Oct 172021
 


Pieter Bruegel the Elder The Triumph of Death 1562

 

A Desperate Biden Administration Turns to Terrorism (Daniel McAdams)
Horse-Bleep (Rescue)
The Antiviral Effects of Ivermectin on RNA Viruses (Nature)
Appeals Court Refuses to Stop Maine Vaccine Mandate (ET)
Covid Vaccine Stand-off Between Chicago Mayor, Police Hits Courts (Y!)
Alarm Bells Ringing Over Poor Greek Vax Rate (K.)
IMDB Steps In To Prop Up Audience Rating Of Fauci Documentary (JTN)
DHS Seeks To Track Biometric Data Of Workers (JTN)
Yes, Virginia, There is a Deep State (Taibbi)
Relentless Retail Inventory Squeeze amid Shortages & Supply Chain Chaos (WS)
Stella Moris On Her Secret Family With Julian Assange (G.)

 

 


Bare Shelves Biden

 

 

RIP
https://twitter.com/i/status/1449207395926745092

 

 

Daniel is Ron Paul’s right hand man.

A Desperate Biden Administration Turns to Terrorism (Daniel McAdams)

For Americans watching the shocking re-Nazification of Germany – where once again the ability to even buy food depends on a person’s physiological/medical status – it may be tempting to downplay the re-emergence of a nasty German political virus and scoff that, “it can’t happen here!” But it is happening here. The Biden Administration is sinking under the weight of its feeble figurehead, who is clearly living in a world of his own creation rather than living on planet reality. As Biden’s approval ratings plummet to near-historic depths, the people who run his administration – some say it’s really led by demon Susan Rice – are not backing off their hyper-authoritarian approach to…well, everything. In fact they’re doubling down.

Nurse shortage? Tough – get your shot. Billions of containers waiting to be unloaded and trucked to fill empty shelves? Tough – get your shot. Murder alley Chicago facing 50 percent less cops because those who don’t want the vax are being fired? Tough – get your shot. No one to fly the plane? Tough – get your shot. No teachers? Tough – get your shot! Into this explosion of malevolent incompetence staggers US Deputy Secretary of the Treasury Department Wally Adeyemo – second-highest ranker in the entire Department. The Nigerian-born Adeyemo, who previously served as director of African American outreach for the inspiring John Kerry 2004 presidential campaign and as a senior advisor to corrupt “woke” multi-gazillionaire Larry Fink, should be given credit for at least being honest about the intentions of his bosses in the Biden Administration.

Sometimes they tell the truth by accident. Interviewed on ABC News on Thursday, Adeyemo was asked about the thousands of container ships anchored offshore in California and elsewhere as US store shelves begin to look like Bulgaria circa 1975 – and even Santa Claus is sweating “supply chain” strangulation as Christmas quickly approaches. It’s not because Newsom’s California is a Marxist hellhole, where the religious fundamentalism of the Green New Deal fanatics has taken massive numbers of truckers off the road. Nope. It’s not Biden’s vax mandate which has unleashed a massive outflux of workers from their jobs – quitting or fired – at a time of severe labor shortages. Nope. The problem is you. You unwashed vermin who refuse to have a cocktail of experimental goop jabbed into your arm.

In the ABC interview Adeyemo admitted what we all know: inflation is beating the hell out of middle America (though Biden’s multi-millionaire chief-of-staff laughed it off as “high class problems”). “We are seeing high prices for some of the things that people have to buy,” Adeyemo told ABC’s Stephanie Ramos. But it’s not the Administration’s fault. Shelves bare? Treasury’s Number Two tells America it’s all the fault of those who have not yet succumbed to his boss’s demand that you take the jab: “The reality is that the only way we’re going to get to a place where we work through this transition is if everyone in America and everyone around the world gets vaccinated.” There is a word for this and it’s not actually blackmail. It’s terrorism. Until that part of America which has to this point decided that it does not want to take an unproven medical treatment is browbeaten – or worse – into submission to Fauci’s needle, the rest of the country will continue to suffer through empty shelves and a crappy Christmas. Too strong a word? Here’s how the dictionary defines terrorism:

Threat: You will eat nothing and you will be happy. Political objective: Get the shot! It’s terrorism plain and simple and the Biden Administration’s “War on Us” is taking a dangerous turn. The millions who have taken the shot are being baited to attack those who have for whatever reason – including the medically sound acquisition of natural immunity through contracting and defeating the virus – declined to take the medical procedure. In reality both groups should unite against the past two Administrations which have lied and intimidated Americans over the virus from nearly day one. But that would threaten the elites, who rule by divide-and-conquer tactics.

Duress
https://twitter.com/i/status/1449519642033197058

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“Within two days, 23.7 million people had seen that Pulitzer-worthy bit of Twitter talk.”

Horse-Bleep (Rescue)

In a hokey tweet on August 21, the U.S. Food and Drug Administration told Americans the obvious: “You are not a horse. You are not a cow. Seriously, y’all. Stop it.” Everyone knew what “it” was: an animal form of the drug ivermectin that folks were said to be using, widely, for covid-19. Don’t, said FDA. Within two days, 23.7 million people had seen that Pulitzer-worthy bit of Twitter talk. Hundreds of thousands more got the message on Facebook, LinkedIn, and from the Today Show’s 3 million-follower Instagram account. “That was great!” declared FDA Acting Commissioner Janet Woodcock in an email to her media team. “Even I saw it!” For the FDA, the “not-a-horse” tweet was “a unique viral moment,” a senior FDA official wrote to Woodcock, “in a time of incredible misinformation.”

There was one problem, however. The tweet was a direct outgrowth of wrong data—call it misinformation—put out the day before by the Mississippi health department. The FDA did not vet the data, according to our review of emails obtained under the Freedom of Information Act and questions to FDA officials. Instead, it saw Mississippi, as one email said, as “an opportunity to remind the public of our own warnings for ivermectin.” The story behind the tweet that went ’round the world shows how a myth was born about a safe, if now controversial, human drug that was FDA-approved for parasitic disease in 1996 and bestowed the Nobel Prize in Medicine in 2015. It is a story in which the barest grain of truth morphed into an anything-goes media firestorm.

It began with one sentence in a Mississippi health alert on reports to the state’s poison control center: “At least 70% of the recent calls have been related to ingestion of livestock or animal formulations of ivermectin purchased at livestock supply centers.” In the thick of a fierce covid wave in the American South, no official at the FDA, or reporter for that matter, seemed to ask: 70 percent of what? Instead, government and media joined forces against a public health threat that, in retrospect, was vastly exaggerated. Amid dozens of articles that ensued, Rolling Stone told of Oklahoma hospitals so jammed with ivermectin overdoses that gunshot victims had to wait for care—except it wasn’t true. Twice, The New York Times printed corrections of the same false information from Mississippi, which it described in one article and later removed, as “a staggering number of calls.” The Associated Press, Washington Post and, twice, the The Guardian in London also corrected its reporting on the alert. The Times’ correction summed it up: “This article misstated the percentage of recent calls to the Mississippi poison control center related to ivermectin. It was 2 percent, not 70 percent.”

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This is where you go: ”any questions?” No? Then let’s roll!

“..a 5000-fold reduction in viral RNA compared with control was found..”

The Antiviral Effects of Ivermectin on RNA Viruses (Nature)

In a recent in vitro study, the Vero/hSLAM cells infected with the SARS-CoV-2 or COVID-19 virus were exposed to 5 μM ivermectin in 48h, and a 5000-fold reduction in viral RNA compared with control was found. The results showed that treatment with ivermectin effectively kills almost all viral particles within 48h. The study was the first to assess the antiviral effect of ivermectin on COVID-19. The authors acknowledged that the drug may have antiviral effects by inhibiting the importin (IMP) α/β receptor, which is responsible for transmitting viral proteins into the host cell nucleus. The authors proposed human studies to confirm the potential benefits of ivermectin in the treatment of COVID-19. Although this study was the first to confirm the antiviral effect of ivermectin on COVID-19, other studies examined the antiviral effects of the drug on both RNA and DNA viruses..

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“We look forward to a decision from the Court of Appeals. If that decision is not favorable, we will request emergency relief from the Supreme Court..”

Appeals Court Refuses to Stop Maine Vaccine Mandate (ET)

The 1st U.S. Circuit Court of Appeals on Friday refused to issue an emergency injunction to stop Maine’s COVID-19 vaccine mandate. The three-judge panel of the Boston-based court issued a one-sentence statement saying the request was denied without an explanation, The Bangor Daily News reported. A final ruling will likely be issued next week, according to Liberty Counsel, an organization representing more than 2,000 health care workers across the state in the lawsuit. “We look forward to a decision from the Court of Appeals. If that decision is not favorable, we will request emergency relief from the Supreme Court,” Liberty Counsel Founder and Chairman Mat Staver said in a statement. Maine Attorney General Aaron Frey applauded the decision.

“We are pleased with the decision and will continue to vigorously defend the requirement that health care workers in Maine be vaccinated against COVID-19,” he said in a statement obtained by The Hill. Maine Governor Janet Mills, a Democrat, announced her state’s mandate on Aug. 12 that workers have until Oct. 29 to comply. Exemptions were allowed for medical reasons. Unlike most states, Maine does not allow for religious or philosophical exemptions to vaccine requirements. The plan was challenged by a group of healthcare workers who said they opposed COVID-19 vaccines because some vaccines were developed from cell lines of aborted fetuses. The workers also sued several healthcare companies where they work.

U.S. district judge Jon Levy ruled on Wednesday that Maine can bar religious exemptions to its requirement that healthcare workers in the state get vaccinated against COVID-19. Levy, who was nominated by former President Barack Obama, said the healthcare workers who brought the case have not been prevented from staying true to their religious beliefs, although refusing the vaccine will cost them their jobs.

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“The Chicago stand-off comes as the city once again leads the United States in murders, with 639 homicides this year through October 13 — up 55 percent from two years ago.”

Covid Vaccine Stand-off Between Chicago Mayor, Police Hits Courts (Y!)

A Chicago judge on Friday banned a police union president from making public statements on the city’s Covid-19 policy as a stand-off over vaccine mandates sparked dueling lawsuits. The dispute between mayor Lori Lightfoot and police union head John Catanzara has made the city the latest flashpoint in a deeply polarized debate over vaccines and whether governments have the right to mandate them. Lightfoot sought and received an injunction against Catanzara Friday when the judge issued a 10-day restraining order that bans him from making statements that encourage members not to report their vaccination status.

The police union filed its own lawsuit Friday against Lightfoot and Chicago Police Superintendent David Brown that seeks to force arbitration over the matter. Like all city employees, Chicago police officers have been mandated to report their vaccine status to an online portal by midnight Friday. Those not vaccinated will be subject to twice-weekly testing. Those who refuse to disclose their status have a few days’ grace to explain themselves — but face being placed on unpaid leave and eventually fired. In two videos released this week, Catanzara urged police officers to ignore the order and risk loss of pay. On Tuesday, he predicted that if a large number of officers refused to be tested or report their vaccinations, Chicago would have a “police force at 50 percent or less for this weekend.”

Lightfoot responded by saying: “I cannot and will not stand idly by while the rhetoric of conspiracy theorists threatens the health and safety of Chicago’s residents and first responders.” She also said Catanzara was “encouraging a work stoppage or strike.” Both state law and the union contract prohibits Chicago police from striking. The union responded with a tweet Friday saying: “President John Catanzara has never engaged in, supported, or encouraged a work stoppage.” [..] The Chicago stand-off comes as the city once again leads the United States in murders, with 639 homicides this year through October 13 — up 55 percent from two years ago. With shootings also up 68 percent over the period and carjackings heading for a record, the threat of losing much of the police force, even temporarily, has caused a deep sense of unease.

