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.

Read more …

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.

Read more …

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.

 

 

 

Sep 282017
 
 September 28, 2017  Posted by at 8:38 am Finance Tagged with: , , , , , , , , ,  


Juan Gris Man in the café 1912

 

The Illusion of Prosperity (Lebowitz)
Trump Tax Plan Economic Outcomes Likely Disappointing (Roberts)
The Top 1% Of Americans Now Control 38% Of The Wealth (CNBC)
This Chart Defines the 21st Century Economy (CHS)
China’s Traders Have an Excuse to Take the Rest of Year Off
China’s Mortgage Debt Bubble Raises Spectre Of 2007 US Crisis (SCMP)
Debt Boom In India And China Threatens New Financial Crisis – WEF (Tel.)
Japan Downgrade Risk Seen Rising as Default Swaps Climb (BBG)
JPMorgan Ordered To Pay Over $4 Billion To Widow And Family (ZH)
The Courage to Normalize Monetary Policy (Stephen Roach)
German Finance Minister Wolfgang Schäuble To Be Bundestag Speaker (G.)

 

 

The future wants its future back.

The Illusion of Prosperity (Lebowitz)

For the last 50 years, the consumer, that means you and me, have been the most powerful force driving the U.S. economy. Household spending now accounts for almost 70% of economic growth, about 10% more than it did in 1971. Household spending in the U.S. is also approximately 10-15% higher than most other developed nations. Currently, U.S. economic growth is anemic and still suffering from the after-shocks of the financial crisis. Importantly, much of that weakness is the result of growing stress on consumers. Using the compelling graph below and the data behind it, we can illustrate why the U.S. economy and consumers are struggling.

The blue line on the graph above marks the difference between median disposable income (income less taxes) and the median cost of living. A positive number indicates people at the median made more than their costs of living. In other words, their income exceeds the costs of things like food, housing, and insurance and they have money left over to spend or save. This is often referred to as “having disposable income.” If the number in the above calculation is negative, income is not enough to cover essential expenses. From at least 1959 to 1971, the blue line above was positive and trending higher. The consumer was in great shape. In 1971 the trend reversed in part due to President Nixon’s actions to remove the U.S. dollar from the gold standard.

Unbeknownst to many at the time, that decision allowed the U.S. government to run consistent trade and fiscal deficits while its citizens were able to take on more debt. Other than rampant inflation, there were no immediate consequences. In 1971, following this historic action, the blue line began to trend lower. By 1990, the median U.S. citizen had less disposable income than the median cost of living; i.e., the blue line turned negative. This trend lower has continued ever since. The 2008 financial crisis proved to be a tipping point where the burden of debt was too much for many consumers to handle. Since 2008 the negative trend in the blue line has further steepened. You might be thinking, if incomes were less than our standard of living, why did it feel like our standard of living remained stable? One word – DEBT.

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Lance has a lot of detail in his assessment. Worth a read.

Trump Tax Plan Economic Outcomes Likely Disappointing (Roberts)

Do not misunderstand me. Tax rates CAN make a difference in the short run particularly when coming out of a recession as it frees up capital for productive investment at a time when recovering economic growth and pent-up demand require it. However, in the long run, it is the direction and trend of economic growth that drives employment. The reason I say “direction and trend” is because, as you will see by the vertical blue dashed line, beginning in 1980, both the direction and trend of economic growth in the United States changed for the worse. Furthermore, as I noted previously, Reagan’s tax cuts were timely due to the economic, fiscal, and valuation backdrop which is diametrically opposed to the situation today.

“Importantly, as has been stated, the proposed tax cut by President-elect Trump will be the largest since Ronald Reagan. However, in order to make valid assumptions on the potential impact of the tax cut on the economy, earnings and the markets, we need to review the differences between the Reagan and Trump eras.

[..] Of course, as noted, rising debt levels is the real impediment to longer-term increases in economic growth. When 75% of your current Federal Budget goes to entitlements and debt service, there is little left over for the expansion of the economic growth. The tailwinds enjoyed by Reagan are now headwinds for Trump as the economic “boom” of the 80’s and 90’s was really not much more than a debt-driven illusion that has now come home to roost. Senator Pat Toomey, a Pennsylvania Republican who sits on the finance committee, said he was confident that a growing economy would pay for the tax cuts and that the plan was fiscally responsible. “This tax plan will be deficit reducing,”

The belief that tax cuts will eventually become revenue neutral due to expanded economic growth is a fallacy. As the CRFB noted: “Given today’s record-high levels of national debt, the country cannot afford a deficit-financed tax cut. Tax reform that adds to the debt is likely to slow, rather than improve, long-term economic growth.” The problem with the claims that tax cuts reduce the deficit is that there is NO evidence to support the claim. The increases in deficit spending to supplant weaker economic growth has been apparent with larger deficits leading to further weakness in economic growth. In fact, ever since Reagan first lowered taxes in the ’80’s both GDP growth and the deficit have only headed in one direction – lower.

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The economy lost its balance. It will tip over.

The Top 1% Of Americans Now Control 38% Of The Wealth (CNBC)

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 nine% 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.

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I smell danger.

This Chart Defines the 21st Century Economy (CHS)

One chart defines the 21st century economy and thus its socio-political system: the chart of soaring wealth/income inequality. This chart doesn’t show a modest widening in the gap between the super-wealthy (top 1/10th of 1%) and everyone else: there is a veritable Grand Canyon between the super-wealthy and everyone else, a gap that is recent in origin. Notice that the majority of all income growth now accrues to the the very apex of the wealth-power pyramid. This is not mere chance, it is the only possible output of our financial system. This is stunning indictment of our socio-political system, for this sort of fast-increasing concentration of income, wealth and power in the hands of the very few at the top can only occur in a financial-political system which is optimized to concentrate income, wealth and power at the top of the apex.

[..] the elephant in the room few are willing to mention much less discuss is financialization, the siphoning off of most of the economy’s gains by those few with the power to borrow and leverage vast sums of capital to buy income streams–a dynamic that greatly enriches the rentier class which has unique access to central bank and private-sector bank credit and leverage. Apologists seek to explain away this soaring concentration of wealth as the inevitable result of some secular trend that we’re powerless to rein in, as if the process that drives this concentration of wealth and power wasn’t political and financial. There is nothing inevitable about such vast, fast-rising income-wealth inequality; it is the only possible output of our financial and pay-to-play political system.

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China just took two giant steps back from being a functioning economy.

China’s Traders Have an Excuse to Take the Rest of Year Off

Financial markets in the world’s second-largest economy are set to turn listless in the fourth quarter as party officials keep a lid on volatility around a seminal Communist Party gathering. That’s the finding of Bloomberg surveys of market participants. The benchmark Shanghai Composite Index is projected to end the year 0.3% higher than Wednesday’s close. The yuan will be at 6.64 per dollar, unchanged from the current level, while the 10-year sovereign bond yield is expected to slip to 3.59% from 3.63%. “I don’t expect any big swings,” said Ken Chen, Shanghai-based analyst with KGI Securities Co. “Regulators would want to ensure the markets are stable for the 19th Party Congress.”

Authorities have stressed the need for stability in the lead-up to what will be China’s most important political event in years. The twice-a-decade party congress, which starts on Oct. 18, is expected to replace about half of China’s top leadership and shape President Xi Jinping’s influence into the next decade. The China Securities Regulatory Commission has ordered local brokerages to mitigate risks and ensure stable markets before and during the event, people familiar with the matter have said. The CSRC has also banned brokerage bosses from taking holidays or leaving the country from Oct. 11 until the congress ends, according to the people.

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Why that forced low volatility is so dangerous. No price discovery.

China’s Mortgage Debt Bubble Raises Spectre Of 2007 US Crisis (SCMP)

Young Chinese like Eli Mai, a sales manager in Guangzhou, and Wendy Wang, an executive in Shenzhen, are borrowing as much money as possible to buy boomtown flats even though they cannot afford the repayments. Behind the dream of property ownership they share with many like-minded friends lies an uninterrupted housing price rally in major Chinese cities that dates back to former premier Zhu Rongji’s privatisation of urban housing in the late 1990s. Rapid urbanisation, combined with unprecedented monetary easing in the past decade, has resulted in runaway property inflation in cities like Shenzhen, where home prices in many projects have doubled or even tripled in the past two years. City residents in their 20s and 30s view property as a one-way bet because they’ve never known prices to drop. At the same time, property inflation has seen the real purchasing power of their money rapidly diminish.

“Almost all my friends born since the 1980s and 1990s are racing to buy homes, while those who already have one are planning to buy a second,” Mai, 33, said. “Very few can be at ease when seeing rents and home prices rise so strongly, and they will continue to rise in a scary way.” The rush of millions young middle-class Chinese like Mai into the property market has created a hysteria that eerily resembles the housing crisis that struck the United States a decade ago. Thanks to the easy credit that has spurred the housing boom, many young Chinese have abandoned the frugal traditions of earlier generations and now lead a lifestyle beyond their financial means. The build-up of household and other debt in China has also sparked widespread concern about the health of the world’s second largest economy.

[..] Mai and Wang have been playing it fast and loose to deal with their debts. Mai has lent 600,000 of the 800,000 yuan he got from a bank after using his first flat as collateral to a money shark promising an annualised return of 20 per cent. Wang gave the bank fake documents showing her monthly income was 18,000 yuan – about 1.6 times her actual salary. It did not ask any questions. Neither see any problem, because the value of their underlying assets, the flats, have risen. The value of Mai’s two flats rose from 3.8 million yuan last year to 6.4 million yuan last month, while the value of Wang’s unit is now 2.93 million yuan, up from 2.6 million yuan. “I think I made a smart and successful decision to leverage debt,” Mai said.

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Watch India.

Debt Boom In India And China Threatens New Financial Crisis – WEF (Tel.)

Banks across the world are more vulnerable to a crisis now than they were in the build up to the credit crunch, the World Economic Forum has warned. Bad loans in India have more than doubled in the past two years, while in China’s financial system “business credit is building up similarly to the United States pre-crisis, and could be a new source of vulnerability.” China’s credit boom has been the subject of several warnings from global finance groups and regulators in recent months. Last week the Bank of International Settlements warned that higher interest rates in the US could have a knock on effect in the world’s second-largest economy, forcing rates higher in China, making the debt mountain more expensive to maintain and hitting the economy hard.

Britain, the US and other developed economies have taken major steps to shore up their banking systems as they were at the heart of the financial crisis, but the global financial system as a whole faces new and growing risks. Other parts of the financial system are taking risks instead, such as fund managers in the so-called shadow banking sector. The eurozone banks have still not fully recovered from the crash either. “In general, there is still too much debt in parts of the private sector, and top global banks are still ‘too big to fail’,” the WEF’s Global Competitiveness Report said. “The largest 30 banks hold almost $43 trillion in assets, compared to less than $30 trillion in 2006, and concentration is continuing to increase in the US, China, and some European countries. “In Europe, banks are still grappling with the consequences of 10 years of low growth and the enduring non-performance of loans in many countries.”

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Abe’s power gamble.

Japan Downgrade Risk Seen Rising as Default Swaps Climb (BBG)

Japan’s credit rating could be in the cross hairs after Prime Minister Shinzo Abe indicated the nation may abandon its goal of covering key expenditures through taxes. The cost of insuring Japan’s government debt against default rose to a 15-month high on Tuesday, with policy uncertainty adding to concerns about tensions with North Korea. On Monday, Abe said he would dissolve parliament later this week and he’d pay for economic measures with funds from a consumption-tax increase originally intended to rein in the nation’s swollen debt. Japanese government bonds extended declines Wednesday after S&P Global Ratings said it expects “material” fiscal deficits to continue through 2020.

S&P’s ratings assume fiscal improvements will be gradual over the next few years, sovereign analyst Craig Michaels said. “The prospect for extra revenue to be spent rather than being used to pay down Japan’s debt is a factor of higher bond yields,” said Shuichi Ohsaki, chief rates strategist for Japan at Bank of America Merrill Lynch. “There also appears to be some speculation that such a policy move will lead to a sovereign downgrade.” Yield on Japan’s five-year note added 2.5 basis points to minus 0.090% Wednesday, which would be the steepest increase since March 9. The benchmark 10-year yield climbed 2.5 basis points to 0.055%, a level unseen since early August.

The challenges in meeting the long-standing objective of achieving a primary balance surplus, add to concerns about Japan’s debt load, which is the world’s heaviest. Getting to that goal would allow the government to pay for programs including social security and public works projects from tax revenue, rather than through new debt financing. Abe is betting he can crush a weak opposition in next month’s election, which he has framed in part as a vote on his plans to use revenue from the upcoming consumption-tax hike to fund an $18 billion economic package aimed at tackling the challenges of an aging society.

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It’s the mob. One question. Who’s going to end up paying?

JPMorgan Ordered To Pay Over $4 Billion To Widow And Family (ZH)

A Dallas jury ordered JPMorgan Chase to pay more than $4 billion in damages for mishandling the estate of a former American Airlines executive. Jo Hopper and two stepchildren won a probate court verdict over claims that JPMorgan mismanaged the administration of the estate of Max Hopper, who was described as an airline technology innovator by the family’s law firm. The bank, which was hired by the family in 2010 to independently administer the estate of Hopper, was found in breach of its fiduciary duties and contract. In total, JP Morgan Chase was ordered to pay at least $4 billion in punitive damages, approximately $4.7 million in actual damages, and $5 million in attorney fees.

The six-person jury, which deliberated a little more than four hours starting Monday night and returned its verdict at approximately 12:15 a.m. Tuesday, found that the bank committed fraud, breached its fiduciary duty and broke a fee agreement, according to court papers. “The nation’s largest bank horribly mistreated me and this verdict provides protection to others from being mistreated by banks that think they’re too powerful to be held accountable,” said Hopper in a statement. “The country’s largest bank, people we are supposed to trust with our livelihood, abused my family and me out of sheer ineptitude and greed. I’m blessed that I have the resources to hold JP Morgan accountable so other widows who don’t have the same resources will be better protected in the future.” “Surviving stage 4 lymphoma cancer was easier than dealing with this bank and its estate administration,” Mrs. Hopper added.

Max Hopper, who pioneered the SABRE reservation system for the airline, died in 2010 with assets of more than $19 million but without a will and testament, according to the statement. JPMorgan was hired as an administrator to divvy up the assets among family members. “Instead of independently and impartially collecting and dividing the estate’s assets, the bank took years to release basic interests in art, home furnishings, jewelry, and notably, Mr. Hopper’s collection of 6,700 golf putters and 900 bottles of wine,” the family’s lawyers said in the statement. “Some of the interests in the assets were not released for more than five years.”

The bank’s incompetence caused more than just unacceptably long timelines; bank representatives failed to meet financial deadlines for the assets under their control. In at least one instance, stock options were allowed to expire. In others, Mrs. Hopper’s wishes to sell certain stock were ignored. The resulting losses, the jury found, resulted in actual damages and mental anguish suffered by Mrs. Hopper. With respect to Mr. Hopper’s adult children, the jury found that they lost potential inheritance in excess of $3 million when the Bank chose to pay its lawyers’ legal fees out of the estate account to defend claims against the Bank for violating its fiduciary duty.

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“A world in recovery”, Stephen?

The Courage to Normalize Monetary Policy (Stephen Roach)

Central banks’ unconventional monetary policies – namely, zero interest rates and massive asset purchases – were put in place in the depths of the 2008-2009 financial crisis. It was an emergency operation, to say the least. With their traditional policy tools all but exhausted, the authorities had to be exceptionally creative in confronting the collapse in financial markets and a looming implosion of the real economy. Central banks, it seemed, had no choice but to opt for the massive liquidity injections known as “quantitative easing.” This strategy did arrest the free-fall in markets. But it did little to spur meaningful economic recovery. The G7 economies (the United States, Japan, Canada, Germany, the United Kingdom, France, and Italy) have collectively grown at just a 1.8% average annual rate over the 2010-2017 post-crisis period.

That is far short of the 3.2% average rebound recorded over comparable eight-year intervals during the two recoveries of the 1980s and the 1990s. Unfortunately, central bankers misread the efficacy of their post-2008 policy actions. They acted as if the strategy that helped end the crisis could achieve the same traction in fostering a cyclical rebound in the real economy. In fact, they doubled down on the cocktail of zero policy rates and balance-sheet expansion. And what a bet it was. According to the Bank for International Settlements, central banks’ combined asset holdings in the major advanced economies (the US, the eurozone, and Japan) expanded by $8.3 trillion over the past nine years, from $4.6 trillion in 2008 to $12.9 trillion in early 2017. Yet this massive balance-sheet expansion has had little to show for it.

Over the same nine-year period, nominal GDP in these economies increased by just $2.1 trillion. That implies a $6.2 trillion injection of excess liquidity – the difference between the growth in central bank assets and nominal GDP – that was not absorbed by the real economy and has, instead been sloshing around in global financial markets, distorting asset prices across the risk spectrum. Normalization is all about a long-overdue unwinding of those distortions. Fully ten years after the onset of the Great Financial Crisis, it seems more than appropriate to move the levers of monetary policy off their emergency settings. A world in recovery – no matter how anemic that recovery may be – does not require a crisis-like approach to monetary policy. Monetary authorities have only grudgingly accepted this. Today’s generation of central bankers is almost religious in its commitment to inflation targeting – even in today’s inflationless world. While the pendulum has swung from squeezing out excess inflation to avoiding deflation, price stability remains the sine qua non in central banking circles.

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Chaos looms in Germany. Merkel will be forced to accept a FinMin she doesn’t want. Greece will be squeezed even more. And Italy, Spain etc.

German Finance Minister Wolfgang Schäuble To Be Bundestag Speaker (G.)

Wolfgang Schäuble, a man revered and reviled in equal measure for his tenacious austerity economics, is to relinquish his powerful role as Germany’s finance minister and instead become the speaker of the parliament, his party has announced. Schäuble, 75, was asked to take on the role by the chancellor, Angela Merkel, who is keen on someone with authority and experience to steer future debate in the Bundestag after the success in Sunday’s election of the rightwing radical Alternative für Deutschland (AfD). The AfD is due to take up 94 seats in the house, having secured 12.6% of the vote, and its leadership has pledged to shake up the debating culture in the Bundestag, making it considerably rowdier than the calm and consensus-based mood that has characterised it in the past.

The role of speaker has been empty since Norbert Lammert, a veteran CDU MP, recently announced he would retire at the end of the last parliamentary term. In terms of protocol it ranks second only to that of federal president, and ahead of the chancellor, but in reality it is considerably less powerful than his current post. Schäuble, a lawyer by training, is the longest-serving MP in the Bundestag, having been elected in 1972. Once one of Merkel’s staunchest rivals, he has since become one of her closest confidantes as well as the most experienced and high-profile minister in her cabinet. He has been finance minister since 2009 and is held in high regard in Germany, particularly by the conservative base, who revere him for acting in Germany’s interests as the dogged protector of austerity economics in the eurozone.

He is also admired at home for his insistence – some would say obsession – with a balanced budget or the “black zero”. Germany today has a record budget surplus. But elsewhere he is a hugely controversial figure, particularly in Greece and in Ireland, where he has often faced criticism for his handling of the euro crisis that has dominated almost his entire time as finance minister. Schäuble has yet to respond to the reports of his new appointment, but it was confirmed on Wednesday afternoon by Volker Kauder, the chairman of the CDU parliamentary bloc.

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Aug 092017
 
 August 9, 2017  Posted by at 7:56 am Finance Tagged with: , , , , , , , , , ,  


Fred Stein Police car, New York 1942

 

The Only Thing Keeping Italy’s Debt Alive is the ECB (DQ)
Federal Bank Regulator Drops a Bombshell as Corporate Media Snoozes (Martens)
Officials Spend Big In The Run Up To China’s Communist Party Congress (BBG)
China Is Taking on the ‘Original Sin’ of Its Mountain of Debt (BBG)
Jeff Gundlach Predicts He Will Make 400% On Bet Against Stock Market (CNBC)
Our Broken Economy, in One Simple Chart (NYT)
The Economic Crash, Ten Years On (Pettifor)
Opioid Deaths In US Break New Record: 100 People A Day (RT)
New Hampshire Sues Purdue Pharma Over Opioid Marketing Practices (R.)
Americans Are Dying Younger, Saving Corporations Billions (BBG)
Unlearning The Myth Of American Innocence (G.)
EU Nations Start Process Of Returning Refugees, Migrants To Greece (AP)

 

 

As Trump sinks into opioids and nuke threats (talking to Kim in his own language, and no, Trump does not like the Korea thing), and Google sinks into its self-dug moral morass, let’s not forget this one thing: we would not have what poses as an economy if not for central banks buying anything not bolted down. And they cannot keep doing that. And what then?

“At current government debt net issuance rates and announced QE levels, the ECB will have been responsible for financing 100% of Italy’s deficits from 2014 to 2019”

The Only Thing Keeping Italy’s Debt Alive is the ECB (DQ)

New statistical data from the investment bank Jefferies LLC has revealed a startling new trend that could have major implications for Europe’s economic future: Italian banks have begun dumping unprecedented volumes of Italian sovereign debt. Holdings of government debt by Italian financial institutions slumped by a record €20 billion in June – almost 10% of the total – after €9.4 billion of sales in May. As the FT reports, the selling by Italian banks is the most emphatic example yet of a broader trend: banks sold €46 billion of government paper in June across Europe, taking the total reduction since the start of this year to €257 billion. The banks’ mass sell-off is probably being driven by two main factors: first, as an attempt to preempt a pending Basel III reform package that could eliminate the equity capital privilege for EU government bonds and second, to position themselves for an anticipated autumn announcement from the ECB that it will begin tightening monetary policy.

“Maybe we are seeing an indication of Italian banks catching up with what their counterparts in Spain have known for a long time – that sovereign debt is not the place to be in a world of rising interest rates, said Jefferies’ senior European economist, Marchel Alexandrovich. But then: who’s buying it? The answer, in the case of Italy, is the ECB and its Italian branch office, the Bank of Italy, where Italian bank deposits rose by €22 billion in June and €50 billion since the start of 2017. The ECB “overbought” Italian government debt in July with purchases of €9.6 billion — its highest monthly quota since quantitative easing began. As Italian banks offload their holdings, the ECB, with Italian native and former Bank of Italy governor Mario Draghi at the helm, is picking up the slack.

In doing so, the central bank surpassed its own capital key rules by which member state debt is bought in proportion to the size of each country’s economy. By contrast, the ECB’s German Bund purchases slipped below its capital key rules for the fourth month in a row, which further depressed the spread between Italian and German 10-year debt to 152 basis points, its lowest level of the year. This spread is artificial, derived from the ECB’s binge buying of European sovereign bonds, particularly those belonging to countries on the periphery. A report published in May by Astellon Capital revealed that since 2008, 88% of Italy’s government debt net issuance was acquired by the ECB and Italian Banks. At current government debt net issuance rates and announced QE levels, the ECB will have been responsible for financing 100% of Italy’s deficits from 2014 to 2019. That was before taking into account the current sell-down of Italian bonds by Italian banks.

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As central banks buy 100% of a country’s new debt, US banks pay out more than 100% of earnings, and “share buybacks represent 72% of the total payouts for the 10 largest bank holding companies”. What better way to characterize a non-functioning economy?

Federal Bank Regulator Drops a Bombshell as Corporate Media Snoozes (Martens)

Last Monday, Thomas Hoenig, the Vice Chairman of the Federal Deposit Insurance Corporation (FDIC), sent a stunning letter to the Chair and Ranking Member of the U.S. Senate Banking Committee. The letter contained information that should have become front page news at every business wire service and the leading business newspapers. But with the exception of Reuters, major corporate media like the Wall Street Journal, Bloomberg News, the Business section of the New York Times and Washington Post ignored the bombshell story, according to our search at Google News. What the fearless Hoenig told the Senate Banking Committee was effectively this: the biggest Wall Street banks have been lying to the American people that overly stringent capital rules by their regulators are constraining their ability to lend to consumers and businesses.

What’s really behind their inability to make more loans is the documented fact that the 10 largest banks in the country “will distribute, in aggregate, 99% of their net income on an annualized basis,” by paying out dividends to shareholders and buying back excessive amounts of their own stock. Hoenig writes that the banks are starving the U.S. economy through these practices and if “the 10 largest U.S. Bank Holding Companies were to retain a greater share of their earnings earmarked for dividends and share buybacks in 2017 they would be able to increase loans by more than $1 trillion, which is greater than 5% of annual U.S. GDP.” Backing up his assertions, Hoenig provided a chart showing payouts on a bank-by-bank basis. Highlighted in yellow on Hoenig’s chart is the fact that four of the big Wall Street banks are set to pay out more than 100% of earnings: Citigroup 127%; Bank of New York Mellon 108%; JPMorgan Chase 107% and Morgan Stanley 103%.

What’s motivating this payout binge at the banks? Hoenig doesn’t offer an opinion in his letter but he does state that share buybacks represent 72% of the total payouts for the 10 largest bank holding companies. What share buybacks do for top management at these banks is to make the share price of their bank’s stock look far better than it otherwise would while making themselves rich on their stock options. If just the share buybacks (forgetting about the dividend payouts) were retained by the banks instead of being paid out, the banks could “increase small business loans by three quarters of a trillion dollars or mortgage loans by almost one and a half trillion dollars.” Hoenig also urged in his letter that there be a “substantive public debate” on what the biggest banks are doing with their capital rather than allowing this “critical” issue to be “discussed in sound bites.” Most corporate media responded to this appeal by ignoring Hoenig’s letter altogether.

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They all want to show nice numbers at the Congress. Shadow banks lend them the money to do it. In exchange for power.

Officials Spend Big In The Run Up To China’s Communist Party Congress (BBG)

In the run up to China’s blockbuster Communist Party congress later this year, officials have spent big to ensure the economy is humming along nicely when the conclave begins. It’s after that that things get interesting. With the central government’s deficit limit capped at 3%, officials usually turn on the taps around November and December, once they know they’ll have raised enough to fund a late-year splurge. Not this time. A push to smooth out spending means the fiscal pump is unlikely to go into high gear at year end, which is when economists see growth moderating toward the government’s baseline of 6.5%. While policy makers have quasi-fiscal options up their sleeve – like accelerating infrastructure project approvals or ratcheting up lending via policy banks – efforts to curb profligate local governments and limit debt may restrain those channels too.

