under command of the national police. We have also reported that Mariano Rajoy will miss tomorrow’s informal EU summit in Tallinn, which starts today with a dinner, ostensibly on account of the Catalan referendum. The referendum is scheduled for Sunday. We wonder whether Mariano Rajoy feels he needs to be in Spain on the Friday just in case unrest breaks out.

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Sounds like a lot. The French are serious about wine.

French Vineyards Robbed Of Seven Tonnes Of Grapes (AFP)

At least seven tonnes of grapes have been stolen in the dead of night from vineyards in France’s prime winegrowing region of Bordeaux, following a disastrous yield blamed on poor weather, police say. Three vineyards have had grapes and even whole vines stolen since mid-September, police said on Wednesday. They said about six and a half tonnes of grapes disappeared from a vineyard in Genissac near the world-famous Saint Emilion region, adding that the theft was clearly committed by professional vintners. Between 600 and 700kg (1,300 and 1,500lb) of grapes were stolen from a vineyard in Pomerol, which produces top quality reds. Thieves also uprooted 500 vines from a vineyard in nearby Montagne, police said.

A fourth grape robbery took place in Lalande-de-Pomerol, according to a local press report. Thieves making away with grapes is not a new phenomenon but it has surged this year apparently because of a very low yield. “There’s a great temptation to help oneself from [the vineyard] next door,” an industry expert told AFP on condition of anonymity. France faces its poorest wine harvest since 1945 after an unusually mild March and frosty April, experts said last month, although a hot summer promises to deliver top vintages. The agriculture ministry said output was expected to total 37.2m hectolitres (983m US gallons), 18% less than 2016 and 17% below the average over the past five years.

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Merkel already sold off Greece to please her bankers. Now she’s planning to make things worse in order to cement a coalition.

Schäuble Leaves But Schäuble-ism Lives On (Varoufakis)

Wolfgang Schäuble may have left the finance ministry but his policy for turning the eurozone into an iron cage of austerity, that is the very antithesis of a democratic federation, lives on. What is remarkable about Dr Schäuble’s tenure was how he invested heavily in maintaining the fragility of the monetary union, rather than eradicating it in order to render the eurozone macro-economically sustainable and resilient. Why did Dr Schäuble aim at maintaining the eurozone’s fragility? Why was he, in this context, ever so keen to maintain the threat of Grexit? The simple answer is: Because a state of permanent fragility was instrumental to his strategy for using the threat of expulsion from the euro (or even of Germany’s withdrawal from it) to discipline the deficit countries – chiefly France.

Deep in Dr Schäuble’ thinking there was the belief that, as a federation is infeasible, the euro is a glorified fixed exchange rate regime. And the only way of maintaining discipline within such a regime was to keep alive the threat of expulsion or exit. But to keep that threat alive, the eurozone could not be allowed to develop the instruments and institutions that would stop it from being fragile. Thus, the eurozone’s permanent fragility was, from Dr Schäuble’s perspective an end-in-itself, rather than a failure. The Free Democratic Party’s ascension will see to it that Wolfgang Schäuble’s departure will not alter the policy of doing whatever it takes to prevent the eurozone‘s evolution into a sustainable macroeconomy.

The FDP’s sole promise to its voters was to prevent any of Emmanuel Macron’s plans, for some federation-lite, from being agreed to, and for pursuing Grexit. Even worse, whereas Wolfgang Schäuble understood that austerity plus new loans were catastrophic for countries like Greece (but insisted on them as part of his campaign to discipline France and Italy), his FDP successors at the finance ministry will probably be less ‘enlightened’ believing that the ‘tough medicine’ is fit for purpose. And so the never ending crisis of Europe’s social economy, that feeds the xenophobic political monsters, continues.

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Waterboarding. And worse. Do this to an economy, and it will fail outright. That, then, must be what Berlin is aiming for.

Over Half Of All Greek Enterprises Are In The Red (K.)