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Nobody I know believes the 62% vaccination rate.

Alarm Bells Ringing Over Poor Greek Vax Rate (K.)

Authorities are feeling increasingly uneasy about the pace of the country’s vaccination program, which is moving even slower in October than September, which had also seen a drop. As a result the aim to vaccinate at least 70% of the population to create the coveted wall of immunity is being further delayed, with winter just around the corner. In early September, after the summer holidays, there was a slight increase compared to the August break, with an average of about 20,000 shots being administered per day. The goal was to gradually increase this number in October so that by the end of the month or the beginning of November an additional million people would be vaccinated.

However, this was not meant to be, as in the first two weeks of October, there was a dip in appointments for the first dose – less than half compared to September. According to data.gov.gr, 62% of the population has received a single dose. The average daily rate of single dose shots in October was 5,500, while in September it was almost 13,000. By the time Greece reached the peak of the vaccination program in June, there was an average of 93,130 vaccinations per day being administered, of which 39,707 were first doses. This was because there was still a large proportion of the population which was positively inclined to the vaccine but wanted to wait a while before going ahead with it.

Currently, the percentage that has not been vaccinated is about the same as the percentage that indicated in the polls they would not get a jab or expressed caution about it. Bearing this in mind, targeted campaigns may be launched in the near future. Getting results, however, will be a tall order.

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Ha ha ha! Brilliant.

IMDB Steps In To Prop Up Audience Rating Of Fauci Documentary (JTN)

A documentary film tracking Dr. Anthony Fauci’s medical career from the AIDS crisis to COVID-19, is creating controversy away from the big screen. “Fauci,” from NatGeo and Magnolia Pictures, hit select theaters Sept. 10 before getting a Disney+ release earlier this month. The documentary lets disparate figures like President George W. Bush, U2’s Bono and Bill Gates praise the Infectious disease specialist. The studios failed to make the documentary’s box office figures available to film industry sites or JustTheNews.com. The vast majority of studios, large and small, routinely share that data, as NatGeo and Magnolia have done on previous releases.

Movie fans then noticed RottenTomatoes.com, arguably the biggest review aggregator site on the web, didn’t initially feature any “audience” reviews of the film. Mainstream film critics saluted “Fauci,” although most admitted the film served up a hagiography of the 80-year-old bureaucrat. Once audiences started weighing in on the film at Rotten Tomatoes, though, the results were withering. Professional critics gave “Fauci” a 92% “fresh” score, while audiences gave it just a 2% — or “rotten” — rating. A similar pattern emerged at IMDB.com, a major film and TV reference destination. “Fauci’s” audience rating, on a scale from 1-10, hovered around 1.8. This week, however, the site altered its review algorithm. Now, the audience review tally is a more robust 5.8.

A quick glimpse at the review breakdown, provided by the site, shows the overwhelming number of audience critics gave the film a one-star rating. The site now features this explanation: “NOTE: Our rating mechanism has detected unusual voting activity on this title. To preserve the reliability of our rating system, an alternate weighting calculation has been applied.”

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Next step after the Green Pass.

DHS Seeks To Track Biometric Data Of Workers (JTN)

The U.S. Department of Homeland Security is seeking proposals for a new system that will allow it to track the biometric data of its workers in order to monitor their physical and mental well-being. DHS said in a call for proposals this week that it is looking to “find innovative technological solutions that will improve the overall health and wellness of those consistently placed in high-stress and dangerous conditions” under DHS employment. “DHS is seeking capabilities that not only promote intervention action when necessary, but preemptively and in real-time optimize DHS personnel performance and resilience,” the agency added. The window for proposals for the project extends until next April.

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“Carollo looks like he’s about six, and I say that fully conceding jealousy over his full head of hair.”

Yes, Virginia, There is a Deep State (Taibbi)

On The Young Turks the other night, during a segment called — this is not a joke — “RebelHQ,” commentator Ben Carollo extolled the virtues of the CIA. In one section, he described how intelligence officials responded to “Donald Trump trying to plan some ridiculous scheme to maintain himself as president”: “It’s not a conspiracy theory to say that these government officials wanted to listen to congress and cared about Democratic norms and respected the constitutional structure of the way the United States is today.” When I first heard Carollo talking about the desire of intelligence officials to “listen to congress,” I thought he was being literal.

Maybe, I thought, he meant that time in 2014, when the CIA spied on the the Senate Intelligence Committee’s investigation into its torture program, wiring up Senate computers and reading staffers’ emails. Or perhaps he meant that time in 2015, when the Obama administration was using the NSA to listen to Israeli critics of his Iran deal, and ended up with “inadvertent” access to phone calls back and forth with political opponents in the U.S. congress, on both sides of the aisle. Or, maybe Carollo also meant that time when the CIA intercepted communications between the Inspector General of the Intelligence Community and congressional staff, about pending whistleblower complaints. As the ICIG put it in one of its declassified notifications, “CIA security compiled a report that includes excerpts of these whistleblower-related communications, and this report was eventually shared with CIA management.” This way, the CIA bosses could know ahead of time who was going to congress with complaints about abuses! Good times.

Alas, Carollo didn’t mean intelligence officials are listening to congress in that sense. His video essay entitled, “Fact-checking Glenn Greenwald’s stunt on Fox News,” was designed to refute the apparently ridiculous notion that “there’s some sort of secret deep state working behind the scenes.” A central part of his argument is that unlike agencies like Homeland Security, formed under the Republican administration of George W. Bush and designed to be “far more shielded from congressional oversight,” the CIA reports to congress and basically does what it’s told. The agencies with the real power to color outside the lines, Carollo tells us, are DHS-sub-operations, “specifically ICE, and Customs and Border Control,” which “have far less congressional oversight and far less structure in place for there to be those checks and balances.” Because of that, Carollo says, “Donald Trump was more than capable of enacting an extremely racist border policy.”

Even the Pentagon and the defense intelligence agencies are less of a concern, he said, because “when it comes to something like the military, there’s a long history of deep congressional oversight,” and “many checks and balances that are put into place.” Carollo looks like he’s about six, and I say that fully conceding jealousy over his full head of hair. It’s relevant only because he’s representative of a generation of young, left-leaning intellectuals who grew up in the Trump years believing the CIA, FBI, NSA, and other such agencies to be trusted, straight-and-narrow defenders of democratic “norms.” These credulous kids with piercings and chin-beards who think the secret services are on their side are the fruits of one of the great P.R. campaigns of our time.

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Great Reset.

Relentless Retail Inventory Squeeze amid Shortages & Supply Chain Chaos (WS)

The holiday selling season is approaching, and a whole litany of weird shortages is ricocheting through the economy. Stuff suddenly gets hung up somewhere, on a ship, or in a port, and then ends up somewhere else, or it’s on backorder for months, as manufacturers are struggling with material shortages and in in Asia with Covid outbreaks that shut down factories for weeks at a time. And stimulus-fueled demand in the US has been huge and relentless, while retailers are struggling with inventories, some more than others. Auto dealers, particularly new-vehicle dealers, are experiencing catastrophic shortages of popular models, as automakers have been getting blasted by semiconductor shortages that simply refuse to abate, leading to rotating shutdowns of assembly plants globally.

Auto dealers are the largest retailer segment, with their sales normally accounting for over 20% of total retail sales, and with their inventories normally accounting for 33% of total retail inventories. Inventories at auto dealers, measured in dollars, declined to a new multi-year low of $151 billion in August, according to data released by the Commerce Department on Friday. The long-term dollar-increase in inventory levels that you can see in the chart above is a reflection of higher costs per vehicle in inventory. But the number of vehicles in inventory has been in the same range for two decades, as unit sales have mostly been below the peak achieved in the year 2000.


It’s even worse during the current shortages: Inventory in dollars – though it collapsed – is being inflated by the shift to high-end models as automakers are prioritizing the biggest money makers. Sales of new and used vehicles also collapsed as there hasn’t been enough to sell. The industry-standard Seasonally Adjusted Annual Rate (SAAR) of sales plunged five months in a row and is down by 33% from May:

And so the inventory-sales ratio – inventories divided by sales, a standard metric of supply that cancels out the impact of price increases – has been ticking up over the past three months from the May low, which had been the lowest in the data going back to 1992. The upticks were driven by sales that collapsed even faster than inventories. Following the Lehman bankruptcy, new vehicle sales plunged, and the US was suddenly drowning in inventory, and the inventory-sales ratio spiked. During the pandemic, the opposite occurred: Fueled by huge amounts of fiscal and monetary stimulus, retail demand surged and collided with production woes due at first to Covid issues and then the semiconductor shortage. And prices have spiked, with many new vehicles being sold at prices well above sticker, which is nuts.

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Really, Stella, talk to the Guardian? They were only ever going to smear Julian even more, while washing their hands of their role in his misery,

Stella Moris On Her Secret Family With Julian Assange (G.)

In May 2012, the UK’s supreme court ruled he should be extradited to Sweden. In June, Assange entered the Ecuadorian embassy, where he could not be arrested because of the international legal protection afforded diplomatic premises, and refused to come out. In doing so, he breached his bail conditions. Two months later, Ecuador granted Assange political asylum, stating that they feared his human rights would be violated if he were extradited. By now, Assange had fallen out with former colleagues at WikiLeaks and collaborators at mainstream news organisations. His relationship with the Guardian soured over the decision to bring the New York Times into the collaboration, and he was angered that the Guardian investigated the Swedish allegations, rather than supporting him unquestioningly.

He was also furious about details published in a Guardian book, WikiLeaks: Inside Julian Assange’s War on Secrecy. Meanwhile, all five media partners condemned his decision to publish Cablegate unredacted, potentially endangering the lives of thousands of activists and informers in countries including Israel, Jordan, Iran and Afghanistan. The situation could not have been messier. He fell out with so many people: WikiLeaks staff, his lawyer Mark Stephens, the writer Andrew O’Hagan, who had been contracted to ghost a book out of him, which Assange never delivered. Laura Poitras’s film about Assange, Risk, is particularly poignant because she had started the project as a fan. In it, Assange comes across as vain, sexist, arrogant and messianic.

The allegations of hypocrisy were most damaging: Poitras reveals that Assange told her the film was a threat to his freedom and demanded scenes be removed. “He was really angry and he tried to intimidate,” Poitras told me at the time of Risk’s release. James Ball, global editor at the Bureau of Investigative Journalism and former Guardian journalist, briefly worked for WikiLeaks. He talks about the “incredible intensity” of his time at Ellingham House. “We were in the middle of nowhere in Norfolk, and we couldn’t bring phones because they could be tracked, so we were cut off from friends and family.” Ball challenged Assange when he was asked to sign a non-disclosure agreement, with a £12m penalty clause, that would have prevented him saying anything about WikiLeaks for two decades.

“Julian basically told everyone not to let me go to bed till I agreed to sign,” Ball says. Eventually, he did get to bed without signing. “I was woken up by Julian who was sitting on my bed, pressuring me again. He was prodding me in the face with a cuddly toy giraffe. I managed to get out, and then I got really angry for several months. A friend suggested I look into cult deprogramming. I don’t think Julian necessarily meant to build a cult, but WikiLeaks did operate like one.” Moris dismisses all the criticism of Assange as character assassination. Does she think his reputation for being difficult is fair? “How many publishers, editors, CEOs have a reputation for being nice and agreeable?” she asks. “Julian doesn’t like people who are deceitful, Julian doesn’t like opportunists, and he can be quite direct. Also people who are on the autism spectrum don’t score particularly high on the agreeableness scale.” (A psychiatrist confirmed a diagnosis of Asperger syndrome in last year’s extradition hearing.)

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Major league weird.

 

 

Leonardo da Vinci’s self-supporting bridge.