“It’s China’s political-business cycle: this year is very important for the political transition, so they front-loaded fiscal spending to ensure a stable economic backdrop,” Larry Hu, head of China economics at Macquarie in Hong Kong. “China’s economy has a fiscal system and a shadow fiscal system. If growth really slows to threaten the target, then we’re going to see spending.” The question is, how much. China ran a fiscal deficit of 918 billion yuan ($137 billion) in the first half, or more than 2% of economic output during the period, Bloomberg calculations show. That’s a record both by value and share. The spending fueled better-than-expected economic growth of 6.9% in the first six months, and infrastructure investment surging at over 20%.

China International Capital Corp. analysts led by Liu Liu say the budgeted deficit will be 1.46 trillion yuan in the second half, versus 2.46 trillion yuan in the same period last year. The world’s second-largest economy still depends on government spending at all levels, as construction of things like roads and railways can be a key buffer when private investors start pulling back or, as now, political sensitivities make robust growth especially important. But those priorities are now clashing with the need to clamp down on indebtedness at lower levels of government, and the desire to avoid a year-end spending glut. In the past, officials have been able to use off-balance sheet spending, such as policy bank loans and funds raised through local government financing vehicles, to keep their deep pockets open.

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It’s starting to feel increasingly like a big fat Ponzi.

China Is Taking on the ‘Original Sin’ of Its Mountain of Debt (BBG)

China’s much-vaunted campaign to tackle its leverage problem has captured headlines this year. But to understand why they’re taking on the challenge – and the threat it could pose to the world’s second-largest economy – you need to dig into the mountain. Characterized in state media as the “original sin” of China’s financial system, leverage has swelled over the past decade – partly because policy makers were trying to cushion a slowdown in growth from the old normal of 10% plus. What’s fueled the leverage has been a rapid expansion in household and corporate wealth looking for higher returns in a system where bank interest rates have been held down. The unprecedented stimulus unleashed since 2008 effectively brought to life the “monster” China’s leadership is now trying to tackle, says Andrew Collier at Orient Capital Research in Hong Kong and author of “Shadow Banking and the Rise of Capitalism in China.”

Implicit backing from the central government meant borrowers had free license to take on debt. “You basically have anybody selling anything they want as they think they can’t lose,” Collier said. Deleveraging – championed by President Xi Jinping and the Communist Party Politburo in April – hasn’t truly begun, as “they’re trying to forestall the pain as long as possible,” he said. The equivalent of trillions of dollars are now held in all manner of assets in China, from high-yielding wealth management products to so-called entrusted investments. Taking the heftiest piece of the leverage mountain first, wealth management products had a precipitous rise over the past several years.

A way for borrowers who have trouble getting traditional bank loans to win funding, WMPs have grown in popularity as they typically offer savers much higher yields than banks offer on deposits. WMPs are also a hit because they give lenders a way to keep loans off of their balance sheets, and to skirt regulatory requirements when channeling funds to borrowers, according to Raymond Yeung at Australia & New Zealand Banking in Hong Kong. The regulatory crackdown this year — mostly in the form of more stringent guidelines on use of financial products — has seen the amount of WMPs outstanding taper off from a peak in April, while yields on them have surged as providers competed for funds. In July, the bank watchdog is said to have told some lenders to cut the rates they offered on the products.

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“It’s not really a bear call on the S&P 500. It’s more of a bull call on volatility..”

Jeff Gundlach Predicts He Will Make 400% On Bet Against Stock Market (CNBC)

DoubleLine CEO Jeffery Gundlach expects his bet for a decline in the S&P 500 will return 400%. “I’ll be disappointed if we don’t make 400% on the puts, and we don’t even need a big market decline for that to happen,” Gundlach said Tuesday on CNBC’s “Halftime Report.” He said that in his firm’s analysis, volatility is so low that it can make a big return by buying put options — bets for a decline — on the S&P 500 for December. “It’s not really a bear call on the S&P 500. It’s more of a bull call on volatility,” he said. In its slow grind higher, the S&P 500 has only closed more than 1% higher or lower on four trading days this year.

As a result of the muted market performance, the CBOE Volatility Index (.VIX), widely considered the best gauge of fear in the market, has persistently held near historical lows around 10 or below this year and hit an all-time low of 8.84 on July 26. The VIX was near 10.1 midday Tuesday as the S&P 500 edged up to a record high. “I think going long the VIX is really sort of free money at a 9.80 VIX level today,” Gundlach said. “I believe the market will drop 3% at a minimum sometime between now and December. And when it does I don’t think the VIX will be at 10.” Gundlach reiterated his expectations for a snap higher in the VIX once volatility picks up, since hedge funds have piled heavily into bets that volatility will remain low.

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OK, got it. Now what?

Our Broken Economy, in One Simple Chart (NYT)

Many Americans can’t remember anything other than an economy with skyrocketing inequality, in which living standards for most Americans are stagnating and the rich are pulling away. It feels inevitable. But it’s not. A well-known team of inequality researchers — Thomas Piketty, Emmanuel Saez and Gabriel Zucman — has been getting some attention recently for a chart it produced. It shows the change in income between 1980 and 2014 for every point on the distribution, and it neatly summarizes the recent soaring of inequality.= The line on the chart (which we have recreated as the red line above) resembles a classic hockey-stick graph. It’s mostly flat and close to zero, before spiking upward at the end. That spike shows that the very affluent, and only the very affluent, have received significant raises in recent decades.

This line captures the rise in inequality better than any other chart or simple summary that I’ve seen. So I went to the economists with a request: Could they produce versions of their chart for years before 1980, to capture the income trends following World War II. You are looking at the result here. The message is straightforward. Only a few decades ago, the middle class and the poor weren’t just receiving healthy raises. Their take-home pay was rising even more rapidly, in%age terms, than the pay of the rich. The post-inflation, after-tax raises that were typical for the middle class during the pre-1980 period — about 2% a year — translate into rapid gains in living standards. At that rate, a household’s income almost doubles every 34 years. (The economists used 34-year windows to stay consistent with their original chart, which covered 1980 through 2014.)

In recent decades, by contrast, only very affluent families — those in roughly the top 1/40th of the income distribution — have received such large raises. Yes, the upper-middle class has done better than the middle class or the poor, but the huge gaps are between the super-rich and everyone else. The basic problem is that most families used to receive something approaching their fair share of economic growth, and they don’t anymore.

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Nice try, Ann. But people have no political power left. Just look at the mess that all parties are in, in both the UK and US. So are you going to break the power of finance?

The Economic Crash, Ten Years On (Pettifor)

Challenging and dismantling gargantuan financial markets that operate beyond democratic regulatory oversight will not be easy, but it is long overdue. Some believe that the management of financial markets by governments will never be restored. I do not agree. Because of global imbalances, economic and financial tensions could lead to the onset of wars. These could dismantle global financial markets just as the two world wars did. There is a more peaceful way of restoring finance to the role of servant to, and not master of, economies and regions. For that to happen the public must realise that citizens can exercise economic power over global financial markets. The global ‘House of Finance’ is almost entirely dependent, and indeed largely parasitic, on the public sector. In other words, private finance is largely dependent for its capital gains on taxpayers like you and me.

Commercial banks do not need savings or tax revenues to lend. All they need is to provide finance to viable projects that will generate employment and income in the future – which will repay the loans. The most viable projects today are those needed to protect Britain from climate change. Any government with political spine would have insisted that the banks lend, at low affordable rates, to transformative projects in the real, productive economy where jobs are created, income generated, and society protected. And if shareholders and executives object to such conditions, then politicians should withdraw access to the Bank of England’s QE and low interest rates, and to government guarantees for deposits.

Quantitative easing – the creation of liquidity currently directed only at the financial sector – is only possible because central banks, if not directly publicly owned, are dependent for their legitimacy and money-creation powers, on taxpayers. The Federal Reserve is ultimately backed by US taxpayers. The Bank of England is a nationalised bank, whose authority is derived from Britain’s 31 million-plus taxpayers.

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” ..in 2015, the amount of opioids prescribed in the US was enough for every American to be medicated around the clock for three weeks.”

Opioid Deaths In US Break New Record: 100 People A Day (RT)

The first nine months of 2016 saw a sharp increase in opioid drug overdoses in the US compared to the prior year, according to new data by the National Center for Health Statistics (NCHS). The government is struggling to respond to the crisis. Deaths due to drug overdose peaked in the third quarter of last year – 19.7 cases for every 100,000 people, compared to 16.7 in the same period the year before, according to newly released numbers from the NCHS, which is part of the US Centers for Disease Control and Prevention (CDC). The Centers attributed 33,000 deaths in 2015 to opioid drugs, including legal prescription painkillers as well as illicit drugs like heroin and street fentanyl. “Opioid prescribing continues to fuel the epidemic. Today, nearly half of all US opioid overdose deaths involve a prescription opioid,” according to the CDC.

A new study published in the American Journal of Preventive Medicine says actual opioid mortality rate changes are on average 22% higher than federal statistics indicate, due to information missing from CDC records. “Opioid mortality rate changes were considerably understated in Pennsylvania, Indiana, New Jersey and Arizona,” said the study’s author, Dr. Christopher Ruhm, a health economist at the University of Virginia. Top US officials have consistently raised the alarm about the addiction crisis in the US, but a solution is yet to be found. [..] Last week, the Trump-appointed commission on combating the drug addiction crisis in America called on the president to declare “a national emergency.”

After the meeting with Trump on Tuesday, Price said the administration will act without such a declaration. “Here is the grim reality,” the commission wrote in their letter to Trump. “Americans consume more opioids than any other country in the world. In fact, in 2015, the amount of opioids prescribed in the US was enough for every American to be medicated around the clock for three weeks.”

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And this is how the opioid disaster started, and still rolls on. Easy fix (pun intended), but who’s going to do it?

New Hampshire Sues Purdue Pharma Over Opioid Marketing Practices (R.)

New Hampshire sued OxyContin maker Purdue Pharma LP on Tuesday, joining several state and local governments in accusing the drugmaker of engaging in deceptive marketing practices that have helped fuel a national opioid addiction epidemic. The lawsuit filed in Merrimack County Superior Court claimed that Purdue Pharma significantly downplayed the risk of addiction posed by OxyContin and engaged in marketing practices that “opened the floodgates” to opioid use and abuse. The lawsuit came after the state’s top court in June overturned a ruling that barred the enforcement of subpoenas against Purdue and four other drugmakers because of the use of a private law firm by the office of the attorney general.

The complaint said the Stamford, Connecticut-based company had spent hundreds of millions of dollars since the 1990s on misleading marketing that overstated the benefits of opioids for treating chronic, rather than short-term, pain. Purdue and three executives in 2007 pleaded guilty to federal charges related to the misbranding of OxyContin, and agreed to pay a total of $634.5 million to resolve a U.S. Justice Department probe. That year, the privately held company reached a $19.5 million settlement with 26 states and the District of Columbia. It agreed in 2015 to pay $24 million to resolve a lawsuit by Kentucky. The lawsuit by New Hampshire, which was not among those settled, said Purdue has continued to benefit from its earlier misconduct and has since 2011 expanded the market for opioids in the state.

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No wonder with the opioid cases.

Americans Are Dying Younger, Saving Corporations Billions (BBG)

Steady improvements in American life expectancy have stalled, and more Americans are dying at younger ages. But for companies straining under the burden of their pension obligations, the distressing trend could have a grim upside: If people don’t end up living as long as they were projected to just a few years ago, their employers ultimately won’t have to pay them as much in pension and other lifelong retirement benefits. In 2015, the American death rate—the age-adjusted share of Americans dying—rose slightly for the first time since 1999. And over the last two years, at least 12 large companies, from Verizon to General Motors, have said recent slips in mortality improvement have led them to reduce their estimates for how much they could owe retirees by upward of a combined $9.7 billion, according to a Bloomberg analysis of company filings.

“Revised assumptions indicating a shortened longevity,” for instance, led Lockheed Martin to adjust its estimated retirement obligations downward by a total of about $1.6 billion for 2015 and 2016, it said in its most recent annual report. Mortality trends are only a small piece of the calculation companies make when estimating what they’ll owe retirees, and indeed, other factors actually led Lockheed’s pension obligations to rise last year. Variables such as asset returns, salary levels, and health care costs can cause big swings in what companies expect to pay retirees. The fact that people are dying slightly younger won’t cure corporate America’s pension woes—but the fact that companies are taking it into account shows just how serious the shift in America’s mortality trends is.

It’s not just corporate pensions, either; the shift also affects Social Security, the government’s program for retirees. The most recent data available “show continued mortality reductions that are generally smaller than those projected,” according to a July report from the program’s chief actuary. Longevity gains fell short of what was projected in last year’s report, leading to a slight improvement in the program’s financial outlook. [..] Absent a war or an epidemic, it’s unusual and alarming for life expectancies in developed countries to stop improving, let alone to worsen. “Mortality is sort of the tip of the iceberg,” says Laudan Aron, a demographer and senior fellow at the Urban Institute. “It really is a reflection of a lot of underlying conditions of life.” The falling trajectory of American life expectancies, especially when compared to those in some other wealthy countries, should be “as urgent a national issue as any other that’s on our national agenda,” she says.

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Not sure where this article aims to go, but Americans entering another dimension is a nice starting point.

Unlearning The Myth Of American Innocence (G.)

I grew up in Wall, a town located by the Jersey Shore, two hours’ drive from New York. Much of it was a landscape of concrete and parking lots, plastic signs and Dunkin’ Donuts. There was no centre, no Main Street, as there was in most of the pleasant beach towns nearby, no tiny old movie theatre or architecture suggesting some sort of history or memory. Most of my friends’ parents were teachers, nurses, cops or electricians, except for the rare father who worked in “the City”, and a handful of Italian families who did less legal things. My parents were descendants of working-class Danish, Italian and Irish immigrants who had little memory of their European origins, and my extended family ran an inexpensive public golf course, where I worked as a hot-dog girl in the summers. The politics I heard about as a kid had to do with taxes and immigrants, and not much else. Bill Clinton was not popular in my house. (In 2016, most of Wall voted Trump.)

We were all patriotic, but I can’t even conceive of what else we could have been, because our entire experience was domestic, interior, American. We went to church on Sundays, until church time was usurped by soccer games. I don’t remember a strong sense of civic engagement. Instead I had the feeling that people could take things from you if you didn’t stay vigilant. Our goals remained local: homecoming queen, state champs, a scholarship to Trenton State, barbecues in the backyard. The lone Asian kid in our class studied hard and went to Berkeley; the Indian went to Yale. Black people never came to Wall. The world was white, Christian; the world was us. We did not study world maps, because international geography, as a subject, had been phased out of many state curriculums long before. There was no sense of the US being one country on a planet of many countries. Even the Soviet Union seemed something more like the Death Star – flying overhead, ready to laser us to smithereens – than a country with people in it.

I have TV memories of world events. Even in my mind, they appear on a screen: Oliver North testifying in the Iran-Contra hearings; the scarred, evil-seeming face of Panama’s dictator Manuel Noriega; the movie-like footage, all flashes of light, of the bombing of Baghdad during the first Gulf war. Mostly what I remember of that war in Iraq was singing God Bless the USA on the school bus – I was 13 – wearing little yellow ribbons and becoming teary-eyed as I remembered the video of the song I had seen on MTV. “And I’m proud to be an American; Where at least I know I’m free”. That “at least” is funny. We were free – at the very least we were that. Everyone else was a chump, because they didn’t even have that obvious thing. Whatever it meant, it was the thing that we had, and no one else did. It was our God-given gift, our superpower.

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Because Greece has the absolutely worst accomodations for them.

EU Nations Start Process Of Returning Refugees, Migrants To Greece (AP)

European Union countries have begun the process of sending migrants who arrived in Europe via Greece over the last five months back to have their asylum applications assessed there. EU rules oblige migrants to apply for asylum in the country they first enter. But the rules were suspended as hundreds of thousands of people, many of them Syrian refugees, entered Greece in 2015. The European Commission recommended in December that EU countries gradually resume transfers to Greece of unauthorized migrants arriving from March 15 onwards. “Some member states have made requests but transfers have not begun. Greece has to give assurances that they have adequate reception conditions,” European Commission spokeswoman Tove Ernst said Tuesday.

“Reception conditions in Greece have significantly improved since last year, which is why the Commission recommended a gradual resumption of transfers,” she said. The recommendation is not binding on EU countries. Greece’s asylum service says requests have been made to return more than 400 migrants. Seven requests have been accepted so far. In Athens, Greece’s migration minister said the returns would involve “tiny numbers.” “We will accept a few dozen people in coming months,” Yiannis Mouzalas told private Skai TV Tuesday. “This will be done provided we have the proper conditions to receive them.” Mouzalas said it was a “symbolic move” dictated by Greece’s EU obligations.

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Jun 272017
 
 June 27, 2017  Posted by at 10:00 am Finance Tagged with: , , , , , , , , ,  


Egon Schiele Port of Trieste 1907

 

Trump Eager For Big Meeting With Putin; Some Advisers Wary (AP)
Three Journalists Quit CNN In Fallout From Retracted Russia Story (Fox)
US Congress To Stop Arms Sales To Gulf Until Qatar Crisis Is Solved (G.)
Democrats Help Corporate Donors Block California Single-Payer (IBT)
Bernanke: Economists Missed Populism, Inequality, But Are Here To Help (CNBC)
Europe’s Inequality Highly Destabilizing – Draghi (R.)
Change the Way Money Is Created, Or More Inequality, Disorder Inevitable (CHS)
ECB Chief Draghi Rules Out Greece Joining QE Soon (K.)
Europe’s Gradualist Fallacy (Varoufakis)
Italy Bank Deal Makes Germans Wary of Macron’s Euro Agenda
Italy’s Latest Bank Bailout Has Created A Two-Speed Eurozone (Coppola)
Brazil Top Prosecutor Charges President With Bribery (AFP)
The Technicolor Swan (Jim Kunstler)
California To List Glyphosate As Cancer-Causing; Monsanto Vows Fight (R.)

 

 

What a great idea to try and prevent the US President from talking to other world leaders (i.e. doing his job).

Trump Eager For Big Meeting With Putin; Some Advisers Wary (AP)

President Donald Trump is eager to meet Russian President Vladimir Putin with full diplomatic bells and whistles when the two are in Germany for a multinational summit next month. But the idea is exposing deep divisions within the administration on the best way to approach Moscow in the midst of an ongoing investigation into Russian meddling in the U.S. elections. Many administration officials believe the U.S. needs to maintain its distance from Russia at such a sensitive time – and interact only with great caution. But Trump and some others within his administration have been pressing for a full bilateral meeting. He’s calling for media access and all the typical protocol associated with such sessions, even as officials within the State Department and National Security Council urge more restraint, according to a current and a former administration official.

Some advisers have recommended that the president instead do either a quick, informal “pull-aside” on the sidelines of the summit, or that the U.S. and Russian delegations hold “strategic stability talks,” which typically don’t involve the presidents. The officials spoke anonymously to discuss private policy discussions. The contrasting views underscore differing views within the administration on overall Russia policy, and Trump’s eagerness to develop a working relationship with Russia despite the ongoing investigations. Asked about the AP report that Trump is eager for a full bilateral meeting, Putin’s spokesman Dmitry Peskov told reporters in Moscow on Monday that “the protocol side of it is secondary.” The two leaders will be attending the same event in the same place at the same time, Peskov said, so “in any case there will be a chance to meet.”

Peskov added, however, that no progress in hammering out the details of the meeting has been made yet. There are potential benefits to a meeting with Putin. A face-to-face meeting can humanize the two sides and often removes some of the intrigue involved in impersonal, telephone communication. Trump — the ultimate dealmaker — has repeatedly suggested that he can replace the Obama-era damage in the U.S.-Russia relationship with a partnership, particularly on issues like the ongoing Syria conflict. There are big risks, though. Trump is known to veer off-script, creating the possibility for a high-stakes diplomatic blunder. In a brief Oval Office meeting with top Russian diplomats last month, Trump revealed highly classified information about an Islamic State group threat to airlines that was relayed to him by Israel, according to a senior administration official. The White House defended the disclosures as “wholly appropriate.”

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Here’s why people don’t want Trump to talk to Putin.

Three Journalists Quit CNN In Fallout From Retracted Russia Story (Fox)

Three CNN journalists who worked on a now-retracted story about Russia and a top Trump adviser are leaving the network. CNN is casting their departure as resignations in the wake of the fiasco, but the network has come under substantial criticism since apologizing for the story. The move would also help CNN’s legal position in case of a lawsuit. Anthony Scaramucci, the Trump adviser who is the target of the story, told me that he has no plans to sue. He said he has accepted CNN’s apology and wants to move on. But Scaramucci also told me in an earlier interview, “I was disappointed the story was published. It was a lie.” Lex Harris, executive editor of CNN’s investigative unit, was the highest-ranking official to resign. Thomas Frank, who wrote the story, and Eric Lichtblau, who edited it, also turned in their resignations.

Lichtblau is a highly regarded reporter who spent nearly a decade and a half at the New York Times. The story tried to draw a link between Scaramucci and the Russian Direct Investment Fund. Scaramucci was a Trump transition team member who has been nominated to an ambassadorial-level post based in Paris. The CNN.com article said that Scaramucci, back in January, held a secret meeting with an official from the Russian fund. According to an unnamed source, Scaramucci discussed the possibility of lifting U.S. sanctions at the meeting. But Scaramucci told me there was no secret meeting. He said he had given a speech on Trump’s behalf at Davos, and fund official Kirill Dmitriev approached him in a restaurant to say hello and they had a brief conversation, with no discussion of sanctions. In the retraction, the network said the story “did not meet CNN’s editorial standards.” The network is now requiring approval from two top editors before any Russia-related story can be published.

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Amazing how easy it can be. Now make it permanent.

US Congress To Stop Arms Sales To Gulf Until Qatar Crisis Is Solved (G.)

The Republican chairman of the Senate foreign relations committee has said the US Congress will hold up approval of arms sales to the Gulf as a result of the Saudi-led blockade of Qatar. Senator Bob Corker said the nations of Gulf Cooperation Council had failed to take advantage of a summit with President Trump in May to overcome their differences and had “instead chosen to devolve into conflict”. Corker continued: “For these reasons, before we provide any further clearances during the informal review period on sales of lethal military equipment to the GCC states, we need a better understanding of the path to resolve the current dispute and reunify the GCC.”

Earlier this month, the Senate narrowly fended off a bid to block a Trump administration plan to sell Saudi Arabia $500m in precision-guided munitions, part of a proposed $110bn arms sales package announced during the president’s visit to Riyadh last month. Congress has the power to block individual sales during a 30-day review period from when the state department gives notification of an impending sale. A Saudi-led coalition that includes Egypt, the United Arab Emirates and Bahrain cut ties with Qatar on 5 June, but only provided a justification 18 days later with the presentation of a list of 13 demands. They want Doha to close the al-Jazeera TV channel, restrict diplomatic ties with Iran, halt the construction of a Turkish military base in the country, and sever contacts with extremist organisations.

Qatar has been given 10 days to meet the demands, but the Saudi-led group has not said what action it would take if the deadline is not met. The US has sent mixed signals on the standoff. In the immediate aftermath of the embargo, Trump gave Riyadh and its allies fulsome support, echoing Saudi claims about Qatari funding for terrorism. However, Rex Tillerson, the secretary of state, last week called on the coalition present its complaints and negotiate a solution. Since the list of 13 demands was presented, Tillerson has been non-committal, observing that some of them would be “very difficult for Qatar to meet”, but arguing there were “significant areas which provide a basis for ongoing dialogue leading to resolution.”

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David Sirota: “Jerry Brown campaigned for president supporting single-payer, then he got big cash from insurers/drugmakers, now he refused to back the bill.”

Single payer is the only thing that can save US health care. But all sides are in debt to the very interests who will block it.

Democrats Help Corporate Donors Block California Single-Payer (IBT)

As Republican lawmakers grapple with their unpopular bill to repeal Obamacare, Democrats have tried to present a united front on health care. But for all their populist rhetoric against insurance and drug companies, Democratic powerbrokers and their allies remain deeply divided on the issue — to the point where a political civil war has spilled into the open in America’s largest state. In California last week, Democratic state Assembly Speaker Anthony Rendon helped his and his party’s corporate donors block a Democrat-sponsored bill to create a universal health care program in which the government would be the single payer. Rendon’s decision shows how progressives’ ideal of universal health care remains elusive — even in a liberal state where government already foots 70% of the total health care bill.

Until Rendon’s move, things seemed to be looking up for Democratic single-payer proponents in deep blue California, which has been hammered by insurance premium increases. There, the Democratic Party — which originally created Medicare — just added a legislative supermajority to a Democratic-controlled state government that oversees the world’s sixth largest economy. That 2016 election victory came as a poll showed nearly two-thirds of Californians support the creation of a taxpayer-funded universal health care system in a state whose population is roughly the size of Canada — which already has such a system. California’s highest-profile federal Democratic lawmaker recently endorsed state efforts to create single-payer systems, and 25 members of its congressional delegation had signed on to sponsor a federal single-payer bill.

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They missed everything so far, but now we need them.

Bernanke: Economists Missed Populism, Inequality, But Are Here To Help (CNBC)

Former chairman of the Federal Reserve Ben Bernanke said Monday that economists have a “responsibility” to help address populist frustrations. “The credibility of economists has been damaged by our insufficient attention, over the years, to the problems of economic adjustment and by our proclivity toward top-down, rather than bottom-up, policies,” Bernanke, now distinguished fellow in residence, Brookings Institution, said in prepared remarks for a dinner speech called “When growth is not enough.” “Nevertheless, as a profession we have expertise that can help make the policy response more effective, and I think we have a responsibility to contribute wherever we can,” the former Fed chair said.