At least 56% of small and medium-sized enterprises (SMEs) are now in debt due to low liquidity and high borrowing, a combination that forbids them from meeting their short-term obligations. Only a fraction have a chance of having their debt restructured, which means that sooner or later they will follow the fate of many of their peers and be forced to shut down. This is the main conclusion of a Piraeus Bank analysis after a sample of 7,896 companies were assessed using its Enterprise Rating System (ERS). Given that over 97% of enterprises in Greece are SMEs, the risk both to them and the economy in general is clear, with an impact on state revenues, employment and bank provisions.

The ERS assessment resulted in four categories of enterprises based on liquidity, solvency, degree of leverage and debt servicing. Just 8.6% of all companies have made it into the A category. They are the healthiest businesses, with high cash flows, even though two-thirds face problems with their earnings. Category B accounts for 35.7% of companies, which display satisfactory performance; however, it should be observed that the obligations of these businesses exceed their assets by 1.2 times. The largest category is C, with two-fifths of all companies, or 40.4%; they are enterprises which have not yet reached the brink as they have some chances at becoming sustainable, but indicate a low degree of debt servicing, finding themselves in the red.

Finally there is category D, which hosts 15.4% of all companies. The vast majority (82.5%) has a substantial problem in terms of sustainability; not only do they have a negative operating profit rate, averaging at -9.1%, but they are also loss-making. The average company in this category has borrowing that is three-and-a-half times its assets and 25 times its earnings before interest, tax, depreciation and amortization (EBITDA).

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Lesvos Solidarity on Twitter: “Section C in #moria now houses around 200 unaccompanied minors, incl pregnant girls. They are unattended after 17.00.”

Surge In Migration To Greece Fuels Misery In Refugee Camps (G.)

Greece is experiencing a dramatic rise in the number of refugees and migrants entering the country, exacerbating already deplorable living conditions on island camps. The number of people arriving, across land and sea borders, has more than doubled since the beginning of the summer. Authorities estimate arrivals are now at their highest level since March 2016, with over 200 men, women and children being registered every day. “It is dramatic and it is the most vulnerable of the vulnerable coming in,” said Elias Pavlopoulos, who heads Médecins sans Frontières in Greece. “There are whole families fleeing war zones in Syria and Iraq. In the last few months our clinics have seen more people who have suffered violence, who are victims of rape, who have been tortured, than ever before.”

Despite a pledge by EU member states in September 2015 to relocate 160,000 asylum seekers – including 106,000 from Greece and Italy – a mere 29,000 have been moved to other European countries so far. With the 28-nation bloc failing to meet the deadline set out in its own plan, mass demonstrations are expected in capitals across Europe this weekend. Refugees and migrants have been arriving in Greece not only on rickety boats from Turkey but by foot across the frontier between the two countries. On Wednesday, police announced 37 refugees – including 19 children – from Iraq, Syria, Eritrea and Afghanistan, had been dumped by smugglers on the national highway outside Thessaloniki.

Human rights groups are increasingly likening the situation to 2015, when, at the height of the migrant crisis that engulfed Europe, Greece saw close to a million people enter the country on onward journeys that often took them to Germany. “We’re living the days of 2015,” said Pantelis Dimitriou from Iliaktida, a local NGO on Lesbos operating accommodation and support centres for the newly arrived. “The flows have become huge. From around 50 to 60 in early July they are now at more than 200 every day. Maybe it is the German elections, maybe it is about Turkey’s [worsening] relations with the EU, or maybe this is the last push before winter, but something is going on.” More worrying is the number of minors making the often treacherous journey to get to Greece. In a statement this week, Save the Children said around 40% of the new arrivals were under the age of 18. Over 1,500 unaccompanied minors are currently on waiting lists in Greece to be housed in child shelters.

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We need a global ban on using antibiotics on farms. But the industry is very powerful.