 

 

 

 

 

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Jan 282017
 
 January 28, 2017  Posted by at 10:23 am Finance Tagged with: , , , , , , , , , ,  6 Responses »


Wassily Kandinsky Autumn Landscape with Boats 1908

US Economy Back Below “Stall Speed” (WS)
Dow Hits 20,000 As US National Debt Reaches $20 Trillion (Snyder)
US Auto Industry In Crisis Amid “Inventory Bubble” (ZH)
Trump’s Crusade on Drug Pricing Puts Both Parties on the Spot (BBG)
Trump Bars Door To Refugees, Visitors From Seven Nations (R.)
EU Lacks Leadership to Tackle Global Crises – Czech Minister (BBG)
‘It Looks as if the World Is Preparing for War’ – Gorbachev (Time)
Congresswoman Returns From Syria With ‘Proof’ Obama Funded ISIS (YNW)
UN Agency Cuts Food Aid To 1.4 Million Displaced Iraqis (AlJ)
The Media Is Now The Political Opposition (Paul Craig Roberts)
Lifting of Sanctions Could Be Costly To Russia (Paul Craig Roberts)
Want To Know How Society’s Doing? Forget GDP – Try These Alternatives (G.)
Canada May Contribute To Dutch-Led International Abortion Fund (AFP)
IMF Says Greece Debt ‘Explosive’ In Long Term (AFP)
Greece: The Game Is On Again (Coppola)

 

 

Nothing is real. And nothing to get hung about. Strawberry Fields forever.

US Economy Back Below “Stall Speed” (WS)

The consensus forecast by economists predicted that the US economy would grow at an rate of 2.2% in the fourth quarter, as measured by inflation-adjusted GDP. The forecasts ranged from 1.5% to 2.8%. The New York Fed’s “Nowcast” pegged it at 2.1%, and the Atlanta Fed’s “GDPNow” at 2.9%. And today, the Bureau of Economic Analysis reported that growth in the fourth quarter was a measly 1.9%. That was down from 3.5% in the third quarter, a spurt that had once again given rise to the now gutted hopes that the US economy would finally emerge from its stall speed. But instead it has slowed down. For the year 2016, the growth rate dropped to 1.6%. It was worse even than 2013, when GDP growth tottered along at 1.7%. And it matched the growth rate in 2011. Both 2016 and 2011 were the worst since 2009 when the US was in the middle of the Great Recession:

In fact, over the past 50 years, anytime the economy grew less than 2% in a year, it was either already in a recession for part of the year, or there’d be a recession the following year. Hence “stall speed” – a speed that is too slow to keep the economy from stalling altogether. [..] So stall speed for the year. But this time it’s different. This is the third year since the Great Recession when GDP growth dropped below 2%. The Fed’s policies of eight years of cheap credit have entailed soaring debt levels among companies, governments, and consumers – money borrowed from tomorrow that was spent today. Borrowing for productive investment is one thing. Borrowing for consumption is another: it boosts GDP but creates a debt overhang with no productive assets that generate income to service that debt in the future; that debt service for prior consumption then acts as a burden on future consumption.

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You can’t buy growth. You can just fake it for a while.

Dow Hits 20,000 As US National Debt Reaches $20 Trillion (Snyder)

The Dow Jones Industrial Average provides us with some pretty strong evidence that our “stock market boom” has been fueled by debt.  On Wednesday, the Dow crossed the 20,000 mark for the first time ever, and this comes at a time when the U.S. national debt is right on the verge of hitting 20 trillion dollars

 

Is this just a coincidence?  As you will see, there has been a very close correlation between the national debt and the Dow Jones Industrial Average for a very long time.

 

For example, when Ronald Reagan took office in 1991, the U.S. national debt had just hit 994 billion dollars and the Dow was sitting at 951.  And as you can see from this chart by Matterhorn.gold via David Stockman, roughly that same ratio has held true throughout subsequent presidential administrations…

During the Clinton years the Dow raced out ahead of the national debt, but an “adjustment” during the Bush years brought things back into line. The cold hard truth is that we have been living way above our means for decades.  Our “prosperity” has been fueled by the greatest debt binge in the history of the world, and we are greatly fooling ourselves if we think otherwise.We would never have gotten to 20,000 on the Dow if Barack Obama and Congress had not gotten us into an extra 9.3 trillion dollars of debt over the past eight years. Unfortunately, most people do not understand this, and the mainstream media is treating “Dow 20,000″ as if it is some sort of great historical achievement

“The average began tracking the most powerful corporate stocks in 1896, and has served as a broad measure of the market’s health through 22 presidents, 22 recessions, a Great Depression, at least two crashes and innumerable rallies, corrections, bull and bear markets. The blue chip reading finally cracked the 20,000 benchmark for the first time early Wednesday. During the current bull market, the second longest in history, the Dow has more than tripled since March 2009.”

Since Donald Trump’s surprise election victory, the Dow has now climbed by approximately 2150 points. And it took just 64 calendar days for the Dow to go from 19,000 to 20,000.  That is an astounding pace, and financial markets around the rest of the planet are doing very well right now too. In fact, global stocks rose to a 19 month high on Wednesday. So where do we go from here? Well, if Donald Trump wants to see Dow 30,000 during his presidency, then history tells us that he needs to take us to 30 trillion dollars in debt.

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“The last thing the auto industry needs is more capacity.”

US Auto Industry In Crisis Amid “Inventory Bubble” (ZH)

Despite record U.S. auto sales last year, the number of vehicles on car-dealer lots remains near record highs, and, as J.D.Power analyst Thomas King warned this week, 2016 ended with an inventory “bubble” that will require less production or more incentives to clear. With near record high inventories of 3.9 million vehicles… U.S. auto inventory finished 2016 at about 66 days supply, up from 60 days a year earlier. Inventory would last 2.23 months at the November sales pace, according to the latest available data from the Census Bureau. The stock-to-sales ratio in 2016 is extremely elevated compared to historical norms…

More problematically, King warns, about one-third of inventory were older model-year vehicles, rather than more typical level of less than a quarter. Of course this massive stockpile hits just as President Trump pressures the auto-industry to onshore more jobs and more production… But as the industry automates, factories don’t create jobs like they used to, said Marina Whitman, a professor of business administration and public policy at the University of Michigan. “The American auto industry last year produced more cars than it ever had before, but they did it with somewhere between one-third and one-half the number of workers that they had decades ago,” said Whitman, who was an adviser to President Richard Nixon and GM’s chief economist from 1978 to 1992. “The last thing the auto industry needs is more capacity,” she said.

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Hilarious to see how much money all these people get from the industry. And insane.

Trump’s Crusade on Drug Pricing Puts Both Parties on the Spot (BBG)

Donald Trump has a chance to rally his core supporters as well as left-wing Democrats, wrapping himself in the populist flag to take on the politically powerful drug industry. He is vowing to keep a campaign pledge to push legislation allowing Medicare to negotiate prescription drug prices, a practice currently prohibited by law. Proponents say this would reduce drug prices and Medicare costs for the federal government. Medicare pays for about 29% of prescription drugs in the U.S. and would have considerable leverage. Trump would be taking on the leaders of his own party, starting with House Speaker Paul Ryan. Most Republicans have long argued that giving Medicare such power is tantamount to government price-setting, which ideologically they oppose and which they say would stifle innovation and research in the drug industry.

Many of them receive huge campaign contributions from the industry’s sizable political war chest. There are arguments over the merits and effects, but the politics are clear cut. In a Kaiser Foundation poll last autumn, the public, by 82% to 17%, favored allowing the federal government to negotiate lower drug prices. Huge majorities say costly drug prices – in recent years they have risen about four times the rate of inflation – are a major concern. These costs are felt by some of Trump’s strongest supporters, non-college educated whites. And liberals, led by politicians like Bernie Sanders, champion a robust government role to keep drug prices down.

[..] There was an instructive vote in the Senate this month on a closely related issue, allowing the importation of cheaper drugs from Canada. It failed 52 to 46. But it garnered the support of 10 Republicans, including deficit hawks like Rand Paul of Kentucky and Utah’s Mike Lee. However, 13 Democrats, most of them beneficiaries of industry political contributions, voted against the measure. Subsequently, they have gotten a lot of flak from liberal groups, which especially have targeted Cory Booker of New Jersey. He received $49,830 from the industry in the last election. If Trump goes all out on this issue, it will be near impossible for most of these Democrats to side with the industry over a Republican president whom they accuse of representing the interests of the rich. And, knowledgeable Congress watchers say, a number of Republicans, in the face of White House pressure and public opinion, would cave, too.

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This is a bump the entire west must go through.

Trump Bars Door To Refugees, Visitors From Seven Nations (R.)

President Donald Trump on Friday put a four-month hold on allowing refugees into the United States and temporarily barred travelers from Syria and six other Muslim-majority countries, saying the moves would help protect Americans from terrorist attacks. In the most sweeping use of his presidential powers since taking office a week ago, Trump paused the entry of travelers from Syria and the six other nations for at least 90 days, saying his administration needed time to develop more stringent screening processes for refugees, immigrants and visitors. “I’m establishing new vetting measures to keep radical Islamic terrorists out of the United States of America. Don’t want them here,” Trump said earlier on Friday at the Pentagon. “We only want to admit those into our country who will support our country and love deeply our people,” he said.

The order seeks to prioritize refugees fleeing religious persecution, a move Trump separately said was aimed at helping Christians in Syria. That led some legal experts to question whether the order was constitutional. One group said it would announce a court challenge on Monday. The Council on American-Islamic Relations said the order targets Muslims because of their faith, contravening the U.S. Constitutional right to freedom of religion. “President Trump has cloaked what is a discriminatory ban against nationals of Muslim countries under the banner of national security,” said Greg Chen of the American Immigration Lawyers Association. The bans, though temporary, took effect immediately, causing havoc and confusion for would-be travelers with passports from Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen.

Trump has long pledged to take this kind of action, making it a prominent feature of his campaign for the Nov. 8 election, but people who work with Muslim immigrants and refugees were scrambling on Friday night to determine the scope of the order. [..] Trump’s order also suspends the Syrian refugee program until further notice, and will eventually give priority to minority religious groups fleeing persecution. Trump said in an interview with the Christian Broadcasting Network that the exception would help Syrian Christians fleeing the civil war there. Legal experts were divided on whether this order would be constitutional. “If they are thinking about an exception for Christians, in almost any other legal context discriminating in favor of one religion and against another religion could violate the constitution,” said Stephen Legomsky, a former chief counsel at U.S. Citizenship and Immigration Services in the Obama administration.

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But apparently he thinks this can change. Shame he doesn’t say how.

EU Lacks Leadership to Tackle Global Crises – Czech Minister (BBG)

The EU is unable to work with global superpowers in addressing conflicts and crises because it lacks leadership, Czech Finance Minister Andrej Babis said. “Europe is very slow, very bureaucratic,” Babis said. “The problem is who will sit together at the table” with leaders of the U.S., U.K., Russia “to solve the problem in the Middle East, North Africa, the migration. Europe is always waiting for elections” in countries including Germany and France, he said. The Czech billionaire, whose party leads polls ahead of the fall general elections, has been critical of the bloc his country joined in 2004 and the way it tackled a series of issues, including the migration crisis. He rejected a call from his fellow Czech interior minister to lead separate talks with the U.K. on Brexit, saying the EU needs to stay united in the negotiations. Babis said he was surprised by the announced “hard Brexit,” and urged Britain to activate Article 50 of the EU’s Lisbon Treaty quickly to speed up the negotiations.

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He’s been here before.