In the last 18 months, growing populist sentiment contributed to the UK’s surprise vote to leave the European Union last June, and the election of U.S. President Donald Trump last November. Trump promised to bring jobs back from China and Mexico to the U.S., winning him support. The U.S. Census Bureau’s latest report on household income showed the Gini index of income inequality for the U.S. in 2015 of 0.482 was significantly higher than the prior year’s 0.480. “This increase suggests that income inequality increased across the country,” the report said. “Policymakers in recent decades have been slow to address or even to recognize those trends, an error of omission that has helped fuel the voters’ backlash,” Bernanke said. He was speaking at the European Central Bank’s Forum on Central Banking in Sintra, Portugal.

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Bernanke and Draghi greatly increased inequality with their ZIRP and NIRP policies. And today both all of a sudden come out as being worried about it?

Europe’s Inequality Highly Destabilizing – Draghi (R.)

Europe’s growing inequality is highly destabilizing and needs to be tackled with education, innovation and investment in human capital, particularly jobs for young people, ECB President Mario Draghi said on Monday. Income inequality has grown among euro zone countries since the global financial crisis and some measures also show divergence between the bloc’s richer and poorer members, a source of tension for the 19-member currency bloc. “Is this a seriously destabilizing factor that we should cope with?” Draghi said in a rare town-hall style meeting with university students in Lisbon. “Yes it is.” “We have to fight against inequality,” Draghi in response to a student question. Draghi, leading one of Europe’s most respected institutions, has for years called on governments to enact fundamental reforms, arguing that the ECB is able to prop up growth, but only temporarily, giving governments a window of opportunity.

Eurostat data has shown that only a handful of countries have managed to shrink income inequality since the crisis while it has grown sharply in places like France or Spain. Figures also show the highest level of income inequality in the bloc’s periphery, like Greece, Spain and Portugal, hit hardest by the crisis. Calling convergence among euro zone members “fundamental,” Draghi said the best way to fight inequality is by creating jobs, which comes from an increased investment in education, skills development and innovation. He also called on governments to consider better income and wealth redistribution policies. Defending the ECB’s ultra easy monetary policy, Draghi said that super low rates create jobs, foster growth and benefit borrowers, ultimately easing inequality. He also rejected calls to exit super easy monetary policy quickly, arguing that premature tightening would lead to a fresh recession and more inequality.

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Here’s how ZIRP creates more inequality.

Change the Way Money Is Created, Or More Inequality, Disorder Inevitable (CHS)

Compare the limited power of an individual with cash and the enormous power of unlimited cheap credit. Let’s say an individual has saved $100,000 in cash. He keeps the money in the bank, which pays him less than 1% interest. Rather than earn this low rate, he decides to loan the cash to an individual who wants to buy a rental home at 4% interest. There’s a tradeoff to earn this higher rate of interest: the saver has to accept the risk that the borrower might default on the loan, and that the home will not be worth the $100,000 the borrower owes. The bank, on the other hand, can perform magic with the $100,000 they obtain from the central bank. The bank can issue 19 times this amount in new loans—in effect, creating $1,900,000 in new money out of thin air.

This is the magic of fractional reserve lending. The bank is only required to hold a small%age of outstanding loans as reserves against losses. If the reserve requirement is 5%, the bank can issue $1,900,000 in new loans based on the $100,000 in cash: the bank holds assets of $2,000,000, of which 5% ($100,000) is held in cash reserves. This is a simplified version of how money is created and issued, but it helps us understand why centrally issued and distributed money concentrates wealth in the hands of those with access to the centrally issued credit and those who have the privilege of leveraging every $1 of cash into $19 newly created dollars that earn interest. Imagine if we each had a relatively modest $1 million line of credit at 0.25% interest from a central bank that we could use to issue loans of $19 million.

Let’s say we issued $19 million in home loans at an annual interest rate of 4%. The gross revenue (before expenses) of our leveraged $1 million would be $760,000 annually –let’s assume we net $600,000 per year after annual expenses of $160,000. (Recall that the interest due on the $1 million line of credit is a paltry $2,500 annually). Median income for workers in the U.S. is around $30,000 annually. Thus a modest $1 million line of credit at 0.25% interest from the central bank would enable us to net 20 years of a typical worker’s earnings every single year. This is just a modest example of pyramiding wealth.

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So Draghi whines about inequality and at the same time makes sure Greece gets hammered even more economically. Does his ass know where his mouth is located?

ECB Chief Draghi Rules Out Greece Joining QE Soon (K.)

The president of the European Central Bank, Mario Draghi, said on Monday that Greece will not join its quantitative easing program (QE) until international creditors specify what sort of debt relief measures the country can expect. “Until sufficient details are given on debt-related measures, serious concerns remain about the sustainability of Greek government debt,” he said in response to a question from Popular Unity (LAE) MEP Nikos Hountis over whether the ECB had completed its own debt sustainability analysis (DSA), and if it had come to any conclusions on the issue. Draghi said that ECB experts “are not currently in a position to complete a fully fledged DSA analysis of Greece’s public debt.” Up until very recently, Greece was banking on its inclusion in QE as a way to return to bond markets, which would put an end to its dependence on bailout programs.

If the ECB were to buy Greek debt it would boost the confidence of investors about the prospects of the Greek economy. But given Draghi’s comment on Monday and the failure of the government to secure more concrete language on debt relief at the Eurogroup on June 15, Athens now believes it can achieve the goal to enter bond markets without having to join QE. And it believes that it has three windows of opportunity to issue a bond in the period stretching from July until early next year. These three opportunities are, reportedly, in July, given the improved climate in international markets. The second chance will be at the end of September and beginning of October after German elections, while the third will be at the end of the year or early 2018, as predicted by the head of the European Stability Mechanism (ESM), Klaus Regling.

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Macron is Merkel’s messenger boy. France has nothing to say in the EU. That’s the essence of Europe’s problem.

Europe’s Gradualist Fallacy (Varoufakis)

Europe is at the mercy of a common currency that not only was unnecessary for European integration, but that is actually undermining the European Union itself. So what should be done about a currency without a state to back it – or about the 19 European states without a currency that they control? The logical answer is either to dismantle the euro or to provide it with the federal state it needs. The problem is that the first solution would be hugely costly, while the second is not feasible in a political climate favoring the re-nationalization of sovereignty. Those who agree that the cost of dismantling the euro is too high to contemplate are being forced into a species of wishful thinking that is now very much in vogue, especially after the election of Emmanuel Macron to the French presidency.

Their idea is that, somehow, by some unspecified means, Europe will find a way to move toward federation. “Just hang in there,” seems to be their motto. Macron’s idea is to move beyond idle optimism by gaining German consent to turn the eurozone into a state-like entity – a federation-lite. In exchange for making French labor markets more Germanic, as well as reining in France’s budget deficit, Germany is being asked to agree in principle to a common budget, a common finance ministry, and a eurozone parliament to provide democratic legitimacy. Macron knows that such a federation would be macroeconomically insignificant, given the depth of the debt, banking, investment, and poverty crisis unfolding across the eurozone. But, in the spirit of the EU’s traditional gradualism, he thinks that such a move would be politically momentous and a decisive step toward a meaningful federation.

“Once the Germans accept the principle, the economics will force them to accept the necessary magnitudes,” is how a French official put it to me recently. Such optimism may seem justified in light of proposals along those lines made in the past by none other than Wolfgang Schäuble, Germany’s finance minister. But there are two powerful reasons to be skeptical. First, Chancellor Angela Merkel and Schäuble were not born yesterday. If Macron’s people imagine a federation-lite as an entering wedge for full-blown political integration, so will Merkel, Schäuble, and the reinvigorated Free Democrats (who will most likely join a coalition government with Merkel’s Christian Democrats after the September federal election). And they will politely but firmly reject the French overtures.

Second, in the unlikely event that Germany gives federation-lite the go-ahead, any change to the functioning of the eurozone would, undoubtedly, devour large portions of the reformers’ political capital. If it does not produce economic and social results that improve, rather than annul, the chances of a proper federation, as I suspect it will not, a political backlash could ensue, ending any prospect of a more substantial federation in the future. In that case, the euro’s dismantling will become inevitable, will cost more, and will leave Europe in even greater shambles.

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Germany doesn’t care one bit about Macron’s agenda; they may pay lip service, but that’s it. In this particular case, do you think Germany wants an Italian bank collapse a few months before Merkel’s election?

Italy Bank Deal Makes Germans Wary of Macron’s Euro Agenda

Germany sounded the alarm over Italy’s latest bank bailout, saying the apparent bending of EU rules casts doubt on efforts to further integrate the euro zone. The government in Rome announced the country’s biggest bank rescue to date on Sunday evening as it committed as much as €17 billion ($19 billion) to clean up two failed banks. While the European Commission approved the plan, German officials pointed to the involvement of state aid to shield senior creditors from losses as working around EU law established to deal with bank failures. That exemption drew criticism from members of Chancellor Angela Merkel’s ruling coalition, who cited the need to uphold European law without setting unhealthy precedents.

“We’re in a phase where we are faced with the question of whether we can succeed at applying European law, irrespective of all the understandable domestic policy discussions,” Alexander Radwan, a lawmaker from Merkel’s CSU Bavarian sister party who sits on the Bundestag’s finance committee, said in an interview on Monday. “Cases like these make it more difficult to think about deepening the economic and monetary union.” The growing drumbeat for closer euro-area integration following Emmanuel Macron’s election in France is making some German lawmakers increasingly uneasy. Citing election results in France and the Netherlands this year that open “an opportunity for moving Europe forward,” Merkel has spoken of joint projects with France and left the door open to creating a euro-area budget and a joint finance minister.

“This decision discredits the further completion of the banking union and moves the common deposit-guarantee scheme into the distant future,” said Carsten Schneider, a deputy head of the Social Democrat caucus in Germany’s lower house. “It’s not acceptable that bank wind-downs under national rules offer better conditions for creditors than under the European regime.” Italy’s decision is “a grave mistake,” Schneider said in emailed comments to Bloomberg.

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Brussels hubris in its full splendor. (BRRD= Bank Recovery and Resolution Directive)

Italy’s Latest Bank Bailout Has Created A Two-Speed Eurozone (Coppola)

The bailout is dressed up as a rescue by a larger bank along the same lines as Santander’s recent acquisition for a nominal 1 euro of the insolvent Banco Popular. Like Santander, Intesa Sanpaolo, Italy’s second-biggest lender, will buy the two banks 1 euro. But there the similarity ends. Santander took on full responsibility for recapitalizing Banco Popular, for which it announced a 7bn euro rights issue. But Intesa isn’t taking financial responsibility for anything. The Italian government is paying Intesa about 5bn euros in cash to take over the two banks, and is additionally providing guarantees worth 12bn euros for the two banks’ bad assets. The total bailout amount is thus around 17bn euros, though according to the European Commission, the net cost will be much lower: Both guarantees and cash injections are backed up by the Italian State’s senior claims on the assets in the liquidation mass. Correspondingly, the net costs to the Italian State will be much lower than the nominal amounts of the measures provided.

The bailout imposes losses on the two banks’ shareholders and subordinated debtholders. But the all-important seniors have been spared, and small subordinated debtholders will be compensated by Intesa from the funds provided by the Italian government. The BRRD has effectively been sidestepped. Did the EU oppose this sleight of hand? Not a bit of it. In this statement, the European Commission approved the use of taxpayers’ funds to bail out these banks: “The Commission found these measures to be in line with EU State aid rules, in particular the 2013 Banking Communication. Existing shareholders and subordinated debt holders have fully contributed to the costs, reducing the cost of the intervention for the Italian State. Both aid recipients, BPVI and Banca Veneto, will be wound up in an orderly fashion and exit the market, while the transferred activities will be restructured and significantly downsized by Intesa, which in combination will limit distortions of competition arising from the aid.”

Remarkable. Winding up two banks in the Venetian area would cause massive economic disruption. So the solution is to create an effective banking monopoly in that area. And this doesn’t distort competition, apparently. I detect a distinct odor of Eurofudge. Italy’s decision, supported by the European Commission, tramples the BRRD to death. Senior creditors need never again fear losses due to a failing bank. If it is systemically important, it will be given a precautionary recapitalization at taxpayers’ expense. If it is not, an excuse will be found to bail it out at taxpayers’ expense. Either way, seniors and unsecured depositors are safe. That is, they are as safe as politicians want them to be. Italy is able to bail out these banks – and will no doubt in due course bail out others too – because it is a big country which can easily borrow the funds needed.

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“..”abundant” proof that the president received bribe money..”

Brazil Top Prosecutor Charges President With Bribery (AFP)

Brazil’s top prosecutor charged President Michel Temer with bribery on Monday, plunging Latin America’s biggest country into what could be prolonged new political turmoil. The bribery charge filed by Prosecutor General Rodrigo Janot swept Temer into the forefront of a giant graft scandal that has engulfed Latin America’s biggest country over the last three years. Although several past Brazilian presidents and scores of other politicians are currently being investigated for corruption in the “Car Wash” probe, Temer is the first leader in the country’s history to face criminal charges while still in office. Temer acted “in violation of his duties to the state and to society,” Janot wrote, citing “abundant” proof that the president received bribe money.

For Temer to go on trial, the lower house of Congress must first approve Janot’s charge by a two-thirds majority. Temer would then be suspended for six months for the trial. Janot is also probing Temer for alleged obstruction of justice and membership of a criminal group. He could file those charges at a later date, guaranteeing a sustained legal assault. However, Temer’s aides say they are confident he has sufficient support in Congress to get the charges thrown out. In his first comments since returning from a trip to Russia and Norway, the president was defiant. “There is no plan B,” he said at a ceremony to sign a new bill in the capital Brasilia. “Nothing will destroy us – not me and not our ministers.”

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Nothing black about it.

The Technicolor Swan (Jim Kunstler)

I registered as a Democrat in 1972 — largely because good ole Nixon was at the height of his power (just before his fall, of course), and because he was preceded as party leader by Barry Goldwater, who, at the time, was avatar for the John Birch Society and all its poisonous nonsense. The Democratic Party was still deeply imbued with the personality of Franklin Roosevelt, with a frosting of the recent memory of John F. Kennedy and his brother Bobby, tragic, heroic, and glamorous. I was old enough to remember the magic of JFK’s press conferences — a type of performance art that neither Bill Clinton or Barack Obama could match for wit and intelligence — and the charisma of authenticity that Bobby projected in the months before that little creep shot him in the kitchen of the Ambassador Hotel. Even the lugubrious Lyndon Johnson had the heroic quality of a Southerner stepping up to abolish the reign of Jim Crow.

Lately, people refer to this bygone era of the 1960s as “the American High” — and by that they are not talking about smoking dope (though it did go mainstream then), but rather the post World War Two economic high, when American business might truly ruled the planet. Perhaps the seeming strength of American political leaders back then was merely a reflection of the country’s economic power, which since has been squandered and purloined into a matrix of rackets loosely called financialization — a criminal magic act whereby wealth is generated without producing anything of value. Leaders in such a system are bound to be not just lesser men and women but something less than human. Hillary Clinton, for instance, lost the 2016 election because she came off as demonic, and I mean that pretty literally.

To many Americans, especially the ones swindled by the magic of financialization, she was the reincarnation of the little girl in The Exorcist. Donald Trump, unlikely as it seems — given his oafish and vulgar guise — was assigned the role of exorcist. Unlike poor father Merrin, he sort of succeeded, even to his very own astonishment. I say sort of succeeded because the Democratic Party is still there, infested with all its gibbering demons, but it has been reduced politically to impotence and appears likely to soon roll over and die. None of this is to say that the other party, the Republicans, have anything but the feeblest grip on credibility or even an assured continued existence. First of all there is Trump’s obvious plight as a rogue only nominally regarded as party leader (or even member).

Then there is the gathering fiasco of neither Trump nor his party being able to deliver remedies for any of the ills of our time that he was elected to fix. The reason for that is simple: the USA has entered Hell, or at least a condition that looks a lot like it. This is not just a matter of a few persons or a party being possessed by demons. We’ve entered a realm that is populated by nothing but demons — of our own design, by the way. Our politics have become so thoroughly demonic, that the sort of exorcism America needs now can only come from outside politics. It’s coming, too. It’s on its way. It will turn our economic situation upside down and inside out. It’s a Technicolor swan, and you can see it coming from a thousand miles out. Wait for it. Wait for it.

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It’s crazy that we’re still talking about this.

California To List Glyphosate As Cancer-Causing; Monsanto Vows Fight (R.)

Glyphosate, an herbicide and the active ingredient in Monsanto Co’s popular Roundup weed killer, will be added to California’s list of chemicals known to cause cancer effective July 7, the state’s Office of Environmental Health Hazard Assessment (OEHHA) said on Monday. Monsanto vowed to continue its legal fight against the designation, required under a state law known as Proposition 65, and called the decision “unwarranted on the basis of science and the law.” The listing is the latest legal setback for the seeds and chemicals company, which has faced increasing litigation over glyphosate since the World Health Organization’s International Agency for Research on Cancer said that it is “probably carcinogenic” in a controversial ruling in 2015.

Dicamba, a weed killer designed for use with Monsanto’s next generation of biotech crops, is under scrutiny in Arkansas after the state’s plant board voted last week to ban the chemical. OEHHA said the designation of glyphosate under Proposition 65 will proceed following an unsuccessful attempt by Monsanto to block the listing in trial court and after requests for stay were denied by a state appellate court and the California’s Supreme Court. Monsanto’s appeal of the trial court’s ruling is pending. “This is not the final step in the process, and it has no bearing on the merits of the case. We will continue to aggressively challenge this improper decision,” Scott Partridge, Monsanto’s vice president of global strategy, said.

Listing glyphosate as a known carcinogen under California’s Proposition 65 would require companies selling the chemical in the state to add warning labels to packaging. Warnings would also be required if glyphosate is being sprayed at levels deemed unsafe by regulators. Users of the chemical include landscapers, golf courses, orchards, vineyards and farms. Monsanto and other glyphosate producers would have roughly a year from the listing date to re-label products or remove them from store shelves if further legal challenges are lost.

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Jun 202017
 
 June 20, 2017  Posted by at 10:03 am Finance Tagged with: , , , , , , , ,  


Pablo Picasso Dans l’atelier 1954

 

Putin: US Routinely Meddles In Russian And Other Elections (Zuesse)
Russia To Consider US Planes In Syria As ‘Targets’ (News.AU)
Absent Without Leave (Jim Kunstler)
Barclays and Four Executives Charged With Fraud In Qatar Case (BBC)
Two-Thirds Of Europeans Believe EU Should Take Hard Line On Brexit (G.)
Britiain’s Carmakers Face Brexit Cliff Edge (BBC)
UK Property Owners’ £2.3 Trillion Windfall ‘Created Huge Inequality Gap’ (G.)
UK’s Co-op Bank In Advanced Talks To Be Rescued By Hedge Funds (G.)
China Cracks Down On Online Moneylenders Targeting Students (BBC)
China’s “Ghost Collateral” Arrives In Canada, “Heralding A Crisis” (ZH)
Household Debt Sees Australian Banks Downgraded Again (ABCAu)
296 Earthquakes Near Yellowstone Supervolcano In Last 7 Days (Snyder)
Drug Prices Far Lower In Countries With Single-Payer Health Systems (IBT)
Could There Be A Bidding War For Whole Foods? (CNN)
Amazon Will Kill Your Local Grocer (BBG)

 

 

Funny how opinions of Russia revert to communism all the time.

Putin: US Routinely Meddles In Russian And Other Elections (Zuesse)

The neoconservative American Jan Wenner’s Rolling Stone magazine headlined on June 16th about these Showtime interviews, «10 Most WTF Things We Learned From Oliver Stone’s Putin Interviews», and sub-headlined: «From denying any involvement with U.S. election hacking to Putin’s love of Judo and Stalin, our takeaways from these truly baffling conversations».

Wenner’s reporter opened: “What’s the Russian equivalent of Kool-Aid? Whatever it is, it’s definitely red – and Oliver Stone has eagerly drunk it down. The trailers for The Putin Interviews, Showtime’s four-part series documenting conversations between Russian President Vladimir Putin and Stone, would have you believe that you’re going to hear some pretty hard-hitting stuff as the autocrat and the filmmaker face off, Frost-Nixon style. What we got instead was a series of softballs lobbed lovingly in the direction of one of the most powerful and dangerous men in the world. Except for a few moments, Stone seems serenely unconcerned with anything beyond flattering his subject – and engaging in some supremely one-sided exchanges about history and policy along the way.”

The term «red» in this context refers, of course, to communism, and alleges that Russia is still a communist country. To allow that type of smear to appear in any ‘news’ vehicle, is to expose itself as being actually a propaganda-vehicle, unless the allegation is backed up by solid documentation, which Wenner’s magazine didn’t do — Wenner’s magazine presented no documentation at all, for the inflammatory allegation. The magazine’s presumption was that their readers will simply believe what Wenner’s operation delivers, to be ipso-facto ‘true’.

But any such reader would be welcoming his own deception by Wenner’s propaganda-operation. Evidently, successful magazines can insult their own subscribers’ intelligence, so long as it’s done in ‘the right way’ — the subscribers won’t despise the publisher for trying to deceive them about such important matters as what countries to invade, or whether to invade, or why to invade. The U.S. military-industrial complex (MIC) can attract cannon-fodder for its operations, by means of such ‘news’ media to produce dupes for that MIC. During the 2016 U.S. Presidential campaign, Mr. Wenner’s propaganda-machine had ardently campaigned for the neoconservative Hillary Clinton against the moderately progressive Bernie Sanders in the U.S. Democratic Party primaries.

And, then, once she (and her friend Debbie Wasserman Schultz who ran the DNC) managed to steal the nomination from her opponent, Wenner’s operation campaigned for Ms. Clinton against her Republican opponent Trump, who claimed (falsely as it turns out, in lies exceeding Clinton’s own) to be opposed to neoconservatives (whom he has actually loaded into his Administration). Trump now relies upon neocons for his support, but perhaps Wenner and Robert Kagan and other neoconservatives won’t be satisfied until the U.S. government takes control over Russia — which cannot happen except upon all of our dead bodies (WW III) — which is precisely what Hillary Clinton was aiming for (and maybe Trump is, too). That’s how insane the U.S. aristocracy (and its PR organs such as Wenner’s) now is – they’re pushing the world toward nuclear Armageddon.

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There will come a point when Russia’s had enough. But they won’t shoot down US planes.

Russia To Consider US Planes In Syria As ‘Targets’ (News.AU)

Russia says it will now consider US planes in Syria as “aerial targets” and cease communications via a military hotline in a rapid escalation of tensions between the two nations. The Russian defence ministry released a statement Monday afternoon, local time, condemning the US for shooting down a Syrian warplane that had dropped bombs near ground forces supported by the US. The ministry said it would now track all US-led coalition jets and drones found west of the Euphrates River in Syria and treat them as targets. This is a significant development because, while it is not uncommon for the two nations to criticise each other politically, Russia stays in contact with the US-led coalition via a military hotline to ensure there is no unintended military conflict between the two powers in the region.

The statement says that Russia will no longer use the communication channel, designed to avoid incidents in Syrian airspace. “The command of the coalition forces did not use the established communication channel for preventing incidents in Syrian airspace,” the defence ministry said in the statement. Russia said it would now “end co-operation with the American side”. “Any flying objects, including planes and drones of the international coalition, discovered west of the Euphrates River will be tracked as aerial targets by Russia’s air defences on and above ground,” it said. [..] The campaign has often put the US at odds with the regime of Syrian President Bashar al-Assad, which is leading its own attack against IS with air cover support from Russia. Syria is also in the grip of a civil war that has claimed more than 400,000 lives, according to the United Nations.

An American F/A-18 Super Hornet shot down a Syrian SU-22 about 7pm on Sunday. The coalition said the Syrian plane had dropped bombs near its allies, the Syrian Democratic Forces, which were fighting IS south of Tabqah. Russia said the shooting down of the plane was an act of aggression against Syria and called for a “careful investigation by the US command” into the incident. “Repeated military actions by US aircraft against the lawful armed forces of a United Nations member state, under the guise of a ‘fight against terrorism’, are a profound violation of international law and, in fact, military aggression against the Syrian Arab Republic,” the Russian Defence Ministry said. “As a result of the strike, the Syrian plane was destroyed. The Syrian pilot catapulted into an area controlled by Islamic State terrorists. His fate is unknown.”

The coalition said the Syrian warplane had been shot down “in accordance with rules of engagement and in collective self-defence of coalition partnered forces”. The deputy chairman of the Russian Senate’s defence committee, Frants Klintsevich, said there was “no defence” for the US shooting down the plane. “Blatant aggression and provocation. To provoke, above all, Russia. It seems that the US under Donald Trump is a source of a qualitatively new level of danger not only in the Middle East but also around the world,” he wrote on Facebook.

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“That well is going dry in the middle of the summer, and without any resolution to the debt ceiling debate, the country will not be able to borrow more to pretend that it’s solvent.”

Absent Without Leave (Jim Kunstler)

After nearly a year of investigating, the FBI, the CIA, the NSA, the DIA, DHS, et. al. haven’t been able to leak any substantial fact about “Russian collusion” with the Trump election campaign — and, considering the torrent of leaks about all manner of other collateral matters during this same period, it seems impossible to conclude that there is anything actually there besides utterly manufactured hysteria. Now, one might imagine that this intelligence community could have manufactured some gift-wrapped facts rather than just waves of hysteria, but that’s where the incompetence and impotence comes in. They never came up with anything besides Flynn and Sessions having conversations with the Russian ambassador — as if the ambassadors are not here to have conversations with our government officials.

You’d think that with all the computer graphics available these days they could concoct a cineplex-quality feature film-length recording of Donald Trump making a “great deal” to swap Kansas for Lithuania, or Jared Kushner giving piggyback rides to Vladimir Putin in the Kremlin. But all we’ve really ever gotten was a packet of emails from the Democratic National Committee and John Podesta of the Clinton campaign gloating about how nicely they fucked over Bernie Sanders — and that doesn’t exactly reflect so well on what has evolved to be the so-called “Resistance.” The net effect of all this sound and fury is a government so paralyzed that it can’t even pass bad legislation or execute its existing (excessive) duties. That might theoretically be a good thing, except what we’re seeing are individual departments just veering off on their own, especially the military, which now operates without any civilian control.