China’s Love of Meat Is Driving Global Antibiotic Usage (BBG)

Growing global demand for animal protein is good news for the pharmaceutical industry, but a worry for public health. Food animals will consume 200,235 tons of antimicrobial medicines by 2030, 53% more than they were getting in 2013, according to a study published Thursday in the journal Science. China, already the world’s largest consumer of veterinary antimicrobials, is forecast to lead the charge, with a 59% jump. That bodes badly for the efficacy of these infection-fighting medications. The study’s authors linked the quantity of drugs used on farms with the emergence of foodborne bacteria, like Campylobacter and Salmonella harboring antibiotic-resistance genes. Limiting daily meat intake worldwide to the equivalent of one standard fast-food burger per person could reduce global consumption of antimicrobials in food animals by 66%, the researchers said.

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It was fun while it lasted?!

Tropical Forests Don’t Absorb Carbon. They Emit As Much As All US Transit (Q.)

Since humans began to worry about having put too much carbon in the atmosphere, we’ve considered tropical forests an important “carbon sink.” Their fast growth rate, dense vegetation, and rich soils sucked more carbon out of the atmosphere then they produced. In other words, tropical forests were a natural greenhouse-gas vacuum. Except now, just when the world most needs them to be, they’re not. At some point, it turns out, deforestation, drought, and other forest-disturbing factors tipped the scales, making tropical forests a net producer of carbon rather than a sink, according to a new study published Sept. 28 in the journal Science. Each year, instead of absorbing carbon, these degraded forests are a source of more carbon (roughly 425 teragrams of carbon per year) than an entire year’s worth of US transportation emissions.

Scientists at Woods Hole Research Center and Boston University spent two and a half years trekking to tropical forests in 22 countries, measuring trees’ thickness and recording their growth rate, which is a big factor in how much carbon a forest is absorbing. They then paired their field data with laser remote-sensing data and 12 years of satellite data from NASA’s MODIS satellites. The researcher’s combined approach allowed them to figure out not just losses from dramatic deforestation, but also the harder-to-calculate losses from less obvious factors, like selective logging and small-scale farming. Previous studies have looked at large-scale deforestation in the tropics as a source of carbon, and more recent papers have pointed towards the subtler forms of degradation as a likely underestimated source.

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Sep 282017
 
 September 28, 2017  Posted by at 1:52 pm Finance Tagged with: , , , , , , ,  


Koyaanisqatsi

 

The film Koyaanisqatsi was released in 1982. The title means ‘life out of balance’ in the language of the Hopi, a Native American tribe who live(d) mainly in what is now north-east Arizona. It is directed by Godfrey Reggio with music by Philip Glass and cinematography by Ron Fricke. There are no actors, and no dialogue. Philip Glass’s music underlies a series of film fragments that contrast the beauty of American nature with the noise and pollution mankind has added to it. Wikipedia:

The film consists primarily of slow motion and time-lapse footage of cities and many natural landscapes across the United States. The visual tone poem contains neither dialogue nor a vocalized narration: its tone is set by the juxtaposition of images and music. Reggio explained the lack of dialogue by stating “it’s not for lack of love of the language that these films have no words. It’s because, from my point of view, our language is in a state of vast humiliation. It no longer describes the world in which we live.”

Due to its initial success, Reggio and Glass made two sequels to the film, Powaqqatsi (1988), meaning “parasitic way of life” or “life in transition”, and Naqoyqatsi (2002) which means “life as war”, “civilized violence” and “a life of killing each other”. If you haven’t seen them, they come highly recommended.

 

 

Koyaanisqatsi is an fitting term to describe not only our world in general, but also our economies. They are severely out of balance, and getting more so every day. But economies, like nature, need at least a minimum in balance. If that disappears, this lack of balance will tip them over. It is somewhat strange that this is not being recognized, and not even discussed.

It’s as if people think that when almost all wealth goes to a select very few, an economy can still continue to function. It can’t. The rich getting continually richer means the poor getting poorer (as overall growth is slow or non-existent), until the latter reach a point where they can no longer afford even basic necessities. That’s when parts of an economy will start dying, in the same vein that parts of a living body, an organism, die off when the supply of blood, nutrients and oxygen is cut off.

For an economy to function, it needs money to flow through it the same way a body needs blood to flow. If all the money gets increasingly concentrated in just a small area, the economy stagnates. We measure the flow of money as velocity:

 

 

If that graph would describe a human body, it would be in an ambulance on the way to ER. The only times velocity of money have been as low as today was during a Great Depression and a World War.