‘It Looks as if the World Is Preparing for War’ (Gorbachev)

The world today is overwhelmed with problems. Policymakers seem to be confused and at a loss. But no problem is more urgent today than the militarization of politics and the new arms race. Stopping and reversing this ruinous race must be our top priority. The current situation is too dangerous. More troops, tanks and armored personnel carriers are being brought to Europe. NATO and Russian forces and weapons that used to be deployed at a distance are now placed closer to each other, as if to shoot point-blank. While state budgets are struggling to fund people’s essential social needs, military spending is growing. Money is easily found for sophisticated weapons whose destructive power is comparable to that of the weapons of mass destruction; for submarines whose single salvo is capable of devastating half a continent; for missile defense systems that undermine strategic stability.

Politicians and military leaders sound increasingly belligerent and defense doctrines more dangerous. Commentators and TV personalities are joining the bellicose chorus. It all looks as if the world is preparing for war. In the second half of the 1980s, together with the U.S., we launched a process of reducing nuclear weapons and lowering the nuclear threat. By now, as Russia and the U.S. reported to the Non-proliferation Treaty Review Conference, 80% of the nuclear weapons accumulated during the years of the Cold War have been decommissioned and destroyed. No one’s security has been diminished, and the danger of nuclear war starting as a result of technical failure or accident has been reduced. This was made possible, above all, by the awareness of the leaders of major nuclear powers that nuclear war is unacceptable.

I urge the members of the U.N. Security Council — the body that bears primary responsibility for international peace and security — to take the first step. Specifically, I propose that a Security Council meeting at the level of heads of state adopt a resolution stating that nuclear war is unacceptable and must never be fought. I think the initiative to adopt such a resolution should come from Donald Trump and Vladimir Putin — the Presidents of two nations that hold over 90% of the world’s nuclear arsenals and therefore bear a special responsibility.

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Tulsi Gabbard is a Democrat. Can we now please finally have a serious conversation about what the US has done to the Middle East/Northern Africa region? How are we ever going to atone for this if we don’t? Or would we rather continue in denial?

Congresswoman Returns From Syria With ‘Proof’ Obama Funded ISIS (YNW)

Congresswoman Tulsi Gabbard told CNN that she has proof the Obama administration was funding ISIS and Al-Qaeda.Hawaii Rep. Gabbard went to Syria on a secret fact-finding mission to wade through the lies and propaganda and find out what is really happening on the ground. Immediately on her return CNN booked her for an “exclusive” interview – and Gabbard told them exactly what they didn’t want to hear: she has proof the Obama administration was funding ISIS and Al-Qaeda. Explaining to Jake Tapper that she met people from all walks of life in Aleppo and Damascus, Gabbard said that Syrians “expressed happiness and joy at seeing an American walking their streets.” But they also wanted to know “why is it that the United States, its allies and other countries, are providing support, are providing arms, to terrorist groups like Al-Nusra, Al-Qaeda, ISIS, who are on the ground there, raping, kidnapping, torturing, and killing the Syrian people?

“They asked me why is the United States supporting these terrorist groups who are destroying Syria – when it was Al-Qaeda who attacked the United States on 9/11, not Syria. “I didn’t have an answer for that.“ That was more than Jake Tapper, who was hostile from the beginning of the interview, could handle. His face screwed up, he lashed out, saying, “Obviously the United States government denies providing any sort of help to the terrorist groups you are talking about, they say they provide help for the rebel groups.“ If that was supposed to Tapper’s knockout blow, Gabbard saw it coming a mile away. Without missing a beat, she calmly deconstructed his ideological, and savagely wrong, talking points.

“The reality is, Jake – and I’m glad you bought up that point – every place that I went, every person I spoke to, I asked this question to them. And without hesitation, they said ‘there are no moderate rebels, who are these moderate rebels that people keep speaking of?’ “Regardless of the name of these groups, the strongest fighting force on the ground in Syria is Al-Nusra or Al-Qaeda and ISIS. That is a fact. There are a number of different other groups, all of them are fighting alongside, with or under the command of the strongest group on the ground that is trying to overthrow Assad.”

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We have so much to answer for.

UN Agency Cuts Food Aid To 1.4 Million Displaced Iraqis (AlJ)

The World Food Programme (WFP) has slashed food rations distributed to 1.4 million displaced Iraqis by 50% because of delays in payments from donor states. The sharp cutbacks come at a time when a growing number of Iraqis flee the Islamic State of Iraq and the Levant (ISIL, also known as ISIS) group. At least 160,000 people have been displaced since October when the Iraqi military, backed by Kurdish forces and Shia militias. launched a military campaign to recapture Mosul from the armed group. WFP spokeswoman Inger Marie Vennize said the UN agency was talking to the United States – its biggest donor, Germany, Japan and others to secure funds to restore full rations.

“We have had to reduce [the rations] as of this month,” she was quoted by the Reuters news agency as saying. “The 50% cuts in monthly rations affect over 1.4 million people across Iraq,” she added. The effect is already being felt in camps east of Mosul, ISIL’s last major bastion in northern Iraq. “They are giving an entire family the food supply of one person … we want to go back home,” said Omar Shukri Mahmoud at the Hassan Sham camp. Safa Shaker, who fled with her extended family, said: “We are a big family and this ration is not going to be enough. “We escaped from [ISIL] in order to have a chance to live and now they have cut the aid. How are we supposed to live?” she added.

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I wouldn’t shoot from the hip as much as PCR does, but in essence he’s right. Old media, CNN, WaPo, NYT, have wasted so much of their credibility. And they’re not taking any step back from that. it’s till all just echo-chambering.

The Media Is Now The Political Opposition (Paul Craig Roberts)

Stephen Bannon is correct that the US media—indeed, the entire Western print and TV media—is nothing but a propaganda machine for the ruling elite. The presstitutes are devoid of integrity, moral conscience, and respect for truth. Who else but the despicable Western media justified the enormous war crimes committed against millions of peoples by the Clinton, Bush, and Obama regimes in nine countries—Afghanistan, Iraq, Libya, Pakistan, Yemen, Syria, Somalia, Palestine, and the Russian areas of Ukraine? Who else but the despicable Western media justified the domestic police states that have been erected in the Western world in the name of the “war on terror”? Along with the war criminals that comprised the Clinton, Bush, and Obama regimes, the Western media should be tried for their complicity in the massive crimes against humanity.

The Western media’s effort to sustain the high level of tension between the West and Russia is a danger to all mankind, a direct threat to life on earth. Gorbachev’s warnings are correct. Yet presstitutes declare that if Trump lifts the sanctions it proves that Trump is a Russian agent. It is paradoxical that the Democrats and the liberal-progressive-left are mobilizing the anti-war movement to oppose Trump’s anti-war policy! By refusing to acknowledge and to apologize for its lies, euphemistically called “fake news,” the Western media has failed humanity in a number of other ways. For example, by consciously telling lies, the media has legitimized the suborning of perjury and false testimony used to convict innocent defendants in America’s “justice” system, which has about the same relation to justice as genocide has to mercy.

If the media can lie about world events, police and prosecutors can lie about crimes. By taking the role of the political opposition to Trump, the media has discredited itself as an honest critic on topics where Trump needs criticism, such as the environment and his tolerance of oppressive methods used by police. The presstitutes have ended all chance of improving Trump’s performance with reports and criticism. Trump needs moderating on the environment, on the police, and on the war on terror. Trump needs to understand that “the Muslim threat” is a hoax created by the neoconservatives and the military/security complex with the complicity of the presstitutes to serve the hegemony agenda and the budget and power of the CIA, Pentagon, and military industries.

If the US stops bombing and slaughtering Muslims and training and equiping forces to overthrow non-compliant Muslim governments such as Syria, Iraq, and Libya, “the Muslim threat” will disappear. Maybe Trump will add to his agenda breaking into hundreds of pieces the six mega-media companies that own 90% of the US media and selling the pieces to seperate independent owners who have no connection to the ruling elites. Then America would again have a media that can constrain the government with truth rather than use lies to act for or against the government.

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Russia knows.

Lifting of Sanctions Could Be Costly To Russia (Paul Craig Roberts)

Tweets on social media say Trump is about to lift the sanctions placed on Russia by the Obama regime. Being a showman, Trump would want to make this announcement himself, not have it made for him by someone outside his administration. Nevertheless, the social media tweets are a good guess. Reports are that Trump and Putin will speak tomorrow. The conversation cannot avoid the issue of sanctions. Trump during his first week has moved rapidly with his agenda. He is unlikely to delay lifting the sanctions. Moreover, there is no cost to Trump of lifting them. The sanctions have no support in the US and Western business communities. The only constituency for the sanctions were the neoconservatives who are not included in the Trump administration.

Victoria Nuland, Susan Rice, Samantha Power are gone along with much of the State Department. So there is nothing in Trump’s way. President Putin is correct that the sanctions helped Russia by pushing Russia to be more economically independent and by pushing Russia toward developing economic relationships with Asia. Lifting the sanctions could actually hurt Russia by integrating Russia into the West. The Russian government should take note that the only sovereign country in the West is the United States. All the rest are US vassals. Could Russia escape the same fate? Anyone integrated into the West is subject to Washington’s pressure. The problem with the sanctions is that they are an insult to Russia. The sanctions are based on lies that the Obama regime told.

The real purpose of the sanctions was not economic. The purpose was to embarrass Russia as an outlaw state and to isolate the outlaw. Trump cannot normalize relations with Russia if he lets this insult stand. Therefore, the social media tweets are likely to be correct that Trump is about to lift the sanctions. This will be good for US-Russian relations, but perhaps not so good for the Russian economy and Russian sovereignty. The Western capitalists would love to get Russia deep in debt and to buy up Russia’s industries and raw materials. The sanctions were a partial protection against foreign influence over the Russian economy, and so the removal of the sanctions is like removing a shield as well as removing an insult.

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I like measuring well-being through grain prices, but at the same time I don’t think basic needs should be subject to the same ‘market forces’ as cellphones etc. As growth and globalism vanish, we should all produce out own basics.

Want To Know How Society’s Doing? Forget GDP – Try These Alternatives (G.)

Here are the week’s leading indicators. The Dow Jones industrial average topped 20,000 points for the first time. British GDP grew 0.6% in the final quarter of 2016. The FTSE 100 and Germany’s DAX 30 persisted close to record highs, while US GDP softened slightly. Bored yet? I am. As a former financial journalist, I’m well acquainted with the merry-go-round of indicators that blip in and out of our lives like digital dopamine, telling us how well we’re doing. As a human being, I’m increasingly alarmed that these are just irrelevant numbers that have little or no bearing on how well we are really doing. [..] I’d rather suggest a series of other metrics that give a clearer indication of where humanity is at. Perhaps these are the key performance indicators we should hardwire into our reporting calendar:

Inequality ratios One of the lessons of the 20th century was that inequality breeds revolt and revolutions never end well. One of the lessons of the 21st century is that people seem to be determined not to learn the lessons of the 20th century. The Gini coefficient is a crude measure of how unequal societies are becoming. Some economists have been toying with another measure, the Palma ratio, which is better at discerning how much richer the richest cohort are getting, compared with the poorest. Both tell us much about our direction of travel.

Grain prices If we must focus on financial instruments, edible commodities are surely more interesting than stock and bond prices. You can’t eat a three-month Treasury bill, after all. In 2007/08, a wave of riots swept the developing world as the cost of basic foodstuffs soared. Governments fell. A dotted line joined that manifestation of unrest with the Arab spring four years later. Food matters. We routinely write that as many as a billion people on the planet are hungry, malnourished. That’s far more than the number with Dow Jones tracker funds.

Carbon dioxide, parts per million, in the atmosphere The most scary dataset of all. It goes up every year. And so do global temperatures. If this carries on for another couple of decades, people won’t be inspecting their portfolios – they’ll be foraging in the woods. Has anyone read The Road?