Apparently General Mattis, the Secretary of Defense, pretty much decided on his own to dispatch another 8,000 US troops to Afghanistan to move things along there in the war’s 16th year. Or did he get President Trump to look up from his Twitter window for three seconds to explain the situation and get a nod of approval? Perhaps you also didn’t notice the news item over the weekend that a US-led fighter plane coalition shot down a Syrian air force plane in Syrian airspace. In an earlier era that could easily be construed as an act of war. Who gave the order for that, you have to wonder. And what will the consequences be? Reasonable people might also ask: haven’t we already made enough deadly mischief in that part of the world? With the US military gone rogue in foreign lands, and the intelligence community off-the-reservation at home, and the Trump White House all gummed up in the tarbaby of RussiaGate, and the House and Senate lost in the shuffle, you also have to wonder what anybody is going to do about the imminent technical bankruptcy of the USA as the Treasury Department spends down its dwindling fund of remaining cash money to pay ongoing expenses — everything from agriculture subsidies to Medicare.

That well is going dry in the middle of the summer, and without any resolution to the debt ceiling debate, the country will not be able to borrow more to pretend that it’s solvent. I don’t see any indication that the House and Senate will be able to bluster their way through this. Instead, the situation will compel extraordinary new acts of financial fraud via the central banks and its cadre of Too-Big-To-Fail associates. In the event, the likely outcome will be a spectacular fall in the value of the US dollar, and perhaps consecutively, the collapse of the equity and real estate markets.

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Actual bankers charged? Or is this just more of the sudden anti-Qatar campaign?

Barclays and Four Executives Charged With Fraud In Qatar Case (BBC)

Barclays and four former executives have been charged with conspiracy to commit fraud and the provision of unlawful financial assistance. The Serious Fraud Office charges come at the end of a five-year investigation and relate to the bank’s fundraising at the height of 2008’s financial crisis. Former chief executive John Varley is one of the four ex-staff who will face Westminster magistrates on 3 July. Barclays says it is considering its position and awaiting further details. Mr Varley, former senior investment banker Roger Jenkins, Thomas Kalaris, a former chief executive of Barclays’ wealth division, and Richard Boath, the ex-European head of financial institutions, have all been charged with conspiracy to commit fraud in the June 2008 capital raising. In addition, Mr Varley and Mr Jenkins have also been charged with the same offence in relation to the October 2008 capital raising and with providing unlawful financial assistance.

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The Greeks are the only ones who’ve seen the real face of the EU.

Two-Thirds Of Europeans Believe EU Should Take Hard Line On Brexit (G.)

Two-thirds of Europeans believe the EU should take a hard line with the UK over Brexit, according to a survey. 65% of those questioned in Belgium, Germany, Greece, Spain, France, Italy Austria, Hungary and Poland said the EU, while trying to maintain a good relationship with Britain, should not compromise on its core principles. The Chatham House-Kantar survey showed just 18% of people in the nine countries – compared with 49% of people in Britain – believed the opposite; that the European commission should aim to keep the UK as close as possible, at the expense of its principles, during the talks, which began on Monday. f those surveyed across the nine continental countries, 57% said the EU had been weakened by Brexit, while 46% felt Britain’s departure would be bad for the bloc. By contrast, 70% of Britons felt the EU would suffer from the UK leaving.

The survey interviewed more than 1,000 people in each of the 10 countries including Britain earlier this year before elections in the Netherlands and France and an economic uptick that have significantly bolstered pro-European sentiment. The election of pro-European centrist Emmanuel Macron in France has in particular given the bloc a boost. The eurozone economy, too, is now growing faster than that of the UK or US. Britain’s confusion over what Brexit strategy to adopt have also helped swing EU opinion. A Pew survey last week found markedly higher approval for the EU since the Brexit vote: 63% of respondents in the 10 EU countries had favourable views about the bloc.

The figures mark a sharp increase from spring last year, with favourable opinions up 18 points in Germany and France, 15 in Spain, 13 in the Netherlands – and 10 in the UK. Only 18% of continental respondents wanted their country to leave the EU. Overall, the survey revealed that more than half (58%) of people in 10 countries believed another EU country might leave the bloc within the next decade. Four-fifths of Greeks, hardest hit by the 2008 financial crisis, backed this view, compared with less than half of Hungarians and Poles. Asked about what they considered the EU’s greatest achievements, the freedom to live and work across Europe and the creation of the border-free Schengen zone came top among continental respondents (both on 17%), followed by European peace and the euro (13%) and the single market (8%).

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“..almost a million people were employed across the wider automotive industry.”

Britiain’s Carmakers Face Brexit Cliff Edge (BBC)

The government must secure a transitional Brexit deal to protect the future of the UK car industry, a trade group has said. The Society of Motor Manufacturers and Traders (SMMT) said Britain was highly unlikely to reach a final agreement with the EU by the March 2019 deadline. That meant carmakers could face a “cliff edge”, whereby tariff-free trade was sharply pulled away. It warned the industry would suffer without a back-up plan in place. The EU is by far the UK’s biggest automotive export market, buying more than half of its finished vehicles – four times as many as the next biggest market. UK car plants also depend heavily on the free movement of components to and from the continent.

The SMMT said any new relationship with the EU would need to address tariff and non-tariff barriers, regulatory and labour issues, “all of which will take time to negotiate”. “We accept that we are leaving the European Union,” said chief executive Mike Hawes. “But our biggest fear is that, in two years’ time, we fall off a cliff edge – no deal, outside the single market and customs union and trading on inferior World Trade Organization terms. “This would undermine our competitiveness and our ability to attract the investment that is critical to future growth.” UK car manufacturing generated £77.5bn of turnover last year and accounted for 12% of all goods exports, according to the trade group. It added that almost a million people were employed across the wider automotive industry.

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At least divvy up the monopoly money with a little sense of justice, you’d say. The fall will be hard enough already.

UK Property Owners’ £2.3 Trillion Windfall ‘Created Huge Inequality Gap’ (G.)

A £2.3tn windfall for those lucky enough to own their own homes during the property boom of the 1990s and early 2000s has opened up a deep and widening inequality gap between the generations, a thinktank has warned. Rising house prices that have enriched older generations have priced the young out of home ownership, said the Resolution Foundation, adding that the pattern whereby each generation was wealthier than the previous one had broken down. In a new report, the thinktank noted that the baby boomers born in the 20 years after the second world war were the big beneficiaries of rapidly rising house prices, but had amassed most of the wealth through no skill of their own. Wealth disparities would have “worrying consequences” for the living standards of younger generations, it added.

Laura Gardiner, senior policy analyst at the Resolution Foundation, said: “Britain’s pre-crash property boom created a huge, unearned and largely tax-free £2.3tn housing wealth windfall for those old enough and lucky enough to be home owners at the time. But while the property bubble hugely benefited many of Britain’s baby boomers, it has also driven generational wealth progress into reverse by pricing younger people out of home ownership. “Property, pension and financial wealth can provide security and opportunities for families, as well as a decent income in retirement. The failure of younger generations to accumulate wealth in the way that earlier generations have been able to is therefore a huge living standards concern for us all.”

The report found that 82% of housing wealth increases between 1993 and 2012-14 were due to the property boom, which saw the average price of a residential property in the UK rise threefold, rather than through any active behaviour – such as buying, moving house or paying off mortgages. At the boom’s zenith in 2003, one in six of all working property-owning adults were earning more from the rising value of their homes than from their jobs.

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What a great idea! Take your money now?!

UK’s Co-op Bank In Advanced Talks To Be Rescued By Hedge Funds (G.)

The Co-operative Group’s stake in the Co-op Bank could fall dramatically under a rescue plan being drawn up by hedge funds. The UK’s largest mutual, which owns supermarkets and funeral homes, has a 20% stake in the bank, which put itself up for sale in February in a search for £750m of extra funding. But under a proposal being discussed by the bank’s controlling hedge fund shareholders, this stake could drop towards zero unless the group decides to pump millions of pounds into the loss-making bank. In April, the group wrote down the value of its stake to zero, taking a further £140m hit on its shareholding that had stood at 100% before the problems at the banking arm were uncovered in 2013.

Four years ago, hedge funds which owned bonds issued by the Co-op bank helped contribute to its rescue and they are again regarded as the most likely source for the extra capital the bank needs to appease the Bank of England. In an update on the sales process on Monday, the Co-op bank, which has 4 million customers, said it was “in advanced discussions with a group of existing investors with a view to a prospective equity capital raise and liability management exercise”. A liability management exercise would involve bondholders agreeing to convert debt into shares. In a previous update to the market, the bank had warned that it would need to undergo a liability management exercise regardless of whether it was sold, signalling that bondholders faced losses under all the options being considered. In the latest announcement, the Co-op Bank said it was still continuing with talks about a sale of the business.

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A few thoughts:

• A) China’s not all that different from the US, is it? Student debt is hot.

• B) This is largely shadow banking, and Beijing has very little grip on it

• C) Well, OK, haven’t heard this from the US yet: “.. borrowers were instructed to send naked pictures of themselves, with their identification cards, to the lender as collateral.”

China Cracks Down On Online Moneylenders Targeting Students (BBC)

China is cracking down on online moneylenders who target university students, following concerns about the largely unregulated industry. A recent government directive has ordered such lenders to suspend all activities wooing student borrowers. The move follows reports of exorbitant interest rates and unsavoury practices in the industry, including demanding “nude selfies” as collateral. Online peer-to-peer moneylending has grown popular in China in recent years. Known as “wang dai” in Chinese, it sees strangers providing small loans to others via websites and phone apps. The directive (in Chinese) was made by China’s banking, education and social security authorities, according to a copy released by the Jiangxi provincial government on its website on Friday.

It said the measures were needed to address moneylenders “making extortionate loans” and other behaviour that has “severely harmed the safety of university students”. The exact number of online moneylenders in China is not known, but one microfinancing portal called Wangdaizhijia lists at least 500 such platforms. In recent years some moneylenders and loan sharks have begun targeting university students in need of quick and easy credit, according to Chinese reports. Some students have since fallen prey to spiralling debt as a result of high interest rates. In some cases, borrowers were instructed to send naked pictures of themselves, with their identification cards, to the lender as collateral. They would threaten to release the pictures if the student defaulted on their debts. In December the naked pictures and contact details of more than 100 young female borrowers were leaked online, causing an outcry and shining a spotlight on the underground business.

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Silly to suggest this is some new development. China prints funny money, and blows bubbles with everywhere. Been going on for years.

China’s “Ghost Collateral” Arrives In Canada, “Heralding A Crisis” (ZH)

Two weeks ago, a key China-linked concern that made headlines back in 2013 and 2014 reemerged after an extensive analysis by Reuters reporter Engen Tham found that China’s “ghost collateral” problem, or collateral that was either rehypothecated between two or more loans, or simply did not exist, had not only not gone away but was still as prevalent as ever if not worse. The report, a continuation of extensive reporting conducted on this site, said that 60% of all loans issued in China’s system are backed by property, and that China’s property values are “wildly misleading, which is part of the reason that China’s credit rating was recently downgraded.” Reuters reported that Chinese lenders are prone to fraud with loan officers turning a blind eye to the quality of collateral and knowingly accepting dubious and even fraudulent documents.

Now, in a follow up by the Vancouver Sun’s Sam Cooper, the real estate reporter explains that China’s “ghost collateral” problem has jumped across the Pacific and is threatening the Canadian banking system. As Cooper notes, “as a result of the flood of money pouring from Mainland China into Vancouver real estate in recent years, some financial experts say they believe Canadian banks are directly exposed to shadow lending in China and the risks of so-called “ghost collateral”, collateral that may not exist or is used continuously to secure loans for multiple borrowers.” And the stunner: “Postmedia confirmed that Canadian banks are allowed by the federal regulator, the Office of the Superintendent of Financial Institutions, to accept collateral from China to secure real estate mortgages in B.C.” “OSFI does not dictate what type of collateral (federally regulated banks) can accept,” spokeswoman Annik Faucher said. “Whether the borrower is foreign or domestic, OSFI (allows) financial institutions to compete effectively and take reasonable risks.”

The underlying reason for Canada’s growing, if paradoxical, exposure to Chinese collateral is due to an explosion of Canada’s shadow banking system. An investigation by Cooper found “massive and risky home loans are increasing in number across Metro Vancouver, while mortgage fraud cases are also on the rise, connected to the growth of so-called “shadow banking.” This is similar, if smaller in scale, to the gargantuan $8.5 trillion shadow banking market in China, where “shadow” lenders and creditors bypass conventional banks to provide and obtain funding, often at far higher terms than prevailing rates, an increasingly dangerous proposition at a time when Chinese interest rates, especially on the short-end, are suddenly spiking. The Vancouver Sun adds that as a result of tighter federal lending rules, borrowers trying to buy million-dollar-plus properties in Vancouver’s market “are increasingly taking out dangerous loans from shadow bankers in a fast-growing and poorly regulated financial market.”

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First of many. Canada, Denmark, Netherlands et al, there’s a long list.

Household Debt Sees Australian Banks Downgraded Again (ABCAu)

Global ratings agency Moody’s has downgraded the big four banks and eight other institutions over fears about the housing market. Moody’s cut ANZ, CBA, NAB and Westpac by one notch from Aa3 to Aa2. Bendigo and Adelaide Bank and Newcastle Permanent Building Society went from A3 to A2 while Heritage Bank, Members Equity, QT Mutual, Teachers Mutual, Victoria Teachers Mutual and Credit Union went from A3 to Baa1. Moody’s action comes a month after rival agency S&P Global downgraded almost all Australian banks over fears of “a sharp correction in property prices”. Moody’s said while it did not expect a sharp downturn in housing as its key scenario, it could not ignore the risk that high levels of debt and the rapid credit expansion could pose down the track.

“Whilst mortgage affordability for most borrowers remains good at current interest rates, the reduction in the savings rate, the rise in household leverage and the rising prevalence of interest-only and investment loans are all indicators of rising risks,” the Moody’s statement said. The agency worries that while Australians have been taking on record amounts of debt, wages have not increased, while underemployment has. It also did not like “the rising prevalence of interest-only and investment loans” which it believed were indicators of rising risks. Banks are carrying an arsenal of cash, as required now by regulators, in preparedness for any downturn in the economy or problems in the housing market but Moody’s indicates it is not sure whether it will be enough. “The resilience of household balance sheets and, consequently, bank portfolios to a serious economic downturn has not been tested at these levels of private-sector indebtedness,” it said.

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Yellowstone is a huge threat, but specifics must be viewed with extreme caution.

296 Earthquakes Near Yellowstone Supervolcano In Last 7 Days (Snyder)

I spend a lot of time documenting how the crust of our planet is becoming increasingly unstable. Most of this shaking is taking place far away from the continental United States, and so most Americans are not too concerned about it. But we should be concerned about it, because a major seismic event could change all of our lives in a single instant. For instance, a full-blown eruption of the Yellowstone supervolcano would have the potential of being an E.L.E. (extinction level event). That is why it is so alarming that there have been 296 earthquakes in the vicinity of the Yellowstone supervolcano within the last 7 days. Scientists are trying to convince us that everything is going to be okay, but there are others that are not so sure.

The biggest earthquake in this swarm occurred last Thursday evening. It was initially measured to be a magnitude 4.5 earthquake, but it was later downgraded to a 4.4. It was the biggest quake in the region since a magnitude 4.8 earthquake struck close to Norris Geyser Basin in March 2014. This magnitude 4.4 earthquake was so powerful that people felt it as far away as Bozeman… “The main quake was centered about 5.8 miles underground. The quake and aftershocks occurred just over 8 miles northeast from West Yellowstone, according to the U.S. Geological Service. A witness reported that she felt the building she was in move. Dozens of people reported that they felt it in and around West Yellowstone, Gardiner, Ennis, and Bozeman”. But by itself that one quake would only be of minor concern. What is troubling many of the experts is that this earthquake has been accompanied by 295 smaller ones.

[..] I would like to try to describe for you what a full-blown eruption of the Yellowstone supervolcano would mean for this country. Hundreds of cubic miles of ash, rock and lava would be blasted into the atmosphere, and this would likely plunge much of the northern hemisphere into several days of complete darkness. Virtually everything within 100 miles of Yellowstone would be immediately killed, but a much more cruel fate would befall those that live in major cities outside of the immediate blast zone such as Salt Lake City and Denver. Hot volcanic ash, rock and dust would rain down on those cities literally for weeks. In the end, it would be extremely difficult for anyone living in those communities to survive.

In fact, it has been estimated that 90% of all people living within 600 miles of Yellowstone would be killed. Experts project that such an eruption would dump a layer of volcanic ash that is at least 10 feet deep up to 1,000 miles away, and approximately two-thirds of the United States would suddenly become uninhabitable. The volcanic ash would severely contaminate most of our water supplies, and growing food in the middle of the country would become next to impossible. In other words, it would be the end of our country as we know it today.

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Never privatize basic needs. Always a bad idea.

Drug Prices Far Lower In Countries With Single-Payer Health Systems (IBT)

As the Senate has quietly been toying with the House’s proposed replacement for the Affordable Care Act, a new study, from researchers at Harvard Medical School and the University of British Columbia, found evidence that single-payer systems may lead to lower pharmaceutical prices. Could that data impact U.S. health care reform? U.S. drug prices are so high that the researchers didn’t even factor them into the study, focusing instead on other developed countries. It’s common knowledge that drug prices have been on the steady rise, increasing faster than average wages; at issue is how to push prices back down, or at least slow their escalation.

Examining the roots of high drug expenditures in 10 wealthy countries with universal health care, the study, published last week in the Canadian Medical Association Journal, discovered lower average drug prices in the nations with single-payer systems, which appeared to be better able to negotiate drug prices with pharmaceutical manufacturers. “There is some advantage to having a not-for-profit body, whether it’s a government body, a crown body… running a system without a profit motive,” said Steven Morgan, one of the authors and a professor of economics at University of British Columbia’s School of Population and Public Health. “The blunt instrument of government regulation will not in itself lower drug prices.”

Using drug price and expenditure data for 2015, the researchers established that the 10 countries with universal health care systems examined in the study — New Zealand, the United Kingdom, Canada, France, Germany, Switzerland, the Netherlands, Norway, Sweden and Australia — exhibited relatively little variation in volume of drug price purchases, with a difference as large as 41%. But the disparities in drug prices told a different story, with the two ends of the spectrum differing by 600%. For example, the average price of drug treatment per capita, per day, in New Zealand, which has a single-payer system, stood at just $23, or a third of those of the nine others. Norway, Australia, Sweden and the U.K., the other countries categorized in the study as single-payer, exhibited average daily per-capita drug expenditures of $59, $91, $56 and $81, respectively.

Switzerland, which has a multi-payer, social insurance-based system, had an average per-diem treatment cost of $171, twice as high as the other nine nations. Its fellow multi-payer countries examined in the study — France, Germany and the Netherlands — paid, per capita, on average, $106, $97 and $49, respectively, per day on drug treatments. Canadians, whose health care system the study described as “mixed,” purchased roughly the same volume of drugs as citizens of the other nine countries, but would’ve collectively saved $1.7 billion if their drug prices were comparable to those of the nine other countries, the study noted.

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As long as there’s plenty free money…

Could There Be A Bidding War For Whole Foods? (CNN)

Whole Foods will eventually be part of Amazon CEO Jeff Bezos’s empire. Or will it? Some Wall Street analysts are starting to wonder whether another retailer will come up with a higher offer and start a bidding war. Amazon announced on Friday that it was offering to pay $13.7 billion in cash for Whole Foods – a deal that values the chain of organic grocery stores at $42 a share. But Whole Foods stock closed above $42 on Friday, and it rose again Monday to top $43. That might not sound significant. But any price for Whole Foods stock that is higher than Amazon’s offer could be a sign that Wall Street thinks another company could swoop in with an even better deal. Barclays analyst Karen Short wrote in a report that she “would not be surprised” if other companies make offers for Whole Foods.

She raised her price target on the company to $48 – nearly 15% higher than Amazon’s bid. Short said in the report that “in theory, all retailers that sell food and compete with Amazon” could come up with their own offer for Whole Foods because they may “have too much to lose not to bid.” She said the likely bidders could include Walmart and Target, both of which have big grocery businesses, and the Kroger supermarket chain. She conceded it might be tough to outbid Amazon, but it could still be worth it to drive up the price and make Amazon pay more. Oppenheimer analyst Rupesh Parikh agreed. He raised his price target on Whole Foods to $45 after the Amazon deal was announced. He wrote in a report that “another bid cannot be ruled out” because other big retailers may want to do anything they can to prevent Amazon from getting even more powerful.

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The worst thing you can do is let your food supply be controllled from some point a thousand miles away. But then, Amazon has killed so much community already, and no-one sproke up. It’s labeled ‘progress’.

Amazon Will Kill Your Local Grocer (BBG)

Amazon’s done it to books. And electronics. And clothing. Now it wants to rule the grocery aisles. But Amazon still has a ways to go — the online retailing behemoth has taken a slow, yet calculated approach to attacking the grocery store. After years of testing the AmazonFresh program in its Seattle hometown, it began expanding the grocery delivery service to other cities in 2013. Today, it delivers fresh fruit and meat in parts of New York, New Jersey, Pennsylvania, Connecticut, California, Washington and Maryland. It also delivers food through its Amazon.com website and its Prime Now program. And even though research from Cowen & Co pegs Amazon’s market share of food and beverages sold online in 2015 at about 22 percent, that overall online grocery market in the U.S. is pretty small.

Out of the $795 billion Cowen expects Americans to spend on food and drinks this year, it estimates only about $33 billion of it will be spent online. That’s because it has taken shoppers a long time to grow comfortable with buying their apples, chicken breasts and granola online when they can stop by a physical store on the way home from work and actually touch and smell the food they’re buying. Companies struggle to profit from the very expensive business of picking, packing and transporting fresh food to their customers. It’s much easier to mail a video game or book, which doesn’t have to be kept cold or free of bruises. But for Amazon, the grocery business not only brings more sales, it could also make its business more profitable.

People tend to buy groceries weekly or daily, so getting them hooked on delivery justifies sending trucks out more frequently. Then any general merchandise, like a book or toy, that Amazon sells along with the food adds to profits. And since Amazon will need more trucks for grocery delivery, it could reduce its reliance on shipping companies, which have contributed to soaring costs. For now, Amazon is likely to take added grocery costs on the chin, in hopes it will pay off down the line. Growing its AmazonFresh and Prime Now offerings suggests Amazon is gearing up for the long haul in grocery. Though traditional grocers are not likely to see sales migrate to Amazon right away, that luxury won’t last. And just like bookstores, your local grocer could be toast.

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Jun 182017
 
 June 18, 2017  Posted by at 9:39 am Finance Tagged with: , , , , , , , , , ,  


Fred Lyon Land’s End San Francisco 1953

 

Global Inequality Much Worse Than Previously Thought (Ind.)
The US Is Where the Rich Are the Richest (BBG)
UK Wealth Gap Rises As Home Ownership Falls (G.)
UK Debt Bubble Returns Millions To Days Of 2008 Crash (G.)
Macron Set To Dynamite Parties That Have Dominated For Half A Century (AFP)
Secret Plot To Oust Theresa May If She Fails To Deliver ‘Hard’ Brexit (Tel.)
Arrogance: The Greeks Had A Word For It (G.)
Illinois Finances In ‘Massive Crisis Mode’ (AP)
Metastability (Kocic)
Young Greeks Can’t Name EU Achievements (K.)
Abandoned and Abused: Syrian Refugee Children On Greek Detention Island (G.)

 

 

It’s like the mob rules the world.

Global Inequality Much Worse Than Previously Thought (Ind.)

The gap between rich and poor across the globe is even wider than we currently think, according to a new analysis. Official estimates of inequality only take into account the money that the tax man sees, according to a recent paper by economists, Annette Alstadsæter, Niels Johannesen and Gabriel Zucman. But recent leaks of vast caches of documents from secretive jurisdictions such as Panama and Switzerland have given a more accurate picture of the sheer scale of global tax evasion – most of it carried out by very wealthy people. The three economists have used this trove of data to make a new assessment of the true wealth of the planet’s richest people, and thus a potentially more accurate measure of just how much richer they are than those at the bottom.

Until now, most assessments of wealth have relied on random tax audits, which do not pick up hidden offshore assets. This would not impact measurements global inequality if the poor dodged paying their dues as much as the rich did. In fact the rich evade many multiples more than the poor, according to Alstadsæter, Johannesen and Zucman. They studied three sets of documents: the Panama Papers, leaked from a Central American law firm which helped people set up tax haven companies; the Swiss Leaks, which revealed the dealings of HSBC’s Swiss subsidiary; and Scandinavian tax records, which give an unusually detailed picture of the income of citizens of that region. By combining the data sets they were able to make an estimate of the true size and scope of tax evasion, and thus inequality.

They found the wealthiest 0.01% in Norway, Sweden and Denmark evaded 30% of their personal taxes on average, compared to just 3% in the total population. In Norway, which has particularly detailed data, the super-rich, ie the top 0.1% of the wealth pyramid, are 30% wealthier than previously thought, when their hidden offshore assets are taken into account. This means they actually own 10% of all wealth, not the 8% previously thought. The authors posit that the scale of tax evasion is likely to be even worse in many other countries which have far less stringent tax disclosure rules. Only when we can truly assess how much personal wealth is stashed offshore will the scale of global equality be known, the economists say.

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It’s also where this won’t last. You CAN go to far.

The US Is Where the Rich Are the Richest (BBG)

It’s an excellent time to be rich, especially in the U.S. Around the world, the number of millionaires and billionaires is surging right along with the value of their holdings. Even as economic growth has slowed, the rich have managed to gain a larger slice of the world’s wealth. Globally, almost 18 million households control more than $1 million in wealth, according to a new report from the Boston Consulting Group. These rich folk represent just 1% of the world’s population, but they hold 45% of the world’s $166.5 trillion in wealth. They will control more than half the world’s wealth by 2021, BCG said. Rising inequality is of course no surprise. Reams of data have shown that in recent decades the rich have been taking ever-larger shares of wealth and income—especially in the U.S., where corporate profits are nearing records while wages for the workforce remain stagnant.