The ever richer rich cannot spend enough to keep things moving. They can buy stocks and bonds and houses, but they can’t buy all the groceries and clothing that the poor and middle class no longer can. But it’s those things that keep the economy humming along.

An economy as unbalanced as the one we presently have is bound to perish. The rich are killing their own economies by trying to get richer all the time. And they have no idea that’s what happens. It’s sort of baked into their understanding of what capitalism is. Or neo-liberalism if you want.

We should look upon, and handle, our economies and societies as living, and vibrant, systems, but we’re miles away from any such understanding. Our education systems are gross failures when it comes to this, and our media, owned by the rich, support anything that will make them richer. Even though that is suicidal for everyone involved. We are a tragic species in many more ways than one.

This has nothing to do with political views, with socialism or communism or any ism, it’s a simple empirical observation. It’s not about ‘everyone deserves their fair share’, but about if they don’t get their share, no economy will be left to hand out any shares even to the rich. If the rich want to get richer, they will need a functioning economy to get there.

In other words, someone will have to call a halt, or at least a pause, to the pace at which they’re getting richer, or their quest for riches will become self-defeating. Literally every single human being can grasp this, but hardly anyone even considers it. At their peril.

Here’s just a small example from CNBC, there are thousands just like it:

The Top 1% Of Americans Now Control 38% Of The Wealth

America’s top 1% now control 38.6% of the nation’s wealth, a historic high, according to a new Federal Reserve Report. The Federal Reserve’s Surveys of Consumer Finance shows that Americans throughout the income and wealth ladder posted gains between 2013 and 2016. But the wealthy gained the most, driven largely by gains in the stock market and asset values. The top 1% saw their share of wealth rise to 38.6% in 2016 from 36.3% in 2013.

The next highest 9% of families fell slightly, and the share of wealth held by the bottom 90% of Americans has been falling steadily for 25 years, hitting 22.8% in 2016 from 33.2% in 1989. The top income earners also saw the biggest gains. The top 1% saw their share of income rise to a new high of 23.8% from 20.3% in 2013. The income shares of the bottom 90% fell to 49.7% in 2016.

Now, you may think: 38%, how bad is that?, and you may be forgiven for thinking that way. After all, you’re in a majority there. To understand the severity of what’s happening, you need to look at the trends:

 

 

This one from the New York Times, annotated by Charles Hugh Smith, is very revealing too. What happens is that just as we find ourselves in a stagnating/shrinking economy, the rich get richer fast. They can do that because central banks are releasing trillions of dollars in QE, but also because the system is geared towards eviscerating the poor, and increasingly the middle class as well:

 

 

And this is amplified by the ultra-low rates policies central banks have been pushing over the past decade. They allow for the ever poorer to keep up appearances of wealth by plunging into debt ever deeper, but they don’t allow for their living conditions, their jobs, their savings, their pensions, to recover. They do the exact opposite. As this graph from Mike Lebowitz, one of many to show the same trendline, goes to show:

 

 

This is not an American phenomenon, though it’s more pronounced stateside. And Trump’s tax reform plans promise to only make it worse. It looks like Bernie Sanders might be the only politician in the US to stop it, but what are the odds of that? We live in a system that is warranting economic suicide for everyone including its own proponents, and we’re blindly following it like so many lemmings.

The Koyaanisqatsi film doesn’t have a happy Hollywood ending, and it makes no pretense of it. Our Koyaanisqatsi economy will not end with ‘they lived happily ever after’ either. The protagonists wouldn’t know how to achieve that. They don’t understand what makes an economy run, and keeps it running.

And they don’t want to understand, because they think it’ll make them less rich. Nobody gives balance a second’s thought. Presumably because they think the system, like nature, will eventually balance itself. And they’re right in that. They just haven’t considered what that balancing act might mean for them personally.

if you’re rich, good on you. But don’t forget what made it possible for you to gather your riches, or you’ll lose them, and probably a lot more too.