Antidepressant prescriptions A veritable bellwether for so much – from the wretched state we’re in psychologically to the inadequacies of our healthcare systems. Prescriptions have doubled in England in the past decade. An interest to declare: I take them, and believe they work for me. But I also firmly believe they are prescribed far too readily, by overstretched GPs who have only six minutes to speak to patients and little recourse to anything other than pills. Personally, I’d be willing to shave a couple of points off GDP in return for a more comprehensive programme to address this 21st-century epidemic.

Homelessness Not just in the UK, where it’s risen for six years in a row, but in California, Paris, Moscow. Surely, one of the first questions a newly arrived alien might ask upon landing in Britain would be “why do so many of you earthlings live outside?”, and not “how are my BT shares doing?”

Dependency ratio Admittedly, this is not a thrilling one to monitor as it doesn’t move much. But it is moving – and in the wrong direction for lots of developed countries. The dependency ratio is the number of working-age people compared with the number of children and those over retirement age. According to the Resolution foundation, there are currently seven dependants for every 10 working-age Britons, but this will increase to eight in the 2020s and nine by 2050.

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It’s not an abortion fund, it’s much wider than that: “sexual reproductive rights, including abortion”.

Canada May Contribute To Dutch-Led International Abortion Fund (AFP)

Canada is considering contributing to a Dutch-led international fund to support abortion services in developing countries, set up in response to Donald Trump’s order to halt financing of NGOs that support the practice. A spokesman for Canada’s international development minister, Marie-Claude Bibeau, told AFP the minister had spoken with her Dutch counterpart about the fund, and was considering donating an unspecified sum to it or a similar measure that would support “sexual reproductive rights, including abortion” abroad. “Sexual health and reproductive rights will be at the heart of Canada’s new international assistance policy,” spokesman Louis Belanger said in an email.

“We will continue to explore opportunities to work together to advance women’s empowerment by expanding access to sexual and reproductive health services including abortion,” he said. Canada is set to unveil its new foreign aid strategy in the coming weeks. A decision on the fund would either be included or follow soon after that announcement. Trump on Monday signed a decree barring US government funding for foreign NGOs that support abortion. The restrictions prohibit them from also providing abortion information, counseling or referrals, or engaging in advocacy to promote abortion. Lilianne Ploumen, the Dutch minister for foreign trade and development cooperation, said when she announced the new fund that the Netherlands must do everything in its power to offset the US ban so that “women can remain in control of their own bodies”.

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Broken record.

IMF Says Greece Debt ‘Explosive’ In Long Term (AFP)

Greece’s government debt remains “highly unsustainable,” and will be “explosive” in the longer run, requiring a more credible debt relief plan from Europe, the International Monetary Fund said in a report obtained by AFP. Addressing the debt burden of the beleaguered nation will require “significant debt relief” from European institutions, including dramatically extending the grace periods and maturities of the loans, the IMF said in it’s annual report on the Greek economy, which includes a debt sustainability analysis. The IMF board is due to discuss the report February 6. Even with full implementation of the economic reforms the country has agreed to, “Greece’s debt is highly unsustainable” and “will become explosive in the long run,” as the government will have to replace highly-subsidized official financing with market financing at much higher rates, the IMF said.

The pessimistic report, though in keeping with the fund’s repeated statements on the topic, makes it more unlikely the IMF stays on the sidelines of any new European loan deal for Greece. Months of bickering have delayed progress of Greece’s 86-billion-euro ($92.4 billion) bailout program agreed in 2015 and officials increasingly are worried that elections this year in the Netherlands, France and Germany could further poison any progress. The IMF report says that in order to “provide more credibility to the debt strategy for Greece, further specificity will be needed regarding the type and scope of debt relief to be expected” from Europe. This must include “ambitious extensions of grace and maturity periods, a full deferral of interest on European loans, as well as a locking in of the interest rate on a significant amount of European loans … to put debt on a sustained downward path.”

The IMF calls for extending the grace period until 2040, during which time no debt payments would be required, and extending the maturity of the loans to 30 years in some cases to 2070, dramatically longer than what Europe agreed to in 2012. At the heart of the dispute over the new loan program is a demand by the eurozone that Greece deliver a primary balance, or surplus on public spending before debt repayments, of 3.5% of GDP, far in excess of the 1.5% the IMF says is feasible. The target is very high – and most countries do not even come close – but Germany and other eurozone hardliners are insistent that Greece reach it for several years after its current program concludes in 2018. Eurogroup head Jeroen Dijsselbloem insisted on Thursday that the IMF remained committed to the Greek bailout program, despite repeated calls by the IMF for more realistic targets and more debt relief.

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1) The IMF is to a large extent playing a double role, and is comfortable in that role.

2) Yes, ‘pensions-to-GDP’ is very high in Greece, but that is only because other benefits simply don’t exist. Pensions can only be cut further if an unemployment benefits program is initiated. Everyone involved knows this, it’s just that some (IMF) prefer to act as if they don’t. Because such a program would cost money.

3) The demise of Greece as a nation is as much the shame of the IMF as that of Germany and the EU. The consequences of the demise will be too.

Greece: The Game Is On Again (Coppola)

In 2015, Yanis Varoufakis tried to renegotiate the terms of the Greek bailout. He expected his peers in the Eurogroup to treat him as an equal. But they were expecting a repentant supplicant. Greece had sinned, it was receiving just punishment for its sins, and who did Varoufakis think he was, coming along and telling them that the treatment Greece was receiving was unjust and counterproductive? This misunderstanding made a bad situation far worse. It led eventually to Greece’s near-expulsion from the Euro and the breaking of Alexis Tsipras. And, of course, to Varoufakis’s resignation. Now it is the IMF’s turn to misread the psychological framing. This is not a four-handed poker game, it is a duel to the death. And it is not really about Greece. The surface conflict is between Greece and its creditors, but the underlying power struggle is between the German-led creditor bloc and the European Commission.

The eventual outcome will determine the shape of the Eurozone, and indeed the whole EU, in the future. Neither the Greek government nor the European Commission want the IMF involved. The only reason the IMF is still involved is that the creditors want it to be. And the reason the creditors want the IMF involved is that they do not trust the Commission to deliver the harsh penance they have prescribed for Greece. The IMF has been cast in the role of creditors’ second. Unfortunately, this is not how the IMF sees itself. It is still trying to act as a neutral broker, crafting a deal acceptable to both sides. It has repeatedly called for substantial debt relief, and has also demanded deep reforms to the Greek economy. But because it is no longer perceived as neutral, its call for debt relief is ignored while its reform initiative is inevitably seen as a disguised demand for more austerity.

[..] Greece’s pension expenditure as a proportion of GDP is the highest in the EU, even though payments are only about 70% of the EU average. That’s the problem with quoting fixed payments like pensions (and debt service) in relation to GDP: as GDP falls, the cost rises. The Greek economy is now about 27% smaller than it was in 2008, and still shrinking. The IMF’s case is that pension cost as a proportion of GDP is now unsustainable, and further, that the creditors are not going to agree to debt relief while pension cost remains so high. It is probably right on both counts. But once again, what really matters is the psychological framing.

[..] the IMF’s position is untenable. Since it can no longer credibly claim to be neutral, it must explicitly back one side or the other. If it backs neither, it will de facto be seen as supporting the creditors – and that is not consistent with its international mandate, since it effectively means giving up its quest for substantial debt relief (since the creditors have no desire to agree to this). But coming out in support of Greece probably means abandoning its long-standing commitment to ensuring fiscal sustainability through pension and tax reforms. It appears an impossible choice. If the IMF can concede neither of these, then it must do what it should have done long ago. Walk.

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Jan 282016
 
 January 28, 2016  Posted by at 8:45 am Finance Tagged with: , , , , , , ,  2 Responses »


DPC The Arcade, Cleveland 1901

US Crude Inventories Are The Highest Since the 1930s (ZH)
Chart Going Back To 1861 Shows Oil Isn’t Insanely Cheap Right Now (MW)
Why the Fed Has the Stock Market Spooked (WSJ)
China Shares Flounder Again, But ‘Real Economy’ Sound Says State Media (Reuters)
China’s Central Bank Makes Most Massive Cash Infusion In 3 Years (WSJ)
China Sharpens Efforts to Halt Money Outflow (WSJ)
Hysteria Over China Has Become Ridiculous (AEP)
Yuan Bears Denounced as Delusional, Doomed by China State Media (BBG)
China’s 2016 Stock Losses Rise To $1.8 Trillion (Reuters)
China’s Smartphone Slump Bites Apple (WSJ)
Xi Urges Sound Planning For Supply-Side Structural Reform (Xinhua)
Pay Attention To Long-Term Debt Cycle (Ray Dalio)
The EU’s Banking Union: A Recipe For Disaster (Thomas Fazi)
EU’s Too-Big-to-Fail Bank Bill Won’t Be Withdrawn (BBG)
Five of Six Brokers in Libor Trial Are Acquitted by London Jury (BBG)
EU Says Greece ‘Seriously Neglected’ Schengen Border Duties (Kath.)
Sweden To Expel Up To 80,000 Rejected Asylum Seekers (Guardian)
European Commission in 2013: Refugee Push-Backs Are Illegal (EURActiv)
Europe Faces Another Million Refugees This Year: UN (BBG)
Refugee Boat Sinks Off Greek Island; 7 Bodies Recovered (AP)

Chinese are highest ever, one would think.

US Crude Inventories Are The Highest Since the 1930s (ZH)

In case you were under the impression that oil was stabilizing, we thought this chart might help clarify just how “different” it is this time in the energy complex… U.S. crude inventories are at levels last seen when President Herbert Hoover was battling the Great Depression.

After this week’s build – Crude stockpiles climbed 8.38 million barrels to 494.9 million in the week ended Jan. 22, the highest since November 1930, according to weekly and monthly data from the Energy Information Administration. It did not end well last time…

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It’ll get cheaper though.

Chart Going Back To 1861 Shows Oil Isn’t Insanely Cheap Right Now (MW)

Oil futures are hovering around $30 a barrel—not far off 12-year lows—and bears are penciling in a test of $20 or lower. It is a pretty downbeat picture, but is black gold really that cheap on a historical basis? Not really, according to the chart from Deutsche Bank, which tracks inflation-adjusted oil prices—and the average price—all the way back to 1861, just two years after Edwin Drake drilled the first productive U.S. oil well near Titusville, Pa. Over the last 150-plus years, the average oil price is $47 a barrel, according to the data. West Texas Intermediate oil futures for March delivery were down 22 cents, or 0.7%, at $31.23 a barrel in late morning trade. “So current levels are low but not exceptionally low relative to long-term history,” said Jim Reid, macro strategist at Deutsche Bank, in a Wednesday note.

The charts were published as part of an annual study by the investment bank. Interestingly, Reid did note that this was the first year that the firm’s long-term mean reversion exercise shows positive return expectations for oil since the study began more than a decade ago. But don’t get too excited over prospects for an immediate mean-reversion rally. Reid puts the findings in the context of the commodity cycle, which is on the downswing after a sharp run-up that began in the mid-1990s. He notes the “long-held belief” that commodities, such as oil, that are a factor of production can’t outstrip inflation over the long term because “if they do there will be alternatives found.”

That helps to explain oil’s pullback. This process, however, “can take years to resolve, so even if we’re correct, commodity cycles can still last a long time before they eventually mean revert,” he wrote. Meanwhile, the graph “doesn’t suggest that current levels are as extreme as many would suggest even if long term value has returned,” Reid said. “The $140 prices a few years back look especially bubble-like” from a long-term perspective.

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Fed’s done.