In fact, while global inequality is simply accelerating, in America it’s gone into overdrive. The share of income going to the top 1% in the U.S. has more than doubled in the last 35 years, after dropping in the decades after World War II (when the rich were taxed at high double-digit rates). The tide shifted in the 1980s under Republican President Ronald Reagan, a decade when “trickle-down economics” saw tax rates for the rich fall, union membership shrink, and stock markets spike. Now, those policies and their progeny have helped put 63% of America’s private wealth in the hands of U.S. millionaires and billionaires, BCG said. By 2021, their share of the nation’s wealth will rise to an estimated 70%. The world’s wealth “gained momentum” last year, BCG concluded, rising 5.3% globally from 2015 to 2016.

The firm expects growth to accelerate to about 6% annually for the next five years, in both the U.S. and globally. But a lot of that can again be attributed to the rich. The wealth held by everyone else is just barely growing. Where is all this wealth coming from? The sources are slightly different in the U.S. compared with the rest of the world. Globally, about half of new wealth comes from existing financial assets—rising stock prices or yields on bonds and bank deposits—held predominately by the already well-off. The rest of the world’s new wealth comes from what BCG classifies as “new wealth creation,” from people saving money they’ve earned through labor or entrepreneurship. In the U.S., the creation of “new” wealth is a minor factor, making up just 28% of the nation’s wealth increase last year. It’s even lower in Japan, at 21%. In the rest of the Asia Pacific region, meanwhile, two-thirds of the rise is driven by new wealth creation.

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Whenever you see “rising pension wealth” anywhere these days, feel free to laugh out loud.

UK Wealth Gap Rises As Home Ownership Falls (G.)

A fall in home ownership is fuelling the return of rising wealth inequality across Britain, it has emerged. Booming house prices in the run-up to the financial crisis had led to a decade-long fall in the uneven distribution of the country’s wealth. However, comprehensive new analysis of the UK’s wealth divisions has now found that the trend has gone into reverse. The study by the Resolution Foundation thinktank found that just a tenth of adults own around half of the nation’s wealth. The top 1% own 14% of the total. It warned that even this figure may be an underestimate because of the difficulties in calculating the assets of the super-rich. By contrast, 15% of adults in Britain have either no share of the nation’s record £11.1 trillion of wealth, or have negative wealth. The study found that wealth is distributed far less evenly than earnings or household income.

The thinktank measured wealth inequality using the “Gini coefficient”, with 0 being perfect wealth equality and 1 representing a society where a single person has it all. Wealth inequality was almost twice as high as earnings inequality. Despite the perception that wealth inequality has been rising for decades, the research found that the inequality of net financial and property wealth fell steadily between 1995 and 2005, with the Gini coefficient falling from 0.71 to 0.64. The fall was driven by high and rising home ownership, with more households benefiting from the pre-crisis property price boom. As a result, the proportion of property wealth owned by the bottom four-fifths of adults grew from 35% in 1995 to 40% in 2005.

However, home ownership has been falling steadily since the mid-2000s, with the wealth held by the bottom four-fifths of the population dipping as a result. Since the financial crisis, home ownership among the least wealthy 50% of the population has fallen by about 12%. Meanwhile, it has risen by 1% for the wealthiest tenth. The shift in property ownership further towards the richest has contributed to the widening of wealth inequality. Including private pensions, the Gini coefficient rose from 0.67 to 0.69 from 2006-08 to 2012-14. Total wealth across Britain, which includes private pensions, property, financial and physical wealth, rose in the wake of the financial crisis from £9.9tn in 2006-08 to £11.1tn in 2012-14. This has been fuelled by rising pension wealth. [..] Private pensions account for 40% of the wealth total – the largest share at £4.5tn.

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Add this to all the other issues. A gutted society.

UK Debt Bubble Returns Millions To Days Of 2008 Crash (G.)

Charities and financial advisers are calling on the government to use the Queen’s speech to address the “bubble” of unmanageable debt that households are rapidly accumulating. Unsecured consumer credit – including credit cards, car loans and payday loans – is this year expected to hit levels not seen since the 2008 financial crash. There has been concern in the Bank of England that consumer spending is being underpinned by debt, amid comparisons to the run-up to the financial crash. In addition, figures published last week show inflation reached a four-year high in May, meaning shopping is getting increasingly expensive, further intensifying the squeeze on household budgets.

Debt advisers are urging the government to make good on fulfil a promise in the Conservative manifesto to introduce a scheme where those in serious debt are protected by law from further interest, charges and enforcement action for up to six weeks. Many campaigners would like to see this extended further, to up to a year. “It would be excellent if the government in the Queen’s speech committed to helping households who are struggling with debt. It really is one of the great problems of the time that politicians have to grapple with,” said Peter Tutton, head of policy at debt charity StepChange. “We are seeing more and more households struggling just to make basic ends meet – to pay their rent, to pay their council tax, to pay their gas bill. We would like to see the government say, ‘we need to do something about this’.”

The charity estimates that 2.9 million people in the UK are experiencing severe financial debt in the aftermath of the recession. One reason is that many who lost their jobs found new jobs that were less well paid. Sara Williams, the author of Debt Camel, a blog advising on money problems, said: “The recent large increases in consumer credit … look alarming to debt advisers – very much like a bubble building up.”

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I still want to see who paid for all this. It’s too fast and furious to be spontaneous.

Macron Set To Dynamite Parties That Have Dominated For Half A Century (AFP)

French voters went to the polls on Sunday for parliamentary elections set to hand a landslide victory to the centrist party of President Emmanuel Macron which would complete his stunning reset of national politics. The new assembly is due to be transformed with a new generation of lawmakers – younger, more female and more ethnically diverse – winning seats in the afterglow of Macron’s success in presidential elections last month. The scale of the change is forecast to be so large that some observers have compared the overhaul to 1958, the start of the present presidential system, or even the post-war rebirth of French democracy in 1945. It is also entirely unexpected: Macron was unknown three years ago and initially given little chance of emerging as president, but he and his 15-month-old Republic on the Move (REM) party have tapped into widespread desire for change.

“It’s like a science fiction movie for me,” REM candidate Beatrice Failles, a weapons inspector, writer and community activist, told AFP this week during campaigning in Paris. REM and its allies are forecast to win 400-470 seats in the 577-strong parliament, one of the biggest majorities post-war that would give the pro-EU Macron a free hand to implement his business-friendly programme. Sunday’s voting is the decisive second round of the election after a first round last weekend which was topped by REM. If confirmed, the victory will come at the expense of France’s traditional parties, the rightwing Republicans and Socialists, but also the far-right National Front which faces major disappointment. The Socialists are set to be the biggest victim of voters’ desire to reject establishment figures associated with years of high unemployment, terror attacks and lost national confidence.

Pollsters predict the party faces financial ruin with its strength in parliament falling from nearly 300 seats to around 20 after their five years in power under president Francois Hollande. The main concern for observers and critics is the likely absence of any political counterweight to Macron, leading some to forecast that opposition could be led through street protests or in the media. “Desperately seeking an opposition,” said the front page of Le Parisien newspaper on Saturday. [..] In the first round, REM won 32% of the total number of votes cast, but this represented only about 15% of the total number of registered voters. Around half of REM’s candidates are virtual unknowns drawn from diverse fields of academia, business or local activism. They include a mathematician, a bullfighter and a former Rwandan orphan. “You could take a goat and give it Macron’s endorsement and it would have good chance of being elected,” political analyst Christophe Barbier joked recently.

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Brexit negotiations will be insane. Multiple governments will fall over this.

Secret Plot To Oust Theresa May If She Fails To Deliver ‘Hard’ Brexit (Tel.)

Theresa May will face a “stalking horse” challenge to topple her as Prime Minister if she waters down Brexit, senior Tories have warned. Leading Eurosceptic MPs have told The Telegraph they are prepared to mount an immediate leadership challenge if Mrs May deviates from her original plan. The revelation comes after a torrid week for the Prime Minister in which she faced fierce criticism for her handling of the Grenfell Tower catastrophe. Conservative MPs – including Cabinet ministers – have concluded that Mrs May cannot lead them into the next election and they are now discussing when she could go. Eurosceptic MPs have warned that any attempt to keep Britain in the customs union and single market or any leeway for the European Court of Justice to retain an oversight function will trigger an “overnight” coup.

The plot has been likened to Sir Anthony Meyer’s 1989 challenge against Margaret Thatcher. One influential former minister said: “If we had a strong signal that she were backsliding I think she would be in major difficulty. The point is she is not a unifying figure any more. She has really hacked off the parliamentary party for obvious reasons. So I’m afraid to say there is no goodwill towards her.” They added: “What we would do is to put up a candidate to run against her, a stalking horse. You can imagine who would do it. It would be a rerun of the Margaret Thatcher scenario, with Anthony Meyer. Of course Meyer had no chance at all, but she lost support and she was gone. Bear in mind that she was a hell of a lot more popular than the current Prime Minister.” Another former minister said: “If she weakened on Brexit, the world would fall in… all hell would break loose.”

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Hubris. England.

Arrogance: The Greeks Had A Word For It (G.)

“I’m not absolutely certain of my facts, but I rather fancy it’s Shakespeare – or, if not, it’s some equally brainy lad – who says that it’s always just when a chappie is feeling particularly top-hole, and more than usually braced with things in general that Fate sneaks up behind him with a bit of lead piping.” So says the immortal Bertie Wooster at the start of the PG Wodehouse story Jeeves and the Unbidden Guest, and it is fairly certain that the hapless hero, in introducing his “fairly rummy” anecdote, is raking back through his sketchily absorbed education to reach for the word “hubris”, a word inherited from those brainy lads, the Greeks.

In the past week of political turmoil, “hubris” is a word that has been exercised rather more than usual. So have other Greek words, most notably “chaos” (the inchoate matter out of which the universe was formed, according to the poet Hesiod). And “crisis”, which began life meaning “a picking apart” or “a separation”; also a bringing to trial, or a moment of judgment. Though whether a universe will be formed from the current chaos, whether a judgment or a moment of clear-eyed seeing will drop neatly out of our present crisis, remains very much to be seen.

Bertie Wooster’s definition of hubris is a perfectly good one as far as our rather limited modern usage of the word goes. The lead piping came for the Tories, first in the shape of an exit poll on election night and, since then, perhaps in their slow, shocked and wholly inadequate reaction to the catastrophe at Grenfell Tower. But hubris, like chaos and crisis, began with a rather different meaning. For the Greeks, it did not simply signal that pride goes before a fall but, rather, something stronger and more morally freighted. Hubris described an act intentionally designed to dishonour its victim. Hubris was something expressly calculated to cause shame to the weak. Hubris was tinged with violence. Hubris was excessive and brutal.

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The first of many. I know I’ve said that before, but these things can be hidden, until they cannot.

Illinois Finances In ‘Massive Crisis Mode’ (AP)

It’s a new low, even for a state that’s seen its financial situation grow increasingly desperate amid a standoff between the Democrat-led Legislature and Republican Gov. Bruce Rauner. Illinois already has $15 billion in overdue bills and the lowest credit rating of any state, and some ratings agencies have warned they will downgrade the rating to “junk” if there’s no budget before the next fiscal year begins July 1. Rauner on Thursday said he was calling lawmakers back to Springfield for a special session, after the Legislature adjourned May 31 without approving a state spending plan — the third straight year lawmakers have been unable to agree on a budget. Legislators are due at the Capitol on Wednesday, and Rauner said the session will continue through June 30 or until the two sides have a deal.

Lawmakers from both parties have acknowledged Illinois needs to raise taxes to make up for revenue lost when a previous tax hike expired, leaving the state on pace to take in $6 billion less than it is spending this year — even without a budget. Rauner, a former businessman who is seeking a second term in 2018, wants Democrats to approve changes he says are needed to improve Illinois’ long-term financial health before he’ll support a tax increase. Among them are term limits for lawmakers, a four-year property tax freeze and new workers’ compensation laws that would reduce costs for employers. Democrats say they’re willing to approve some items on Rauner’s list, but that what he’s demanding keeps changing or goes too far and would hurt working families. Senate Democrats also note that they approved a $37 billion budget with $3 billion in cuts and an income tax increase in May. The House has not taken up that plan.

In the absence of a budget, funding has been reduced or eliminated in areas such as social services and higher education. Many vendors have gone months without being paid. And increasingly, they’re filing lawsuits to try to get paid. The courts already have ruled in favor of state workers who want paychecks, as well as lottery winners whose payouts were put on hold. Transit agencies have sued, as has a coalition of social service agencies, including one that’s run by Rauner’s wife. Health care plans that administer the state’s Medicaid program also asked a federal judge to order Mendoza’s office to immediately pay $2 billion in unpaid bills. They argued that access to health care for the poor and other vulnerable groups was impaired or “at grave risk” because the state wasn’t paying providers, causing them to leave the program.

Judge Joan Lefkow ruled June 7 that Illinois isn’t complying with a previous agreement to pay the bills and gave attorneys for the providers and the state until Tuesday to work out a level of payment. Mendoza says whatever that amount will be, it will likely put Illinois at the point where 100% of revenues must be paid to one of the office’s “core priorities,” such as those required by court order. And if this lawsuit doesn’t do it, the next court ruling against the state will. Then, she’s not sure what will happen, other than more damage. “Once the money’s gone, the money’s gone, and I can’t print it,” Mendoza said.

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A very useful concept. Reference to Minsky would be in order, though.

Metastability (Kocic)

Big changes threaten to explode not when uncertainty begins to rise, but when it is withdrawn. Excessive determinism is almost always the biggest enemy of stability. This seeming contradiction is behind the concept of metastability which captures the mode of market functioning in the last years. Imagine you have to balance a long stick on your finger. By placing it vertically on your fingertip, the stick could fall either left or right from its initial position because standing upright is unstable. However, in trying to keep the stick vertical, you instinctively (and randomly) wiggle your finger. The added randomness (noise) acts as a stabilizer of an otherwise unstable equilibrium. So long as the noise is administered carefully, the stick remains vertical, or metastable. The withdrawal of noise becomes destabilizing.

In general, there are three types of equilibria to distinguish: stable, unstable and metastable. The bottom of the valley is stable; top of the hill is unstable; a dimple at the top of the hill is metastable. Metastability is what seems stable, but is not – a stable waiting for something to happen. Avalanche is a good example of metastability to keep in mind – a totally innocuous event can trigger a cataclysmic event (e.g. a skier’s scream, or simply continued snowfall until the snow cover is so massive that its own weight triggers an avalanche). Complacency is a source of metastability. It has a moral hazard inscribed into it. Complacency encourages bad behavior and penalizing dissent – there is a negative carry for not joining the crowd, which further reinforces bad behavior.

This is the source of the positive feedback that triggers occasional anxiety attacks, which, although episodic, have the potential to create liquidity problems. Complacency arises either when everyone agrees with everyone else or when no one agrees with anyone. In these situations, which capture the two modes of recent market trading, current and the QE period, the markets become calm and volatility selling and carry strategies define the trading landscape. But, calm makes us worry, and persistent worrying causes fear, and fear tends to be reinforcing. Persistence of low volatility causes misallocation of capital. This is how complacency leads to buildup of risk – it is the avalanche waiting to happen. For a given level of uncertainty, on the risk/reward curve investors settle at a point that corresponds to their risk limits. This position is determined by the volatility cone on the risk frontier, its width commensurate with volatility.

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Insanely positive still.

Young Greeks Can’t Name EU Achievements (K.)

An 84% majority of Greeks aged between 16-25 say that peace is the most important result of the country’s membership in the EU, according to an upcoming survey, which also found that 24% are unable to name three or more achievements of the 28-member club. The online survey, which will be published in full on Wednesday, was conducted by pro-European think tank To Diktio (The Network) with the help of MAD TV on a sample of 1,173 high-school and university students using a multiple-choice questionnaire. Asked if they think that Greece’s membership of the 28-member bloc improves their daily life, just over 37% gave a negative answer.

Whereas most of those who took part in the poll said they are in favor of closer European integration, only a minority said they consider the establishment of welfare states a significant contribution of the EU process. Meanwhile, 86% agreed it is “very significant” that they can travel, live, study or work freely across the EU, while 72% said it is positive that “we have a common strong currency which makes our transactions easier.” Finally, 83% said that the union can play a key role in “protecting fundamental rights regardless of gender, race, religion, disability or age.” Greece joined the EEC, the predecessor of today’s EU, in 1981.

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Just to add the proper insult, the picture below comes from Yuan Yang on Twitter: “Five min into this international property fair & I’ve already been offered to emigrate to the UK, Australia & get my kids into school in US”.

While Syrians kids face abuse, Greece offers passports and ‘Easy Living’ to wealthy Chinese. Mankind has fully lost its compass.

Abandoned and Abused: Syrian Refugee Children On Greek Detention Island (G.)

Rasha went missing late afternoon last Saturday. Her peers describe hanging out as normal with the 20-year-old Syrian in the Greek refugee detention camp. Then she vanished. Last Tuesday her friend Amira, 15, received a flurry of images on her phone. Rasha was lying naked in bed with a man. Superimposed upon his head were grotesque cartoon faces and an accompanying message from the anonymous caller: “I promise I will kidnap you also.” This was far from being the first threat that the teenage refugee from the Syrian city of Qamishli has received since arriving on the Aegean island of Chios six months ago. Existence in the razor-wire-fenced detention centre, a former factory known as Vial, deep within the island’s mountainous interior, is fraught for a child hoping for a fresh start in Europe, preferably the UK.

Fellow refugees intimidate her routinely. “Men say they will attack me, they try and trap us by saying don’t go to Souda [another refugee camp on the island] or go into the town. They say: ‘If I see you there, I will attack you. I will kidnap you and kill you.’” Amira is among scores of unaccompanied minors on Chios who are eligible to claim asylum in the UK under the so-called Dubs amendment. A year ago the UK government announced it would urgently offer sanctuary to a sizeable proportion of Europe’s vulnerable child refugees, a figure widely understood to be about 3,000 minors until, in February, the Home Office unexpectedly stopped the scheme after helping just 480, one child for every 130,000 UK residents. Not a single unaccompanied minor has been transferred from Greece to the UK under the Dubs scheme.

On Tuesday the last chance to reopen Dubs will be heard in the high court in London, a legal challenge that describes the Home Office’s premature closure of Dubs as unlawful and “seriously defective”. The three-day hearing holds potentially profound ramifications for Chios, which is separated by a slim strip of water from Turkey, so close that Amira can see its summer homes and factories from the island’s coast. Beyond lie the borders with Syria and Iraq from where each day people board a motley flotilla of rubber boats and dinghies to attempt the short but perilous crossing to Europe’s gateway. What those that successfully make the crossing quickly encounter could hardly be further from their aspirations of a civilised and safe world. The child refugees of Chios describe being stabbed by local people, police beatings, attacks by the far right, knife fights among drunken adult asylum seekers, and sleepless nights in flimsy tents on pebble beaches.


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Jun 092017
 
 June 9, 2017  Posted by at 9:27 am Finance Tagged with: , , , , , , , , , , ,  


Labour Campaign Poster 1922

 

Trump Accuses Comey Of Lying About Leaked Memo (ZH)
Chris Matthews: “There’s No ‘There’ There” On Trump-Russia ‘Collusion’ (ZH)
Theresa May Has ‘No Intention Of Resigning’ After Losses (BBC)
This Is Where Theresa May’s Arrogance Will Lead Us Next (Ind.)
UK’s Shock Election Result May Hamper Brexit Talks, EU Leaders Warn (G.)
The Myth of “Cash on The Sidelines” (Roberts)
US Household Net Worth Hits Record $95 Trillion… There Is a Catch (ZH)
Opioid Overdoses The Leading Killer Of American Adults Under 50 (ZH)
Trump’s $110 Billion Arms Deal With Saudis Mostly Speculative (RT)
Defense Minister Kammenos Says US Is Greece’s Best International Ally (K.)
European Court Of Justice: Refugee Crisis Trumps Dublin Regulation (K.)
The Shield of Law and Humanism (K.)

 

 

I know the echo chamber won’t agree, but after watching quite a bit of it, four things stood out for me in the Comey testimony, other than the somewhat too loud remarks about how the entire White House lied about him and the FBI:

1) He admitted to leaking information of his private talk with Trump in the Oval Office. Comey said he didn’t understand why Trump asked everyone to leave the room, but, well, perhaps it’s this: that if anything leaked, it would be clear whodunnit. And leaking info about a private talk with your president is not an obvious thing to do. Illegal? Borderline? Comey stated that he did it because he thought it would lead to a special counsel being appointed. But who is he to ‘promote’ such a thing?

2) He finally said in public that Trump himself had not been under investigation, something the president had asked him to do on three occasions. There was some excuse about not doing it because he might have to walk that back later, but the fact remains: no Trump investigation, and despite all other leaks, no public acknowledgement of that.

3) Comey insisted in no uncertain terms that the entire US intelligence community is convinced that Russia interfered in the 2016 elections, and Russia here means the Kremlin, re: Putin. Well, let’s finally see the proof.

4) He recounted how then-AG Loretta Lynch pushed him to relabel the criminal investigation into the Clinton server as a “matter”, a term the Clinton campaign used. But why would an AG do it too, and push the FBI to do the same? Very odd. And then Comey added that this was a reason to call the press conference in which he advised the Department of Justice not to indict Clinton.

Trump Accuses Comey Of Lying About Leaked Memo (ZH)

As we detailed earlier, during his testimony today, former FBI Director Comey testified that he only leaked the memo about his contact with the President AFTER he saw President Trump’s tweet…
COMEY: I asked — the president tweeted on Friday after I got fired that I better hope there’s not tapes. I woke up in the middle of the night on Monday night because it didn’t dawn on me originally, that there might be corroboration for our conversation. There might a tape. My judgement was, I need to get that out into the public square. I asked a friend of mine to share the content of the memo with a reporter. Didn’t do it myself for a variety of reasons. I asked him to because I thought that might prompt the appointment of a special counsel. I asked a close friend to do it. [..] A close friend who is a professor at Columbia law school.

Pretty clear – it was a response to a tweet. But, as President Trump’s personal lawyer Marc Kasowitz states: “Today, Mr. Comey admitted that he unilaterally and surreptitiously made unauthorized disclosures to the press of privileged communications with the President. The leaks of this privileged information began no later than March 2017 when friends of Mr. Comey have stated he disclosed to them the conversations he had with the President during their January 27, 2017 dinner and February 14, 2017 White House meeting. Today, Mr. Comey admitted that he leaked to friends his purported memos of these privileged conversations, one of which he testified was classified.

He also testified that immediately after he was terminated he authorized his friends to leak the contents of these memos to the press in order to “prompt the appointment of a special counsel.” Although Mr. Comey testified he only leaked the memos in response to a tweet, the public record reveals that the New York Times was quoting from these memos the day before the referenced tweet, which belies Mr. Comey’s excuse for this unauthorized disclosure of privileged information and appears to entirely retaliatory. We will leave it the appropriate authorities to determine whether this leak should be investigated along with all those others being investigated”

So the question is – having called President Trump a liar, did Comey just get caught in an even bigger lie… ?

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At least on his personal involvement.

Chris Matthews: “There’s No ‘There’ There” On Trump-Russia ‘Collusion’ (ZH)

If you count yourself among the die-hard, disaffected Hillary supporters still holding out hope that President Trump will be impeached for conspiring with Russian spies to stage a coup in the United States, then you may want to sit down because earlier today one of your biggest cheerleaders just threw in the towel on that whole narrative. Yes, MSNBC’s very own Chris Matthews, the same man who confessed he “got a thrill up his leg” from simply watching Obama speak, admitted today that Comey’s testimony pretty much confirmed that “there’s no ‘there’ there” when it comes to Trump colluding with the Russians.

“The assumption of the critics of the President, of his pursuers, you might say, is that somewhere along the line in the last year is the President had something to do with colluding with the Russians … to affect the election in some way. Some conversation he had with Michael Flynn or Pual Manafort or somewhere.” “And yet what came apart this morning was that theory in two regards…the President said, according to the written testimony of Mr. Comey, go ahead and get any satellites of my operation and nail them. I’m with you on that…” “And then also, Comey said that basically Flynn wasn’t central to the Russian investigation.” “And I’ve always assumed that what Trump was afraid of was that he had said something to Flynn and Flynn could be flipped on that and Flynn would testify against the President that he’d had some conversation with Flynn in terms of dealing with the Russians affirmatively.” “And if that’s not the case, where’s the there-there?”

And when Chris Matthews throws in the towel on a liberal narrative, you know the gig is up. Oh, and by the way, this probably doesn’t help your case either… Burr: “Director Comey, did the President at any time ask you to stop the FBI investigation into Russian involvement in the 2016 U.S. elections?” Comey: “Not to my understanding, no.” Burr: “Did any individual working for this administration, including the Justice Department, ask you to stop the Russian investigation?” Comey: “No.”

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Theresa May can stay until the Tories throw her out; she’s proven to be an awful liability, not a leader. Far too risky. How much would she lose next time around? Their problem is there’s no-one else who’s obvious, there must be dirty fights in dark and rainy alleys first.

So: Tories will throw out May, while Corbyn will have to throw the Blairites out of Labour who made his position a living hell.

Most likely seems Corbyn as PM of a minority government. But that’s a big risk going into Brexit talks.

Theresa May Has ‘No Intention Of Resigning’ After Losses (BBC)

The UK faces the prospect of a hung parliament with the Conservatives as the largest party after the general election produced no overall winner. With nearly all results in, Theresa May faces having fewer seats than when she called the election. The Tories are projected to get 318 seats, Labour 261 and the SNP 35. Jeremy Corbyn has urged the PM to resign but the BBC understands she has no intention of doing so at this stage and will try to form a government. The prime minister has said the country needs stability after the inconclusive election result and the BBC’s political editor Laura Kuenssberg said Mrs May intended to try and govern on the basis that her party had won the largest number of votes and seats.

Labour is set to make 29 gains with the Tories losing 13 seats – and the SNP down by 22 seats in a bad night for Nicola Sturgeon, with her party losing seats to the Tories, Labour and Lib Dems. The Conservatives are forecast to win 42% of the vote, Labour 40%, the Lib Dems 7%, UKIP 2% and the Greens 2%. Turnout so far is 68.7% – up 2% up on 2015 – but it has been a return two party politics in many parts of the country, with Labour and the Conservatives both piling up votes in numbers not seen since the 1990s. UKIP’s vote slumped dramatically but rather than moving en masse to the Tories, as they had expected, their voters also switched to Labour.