Why the Fed Has the Stock Market Spooked (WSJ)

Investors have grown accustomed to getting help from the Federal Reserve. But in a world where American companies are tethered less tightly to the U.S. economy, that help may not be so forthcoming. The Fed on Wednesday said economic data had softened since it decided to raise rates in December, and that policy makers were “closely monitoring global economic and financial developments.” But they didn’t send a clear signal that many investors were hoping for: that they would forgo raising rates at their March meeting. Stocks, which had been higher ahead of the Fed’s postmeeting statement, fell. One reason the prospect of further rate rises is jarring to investors is that they would come at an unusual and unfortunate time. While rate increases usually arrive when profits are growing solidly, they are now shrinking.

That this hasn’t chastened the Fed may reflect the growing role in U.S. companies’ results of operations outside the U.S. So falling profits simply aren’t the clear indication of U.S. economic vulnerability that they once were. As companies continue to report fourth-quarter earnings, the decline in profits is something investors are acutely aware of. With about one-quarter of results from the index’s constituent companies now in, S&P 500 earnings look to have fallen by 4.9% in the fourth quarter from a year earlier, according to Thomson Reuters. This follows a 0.8% decline in the third quarter. That marked the first drop since the deep profits recession that ended in 2009. To be sure, the collapse in energy-sector earnings plays a big role. But excluding them, profits would be up just 1.3%.

Moreover, ignoring a sector because it is doing poorly—energy now, financials during the crisis, technology after the dot-com bust—risks sugarcoating the situation. Even if it weren’t for all the other things unsettling investors now—dollar debt and commodity market woes, emerging market outflows, concerns over the U.S. economy’s ability to grow in a troubled world—the combination of Fed tightening and falling profits would be worrisome. After all, points out Richard Bernstein Advisors portfolio strategist Joe Zidle, the two variables investors care most about when valuing stocks are profits and interest rates. When, as now, they both are headed the wrong way, it is a recipe for trouble. It also is a recipe that is exceedingly rare. The only other time that Mr. Zidle and his colleagues have identified where the Fed raised rates during a profits recession was in the early 1980s. That was when the central bank was moving to snuff exceedingly high inflation.

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“Margin calls and deleveraging is being talked about more and more..”

China Shares Flounder Again, But ‘Real Economy’ Sound Says State Media (Reuters)

China’s volatile shares tumbled again on Thursday, taking losses this month to about 25% or 13 trillion yuan ($2 trillion), while state media insisted that the market ructions did not reflect the real economy. The benchmark Shanghai Composite Index ended down 2.9%, and the CSI300 index of the largest listed companies in Shanghai and Shenzhen shed 2.6%, both indexes having tumbled this week to levels not seen since 2014. Trading was very light, as many investors have given up on Chinese stocks, burnt by last summer’s 40% crash and a hair-raising January that has taken indexes back to late 2014 levels.

“The majority of equity investors we met over a four-day marketing trip in ASEAN last week had trimmed exposure to China equities by varying degrees and were waiting for signs of stabilisation for potential re-entry,” said Japanese broker Nomura. January began with sharp falls in Chinese stocks and a depreciation in the yuan currency, and the sell-off hasn’t abated as economic data confirmed slowing growth and deteriorating business conditions. As the markets keep falling, the prospect of investors being forced to sell stocks bought with borrowed money to cover margin calls has hurt sentiment further. “Margin calls and delveraging is being talked about more and more in a market extremely bearish about China’s economy and the yuan’s value,” said Wang Yu, analyst at Pacific Securities.

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Control P.

China’s Central Bank Makes Most Massive Cash Infusion In 3 Years (WSJ)

China’s central bank is putting the largest amount of cash into the financial system in nearly three years, using a weekly market operation to pre-empt a holiday-induced funding squeeze and offset rapid capital outflows. The People’s Bank of China offered 340 billion yuan ($51.89 billion) of short-term loans, known as reverse repurchase agreements, to commercial banks in a routine money market operation Thursday. The central bank provided 440 billion yuan via similar tools Tuesday, the first leg of its twice-a-week liquidity-management exercises.

Given the maturity of 190 billion yuan of previously issued loans, the PBOC’s net cash injection this week totals 590 billion yuan, the biggest of its kind since early February 2013, when it reached 662 billion yuan. The move follows an aggressive pump-priming exercise by the PBOC last week, when the central bank offered more than 1.5 trillion yuan in gross short- and medium-term lending to banks. The eye-popping liquidity injection is partly intended to satisfy typically surging demand for cash ahead of the Lunar New Year holiday that starts Feb. 7. It also constitutes an effort to stem accelerating capital flight as investors become more nervous about the health of China’s economy, and as the country’s main stock market has lost nearly 23% since the start of this year.

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“The last time central bank Gov. Zhou Xiaochuan spoke publicly was in early September..”

China Sharpens Efforts to Halt Money Outflow (WSJ)

China is ramping up efforts to halt a flood of money leaving the country in response to an economic slowdown, moves that risk undermining Beijing’s ambition to elevate the yuan’s profile on the world stage. Its latest steps involve curbing the ability of foreign companies in China to repatriate earnings, shrinking the pool of Chinese yuan available for banks in Hong Kong to make loans, and banning yuan-based funds for overseas investments, people with direct knowledge of the matter said. The measures, most of which haven’t been publicly disclosed, follow efforts by China’s central bank to discourage investors from betting against the yuan and to crack down on overseas money transfers. “They’re sparing no effort to prevent capital outflows,” said a senior Chinese banking executive close to the central bank.

“All the measures are the most aggressive I’ve seen in recent history.” The people with direct knowledge said the People’s Bank of China, the central bank, also is considering ways to lure money back to the country, including letting foreign residents and companies buy certificates of deposit for fixed periods. Currently they are restricted to ordinary deposit accounts. The unusual moves come as China burns through foreign-exchange reserves to prop up its currency and stem an increasingly vicious cycle of easing credit, a weakening currency and fleeing capital. Too much outflow, Chinese officials say, could threaten the stability of the country’s financial system. Just two months ago, the IMF’s designated the yuan as one of the world’s reserve currencies, a nod to China as a global economic power.

Still, Beijing is now retreating from its pledges to give markets more influence in setting the yuan’s value. Many investors say they are also concerned over what they consider to be inadequate communication by the central bank. The last time central bank Gov. Zhou Xiaochuan spoke publicly was in early September, when he sought to reassure central bankers and finance ministers from the Group of 20 large economies that the rout in China’s stock markets was nearing an end. Investors and analysts have questioned the government’s commitment to market liberalization following Beijing’s attempts to prop up the stock market this past summer and, more recently, sending mixed signals over yuan policy. “China is aggressively reinserting capital controls,” said Scott Kennedy at Center for Strategic & International Studies in Washington. “It appears China has for the foreseeable future given up on the goal of substantial exchange-rate liberalization.”

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“I’m not expecting it, I’m observing it..” See, Ambrose wants the cake and eat it. All’s fine, but at the same time “It is stimulus as usual. The Politburo is back to its bad old ways.” It’s all fake, that’s the problem: “credit growth continues to expand far more rapidly than GDP growth..”

Hysteria Over China Has Become Ridiculous (AEP)

Hysteria over China has reached the point of collective madness. Forecaster Nouriel Roubini said in Davos that markets have swung from fawning adulation of the Chinese policy elites to near revulsion within a space of 12 months, and they have done so based on scant knowledge and a string of misunderstandings. The Chinese themselves are being swept up by the swirling emotions. State media has accused hedge fund veteran George Soros in front page editorials of attempting to smash China’s currency regime by “reckless speculation and vicious shorting”. “Soros’s war on the renminbi cannot possibly succeed – about this there can be no doubt,” warned the People’s Daily. Articles are appearing across the world debating whether Mr Soros and his putative wolf pack will succeed in doing to the People’s Bank of China (PBOC) what he did to the Bank of England in 1992 – in the latter case with entirely positive consequences.

In fact, Mr Soros issued no such “declaration of war”, and nor is he so foolish as to take on a foreign exchange superpower and net global creditor with $3.3 trillion in foreign reserves. As it happens, I was at the dinner at the Hotel Seehof in Davos – drinking white Rioja – where Mr Soros supposedly revealed his plot. What he did let slip is that he had been shorting some Asian currencies – the Malaysian Ringitt or the Thai Baht, perhaps, out of nostalgia for the 1998 crisis. Mr Soros made general comments, claiming that credit in China has reached 350pc of GDP and that the hard landing is already happening. “I’m not expecting it, I’m observing it,” he said. The observations were boilerplate, what are called “tourist” insights in hedge fund parlance. He is not a player in China. So let us return to reality. The economic facts are in plain view. China is not slowing. It is picking itself up slowly after a “recession” in early 2015.

Car sales give us a steer. They collapsed early last year and touched bottom at 1.27m in July. Sales have been rising every month since, surging to a record 2.44m in December thanks to lower taxes. New registrations were up by 37pc for GM and 36pc for Ford and Mercedes. House prices have been climbing for three months. The nationwide index was up 1.6pc in December. Shanghai rose 15.5pc and Shenzhen 47pc. Even the “Tier 3 and 4” cities are coming back from an epic glut. The economy did indeed hit a brick wall early last year due to a fiscal shock and ferocious monetary tightening (passive) in late 2014. That was the time to lambast the Chinese authorities for errors of judgment, and some of us did so. Capital Economics estimates that growth slowed to 4pc based on its proxy indicator, and others broadly concur.

These indicators are not derived from the now useless “Li Keqiang index” of rail freight, electricity use and credit growth, which overstate the slowdown. Growth of total freight traffic has risen to 5.4pc from 3.5pc in June. That is a plausible gauge of what is really happening. A short-term economic rebound is already baked into the pie. Fiscal spending jumped 30pc in October and November. New bank loans and local government bond issuance – together, the proper measure of credit – reached a 12-month high of 14.4pc in December. It is stimulus as usual. The Politburo is back to its bad old ways. “Despite talk of deleveraging, credit growth continues to expand far more rapidly than GDP growth because, quite simply, they are not willing to tolerate any slowdown,” said Prof Christopher Balding from Peking University.

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“They have to reassure local savers and show them a willingness that the government is looking after them and their savings.”

Yuan Bears Denounced as Delusional, Doomed by China State Media (BBG)

China’s leading state media are becoming more vociferous in their support for the yuan, having been fired up in the past week by George Soros’s observation that the economy is headed for a hard landing. Yuan short sellers “haven’t done their homework,” the state-run Xinhua News Agency said in an English-language article on Wednesday, while a People’s Daily commentary in Chinese declared that such trades will undoubtedly fail. The two editorials, in addition to at least three other articles published by Xinhua since the weekend, all argue the economy is growing at a decent pace. China is resorting to stepped-up rhetoric to help offset depreciation expectations after the yuan started the new year with the biggest weekly plunge since a devaluation in August.

The cost of steadying the exchange rate has shot up as a slowing economy, equity market turmoil, declining foreign-exchange reserves and surging capital outflows add to the pessimism. “They can write as many op-eds as they want, but two plus two doesn’t make five,” said Michael Every at Rabobank Group in Hong Kong, whose year-end 7.53 forecast for the yuan against the dollar is the most bearish in a Bloomberg survey of 41 analysts. “What they’re saying won’t put off speculators. The fundamentals are screaming and sending a clear picture that if economic growth doesn’t start picking up, the exchange rate will weaken.”

Soros said in Davos that he’s been betting against Asian currencies because a hard landing in China is “practically unavoidable.” Xinhua retorted by saying that his observations are the result of “partial blindness.” The billionaire investor rose to fame as the money manager who broke the Bank of England in 1992, netting a profit of $1 billion with a wager that the U.K. would be forced to devalue the pound. Malaysian Prime Minister Mahathir Mohamad called him a “moron” during the 1997 Asian financial crisis, saying he was out to wreck the region’s economies. “Given how people know Soros and what he did in 1992 and during the 1997-1998 Asian crisis, he’s too important to ignore, so China felt that they had to counter any negative comments,” said Tommy Xie at Oversea-Chinese Banking, who was cited by Xinhua as saying that the People’s Bank of China has become more predictable. “They have to reassure local savers and show them a willingness that the government is looking after them and their savings.”