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New elections? One positive for the former Empire: the threat of Scottish independence was wiped out.

This Is Where Theresa May’s Arrogance Will Lead Us Next (Ind.)

Despite a lot of the good news streaming out of counts everywhere right now, make no mistake: this is going to be chaos. A deep and growing sense of frustration is about to ripple through the country, because what May has essentially done in her arrogance is take a gamble that could cost us decades of stability and prosperity. It is likely that what awaits us over the next few weeks is, to put it bluntly, a mess. Hung parliament. No clear majority. No willingness to form a coalition. A possible resignation from the Prime Minister (whether she’s pushed or jumps is yet to be seen) and then yet another leadership contest. Boris Johnson is said on the Westminster grapevine to already be positioning himself as a candidate, yet his reputation has turned increasingly sour over the last few years.

Many now regard him as a cynical power-grabber without much regard for the people he claims to represent. The Tories have spent the last two years playing Russian roulette with the electorate in the hope of cementing their credibility, and causing utter shambles along the way. Having barely recovered from a referendum result which caused deep divisions and painful rifts within our society, and as Europe watches us scramble for any sort of political legitimacy, who will now head into the talks that will determine our economic and political future? Theresa May has now shoved us off a cliff into political unknowns just when what we actually needed was, ironically enough, some strong and stable leadership.

Any reassurance from Westminster that the lives of ordinary people in this country mattered more than political point-scoring would be welcome. What we’ll get instead, despite the Labour surge, is yet another election, whether that be in two months’ or two years’ time. It feels inspiring and hopeful that we have so many progressive and wonderful MPs back in the Commons. But until we have a government and a plan of how to get ourselves through this, that hope is limited to a symbolic step in the right direction. In the words of one particularly concise campaign poster: strong and stable, my arse.

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It’s going to get terrible no matter what. But for now the EU has no-one to talk to. They’re not going to sit down with May if she may last only a few more weeks.

UK’s Shock Election Result May Hamper Brexit Talks, EU Leaders Warn (G.)

The EU will force a humiliated Theresa May to explain her intentions at a face-to-face meeting in Brussels as senior diplomats and politicians warned that the hung parliament resulting from the UK election was a “disaster” that hugely increases the chance of a breakdown in the Brexit negotiations. The result is likely to delay the point at which Michel Barnier, the EU’s chief negotiator, has someone with whom to negotiate. Sources said a meeting of the European council on 22 June was the deadline by which time the EU27 would want to know the prime minister’s plans. Guenther Oettinger, the German member of the European commission, said: “We need a government that can act. With a weak negotiating partner, there’s the danger than the negotiations will turn out badly for both sides … I expect more more uncertainty now.”

It had been hoped that officials from both sides would have informal talks next week over the logistics of the negotiations, before formal talks began on the week starting 19 June. With the prime minister needing to both seek to form a minority or coalition government, as well as potentially revise her goals for the talks in the light of the election result, the original timetable seems unrealistic to officials in Brussels. The EU had, until now, believed it understood that May wanted to take the UK out of both the single market and the customs union, but in the early hours of Friday morning the Brexit secretary, David Davis, had suggested the election result could prompt a rethink.

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All on red.

The Myth of “Cash on The Sidelines” (Roberts)

[..] despite 8-years of a bull market advance, one of the prevailing myths that seeming will not die is that of “cash on the sidelines.” To wit: “Underpinning gains in both stocks and bonds is $5 trillion of capital that is sitting on the sidelines and serving as a reservoir for buying on weakness. This excess cash acts as a backstop for financial assets, both bonds and equities, because any correction is quickly reversed by investors deploying their excess cash to buy the dip,” Nikolaos Panigirtzoglou, the managing director of global market strategy at JPMorgan, wrote in a client note. This is the age old excuse why the current “bull market” rally is set to continue into the indefinite future. The ongoing belief is that at any moment investors are suddenly going to empty bank accounts and pour it into the markets.

However, the reality is if they haven’t done it by now after 3-consecutive rounds of Q.E. in the U.S., a 200% advance in the markets, and ongoing global Q.E., exactly what will that catalyst be? However, Clifford Asness previously wrote: “There are no sidelines. Those saying this seem to envision a seller of stocks moving her money to cash and awaiting a chance to return. But they always ignore that this seller sold to somebody, who presumably moved a precisely equal amount of cash off the sidelines.” Every transaction in the market requires both a buyer and a seller with the only differentiating factor being at what PRICE the transaction occurs. Since this must be the case for there to be equilibrium to the markets there can be no “sidelines.”

Each month, the Investment Company Institute releases information related to the mutual fund industry. Included in this data is the total amount of assets invested in mutual funds, ETFs and money market funds. As a rough measure of investor sentiment, this indicator looks at the total assets invested in equity mutual funds and ETFs, and compares it to the total assets invested in the safety of money market funds. The higher the ratio, the more comfortable investors have become holding stocks; the lower the ratio, the more uncertainty there is in the market. Currently, with the ratio at the highest level on record there is little fear of holding stocks. Negative free cash balances also suggest the same as investors have piled on the highest levels of leverage in market history.

Furthermore, with investors once again “fully invested” in equities, it is not surprising to see cash and bond allocations near historic lows. Cash on the sidelines? Not really. Everyone “all in the boat?” Absolutely. Historical outcomes from such situations? Not Great.

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The No Price Discovery Bubble.

US Household Net Worth Hits Record $95 Trillion… There Is a Catch (ZH)

In the Fed’s latest Flow of Funds report, today the Fed released the latest snapshot of the US “household” sector as of March 31, 2017. What it revealed is that with $110.0 trillion in assets and a modest $15.2 trillion in liabilities, the net worth of the average US household rose to a new all time high of $94.835 trillion, up $2.4 trillion as a result of an estimated $500 billion increase in real estate values, but mostly $1.78 trillion increase in various stock-market linked financial assets like corporate equities, mutual and pension funds, as the stock market continued to soar to all time highs . At the same time, household borrowing rose by only $36 billion from $15.1 trillion to $15.2 trillion, the bulk of which was $9.8 trillion in home mortgages.

And the historical change of the US household balance sheet.

And while it would be great news if wealth across America had indeed risen as much as the chart above shows, the reality is that there is a big catch: as shown previously, virtually all of the net worth, and associated increase thereof, has only benefited a handful of the wealthiest Americans. As a reminder, from the CBO’s latest Trends in Family Wealth analysis, here is a breakdown of the above chart by wealth group, which sadly shows how the “average” American wealth is anything but.

While the breakdown has not caught up with the latest data, it provides an indicative snapshot of who benefits. Here is how the CBO recently explained the wealth is distributed: In 2013, families in the top 10% of the wealth distribution held 76% of all family wealth, families in the 51st to the 90thpercentiles held 23%, and those in the bottom half of the distribution held 1%. Average wealth was about $4 million for families in the top 10% of the wealth distribution, $316,000 for families in the 51st to 90th percentiles, and $36,000 for families in the 26th to 50th percentiles. On average, families at or below the 25th percentile were $13,000 in debt In other words, roughly three-quarter of the $2.4 trillion increase in assets went to benefit just 10% of the population, who also account for roughly 76% of America’s financial net worth,

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Trump and Congress had better go out and do something.

Opioid Overdoses The Leading Killer Of American Adults Under 50 (ZH)

The opioid crisis that is ravaging urban and suburban communities across the US claimed an unprecedented 59,000 lives last year, according to preliminary data gathered by the New York Times. If accurate, that’s equivalent to a roughly 19% increase over the approximately 52,000 overdose deaths recorded in 2015, the NYT reported last year. Overdoses, made increasingly common by the introduction of fentanyl and other powerful synthetic opioids into the heroin supply, are now the leading cause of death for Americans under 50. And all evidence suggests the problem has continued to worsen in 2017. One coroner in Western Pennsylvania told a local newspaper that his office is literally running out of room to store the bodies, and that it was recently forced to buy a larger freezer. The initial data points to large increases in these types of deaths in states along the East Coast, particularly Maryland, Florida, Pennsylvania and Maine.

In Ohio, which filed a lawsuit last week accusing five drug companies of abetting the opioid epidemic, the Times estimated that overdose deaths increased by more than 25% in 2016. In some Ohio counties, deaths from heroin have virtually disappeared. Instead, the primary culprit is fentanyl or one of its many analogues. In Montgomery County, home to Dayton, of the 100 drug overdose deaths recorded in January and February, only three people tested positive for heroin; 97 tested positive for fentanyl or another analogue. In some states in the western half of the US, data suggest deaths may have leveled off for the time being – or even begun to decline. Experts believe that the heroin supply west of the Mississippi River, traditionally dominated by a variant of the drug known as black tar which is smuggled over the border from Mexico, isn’t as easily adulterated with lethal analogues as the powder that’s common on the East Coast.

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Fake News.

Trump’s $110 Billion Arms Deal With Saudis Mostly Speculative (RT)

That $110 billion arms deal President Donald Trump signed with Saudi Arabia isn’t much of a deal at all, according to reports which found the majority of the agreement was based on memos, rather than contracts. On May 20, Trump negotiated an arms deal with Riyadh. The State Department said it was worth nearly $110 billion to support “the long-term security of Saudi Arabia and the Gulf region in the face of malign Iranian influence and Iranian related threat.” White House Press Secretary Sean Spicer hailed it the “largest single arms deal in US history.” The State Department then released a general list of the weapons that were included in the deal. However, many experts have said that most of the arms sales had not been cleared by the State Department, Congress or even the industries themselves.

On Thursday, Defense News released a more detailed list of the weapons included in the deal, according to documents they obtained from the White House. The ‘deal’ lists $84.8 billion under memos of intent (MOI) “to be offered at visit,” and $12.5 billion under letters of agreement (LOA), rather than contracts. NPR also obtained a list of commercial deals from a White House spokeswoman and found that it added up to $267 billion, but said most of the deals were listed as “memoranda of understanding” (MOU). “There is no $110 billion deal,” Brookings Institution Senior Fellow Bruce Riedel wrote in blog post Monday. “Instead, there are a bunch of letters of interest or intent, but not contracts,” Riedel said. “Even then the numbers don’t add up. It’s fake news.”

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So what did they do to prove that?

Defense Minister Kammenos Says US Is Greece’s Best International Ally (K.)

Washington is Greece’s only true international ally, Defense Minister Panos Kammenos insisted on Thursday, and accused the country’s European partners of showing a lack of respect. “The Greek people are well aware that the United States has been the country’s only genuine ally,” Kammenos said. “The others are allies, but they are [allies] only in the form of creditors, without [any sense of] respect and this is because some of them will never forget that they lost World War II to this country,” Kammenos, who is also leader of junior coalition partner Independent Greeks, added during a speech marking the 70th anniversary of the US Office of Defense Cooperation in Athens yesterday. “For this reason, we welcome US support at this very difficult moment for our country,” said Kammenos, who also called for the strengthening of the Hellenic Navy with US help so “that it can operate from Crete to the Suez.”

Bolstering the navy and the country’s military aviation capabilities are necessary, he said, to intercept the flow of drugs, weapons and fuel through which terrorism is funded. He also said that Greece is positively inclined to extend the time frame of the defense agreement between the two countries, adding that Prime Minister Alexis Tsipras and his government are working in that direction. He also referred to the latest developments in the Gulf states and stressed that he supports describing the Muslim Brotherhood as a terrorist organization. Aiming his fire at Turkey, he said that each country must choose “whose side they want to be on.” It is certain, he said, that “Greece will be on the side of the US.” For his part, US Ambassador to Greece Geoffrey Pyatt praised relations between Athens and Washington, adding that as Greece’s economy stabilizes, it will become even more active in its role as a bridge between countries of the region.

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Nobody cares unless you hold their feet to the fire.

European Court Of Justice: Refugee Crisis Trumps Dublin Regulation (K.)

Any countries in the European Union receiving asylum requests from refugees have an obligation to process them irrespective of where the applicants first entered into the bloc, an advocate general at the European Court of Justice said on Thursday. Eleanor Sharpston said in a non-binding opinion that under the “exceptional circumstances” of the refugee crisis, member states should not be bound by the Dublin Regulation’s requirement that first-entry states handle all asylum applications, even after a refugee or migrant has moved on to a different country. “The words ‘irregular crossing’ in the Dublin III Regulation do not cover a situation where, as a result of the mass inflow of people into border member states, those countries allowed third-country nationals to enter and transit through their territory in order to reach other member states,” she wrote.

Sharpston referred to the case of a Syrian national who traveled to Slovenia via Croatia and that of an Afghan family that entered Europe in Greece and then made its way to Austria. Slovenia and Austria should be responsible for examining their asylum applications, she said. “If border member states… are deemed to be responsible for accepting and processing exceptionally high numbers of asylum seekers, there is a real risk that they will simply be unable to cope with the situation,” Sharpston wrote. “This in turn could place member states in a position where they are unable to comply with their obligations under EU and international law,” she added.

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The last thing Greece has left is rumored to be on the way out.

The Shield of Law and Humanism (K.)

It is difficult to believe that after Greece’s judiciary offered protection to eight members of the Turkish military, rejecting Ankara’s request for their extradition, the government would agree to the illegal, secret and inhuman expulsion of people who requested asylum here. Yet unease grows. On Wednesday the government spokesman stated, “The Greek government does not engage in pushbacks.” Let us hope that is so. The Hellenic League for Human Rights cites two instances where groups of Turkish citizens who requested asylum in Greece appear to have been handed over illegally to Turkish authorities. The Council of Europe’s commissioner for human rights, Nils Muiznieks, the UN High Commissioner for Refugees and the head of the Alliance of Liberals and Democrats in the European Parliament, Guy Verhofstadt, have expressed concern at the possibility.

There is also the strange story of three Turkish military men who where arrested in Edirne last month, accused of being part of a group that intended to kidnap President Recep Tayyip Erdogan during the failed coup last July. Turkish media said the men were arrested while on their way to Greece; some Greek lawyers, however, claim that the three had crossed into Greece when they disappeared, only to turn up in Turkish custody. The Citizens’ Protection Ministry in Greece scoffed that the claims were “fairy tales.” The case of the eight servicemen who arrived in Alexandroupoli in a helicopter the day after the coup attempt shows how difficult it is for any country to withstand Ankara’s pressure. It is understandable that no government would like to open a new front with a neighbor who can cause problems at will. But it is of paramount importance that Greece withstand such pressures.

In the past few years, among our country’s very few victories were the welcome provided to refugees and the institutional way in which it dealt with the “Eight.” Our great wound, though, is the lack of strategy, of method, of goals – of follow-up. On the refugee issue, government incompetence undermined the initial, heroic efforts of citizens. In the case of Turkish asylum seekers, the difficulties of handling the case of the Eight should not lead to cynicism, to injustice, to the violation of international conventions. Greece has a responsibility toward its own people and toward the Turkish people, to serve the principles of humanism, to abide by the law. Strenuous defense of these principles is part of the identity we aspire to but also our shield. And it is the best thing that we can offer our neighbors – the hope that there is something better than that which they are now enduring.

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Dec 282016
 
 December 28, 2016  Posted by at 10:23 am Finance Tagged with: , , , , , , , , , ,  Comments Off on Debt Rattle December 28 2016


Albert Kahn Paris, Autochrome Lumière color photo 1914

Turkey and Russia Agree on Syria Ceasefire, Into Effect by Midnight (R.)
Erdogan Says He Has Evidence US-Led Coalition Has Given Support To ISIS (Ind.)
Turkey Says Saudis, Qatar Should Attend Syria Peace Talks (AP)
‘US Raised Middle East Terrorists & Wants Them To Stay’ – Iran Def Min (RT)
Toshiba Shares Fall 20%, Hit Limit, As US Nuclear Writedown Sinks In (AFP)
China To Rein In Outward Investment As Domestic Growth Stalls (G.)
Chinese Interbank Funding Freezes Again As Overnight Repo Hits 33% (ZH)
No Happy New Year in China as Currency, Liquidity Fears Loom (BBG)
Greek Taxpayers Face €4 Billion Tax Bill By New Year’s Eve (Xinhua)
Clash Over New Government Sends Romania Spiraling Toward Crisis (BBG)
Inequality and Skin in the Game (Taleb)
The New Normal ‘Safety Net’: Surging Disability Benefits Claims (ZH)
The Battle Against The ‘Superbugs’: Transplants, Chemotherapy At Risk (CNBC)

 

 

Obama’s PR fiasco widens.

Turkey and Russia Agree on Syria Ceasefire, Into Effect by Midnight (R.)

Turkey and Russia have agreed on a proposal toward a general ceasefire in Syria, Turkey’s state-run Anadolu Agency said on Wednesday, and will aim to put it into effect by midnight. Anadolu, citing sources, said the two countries have reached a consensus that will be presented to participants in the conflict on expanding the ceasefire that was established in Aleppo earlier this month. Russia, Iran and Turkey said last week they were ready to help broker a peace deal after holding talks in Moscow where they adopted a declaration setting out the principles any agreement should adhere to. Arrangements for the talks, which would not include the United States and be distinct from separate intermittent U.N.-brokered negotiations, remain hazy, but Moscow has said they would take place in Kazakhstan, a close ally. Russia’s foreign minister on Tuesday said the Syrian government was consulting with the opposition ahead of possible peace talks, while a Saudi-backed opposition group said it knew nothing of the negotiations but supported a ceasefire.

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Accuse the accuser.

Erdogan Says He Has Evidence US-Led Coalition Has Given Support To ISIS (Ind.)

The Turkish President Recep Tayyip Erdogan says he has uncovered evidence that US-led coalition forces have helped support terrorists in Syria – including Isis. American-led forces have been working alongside Syrian rebels fighting President Bashar al-Assad but have attempted to avoid helping Isis and other Islamist militant groups. However, speaking on Tuesday in the Turkish capital, Ankara, he said he believed they had given support to a variety of militant groups, including Isis Kurdish outfits YPG and PYD. “They were accusing us of supporting Daesh [Islamic State],” he told a press conference, according to Reuters. “Now they give support to terrorist groups including Daesh, YPG, PYD. It’s very clear. We have confirmed evidence, with pictures, photos and videos.”

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So Turkey is accused of aiding ISIS, now accuses the US of doing just that, and wants known ISIS backers to join peace talks. Enter Putin stage left.

Turkey Says Saudis, Qatar Should Attend Syria Peace Talks (AP)

Turkish President Recep Tayyip Erdogan says Saudi Arabia and Qatar should join its meeting with Russia and Iran to discuss Syrian peace efforts. Russia, Turkey and Iran, which helped broker the withdrawal of civilians and militants from the Syrian city of Aleppo, have agreed to hold talks on Syria in Kazakhstan next month. Erdogan said Tuesday the meeting of foreign ministers should include Saudi Arabia and Qatar, saying they had “shown goodwill and given support” to Syria. Turkey, Saudi Arabia and Qatar are the main backers of rebels seeking to topple Syrian President Bashar Assad, who is closely allied with Moscow and Tehran. Erdogan added, however, that Turkey would not take part if any “terror organizations” are also invited, referring to Syrian Kurdish groups affiliated with Kurdish insurgents in Turkey.

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All the US has ever bet on is chaos.

‘US Raised Middle East Terrorists & Wants Them To Stay’ – Iran Def Min (RT)

Washington appears unready to play a serious role in fighting Islamic State (IS, formerly ISIS/ISIL), as it has fostered terrorists itself and now wants them to remain in the Middle East, Iranian Defense Minister Hossein Dehghan told RT. “The Western coalition is of a formal nature, they have no real intention to fight neither in Syria nor in Iraq. We don’t see any readiness on their part to play a truly useful and meaningful role in fighting IS, because it’s them who have raised terrorists and they are interested in keeping them there,” Dehghan said. According to the Iranian defense minister, Tehran has never coordinated its operations with the Americans and “will never collaborate with them.”

“Maybe the coalition forces would like to see terrorists weakened, but certainly not destroyed, because those terrorists are their tool for destabilizing this region and some other parts of the world.” He also mentioned Al-Nusra Front (also known as Jabhat Fateh al-Sham) and said that terrorists in Syria receive support from the US, Saudi Arabia and Qatar. He also accused Turkey of supporting terrorists on the ground. “If Iran, Russia and Syria were to reach an agreement with Turkey to end Turkish support for those terrorist groups, particularly IS and Jabhat al-Nusra, and start fighting them, then I think we would see the situation in Syria improve,” he added. According to the minister, any ceasefire in Syria demands guarantees and all parties should agree to fulfill the conditions for a truce.

“We shouldn’t let Islamic State or Al-Nusra groups take part in the ceasefire. All other groups should start a political process and negotiations with the Syrian government.” He added that after the truce comes into force, it is important to separate terrorists and opposition groups ready to negotiate with the Syrian government. All sides should fight IS and Al-Nusra Front, Dehghan stated, adding that everyone should stop supporting terrorists in political, financial and military areas.

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That’s a big company to have this happen to.

Toshiba Shares Fall 20%, Hit Limit, As US Nuclear Writedown Sinks In (AFP)

Toshiba shares dived more than 20% on Wednesday in their second straight double-digit plunge as the company said it may book a one-time loss of several billion dollars over its US nuclear business. Toshiba’s stock price dropped by 20.42% to 311.60 yen, the largest fall allowed for a single day, about 30 minutes after the opening bell, as the company failed to remove investor worries over the potential risk. On Tuesday the Tokyo-based conglomerate said costs linked to the acquisition in 2015 by its US subsidiary of a nuclear service company would possibly come to “several billion US dollars, resulting in a negative impact on Toshiba’s financial results”. The exact figure of the potential writedown was still being worked out, Toshiba president Satoshi Tsunakawa said after the announcement, apologising for “causing concern”.

The company statement suggested the figure would be released soon, citing an end-of-year deadline. Toshiba shares had closed nearly 12% lower on Tuesday on media reports about the potential loss. Analysts said uncertainty was fuelling investor anxiety. “Concerns have yet to be cleared away as they said they didn’t know the figure,” Yukihiko Shimada, senior analyst at SMBC Nikko Securities, told AFP. SMBC Nikko credit analysts Yutaka Ban and Kentaro Harada said in a report that investors “can’t be optimistic about the situation” even though the total writedown may not end up as big as the 500 billion yen (US$4.3bn) reported by local media. Nomura Securities analyst Masaya Yamasaki said in a report issued late on Tuesday that the expected loss “is negative for the company as its financial standing is fragile”.

Tsunakawa answered in the affirmative when asked if Toshiba was considering boosting capital. Its chief financial officer, Masayoshi Hirata, said that after the figure was confirmed the company would “explain and seek support” from financial institutions. Toshiba said the possible loss was related to the valuation of the purchase by subsidiary Westinghouse Electric of the nuclear construction and services business of Chicago Bridge and Iron.

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Something’s not right.

China To Rein In Outward Investment As Domestic Growth Stalls (G.)

Beijing has signalled plans to curb Chinese firms’ investment in foreign assets, after revealing that companies from China are on course to spend 1.12 trillion yuan (£130bn) on everything from British football clubs to a Hollywood film producer in 2016. Companies from China ramped up their spending on overseas assets during the year, as a weakening domestic economy saw investors turn their attention overseas. A diverse array of targets included the maker of Godzilla, Aston Villa Football Club and the pub in which former prime minister David Cameron and Chinese premier Xi Jinping once shared a pint. The spending spree boosted non-financial overseas investment 55% in the first 11 months of 2016, putting Chinese companies on course to spend £130bn this year, compared with £86bn in 2015, said commerce minister Gao Hucheng.

While foreign investment has soared, the amount of money flowing into the country is set to remain broadly flat at £92bn. This means the difference between investments abroad and those coming into China has reached an unprecedented £39bn. The widening gap has triggered concerns about capital flight, where investors send their money out of the country rather than investing it to spur domestic growth. Gao signalled that Beijing would move to address the investment gap by reining in Chinese firms’ overseas spending and making it easier for firms from abroad to access the Chinese economy.

He said the government would “promote the healthy and orderly development of outbound investment and cooperation in 2017”, in remarks at a conference that were published on the commerce ministry’s website. In November it was reported that China was preparing a clampdown on non-Chinese mergers and acquisitions. Separately, the ministry said on its blog that China would sharply reduce restrictions on foreign investment access in 2017 to make it easier for overseas firms to spend their cash in the People’s Republic. No details were given on what restrictions would be changed.

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Even worse than in other years, and there’s a reason for that.

Chinese Interbank Funding Freezes Again As Overnight Repo Hits 33% (ZH)

… when it comes to more traditional unsecured short-term funding markets, like the simple overnight repo, these reflect overall levels of liquidity in the interbank market, or as the case may be, complete absence thereof. And while China is notorious for suffering major liquidity shortages heading into a new year (including the non-lunar variety), what happened overnight in China is worth pointing out because according to Bloomberg data, the overnight repo rate traded on Shanghai Stock Exchange soared as much as 30.87% to 33%, the highest since September 29, before closing at 18.55%.

And while some of the liquidity squeeze was certainly calendar driven, what is more concerning for Chinese markets, where as we reported recently the local authorities, regulators and even press are confirming that the government crackdown on the credit and housing bubble may be serious for once due to fears about “rising social tensions”, much of the overnight repo rate spike was driven by the PBOC which pulled a net 150 billion yuan of funds in open-market operations today, the most since December 7. The result was another brief, but painful, freeze of the interbank lending market. Should the PBOC continue to not only not inject liquidity among banks, but aggressively withdraw it, it is possible that a repeat of the 2013 bank crisis when as a result of the government’s eagerness to delever the economy it almost crushed its financial sector (it ultimately gave up, with Chinese debt/GDP subsequently rising to 300% according to the IIF), should be one of the more notable risk factors for 2017.

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How can Beijing NOT devalue?

No Happy New Year in China as Currency, Liquidity Fears Loom (BBG)

China bulls could be facing a grim New Year’s eve. The first day of 2017 is when an annual $50,000 quota to convert the yuan into foreign exchange resets, stoking concern there will be a rush to sell the local currency. With tax payments and a regulatory assessment also tightening liquidity in the money market toward year-end, January may bring scant relief as lenders prepare for stronger cash demand before Lunar New Year holidays, which are only a month away. China’s markets are seeing renewed pressure this month as the Federal Reserve projects a faster pace of rate increases for 2017 and its Chinese counterpart tightens monetary conditions to spur deleveraging and defend the exchange rate. The declines are capping off a tough year for investors during which bonds, shares and currency all slumped.

“You have Chinese New Year quite early, and because of that one-month window, most of the banks will try to lock the money in a three-month cycle,” said Arthur Lau, Hong Kong-based head of Asia ex-Japan fixed income at PineBridge Investments. “The current situation in the bond market is partly because of year-end and because of Chinese New Year.” The week-long Lunar New Year holidays are traditionally a time when people give out cash gifts and companies pay employee bonuses. China’s 10-year government bond yield has surged 21 basis points in December, poised for its biggest monthly increase since August 2013, and its first annual gain since that same year. The yuan’s 6.6% decline in 2016 puts it on course for its worst year since 1994, while the Shanghai Composite Index is headed for its largest drop in five years.

The three-month interbank rate known as Shibor rose for a 50th day, its longest streak since 2010, to an 18-month high on Wednesday. The overnight repurchase rate on the Shanghai Stock Exchange jumped to as high as 33% the day before, the highest since Sept. 29. As banks become more reluctant to offer cash to other types of institutions, the latter have to turn to the exchange for money, said Xu Hanfei at Guotai Junan Securities in Shanghai. Bond and money markets may stabilize after Lunar New Year holidays – which start Jan. 27 and end Feb. 2 – though they’re unlikely to return to levels before the latest rout owing to yuan weakness and tighter monetary policy, said Lau. The People Bank of China’s yuan position – a gauge of capital flows – dropped the most in 10 months in November amid expectations for faster U.S. rate increases.

The onshore yuan’s surging trading volume suggests outflows are quickening, according to Harrison Hu, chief greater China economist at RBS. The daily average value of transactions in Shanghai climbed to $34 billion in December as of Monday, the highest since at least April 2014, according to data from China Foreign Exchange Trade System. “In the new year, the new foreign-exchange purchase quota starts, so we expect yuan positions in January to drop significantly,” Liu Dongliang at China Merchants Bank wrote in a note this month. “Within the foreseeable future, the market will be pessimistic about funding conditions. It happens to be near year-end now, where money markets are tight, and after New Year’s Day it’s almost Chinese New Year.”

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“Happy New Year with fewer taxes!”

Greek Taxpayers Face €4 Billion Tax Bill By New Year’s Eve (Xinhua)

Greek taxpayers are obliged to pay some €4 billion in taxes by New Year Eve, as outstanding debts to the state have soared to more than €94 billion by November, according to Finance Ministry data. However, some recession-hit taxpayers seem unable to pay the full taxes within deadlines and apply for settlements to pay their debts in more installments. To collect as much as possible to reach bailout targets, the Greek state has launched confiscation procedures for debtors. According to official data, in the first 10 months of 2016, the procedures had been applied onto 108,729 debtors. And another 1.6 million debtors are facing confiscation in early 2017 should they do not immediately settle their debts to the Tax office.

However, some debtors complained about the levies, saying they can not afford any more as they have been struggling to make ends meet amid seven-year austerity. Many financial analysts also warned that Greek society has reached a breaking point due to over-taxation combined with salary, pension cuts and high unemployment rates. Despite the levies, the country’s tax evasion still exists. According to a recent study conducted by the independent Greek research organization diaNEOsis, tax evasion in Greece is estimated range between 6% and 9% of the country’s GDP, which means a loss of some €16 billion in taxes a year. Experts as well as ordinary citizens urge the government to do more to address widespread tax evasion instead of adding more burdens on those who are trying to pay their share.

While mentioning the tax obligations due by Friday, the Hellenic Confederation of Commerce and Entrepreneurship (ESEE), which represents small and medium-sized companies in Greece, wishes in an e-mailed card to its members on Tuesday “Happy New Year with fewer taxes!”

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is this just a stunt to get rid of the president, proposing a female Muslim for PM?

Clash Over New Government Sends Romania Spiraling Toward Crisis (BBG)

Romania tumbled toward a new political crisis after President Klaus Iohannis rejected a prime minister nominee from the Social Democratic Party, which threatened to suspend him after winning a landslide election victory this month. Iohannis called on the party to pick someone else to lead a government after Sevil Shhaideh, a former development minister with little previous political influence, was picked by Social Democrat leader Liviu Dragnea last week. Dragnea, who can’t take the post himself because he was previously convicted of rigging a referendum, called the decision unjustified. He said he’ll consider his options, including potentially starting the procedure to suspend Iohannis, and will announce a decision by Dec. 29.

“It seems the president clearly wants to be suspended,” Dragnea said in a speech in Bucharest on Tuesday. “We’ll weigh our options very carefully, because we don’t want to take emotional decisions. We don’t want to trigger a political crisis for nothing, but if we come to the conclusion that the president must be suspended, I won’t hesitate.” The standoff in the European Union’s second-poorest country raises the risk of returning to the type of crisis that led to months of bickering between top leaders and culminated in Traian Basescu’s suspension from the presidency in 2012. It may also undermine one of the fastest paces of growth in the EU by delaying investment and the tapping of development funds, an area where Romania has ranked last in the 28-member club.

Iohannis has the constitutional right to reject any premier candidate that he doesn’t consider fit for the job. He didn’t give a reason for his decision. The choice of Shhaideh, a member of the mainly Orthodox country’s tiny Muslim minority, had fueled speculation that Dragnea may try to run the government himself from the sidelines.

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“..the detractors of Donald Trump, when he was a candidate, failed to realize that [..] there is something respectable in losing a billion dollars, provided it is your own money.

Inequality and Skin in the Game (Taleb)

There is inequality and inequality. The first is the inequality people tolerate, such as one’s understanding compared to that of people deemed heroes, say Einstein, Michelangelo, or the recluse mathematician Grisha Perelman, in comparison to whom one has no difficulty acknowledging a large surplus. This applies to entrepreneurs, artists, soldiers, heroes, the singer Bob Dylan, Socrates, the current local celebrity chef, some Roman Emperor of good repute, say Marcus Aurelius; in short those for whom one can naturally be a “fan”. You may like to imitate them, you may aspire to be like them; but you don’t resent them.

The second is the inequality people find intolerable because the subject appears to be just a person like you, except that he has been playing the system, and getting himself into rent seeking, acquiring privileges that are not warranted –and although he has something you would not mind having (which may include his Russian girlfriend), he is exactly the type of whom you cannot possibly become a fan. The latter category includes bankers, bureaucrats who get rich, former senators shilling for the evil firm Monsanto, clean-shaven chief executives who wear ties, and talking heads on television making outsized bonuses. You don’t just envy them; you take umbrage at their fame, and the sight of their expensive or even semi-expensive car trigger some feeling of bitterness. They make you feel smaller.

There may be something dissonant in the spectacle of a rich slave. The author Joan Williams, in an insightful article, explains that the working class is impressed by the rich, as role models. Michèle Lamont, the author of The Dignity of Working Men, whom she cites, did a systematic interview of blue collar Americans and found present a resentment of professionals but, unexpectedly, not of the rich. It is safe to accept that the American public –actually all public –despise people who make a lot of money on a salary, or, rather, salarymen who make a lot of money. This is indeed generalized to other countries: a few years ago the Swiss, of all people almost voted a law capping salaries of managers . But the same Swiss hold rich entrepreneurs, and people who have derived their celebrity by other means, in some respect.

In this chapter I will propose that effectively what people resent –or should resent –is the person at the top who has no skin in the game, that is, because he doesn’t bear his allotted risk, is immune to the possibility of falling from his pedestal, exiting the income or wealth bracket, and getting to the soup kitchen. Again, on that account, the detractors of Donald Trump, when he was a candidate, failed to realize that, by advertising his episode of bankruptcy and his personal losses of close to a billion dollars, they removed the resentment (the second type of inequality) one may have towards him. There is something respectable in losing a billion dollars, provided it is your own money.

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Many countries use these ‘outlets’, pushing people into programs not intended for them.

The New Normal ‘Safety Net’: Surging Disability Benefits Claims (ZH)

If you’ve paid into Social Security, become injured or sick, and can no longer earn more than $1,130 a month, you can get a monthly subsidy from the Disability Insurance Trust Fund. As Bloomberg notes, in 1990 fewer than 2.5% of working-age Americans were “on the check;” by 2015 the number stood at 5.2%, with geographical “disability belts” appearing across America. That growth has left the fund in periodic need of rescues by Congress – most recently in 2015, when the Bipartisan Budget Act shifted money from Social Security’s old-age survivors’ fund to extend the solvency of the disability fund to 2023. Something changed in 2000…

“None of us should be surprised that the cost of the program was rising,” says Stephen Goss, Social Security’s chief actuary. He says the program’s growth is mostly a consequence of demographic change. Older workers are more likely to get sick, and as women have entered the workforce, they too have become eligible for benefits.”

In 1956, when the disability insurance fund was created, qualification was based on a list of accepted medical conditions. In 1984, Congress broadened the criteria, giving more weight to chronic pain and mental disorders. The qualification process also became more subjective. Now, rather than check diagnostic conditions against a list, the process determines whether applicants are able to perform work that’s available. It’s not as if you go to the doctor, the doctor says, “I’m sorry, son, you’ve got disability, Autor says. “It’s a social construct, because it’s about whether you can work.”

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I’m prety sure it’s worse than this: “..more than 70% of the antibiotics considered medically important for human health sold in the U.S. are actually used in livestock.”

But also: “..half of antibiotic use in humans is unnecessary.”

The Battle Against The ‘Superbugs’: Transplants, Chemotherapy At Risk (CNBC)

Headlines about antibiotic resistance – the increase in so-called “superbugs” – have been persistent in 2016. The issue of infection-causing bacteria becoming increasingly resistant to the drugs used to fight them poses a pressing risk to public health worldwide, and according to a 2014 report from the World Health Organization, “threatens the achievements of modern medicine.” The Review on Antimicrobial Resistance, commissioned by the U.K. government, estimated that “by 2050, 10 million lives a year and a cumulative $100 trillion of economic output are at risk due to the rise of drug resistant infections.” For perspective, cancer currently kills 8.2 million people annually. In September of this year, the United Nations agreed on a declaration to fight antibiotic resistance.

This was only the fourth time in the organisation’s 71-year history that a health issue has been treated with such gravity, putting antibiotic resistance on par with HIV and ebola. “It’s hard to be too dramatic,” Prof. Michael Gardam, associate professor of medicine at the University of Toronto, told CNBC via telephone. Echoing this severity, Prof. Toby Jenkins, a biophysical chemist at the University of Bath, said that “a Doomsday scenario is that transplant surgery will be impossible, chemotherapy likewise.” “Even a dental abscess could become deadly, or at least very painful,” he added. The overprescription of antibiotics is one cause of the problem, with Gardam saying that it is “becoming the norm to use last line drugs” in treating bacterial infections, and that “just in case” prescriptions should be handled with care. The U.S.-based Centers for Disease Control and Prevention estimates that half of antibiotic use in humans is unnecessary.

But, other contributing factors well integrated into daily life are also to blame. Gardam also criticized antibacterial soap and toothpaste, particularly prevalent in North America. Deeming such products unnecessary, Gardam warned that “your mouth is not meant to be a sterile zone.” He also stressed the importance of “not messing around with the natural flora of the body,” as such consumer products are wont to do. The food industry also plays a significant part in the antibiotic resistance dilemma, with healthy food-producing animals fed drugs to both prevent disease and promote growth. According to 2012 data from the U.S. Food and Drug Administration and research firm IMS Health, more than 70% of the antibiotics considered medically important for human health sold in the U.S. are actually used in livestock.

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Mar 082016
 
 March 8, 2016  Posted by at 10:05 am Finance Tagged with: , , , , , , , ,  


NPC Communist Party Young Communist League, Washington, DC 1925

China Exports Crash 25.4%, Imports Down 13.8% (ZH)
Conflicting China Policy Objectives Put Reform at Risk (Moody’s)
Despite Slowdown, China’s Oil Imports Surge (WSJ)
China’s Velocity Of Money Is Now The Lowest In The Entire World (ZH)
Central Banks Are Fixing To Ambush The Casino (David Stockman)
Brussels Seeks Further Reform To Seal Greek Bailout (FT)
Greece Clears Bailout Hurdle With Debt Relief Pledge (AFP)
ECB Solutions Create More Problems (CNBC)
Ontario Plans To Trial Universal Basic Income (Ind.)
Canada Prepares To Fight Inequality (BBG)
Mistakes Were Made (Jim Kunstler)
Germany Once Again Finds Itself In An Age Of Dislocation (MW)
Merkel Ally Fuchs: Syria, Libya Key To Solving Refugee Crisis (CNBC)
Turkey Makes Last-Minute Demands Over Refugees (FT)
EU And Turkey Close In On Refugee Deal (BBC)
EU Defies International Law To Push Back Refugees To Turkey (Mason)
Europe Must Share Refugee Burden With Turkey, Says UNHCR Chief (Reuters)
EU Making ‘Big Mistake’ in Turkey Deal, Kurdish Leader Warns (BBG)
Crisis-Hit Greeks Put Own Woes Aside To Help Refugees (AFP)

Yeah, the New Year break has an impact, but even on an annual basis exports fell 13.1%.

China Exports Crash 25.4%, Imports Down 13.8% (ZH)

Worse than expected is an understatement. Things are not getting better in China as Exports crashed 25.4% YoY (the 3rd largest drop in history), almost double the 14.5% expectation and Imports tumbled 13.8%, the 16th month of YoY decline – the longest ever. Altogether this sent the trade surplus down to $32.6bn (missing expectations of $51bn) to 11-month lows.

 

 

So much for that whole "devalue yourself to export growth" idea…

 

As Bloomberg notes,

China’s exports in yuan terms fell 20.6% year on year in February, down from a 6.6% drop in January, and missing expectations of an 11.3% fall. Imports were down 8.0%, an improvement from January’s 14.4% drop. The trade surplus came in at 209.5 billion yuan ($32 billion), down from 406.2 billion yuan.

The Chinese New Year holiday, which fell at the start of February in 2016 and in the middle of February in 2015, distorts the data in unpredictable ways. Holiday effects mean the outsize drop in February exports overstates the weakness in China’s factory sector. Even so, looking at a year-to-date figure for the first two months of the year, the picture is only slightly less gloomy. In the year through February, exports are down 13.1%.

The policy response has already been announced. The National People’s Congress set a target for 13% growth in money supply in 2016, up from 12% in 2015, and a 3% of GDP fiscal deficit, up from 2.3%. In other words: more lending and more public spending to provide a boost to demand. In the short term, that shores up confidence in the growth outlook. Medium term, of course, there is a price to be paid.

Stocks are mounting a modest rebound on this terrible data (moar stimulus hopes) but after $1 trillion of new credit in 2 months, is there seriously anyone left who thinks moar will help?

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“The depreciation of the RMB can therefore only be avoided by stepping back from the commitment to a more open capital account..”

Conflicting China Policy Objectives Put Reform at Risk (Moody’s)

Moody’s Investors Service says that China’s (Aa3, negative) policy makers appear to have set themselves three main policy objectives: maintaining reasonably high rates of GDP growth, reforming and rebalancing the economy, and ensuring financial and economic — and thereby social — stability. The Government Work Report delivered to the National People’s Congress on 5 March made explicit reference to each of these policy objectives. “However, against the backdrop of China’s slower economic growth, capital outflows and rising corporate stress, it will be increasingly difficult for these policy objectives to be achieved in unison,” says Michael Taylor, a Moody’s Managing Director and Chief Credit Officer for Asia Pacific.

“With the government having now given a strong commitment to a growth target of between 6.5%-7.0%, it seems unavoidable that one of the other policy objectives will assume lesser priority. The most likely near-term casualty is reform momentum.” “We believe that achieving even the lower end of the growth target for 2016 is likely to require further substantial monetary and fiscal stimulus, as evidenced by the 50-basis-point cut to the required reserve ratio in February and the government’s announcement of a 3% fiscal deficit for this year”, adds Taylor. “This level of policy support is likely to frustrate the government’s ability to achieve at least one of its other objectives.” Moody’s analysis is contained in its just-released report titled “China Credit: Conflicts Between Policy Objectives Raise Risk That Momentum on Reform Will Slow”.

Moody’s report points out that it will be difficult even to implement two of the three objectives at any one time. If the authorities choose to prioritize reform while trying to maintain a growth target of in excess of 6.5%, the consequence will be to sacrifice some degree of financial stability, and accept a larger level of RMB depreciation, more widespread defaults, and perhaps even some failures in the banking system. Alternatively, a combination of growth and stability is also achievable, at least for some time, but such a strategy will leave unaddressed the deep imbalances in China’s economy, such as elevated system leverage and excess capacity. The risk is that the support necessary to achieve 6.5% growth instead postpones the restructuring of the SOE sector by creating artificially favorable demand and maintaining accommodative financing conditions for loss-making, as well as viable SOEs.

In addition, the implementation of the accommodative monetary policy needed to support growth would lead to further downward pressure on the RMB and would likely delay much-needed deleveraging. The depreciation of the RMB can therefore only be avoided by stepping back from the commitment to a more open capital account, thereby substantially slowing the pace at which this and related reforms, such as more market-based credit allocation, would be enacted.

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Where would imports numbers be without this?

Despite Slowdown, China’s Oil Imports Surge (WSJ)

China imported 31.80 million metric tons of crude oil in February, equivalent to 8.0 million barrels a day, preliminary data from the General Administration of Customs showed Tuesday. Imports were 24.5% higher than the 25.55 million tons of crude shipped in during the month a year earlier and was up about 19% from 26.69 million tons in January. BMI Research analyst Peter Lee said the rise was likely due to robust crude imports in the beginning of February by local refineries in preparation for expected higher demand during the Lunar New Year holiday. Despite its economic slowdown, China remains a strong importer of crude, driven by the rise of independent refineries. Government efforts to fill the strategic petroleum reserves are also pushing China to import more foreign crude as domestic production is likely to slide by 1.5% this year, according to research firm ICIS.

According to the Chinese government’s forecast, the country’s reliance on foreign crude will likely rise to 62% this year. However, many analysts have said that as China moves to a more consumption and services-oriented economy, China’s oil demand will likely continue on a downtrend. Investment firm CLSA estimates that China’s crude imports will rise about 6% this year, lower than the 8.8% growth in the previous year when China shipped in a total of 336 million tons. The firm also expects the country’s oil demand to reach 2.5% this year. “A low single-digit growth might be the new norm for China’s oil demand,” said Nelson Wang, a CLSA China energy analyst. Refined oil product imports totaled 2.64 million tons, while exports totaled 2.99 million tons, the data showed.

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Here comes deflation.

China’s Velocity Of Money Is Now The Lowest In The Entire World (ZH)

[..] here, courtesy of Macquarie’s Viktor Shvets, is the best encapsulation of the predicament the world finds itself in. From volume 52 of “What Caught My Eye”

Rising leverage levels (whilst positive initially) eventually turn to “poison”, as incremental benefit diminishes and in order to maintain growth rates, economies require an ever increasing infusion of credit and ever declining cost of capital.

Although not perfect there is a well-defined relationship between the overall level of debt and velocity of money. Each economy is different (both in term of structure and efficiency) and therefore the degree of tolerance to rising debt levels and associated volatility also differs; nevertheless, as a generalization, the higher debt levels and the faster pace of debt accumulation tends to coincide with lower (and declining) velocity of money.

Then, after showing the declining velocity of money in all developed markets as leverage exploded higher, Shvets focuses on China:

The massive rise in China’s financial leverage is in a class of its own. As China embarked on a highly capital intensive growth strategy, its debt levels accelerated, driving velocity of money down. As can be seen below, China’s estimated debt burden has increased from US$1.5 trillion in 2000 to US$5.8 trillion in 2007 and exploded to over US$28 trillion by 2014 (and should have reached US$30-31 trillion in 2015).

The punchline: China’s velocity of money is now the lowest in the entire world, a world in which China provided 40% of the entire credit impulse since 2008!

In the last seven years, China has accounted for around ~40% of entire global incremental debt creation. Such a rapid accumulation of debt in less than a decade, when combined with the capital-intensive nature of the economy and a less sophisticated financial sector, drove China’s velocity of money to one of the lowest levels globally (~0.5x, i.e. below that of Japan).

 

And while we agree with the BIS and all those others who suddenly had an epiphany and confirmed what we have been saying for years about China’s debt load, the question remains: just who will propel the global debt-creation growth dynamo if China is taken out of the picture, and if 25% of the world is covered in debt-demand destroying NIRP?

We hope to get some answers just as soon as the massive short squeeze acorss global markets, the biggest in history, is over.

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“Markets are therefore unhinged from any connection to fundamental economic and financial reality, meaning that they are capable of an extended period of spasmodic deadcat bounces that will have only one end result.”

Central Banks Are Fixing To Ambush The Casino (David Stockman)

The casino is incorrigible. After a monumental short squeeze that has lifted the averages right into the jaws of danger, Goldman Sachs has the temerity to print the following: “Our model suggests SPX calls are more attractive than at any time over the past 20 years”. There must have been a mullets’ breeding frenzy awhile back because it’s hard to fathom how Goldman has any real customers left. Then again, its current preposterous call is just indicative of the horrible threat heading menacingly toward what remains of main street’s 401k investments. To wit, the Fed and other central banks have thoroughly falsified financial market prices and destroyed all of the ordinary mechanisms of financial discipline. Foremost among these are short sellers and a meaningfully positive cost of carry trades.

Markets are therefore unhinged from any connection to fundamental economic and financial reality, meaning that they are capable of an extended period of spasmodic deadcat bounces that will have only one end result. Namely, the naïve and desperate among main street investors who still, unaccountably, frequent the casino will presently be taken out back and shot yet another time. The market technicians are pleased to call this “distribution”. Would that someone on Wall Street man-up and amend the phrase to read ”distribution…….of losses to the mullets” and be done with the charade. The S&P 500 is heading through 1300 from above long before it ever again penetrates from below its old May 2015 high of 2130. And now that 97% of Q4 results are in, there is a single number that proves the case.

Reported LTM profits as of year-end 2015 stood at just $86.46 per S&P 500 share. That particular number is a flat-out bull killer. At a plausible PE multiple of 15X, it does indeed imply 1300 on the S&P 500 index. It also represents an 18% decline from peak S&P 500 reported earnings of $106 per share back in September 2014. And more importantly, it means that the robo-machines and hedge fund gamblers have traded the market back up to 23.1X earnings. That’s off the charts…….except for when recession has already arrived unannounced by the hockey stick factories of Wall Street. But here’s the thing with respect to the scarlet 23.1X numerals now painted on the casino’s front entrance. It comes at a time when the so-called historical average PE ratios are way too high for present realities. That is, in a world sliding into a prolonged deflationary decline, capitalization rates should be falling into the sub-basement of history.

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The Troika’s back in Athens.

Brussels Seeks Further Reform To Seal Greek Bailout (FT)

Eurozone finance ministers have moved to break a deadlock between Greece’s warring creditors by sending bailout negotiators back to Athens to agree a new set of economic reforms. Despite continued disagreement over how long the list of reforms must be, Jeroen Dijsselbloem, the Dutch finance minister who chaired the eurogroup meeting of his 16 counterparts, insisted there was “enough common ground” between the EU and the IMF to restart the negotiations. He said mission chiefs from the bailout monitors could arrive as early as Tuesday. “More work will have to be done in Athens,” Mr Dijsselbloem said after the Monday evening eurogroup meeting in Brussels. “It’s not going to be easy, we’re very much aware of that.”

Officials acknowledged that the IMF and the EU had not reached an agreement on how thorough the reforms must be, essentially putting off a final fight over the future of Greece’s third, €86bn rescue for at least another month. The IMF has hinted it is willing to walk away from the bailout if it deems the reforms inadequate, a move that would plunge Greece back into economic uncertainty. Without the IMF, a German-led group of creditor countries have said they would be unable to secure parliamentary approval for their participation in the EU’s rescue, potentially scuppering the deal. “An interim solution without the IMF would be very difficult for a number of countries, including my own,” Alex Stubb, the Finnish finance minister, said.

Euclid Tsakalotos, the Greek finance minister, acknowledged the talks would restart “despite certain differences”, which he hoped could be overcome in the negotiations. “I’m sure sensible people when they get across the table will come to sensible conclusions,” Mr Tsakalotos said as he left the eurogroup meeting. Under the terms of the new bailout, Greece must pass measures designed to take government finances to a primary budget surplus of 3.5% of economic output by 2018. A country’s primary balance is its revenues minus expenses excluding debt payments.

The IMF and the EU are at loggerheads over both the stringency of the new reform measures and how many of them must be adopted to hit the 3.5% target. Officials said the differences would only be sorted out at a later date. The IMF believes the reform measures on the table are insufficient and has pushed for more concrete and deeper cuts. Athens has caved in to an ultimatum from its creditors and agreed to rush through long-resisted economic reforms in return for a third bailout. Further reading Mr Dijsselbloem appeared to side with the IMF’s tough line, saying “the package of measures needs to become even more solid, needs to go even deeper than what’s been put on the table so far” — though when pressed whether he backed the IMF’s view, he insisted, “I’m not in anyone’s camp.”

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The big words are back.

Greece Clears Bailout Hurdle With Debt Relief Pledge (AFP)

Greece cleared a crucial hurdle in its massive bailout programme on Monday as eurozone ministers promised to consider debt relief to Athens, which is already under pressure from the refugee crisis. Bailout monitors from the EU and IMF will return to Greece as soon as Tuesday in an effort to complete a long-delayed review of the programme that could unlock rescue cash, European Economic Affairs Commissioner Pierre Moscovici said. “I am very happy that mission chiefs are going to Athens as soon as tomorrow,” Moscovici said after a meeting of the eurozone’s 19 finance ministers in Brussels, taking place in parallel to an EU-Turkey summit on the refugee crisis. Greek Prime Minister Alexis Tsipras secured Greece’s third bailout, worth a staggering 86 billion euros ($95 billion), last July after six months of bruising negotiations that shook the EU and nearly saw Athens thrown out of the single currency.