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“..the prospect of investors having to sell stocks they bought with borrowed money in order to cover margin calls has also hurt sentiment.”

China’s 2016 Stock Losses Rise To $1.8 Trillion (Reuters)

Chinese highly volatile shares ended lower again on Wednesday after plunging on Tuesday, taking losses in 2016 to about 22% or 12 trillion yuan ($1.8 trillion). The benchmark Shanghai Composite Index ended down 0.5%, having been up in the morning and as much as 4% lower during the day. It tumbled 6.4% on Tuesday to its lowest close since Dec. 1, 2014. The CSI300 index of the largest listed companies in Shanghai and Shenzhen ended down 0.3% after a similar rollercoaster ride. China markets began the year with a series of precipitous falls and a sharp depreciation in the yuan currency, and selling pressure has persisted as economic data confirmed slowing growth and deteriorating business conditions, hammering investors’ confidence in stocks.

Gu Yongtai, analyst at Cinda Securities, said the prospect of investors having to sell stocks they bought with borrowed money in order to cover margin calls has also hurt sentiment. “There’s fear that stock price falls would trigger margin calls, which then adds further pressure on prices, although the actual amount of forced liquidation is not as big as people would imagine,” Gu said. Four listed companies suspended trading in their shares on Wednesday, saying their major shareholders, who have pledged shares as collateral, face margin calls and would seek ways to avoid forced liquidation. “If the market continues to fall, equity pledging-related selling pressure could increase significantly, putting further pressure on the stock market,” said Gao Ting at UBS Securities.

Trading volumes have thinned, making price moves even more volatile, as many investors have given up on Chinese stocks since last summer, when shares crashed 40%. Beijing intervened to stem that rout and orchestrate a recovery of sorts, but anyone who mistook that for a bottom and bought back in will be nursing losses again. China’s woes have damaged risk appetite in global markets, too, along with tumbling oil prices. Investors across the world will hang on whether the market chaos of the last few weeks and concerns over China’s slowing economy might blow the U.S. Federal Reserve off its proposed course of gradual interest rate hikes. The Fed is expected to leave rates unchanged later on Wednesday and acknowledge that turmoil in financial markets threatens its upbeat view of the U.S. economy, leaving the chances of a March hike diminished but alive.

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Understating: “Most players will have a quiet quarter in China, including Apple..”

China’s Smartphone Slump Bites Apple (WSJ)

A slump in China’s smartphone market is weighing on Apple Inc.’s growth, even as the country remains a relatively bright spot for the iPhone maker. Chief Executive Tim Cook said on an earnings call Tuesday that Apple has begun to see “signs of economic softness” in the Greater China region, which includes China, Taiwan and Hong Kong. Apple’s sales in the region grew 14% in its fiscal first quarter ended Dec. 26 to $18.4 billion, better than any other region during the period, but far from the 70% growth it saw in the year-earlier period. In the fiscal year that ended Sept. 26, Greater China sales had surged 84%, with profits growing even faster. Keeping up this momentum will be a challenge for Apple this year, with China’s smartphone market slowing and the country’s economy cooling. China’s economic growth in 2015 was the slowest in a quarter century.

Apple’s suppliers in Asia have already warned of lower iPhone demand in the current quarter and have been told to scale back production, according to people familiar with the matter. China’s smartphone market growth will continue to slow this year, as most people in the country who want a smartphone already have one, analysts say. First quarter smartphone purchases will be hit by this market saturation, as well as secondary factors like freezing weather that is keeping shoppers in the north part of the country indoors, said Canalys analyst Nicole Peng. “Most players will have a quiet quarter in China, including Apple,” she said. Apple currently ranks No. 3 in China’s smartphone market after Huawei and Xiaomi. China’s smartphone market has grown crowded in the past year, after the success of smartphone startup Xiaomi encouraged imitators.

After several years of triple-digit percentage growth, Xiaomi missed its sales target for 2015. Samsung, the world’s biggest smartphone maker, has also struggled in China, where it has been hit by stiff competition. Mr. Cook said on the investor call that Apple was still optimistic on China and was “crafting products and services” with the country in mind. “We remain bullish on China and don’t subscribe to the doom and gloom,” he said. Still, Apple forecast Tuesday that its overall revenue will fall for the first time in 13 years in the current quarter and its stock fell in after-hours trade on concerns about growth.

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Where official news meets Bizarro world.

Xi Urges Sound Planning For Supply-Side Structural Reform (Xinhua)

President Xi Jinping on Tuesday urged authorities to formulate targeted and specific plans to deliver structural reform on the supply side. Sound planning is the foundation for supply-side structural reform, which aims to improve productivity and realize people-first development, Xi told a meeting of the Central Leading Group for Financial and Economic Affairs. He stressed the importance of extensive research of the current economic conditions and to this end, he said, clear objectives were needed. Reform tasks should be specified and a system to designate and track responsibility should be put in place, he added. To address problems such as overcapacity, the government has pinned its hopes on supply-side structural reform, which focuses on better provision for high-quality goods and services and lower costs for businesses.

China’s economy grew by 6.9% year on year in 2015, its lowest annual expansion in a quarter of a century. During the meeting, Xi stressed the importance of environmental protection while developing the Yangtze River economic belt. “The Yangtze is the nation’s River of Life. No economic activities related to Yangtze should damage its environment. Its ecological system should only get better, not worse,” he said. Xi also emphasized the need to preserve forests. The tradition of voluntary tree planting should continue and a new round of “returning the farmland to forests” will begin, he said. He also urged cities to do more to achieve urban greening and called for more attention to be given to national parks to better protect endangered animals. Premier Li Keqiang, who is also deputy head of the Central Leading Group for Financial and Economic Affairs, also attended the meeting.

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Dalio argues something similar to what I often say when ‘experts’ talk about economic cycles: Kondratieff is a cycle, too. Don’t agree with him on everything, though.

Pay Attention To Long-Term Debt Cycle (Ray Dalio)

I have a controversial view that is based on my alternative economic template, and I feel a responsibility to share at this precarious time. In brief, the Federal Reserve’s template, and that of most economists and market participants, reflects the business cycle. Based on it, tightening should occur when a) the rate of growth in demand is greater than the rate of growth in capacity and b) the usage of capacity (as measured by indicators such as the GDP gap and the unemployment rate) is becoming high. As a result, tightening now makes sense. However, as I see it, there are two important cycles to pay attention to — the business cycle, or short-term debt cycle, and the debt supercycle, or long-term debt cycle.

We are seven years into the expansion phase of the business/short-term debt cycle — which typically lasts about eight to 10 years — and near the end of the expansion phase of a long-term debt cycle, which typically lasts about 50 to 75 years. It is because of the long-term debt cycle dynamics that we are seeing global weakness and deflationary pressures that warrant global easing rather than tightening. Since the dollar is the world’s most important currency, the Fed is the most important central bank for the world as well as the central bank for Americans, and as the risks are asymmetric on the downside, it is best for the world and for the US for the Fed not to tighten.

Since the long-term debt cycle issue is the biggest issue that separates my view from others, I’d like to briefly focus on its mechanics. What I am contending is that there are limits to spending growth financed by a combination of debt and money. When these limits are reached, it marks the end of the upward phase of the long-term debt cycle. In 1935, this scenario was dubbed “pushing on a string”. This scenario reflects the reduced ability of the world’s reserve currency central banks to be effective at easing when both interest can’t be lowered and risk premia are too low to have quantitative easing be effective.

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Solid piece on yet another EU disaster.

The EU’s Banking Union: A Recipe For Disaster (Thomas Fazi)

[..] the average balance sheets of the European Union’s 30 and 15 largest banks (€800 billion and €1.3 trillion respectively) are 13 and 21 times larger than the proposed recapitalisation limit. Not only are these banks too big to fail – they are too big to bail. The failure of any of them – even assuming that it would take place in isolation, rather than as part of a wider systemic crisis – would require the mobilisation of huge financial resources. This is also proven by the recent crisis, with certain large banks receiving public assistance in excess of €100 billion. With all this in mind, one could still argue that the bail-in mechanism represents a step forwards vis-à-vis the bailouts of recent years, by limiting the burden placed on sovereigns and thus the ‘socialisation’ of banking crises.

The crucial point to understand here is that the bail-in is indeed a great tool to have at one’s disposal, as there are undoubtedly numerous cases where a bail-in might be preferable to a bailout. But this has to be decided on a case-by-case basis. The problems arise when member states are forced to resort to the bail-in as the primary method of bank resolution, regardless of the potential consequences of such a move, of the nature of the bank’s problems, of the wider macroeconomic context, etc. – which is precisely what the banking union prescribes. This is especially true in light of the extreme disequilibrium between banking systems in the EU, itself a reflections of the wider social and macroeconomic imbalances between core and periphery countries.

As the ECB’s recent stress tests have revealed, the banks with the largest capital shortfalls are all located in the countries of the periphery, which have been hit the hardest by the crisis: Italy, Greece, Portugal, Ireland and Cyprus. This is not surprising: various studies have shown that there is a clear pro-cyclical link between a country’s negative macroeconomic performance and the capital adequacy of its banks. This is evident from the dizzying and rapidly-growing volume of non-performing loans (NPLs) in these countries – a direct result of the austerity policies pursued in recent years and, of course, the main reason why periphery banks failed the ECB’s stress tests. Which leads us to the paradoxical situation in which Italy finds itself in today.

The country’s banks fared relatively well during the financial crisis and therefore didn’t require almost any government aid at the time; since then, as a result of the country’s unprecedented socioeconomic collapse, itself a result of EU-sanctioned austerity, the balance sheets of Italian banks have severely deteriorated, and today – after a seven-year-long build-up of non-performing loans – are facing a system-wide crisis. For this reason, the Italian government has been in talks with the Commission for months over its plan to create a ‘bad bank’ to help offload some of the banks’ bad debt; at the time of writing, though, the Commission – the same Commission that by mid-2009 had approved €3 trillion in guarantee umbrellas, risk shields and recapitalisation measures to bail out Europe’s banks – continues to block the government’s plan, on grounds that it would amount to a violation of state aid and banking union rules.

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Just delayed ad infinitum?!

EU’s Too-Big-to-Fail Bank Bill Won’t Be Withdrawn (BBG)

Jonathan Hill, the European Union’s financial-services chief said he won’t pull the plug on a bill intended to tackle too-big-to-fail banks that’s bogged down in a divided legislature. Asked in an interview in his Brussels office if he planned to heed calls from some bankers and European Parliament lawmakers to withdraw the legislation, Hill said firmly, “I don’t.” The European Commission, the EU’s executive arm, presented a draft bank-structure plan in early 2014 – before Hill’s tenure as commissioner began – as a way to boost financial stability by separating banks’ retail operations from riskier investment banking. The Council of the EU, which represents national governments and forms one half of the bloc’s legislature, reached a negotiating position on the bill in June 2015. But parliament, the other half, has made no progress on the proposal.

A proposal by Gunnar Hoekmark, the parliament’s lead lawmaker on the bill, was rejected by the Economic and Monetary Affairs Committee last May. A tentative compromise subsequently brokered by Hoekmark collapsed later in the year in the face of strong French-led opposition, leaving the committee fresh out of ideas and momentum on how to bridge the gap between the two main political groups, the center-right European People’s Party and the Progressive Alliance of Socialists and Democrats. Hoekmark has consistently rejected proposals for the mandatory separation of investment and consumer operations, while the Socialists have pushed for a strong separation trigger in the bill “We have told the Socialist group that there shall be no automaticity,” said Hoekmark, a member of the EPP group.