Along with its debt crisis the Greek state is now overwhelmed by the arrival of around a million migrants in a year. As refugees trek across Europe seeking new lives in Germany and elsewhere, the fresh crisis has increased the pressure on Athens’ eurozone partners to soften their demands of Greek austerity. Eurogroup chief Jeroen Dijsselbloem, who last year was one of Greece’s harshest critics, said eurozone ministers would now address debt relief, meeting a key demand of the Greek government that has been resisted by its pro-austerity partners. The EU forecasts that Greece’s debt will soar to 185% of GDP in 2016 – a level generally understood to be unsustainable. “We have a longstanding promise that if the Greek government fulfils its commitments … we will do what is necessary to make debt service manageable,” said Dijsselbloem. “Today… we made explicit that the discussion is on our table,” the Dutch finance minister said.

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They have absolutely no idea where their policies will lead. That’s a very thin premise to throw trillions around on.

ECB Solutions Create More Problems (CNBC)

What a difference a few weeks make. Market sentiment seems to have improved and the fears of imminent recession now appear a touch hasty. But the question of where markets head next continues to depend on policymakers’ ability to deliver bold and decisive action. Step forward “Super” Mario Draghi, the President of the ECB, who is widely expected to tinker with the euro zone’s financial plumbing this week in the face of weaker-than-expected inflation and six weeks of volatility weighing on business sentiment. Once again, with the market already pricing aggressive action, there’s a risk of disappointment just as there was in December 2015. Analyst expectations include a 10-20 basis point cut in the deposit rate, taking it further in to negative territory, an increase of €10 -20 billion in monthly asset purchases, more longer-term cash available for borrowing and even a further extension in the maturity of the programme.

The problem for the ECB is that all the available options come with complications. The most immediate of those hazards applies to negative deposit rates and the impact on bank profitability and consumer behaviour, as the Bank for International Settlements highlighted this past weekend. The BIS warned that it was impossible to predict how borrowers or savers would react to the increasing possibility of negative rates for an extended period of time. A negative deposit rate means that ordinary banks have to actually pay the ECB to deposit money, rather than receiving money as they would in a normal environment. The hope is that, instead of paying up, the banks will decide to lend the money instead. If they don’t lend, they have the choice of passing on the costs to depositors or suffer what is an effect tax on their business. And that’s at a time when profits are tough to come by.

A further complication is that it’s not just the euro zone that has resorted to negative rates, Switzerland, Denmark, Sweden and most recently Japan are all applying this monetary policy tool. Mohamed el-Erian told CNBC last week that the ‘system is not equipped to deal with negative rates all across the world.’ So while broader sentiment in the market recovers, I think it’s worth asking why the Stoxx Europe banks Index is still down 15% this year. Is this a sign that investors are growing increasingly concerned that the ECB has reached its limits and policy may now be doing more harm than good? And more importantly how cautious are the ECB?

Executive Board Member Benoit Cœuré noted in a speech on 2 March that the ECB is well aware of the issue but pointed out that ‘many (banks) have overcome negative central bank rates and the ECB’s commitment to price stability has actually supported banking profitability. A green light for more action there, I think. No one has been more reticent about further stimulus than the Bundesbank President Jens Weidmann, who told me this month that the ECB was not a miracle-worker. And more is needed for euro zone policymakers. Yet even the German central banker drew a distinction between longer-term risks and support for the economy in the short term.

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Right on the US doorstep.

Ontario Plans To Trial Universal Basic Income (Ind.)

Ontario has announced it could soon be sending a monthly cheque to its residents as it plans to launch an experiment testing the basic income concept. While officials in the Canadian province are yet to release any specific details of the project – including how much will be given to residents who participate – the finance ministry has published a report confirming the government’s intention to roll out the experiment. The general concept of basic income involves a government handing out a flat-rate income to every single citizen within a country, either by replacing existing benefits or to top them up. Proponents of the idea say it would save on welfare administration costs, reduce the poverty traps of traditional welfare states, be fair to people who have jobs, and give people more autonomy in general.

In Britain, the think tank Royal Society for the encouragement of Arts, Manufactures and Commerce has proposed a system of universal income that would give a basic amount to fit, working-age people that it believes would still give a strong incentive to these people to work. It suggests providing an income of £3,692 for all qualifying citizens between 25 and 65, or £308 per month. “As Ontario’s economy grows, the government remains committed to leaving no one behind. Maintaining an effective social safety net is one part of the government’s broader efforts to reduce poverty and ensure inclusion in communities and the economy,” Ontario’s budget statement said.

It added: “The pilot project will test a growing view at home and abroad that basic income could build on the success of minimum wage policies and increases in child benefits by providing more consistent and predictable support in the context of today’s dynamic labour market. “The pilot would also test whether a basic income would provide a more efficient way of delivering income support, strengthen the attachment to the labour force, and achieve savings in other areas such as health care and housing supports. The government will work with communities, researchers and other stakeholders in 2016 to determine how best to implement a Basic Income pilot.”

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Interesting.

Canada Prepares To Fight Inequality (BBG)

[..] Canada is about to embark on an experiment whose outcome ought to matter deeply to U.S. Democrats and Republicans alike as they consider how to respond to Donald Trump’s angry coalition of the downwardly mobile. At issue is this: How far can a market-oriented country, if it were temporarily freed from short-term concerns about politics and budget deficits, push the fight against inequality – without sparking public alienation, a decline in work, a rash of tax avoidance, an exodus of talent or wealth, or some other unpleasant consequence? In other words, what are the practical limits of the inequality agenda? And how much can be done within those limits to satisfy, or at least mollify, the furies of economic insecurity?

Canada is perhaps the ideal setting for that experiment. Despite its image as a North American outpost of Scandinavian social values, the country has experienced a divergence in high and middle incomes similar to the U.S.’s, if not quite as severe. Unlike the U.S., Canada has already done the obvious things to remedy that: Its residents enjoy universal health care, reasonably generous social programs, paid family leave, a relatively high minimum wage, and college tuition that averages less than $5,000 a year. Yet that hasn’t been enough to reverse the trend (interrupted by the recession) toward ever-greater inequality. So the lingering question for progressives in both countries is this: What more is there to do? The short answer: quite a bit. In December, the Liberal government increased the tax rate on income above Canadian $200,000 ($150,800) and cut taxes on the middle class.

The Liberals have said their budget, to be introduced later this month, will introduce benefits to low- and middle-income families of C$6,400 a year ($4,825) for each child under 6, and slightly less for children ages 6 to 17. They also promise to reduce contribution limits for tax-free savings accounts and prevent single-income couples from splitting that income for tax purposes, reversing policies that disproportionately benefit the wealthy; increase monthly payments to low-income seniors (think of top-up payments to Social Security); fund the construction of more affordable housing; and make it easier for workers to form unions. In case that’s not enough, Prime Minster Justin Trudeau has asked Duclos to develop a national poverty-reduction strategy. Duclos has even mused publicly about introducing a guaranteed minimum income.

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“..if there is just a little more trouble in banking and financial markets before November 8, we can’t even be certain of holding the general election.”

Mistakes Were Made (Jim Kunstler)

[..] the US Department of Justice did nothing under six-plus years of Attorney General Eric Holder to prosecute criminal misconduct in banking. And then President Obama, who is ultimately responsible, did absolutely nothing to prompt that Attorney General into action or replace him with somebody who would act. Obama’s lame excuse back in the days when informed people were still wondering about this, was that the bankers had done nothing patently illegal enough to warrant investigation — a claim that was absurd on its face. Obama didn’t do any better with the regulating agencies that are supposed to make criminal referrals to the Department of Justice, especially the Securities and Exchange Commission (SEC) charged with keeping financial markets honest.

There was nothing that difficult about those criminal matters now fading in the nation’s memory: for instance, the bundled bonds (CDOs) of “non-performing” mortgages designed to pay off the issuers handsomely when they failed. A child of ten could have unpacked the Goldman Sachs Timberwolf bond caper. Eventually Goldman and others were slapped with mere fines that could be (and were) written off as the cost of doing business. What a difference it would have made if Lloyd Blankfein and a few hundred other bank executives were personally held accountable and sent to cool their heels in federal prison. As the politicians are fond of saying, make no mistake: this was Barack Obama’s failure to act. Likewise, regarding the Citizens United Supreme Court’s decision that equated arrant corporate bribery of public officials with “free speech;”

Mr. Obama (a constitutional lawyer by training) had a range of remedies at his disposal, foremostly working with the then-majority Democratic congressional leadership to legislate a new and clearer definition of so-far-alleged corporate “personhood,” its duties, obligations, and responsibilities to the public interest — and its limits! Not only did Mr. Obama fail to act then, but nobody in his own party even coughed into his-or-her sleeve when he so failed. And now, of course, nobody remembers any of that. The effects of all this fundamental dishonesty have thundered through our national life to the degree that American society is now divided into the swindlers and the swindled, loosing the monster of collective Id known as Trump on the public. This is what comes of attempting to divorce truth from reality, which has been the principal business of American life for several decades now. When truth and reality become de-linked, a society literally doesn’t know what it is doing.

With that goes the collective sense of purpose, replaced with bromides and platitudes such as Trump’s “make America great again,” and Hillary’s “In America, every family should feel like they belong.” Unbeknownst to the cable news hustlers, events are in the driver’s seat, not the personalities of the puppets and muppets in the spotlight. Come July, there may not be anything that could be called the Republican Party. And Hillary is the first leading contender for the highest office with a possible indictment looming over her. Yes, it’s really there percolating on the FBI’s front burner. Even if the machinery of justice trips over itself again on that, imagine how the questions behind it will color the final battle for the general election. We also fail to appreciate how, if there is just a little more trouble in banking and financial markets before November 8, we can’t even be certain of holding the general election.

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Back to the pre-Nazi era.

Germany Once Again Finds Itself In An Age Of Dislocation (MW)

“Germany is not an island. No country is in the same degree woven actively or passively into the world’s destiny. Germany’s geographical position, its lack of natural borders, condemn it to this role. The Germans, more than anyone, must think politically and economically well beyond their borders. Everything that happens afar sweeps through to the heart of Germany.” So wrote Oswald Spengler, a German writer-philosopher of the Weimar republic and the early-Nazi period, whose gloomy 1920s and 1930s prognostications made him a symbol of that age of dislocation. I first became aware of Spengler’s writings during the build-up to German unification. A mass exodus from East Germany into the Federal Republic from autumn 1989 onwards, a product of relaxation of Soviet control over eastern Europe and the realization that Marxism-Leninism was a bust, brought 300,000 people into the western part of the country.

Reunification followed in October 1990. During 1989, the population rose by 800,000 as a result of immigration from the eastern part of the country and the developing world. Germany was again at the epicenter of far-reaching geopolitical and migration upheavals. It’s not so different today. Germany took more than a million immigrants last year, with more on the way. Soviet uncertainties have been replaced by Russian ones. The European Union will either be dismantled or head for more centralization. Soul searching under Chancellor Angela Merkel has reached Spenglerian proportions. Here are four examples of how Spengler’s painful tales of wrenching interdependence are striking home.

• Real-life events have eclipsed Germany’s vision of leading the EU into a fresh wave of liberal democracy, efficient markets and economic prosperity. The euro has sown European division. Populist anti-European parties are on the march. If Britain leaves the EU — the vote in June is still astonishingly wide open — then no nation will be more negatively affected than Germany.

• Assembling enormous annual current account surpluses — a product of an undervalued currency and concentrating German resources on exports and savings — will not safeguard Germany’s future. The country has built up unrepayable claims on foreign countries that will be written off.

• Germany’s need for European solidarity over the migration crisis — which Merkel has made worse by overdoing the welcome — has exposed it to blackmail. Turkey, shifting daily to more authoritarianism, is asking for ever more money to keep refugees on Turkish soil. Greece, facing thousands hemmed in between the hemorrhaging south and an increasingly sealed-off north, is suffering a national emergency. So no one can press Athens into completing IMF-ordained reforms.

• To revive euro-area inflation, the European Central Bank will almost certainly cut negative interest rates further on March 10. The Bundesbank will acquiesce. This will have counterproductive consequences. The euro will be weak, exacerbating the German current account surplus; and European banks’ profitability (especially in peripheral countries) will come under fresh pressure, delaying recovery.

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But nothing is done about this.

Merkel Ally Fuchs: Syria, Libya Key To Solving Migrant Crisis (CNBC)

Germany is seeking a longer-term solution to the migrant crisis, a key ally of Chancellor Angela Merkel told CNBC, as European Union (EU) leaders came to a tentative deal with Turkey to stem the flow of people into Europe. Michael Fuchs, vice chairman of Merkel’s central-right party, the Christian Democratic Union, told CNBC’s “Squawk Box” that a solution to the crisis needed to be found at the source of the human influx. “We need to have a solution which is including Syria and also Libya because both countries are still filled with refugees which are trying to enter either via Turkey into Europe or directly from Libya into Italy,” Fuchs said. But he admitted that working with migrants’ home countries could be difficult. “One of the problems is, for instance in Libya, to whom to talk. There are three different groups fighting each other: who to talk to? They don’t have a foreign minister to talk to,” Fuchs said.

The comments came after the European Union and Turkey agreed on Monday night local time the outlines of a deal designed to stem the tide of migrants that has flowed into Europe over the past six months. Turkey agreed to take back migrants who crossed into Europe from its soil. In return, the EU may increase the €3 billion of aid already set for Turkey to deal with the migrant crisis; it could also ease visa requirements for Turks traveling to Europe, as well as potentially expedite Turkey’s talks to join the EU. Speaking in Hong Kong, where he was set to deliver a speech at the Asia Society, Fuchs underlined the need for a speedy resolution to the issue. “We have over a million refugees already in Germany, which is quite a lot,” he said. Those figures are likely related to the number of asylum seekers in the country. “We have to find solutions because it cannot be double or three times more, because then it’s coming to a difficult situation.”

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What a mess this is becoming.

Turkey Makes Last-Minute Demands Over Migrants (FT)

Turkey has made a host of last-minute funding and political demands that threaten to derail a controversial EU-Turkey deal to dramatically reduce migrant flows to Europe. Ahead of crunch summit between EU leaders and the Turkish prime minister on Monday, Ankara has called for a an increase to the €3bn in aid previously promised by Brussels, faster access to Schengen visas for Turkish citizens and accelerated progress in its EU membership bid. Although talks remain fluid, the wishlist represents the new price demanded by Ankara to help the EU handle the migrant crisis by facilitating the systematic return of non-Syrian migrants from Greek islands to Turkey. A deal of some kind is still expected at the end of the summit. But four diplomats involved in the talks said that Turkey’s revised demands would be extremely challenging and could blow apart a fragile EU consensus on the sweeteners offered to Ankara.

A deal with Turkey is crucial for reducing the flow of people entering Europe, according to EU officials. This has overridden concerns about the country s asylum system and human rights record. Turkish prime minister Ahmet Davutoglu said that the proposed deal demonstrated how indispensable the EU is for Turkey and Turkey for the EU. Speaking before the meeting, Mr Davutoglu added: “The whole future of Europe is on the table”. Last week Mr Davutoglu privately signalled to EU negotiators that Turkey would be willing to accept the systematic return of non-Syrian migrants to Turkey. In the final stages of the negotiation, however, Turkey made clear it would expect its EU agreement on migration to be improved. This includes moving forward a recommendation to grant visa privileges to Turkish citizens, which was expected in the autumn.

Turkey has yet to meet some of the most difficult conditions for visa access, including the recognition of Cyprus. Ankara also wants an increase in the EU’s proposed €3bn in funding, so that it covers municipal infrastructure costs as well as health, education and material support for Syrian refugees in Turkey. On top of these concessions, Turkey wants to speed up the already fast-tracked process of opening several new chapters in its EU membership bid. Cyprus in particular is also loath to make further concessions to Ankara in membership talks. One diplomat said the additional demands could make for a’ train wreck’. Another compared the haggling to a Turkish bazaar. According to draft conclusions for the meetings, EU leaders will declare that the western Balkans route used by more than 1m people to enter Europe has been “closed”, despite opposition from Berlin over such wording.

In Berlin’s view, the statement cannot say the Balkan route is closed when hundreds of people are still arriving via the Balkans in Germany every day. The dispute illustrates the split at the highest levels of the EU over how to cope with the migration crisis. While some such as European Council president Donald Tusk have advocated tough rhetoric to deter people from making the trip, other leaders such as German Chancellor Angela Merkel have called for a softer approach. Leaders will also discuss whether to push on with a plan to resettle refugees directly from Turkey into the EU. Turkey, which hosts 2.5m Syrian refugees, has long argued that such an agreement is vital if it is to cut down on the number of people heading to Greece. Ms Merkel, who has been the most vocal proponent of this plan, held late-night talks with the Turkish prime minister in Brussels on Sunday night. Despite pressure from Berlin, other member states have been unwilling to back such a scheme.

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ALL refugees will be forced back to Turkey. Imagine what scenes that will cause on the Greek islands.

EU And Turkey Close In On Refugee Deal (BBC)

The EU and Turkey say they have agreed the broad principles of a plan to ease the migration crisis at a summit in Brussels, but delayed a final decision. European Council President Donald Tusk said all irregular migrants arriving in Greece from Turkey would be returned. For each Syrian returned, Turkey wants the EU to accept a recognised Syrian refugee, and offer more funding and progress on EU integration. Talks on the plan will continue ahead of an EU meeting on 17-18 March. Europe is facing its biggest refugee crisis since World War Two. Most migrants come via Turkey, which is already sheltering more than 2.7 million refugees from the civil war in neighbouring Syria. Turkey tabled new proposals ahead of the EU summit on Monday, and there was uncertainty on whether any agreement would be possible.

However, European Council President Donald Tusk said leaders had made a “breakthrough”, and he was hopeful of concluding a deal next week. He said the progress sent “a very clear message that the days of irregular migration to Europe are over”. In a statement, EU leaders said they broadly supported a deal that included:
• the return of all new irregular migrants crossing from Turkey to the Greek islands with the costs covered by the EU
• the resettlement of one Syrian from Turkey to the EU for every Syrian readmitted by Turkey from Greece
• speeding up of plans to allow Turks visa-free travel in Europe, with a view to lifting visa requirements by June 2016
• speeding up the payment of €3bn promised in October, and a decision on additional funding to help Turkey deal with the crisis. Turkey reportedly asked for EU aid to be increased to €6bn.
• preparations for a decision on the opening of new chapters in talks on EU membership for Turkey

Speaking at a news conference after the summit, Turkish PM Ahmet Davutoglu said Turkey had made a “bold decision to accept all irregular illegal migrants… based on the assumption that for every one Syrian readmitted by Turkey from the Greek islands another Syrian will be resettled by Europe.” But he said it was important to see the refugee deal as a package, to include progress on Turkish integration within the EU. The BBC’s Chris Morris in Brussels says that, although this new initiative is bold, it could spark fierce argument and its implementation will not be easy. But, he says, the EU clearly needs Turkey’s co-operation if it is to begin coping with the migration crisis. German Chancellor Angela Merkel said the proposals could be a major step forward if realised, stressing that “irregular migration” needed to be turned into “regular migration”.

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Faustian deal.

EU Defies International Law To Push Back Refugees To Turkey (Mason)

It is waging war on an ethnic minority, its riot police just stormed the offices of a major newspaper, its secret service faces allegations of arming Isis, its military shot down a Russian bomber and yet Turkey wants to join the European Union. The country s swift descent into despotism poses yet another existential problem for the west. The sight of Europe’s leaders kowtowing to Turkey’s president, Recep Tayyip Erdogan, in the hope he would switch off the flood of refugees to Greece, was sickening. After the Turkish courts authorised police to seize the Zaman newspaper, tear-gassing its employees and sacking the editors, the new bosses immediately placed Erdogan’s smiling picture on the front page. He has a lot to smile about.

Erdogan’s mass support in Turkey is real. To the conservative heartlands, where Islam was suppressed for decades by one secular military regime after another, he initially seemed to have achieved an ideal stasis. The liberal, networked, progressive part of Turkey would leave the reactionary, religious, patriarchal part in peace, and vice versa. The Kurds would renounce guerilla warfare in favour of parliamentary opposition. Erdogan would lead the country towards EU accession, at a pace slow enough to allow the obvious failings in democracy to be ignored. But it has all gone wrong, and for the same fundamental reason that Assad’s regime in Syria collapsed: the unwillingness of educated youth to be ruled by simpletons running a “benign” police state.

The revolts that swept Turkey’s cities in June 2013 were triggered by the inability of Erdogan and his old-man’s form of Islam to tolerate the basic microfreedoms that the younger generation want: the right to drink alcohol on campus, the right to uncensored social media, the right to protest peacefully about the same things European kids protest about in the case of Gezi Park, the bulldozing of green space for a shopping mall. Since then, Erdogan has overcome all obstacles. The protest was suppressed by the simple method of firing US-made tear gas canisters into the crowd and laying waste to the urban areas of the Kurdish minority, who had joined the struggle.

Then Erdogan got himself made president. And having narrowly lost his parliamentary majority in June 2015, he regained it late last year after a campaign that left the offices of the pro-Kurdish HDP party burned out in several cities. Simultaneously, the Turkish military provoked an end to a three-year ceasefire with the Kurdish PKK, unleashing the army into the Kurdish towns of southern Turkey on a scale that has left some the mirror image of burned-out Syrian towns just across the border.

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The UN should speak out a lot louder and clearer. It’s UN laws that are being violated here.

Europe Must Share Refugee Burden With Turkey, Says UNHCR Chief (Reuters)

The United Nations refugee chief said on Monday he was “very concerned” about what solution European leaders were debating and called for countries to share the burden with Turkey by taking in hundreds of thousands of Syrian refugees. Filippo Grandi, UN High Commissioner for Refugees, told an event at the Geneva Graduate Institute: “In the joint action plan, the most important thing is to help Turkey bear the burden, responsibility by taking people … not in the thousands or tens of thousands but in the hundreds of thousands.” Turkey offered the European Union greater help on Monday to stem a flood of migrants into Europe but raised the stakes by demanding more money, accelerated membership talks and faster visa-free travel for its citizens in return.

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“The world has gone very silent on what’s happening in Turkey, and that’s saddening and also short-sighted. If the war in Turkey continues like this, you’re also going to have refugees from Turkey.”

EU Making ‘Big Mistake’ in Turkey Deal, Kurdish Leader Warns (BBG)

The EEU is making an historic mistake in its haste to conclude a refugee deal with Turkey, overlooking human rights violations that risk plunging the bloc’s largest membership candidate into civil war, said Selahattin Demirtas, leader of the nation’s most prominent pro-Kurdish party. The EU is turning a blind eye to an opposition crackdown in Turkey that’s polarizing society and complicating efforts to find a political solution to the nation’s Kurdish conflict, Demirtas said in an impromptu interview en route to Brussels. European leaders are expected to ink an agreement with Turkey on Monday that will offer faster EU membership negotiations and visa-free travel in exchange for stopping refugees from crossing the country to enter Europe. “The EU is trying so hard not to upset Erdogan, and that’s a big mistake,” Demirtas said.

“The world has gone very silent on what’s happening in Turkey, and that’s saddening and also short-sighted. If the war in Turkey continues like this, you’re also going to have refugees from Turkey.” Demirtas’s own experience show how fast things are changing. Less than a year ago, he was celebrating a momentous electoral result that marked him as a rising political star, dealing a blow to Erdogan’s attempts to concentrate more power in his office. But on Sunday night, sitting alone on the front row of a Turkish Airlines flight, Demirtas had a possible jail sentence on his mind. Erdogan has called on parliament to strip HDP lawmakers of their immunity to try them for their links to the Kurdish PKK, considered a terrorist group by Turkey, the U.S. and EU. PKK gunmen resumed their 30-year-old insurgency after the collapse of the political peace process last year.

Turkish Prime Minister Ahmet Davutoglu said on Sunday that parliament would take up the subject after budget talks. “There’s a very high risk it will happen,” said Demirtas, with a copy of “Remaking Society” by decentralization advocate Murray Bookchin perched on his armrest. “I don’t see this as a big risk for me personally. But for the country, it is.” Demirtas was speaking two days after Turkish government trustees took over one of Turkey’s primary opposition newspapers in a dramatic raid that sparked clashes between protesters and police. The seizure reflects a broader intolerance of dissent that has also undermined the HDP, who are now largely excluded from mainstream media coverage. “Of course this affects us,” Demirtas said. “We were a party on the rise, and now we can only try to protect our position.”

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“..A friend of mine says that we stopped being human as soon as we became citizens ourselves..”

Crisis-Hit Greeks Put Own Woes Aside To Help Refugees (AFP)

Their own wages and pensions have been slashed by the debt crisis, but thousands of Greeks are putting their economic woes aside to help desperate refugees trapped in the country by the Balkan border blockade. People old and young, from couples with babies to pensioners and teenagers, came to Athens’ Syntagma Square on Sunday loaded with bottles of water, medicine, pasta, nappies and clothes. Panayiotis, a 32-year-old accountant, was just one of those determined to help. “Greek people know what it is to be a refugee,” said Panayiotis, a volunteer with the Red Cross at the Sunday donation organized by a social solidarity network.

“My grandmother came from Turkey in the 1920s. She had to leave everything there and she arrived in Thessaloniki with nothing. A lot of people in Greece have grandparents who experienced this exodus. This is maybe why we are helping those people,” he said. With Greek state services overwhelmed by the arrival of around a million people in a year – most en route to countries in northern Europe – the support of volunteers and private donations has been invaluable in helping aid groups manage the crisis. Like Panayiotis, many donors say they are motivated by the suffering of family relatives who became refugees themselves in the 20th century when Turkey progressively expelled a sizeable Greek minority from Istanbul and Asia Minor.

Giorgos and his wife have came to Syntagma Square with bags of food and clothes after seeing television images of migrants stuck at Idomeni on the Greek side of the Greek border with Former Yugoslav Republic of Macedonia (FYROM) where over 13,000 people are camping in miserable conditions waiting to cross. FYROM is only allowing a few hundred people through every day, while thousands more continue to arrive from Turkey. “The only thing we want is to help those people. We saw them on TV in Idomeni. A friend of mine says that we stopped being human as soon as we became citizens ourselves,” said the 70-year-old pensioner.

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