“The only option on the table is reasonable legislation based upon risk criteria, or we will reach a point where there is no common solution.” In fact, Hoekmark said he had rejected a fresh proposal from the Socialists this week. “I prefer no legislation instead of bad legislation,” he said. And Hoekmark appears to be in no hurry to cobble together a new compromise. “There is a broader understanding that we must take stock and look at what we have achieved before proceeding with new legislation,” he said. “Let’s analyse the consequences, let’s see if we are lacking, or if we have some over-regulation. 2016 is a good year for such assessments.”

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Only bank shareholders get punished.

Five of Six Brokers in Libor Trial Are Acquitted by London Jury (BBG)

Five ex-brokers accused of helping convicted trader Tom Hayes rig Libor were acquitted Wednesday by a London jury, in a setback to U.K. fraud prosecutors. Noel Cryan, 50, who worked at Tullett Prebon Plc in London, Colin Goodman, 54, and Danny Wilkinson, 49, formerly of ICAP, and RP Martin’s Terry Farr, 44, and James Gilmour, 50, were found not guilty and released. The jury couldn’t reach a unanimous verdict on a sixth man, ICAP’s Darrell Read, 50, and was sent home to come back Thursday to discuss the remaining charge. After a four-month trial, the jury took about a day to find the others not guilty. The verdicts will be seen as a blow to the Serious Fraud Office, which appeared to have turned its fortunes around in the last 12 months.

A dozen banks have been fined about $9 billion by global authorities over the last four years in relation to the manipulation of Libor, the benchmark interest rate used in trillions of dollars of derivatives and loans. More than 30 individuals have been charged, and Hayes was convicted last year. “It’s always been a surprise and disappointment that these people were seen as front and center when they weren’t even bankers,” Matthew Frankland, a lawyer for Wilkinson, said by phone. “If what the SFO says is true, it’s rather shocking that more senior people aren’t being prosecuted.” Hayes, the former UBS and Citigroup trader prosecutors alleged was at the center of a conspiracy, was jailed in August. His sentence was reduced to 11 years from 14 years upon appeal in December.

“The key issue in this trial was whether these defendants were party to a dishonest agreement with Tom Hayes,” SFO Director David Green said in a statement. “By their verdicts the jury have said that they could not be sure that this was the case. Nobody could sensibly suggest that these charges should not have been brought and considered by a jury.” The result comes at the end of a sprawling and complex case that was postponed for several days when one of the defendants, Wilkinson, fell ill. Several of the men cried as the verdicts were read out. Farr burst from the dock and climbed the stairs to embrace his wife and son.

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Because that’s more important than human lives.

EU Says Greece ‘Seriously Neglected’ Schengen Border Duties (Kath.)

The EU executive said on Wednesday that Greece has “seriously neglected” its frontier duties to Europe’s free-travel Schengen zone and could be subject to new border controls by other members if it fails to remedy the problems within three months. “The draft report concludes that Greece seriously neglected its obligations and that there are serious deficiencies in the carrying out of external border control that must be overcome … by the Greek authorities,” European Commission Vice President Valdis Dombrovskis told a news briefing. The draft Schengen evaluation report on Greece was based on unannounced site visits to the Greek-Turkish land border as well as to the islands of Chios and Samos carried out from 10 to 13 November 2015. Experts looked at the presence of police and coast guard personnel on the inspected sites, the efficiency of the identification and registration process, sea border surveillance and cooperation with neighbouring countries.

According to the report “there is no effective identification and registration of irregular migrants and… fingerprints are not being systematically entered into the system and travel documents are not being systematically checked for the authenticity or against crucial security databases, such as SIS, Interpol and national databases.” “The report shows that there are serious deficiencies in the management of the external border in Greece,” Migration and Home Affairs Commissioner Dimitris Avramopoulos said. “We know that in the meantime Greece has started undertaking efforts towards rectifying and complying with the Schengen rules. Substantial improvements are needed to ensure the proper reception, registration, relocation or return of migrants in order to bring Schengen functioning back to normal, without internal border controls. This is our ultimate common goal,” Avramopoulos said.

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Sweden is busy organizing the ‘expulsion’ of 80,000 refugees, while the Dutch government (they chair the EU until July 1) has announced plans to launch a ‘ferry’ line to force refugees back to Turkey from Greece. One day after the parliament in The Hague approved a motion for Dutch jets to start bombing Syria.

And I’m thinking: it’s alright to not be all that smart or competent, but please at least try to maintain a degree of decency, hold on to a shade of moral values. But perhaps those two things are two sides of the same coin. We should seriously wonder what Europe will look like a year from now. There’ll be at least another 1 million refugees trying to make it to Europe in 2016, that’s a given. The heart shudders.

Sweden To Expel Up To 80,000 Rejected Asylum Seekers (Guardian)

Sweden intends to expel up to 80,000 asylum seekers who arrived in 2015 and whose applications had been rejected, interior minister Anders Ygeman said on Wednesday. “We are talking about 60,000 people but the number could climb to 80,000,” the minister was quoted as saying by Swedish media, adding that the government had asked the police and authorities in charge of migrants to organise their expulsion. Ygeman said the expulsions, normally carried out using commercial flights, would have to be done using specially chartered aircraft, given the large numbers, staggered over several years.

The proposed measure was announced as Europe struggles to deal with a crisis that has seen tens of thousands of refugees arrive on Greek beaches, with the passengers – mostly fleeing conflict in Syria, Iraq and Afghanistan – undeterred by cold, wintry conditions. The United Nations says more than 46,000 people have arrived in Greece so far this year, with more than 170 people killed making the dangerous crossing. Sweden, which is home to 9.8 million people, is one of the European Union countries that has taken in the largest number of refugees in relation to its population. Sweden accepted more than 160,000 asylum seekers in 2015.

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The difference two years make. From 19 Nov 2013. Paraphrasing Groucho: “These are my principles, and if you don’t like them, I have others.” Zero moral compass.

European Commission in 2013: Refugee Push-Backs Are Illegal (EURActiv)

The European Commission indirectly warned Greece and Bulgaria today (19 November) to stop turning down Syrian refugees at their borders with Turkey, after the UN issued a similar call just a few days before. The UN High Commissioner for Refugees (UNHCR) António Guterres called last Friday on Greece and Bulgaria to stop turning back Syrians fleeing their war-ravaged homeland. Bulgarian authorities have reportedly bragged of turning down refugees at the border. According to the government website, Interior Minister Tsvetlin Yovchev, who is also deputy prime minister, has said that in just one day more than 100 persons, and previously more than 150, were from entering the country. Hundreds of policemen have been sent to the Bulgarian border with Turkey to push back prospective immigrants.

The impoverished country is struggling to deal with the some 7,000 refugees from Syria already on its soil, with more and more still managing to arrive. Both Greece and Bulgaria have begun the construction of fences on their borders with Turkey. Greece has erected a 12.5km wall at a critical section of the Greece-Turkish border near the town of Orestiada, while Bulgaria has announced plan to build a similar, 30-km fence near the town of Elhovo. Michele Cercone, spokesperson for home affairs commissioner Cecilia Malmström, told EurActiv that pushing back asylum seekers was against EU and international law. “Push-backs are simply not allowed. They are not in line with EU and international obligations. Member states cannot, shall not and should not carry out any push-back,” he said.

Asked how laws against push-backs were consistent with the fact that several member states had erected walls or fences at their borders, Cercone conceded that EU countries were free to decide their own border protection measures. “This is of course their choice. But we have always said that walls do not solve problems. What solves problems is a consistent structural management of migratory and asylum seekers’ flows,” Cercone said. He explained that this was implying that member states should be able to manage these flows in full respect of fundamental rights and international and European obligations. “Nobody coming or arriving to the EU territory and asking for asylum can be pushed back or can be denied this possibility,” he said, adding that this stemmed from the core values on which the EU was built. Asked if the Commission had any particular message for Bulgaria and Greece, Cercone said this was a message to all member states.

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What happened to the 3 million prediction?

Europe Faces Another Million Refugees This Year: UN (BBG)

As many as 1 million people from Africa, the Middle East and Asia will seek refuge in Europe this year, according to a report by global migration agencies, a number that nears levels seen last year in the continent’s worst migration crisis since World War II. The war in Syria will continue to be the main source of migrants after triggering a spike in 2015, according to the report from the United Nations High Commissioner for Refugees and the International Organization for Migration. An increasing number of people will also come from southwest Asia and northern and western Africa, and the continued flow will exacerbate tension among European Union governments already deemed incapable of dealing with new entries smoothly, they said.

“The conflict in Syria will continue unabated and will generate high levels of internal and external displacement,” the agencies said in the report published on their websites. Refugees fleeing “Afghanistan may increase amid “deteriorating security situation in the majority of the provinces and the continuing downward spiral of the economy.” The EU is struggling to create a comprehensive plan to deal with its worst refugee crisis since World War II. The crunch has riled politics across the bloc by bolstering support for anti-immigrant parties and has prompted some governments to impose border controls with other European countries. This week, Germany and its neighbors laid the groundwork to extend a reintroduction of checks at internal borders for as long as two years, a move that departs from the EU’s principle of passport-free travel among most of its members.

The situation won’t measurably improve this year, according to the report, which estimated that about 6.5 million Syrians have been driven from their homes inside their country and another 4 million have sought shelter in Egypt, Iraq, Jordan, Lebanon and Turkey. The agencies, which have drawn up a $550 million plan to help refugees, also said Afghanistan’s deteriorating security and the “downward spiral of the economy” will add to migrant numbers.

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No tears left.

Refugee Boat Sinks Off Greek Island; 7 Bodies Recovered (AP)

Greek authorities say a total of seven bodies, including those of two children, have been recovered from the sea off the eastern Aegean island of Kos after a boat carrying migrants or refugees sank early Wednesday. Rescue crews recovered the bodies of three men, two women, a boy and a girl. There were two survivors — a man and a woman. A search and rescue operation in the area by vessels from the Greek coast guard and the European border patrol agency Frontex, a helicopter and Greek rescue volunteers was called off after all on board the boat were accounted for.

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Jan 152016
 
 January 15, 2016  Posted by at 8:03 am Finance Tagged with: , , , , , , , , , ,  11 Responses »


Russell Lee Tracy, California. Tank truck delivering gasoline to a filling station 1942

The first thing that popped into our minds on Tuesday when WTI oil briefly broached $30 for its first $20 handle in many years, was that this should be triggering a Gawdawful amount of bets, $30 being such an obvious number. Which in turn would of necessity lead to a -brief- rise in prices.

Apparently even that is not so easy to see, since when prices did indeed go up after, some 3% at the ‘top’, ‘analysts’ fell over each other talking up ‘bottom’, ‘rebound’ and even ‘recovery’. We’re really addicted to that recovery idea, aren’t we? Well, sorry, but this is not about recovering, it’s about covering (wagers).

Same thing happened on Thursday after Brent hit that $20 handle, with prices up 2.5% at noon. That too, predictably, shall pass. Covering. On this early Friday morning, both WTI and Brent have resumed their fall, threatening $30 again. And those are just ‘official’ numbers, spot prices.

If as a producer you’re really squeezed by your overproduction and your credit lines and your overflowing storage, you’ll have to settle for less. And you will. Which is going to put downward pressure on oil prices for a while to come. Inventories are more than full all over the world. With oil that was largely purchased, somewhat ironically, because prices were perceived as being low.

Interestingly, people are finally waking up to the reality that this is a development that first started with falling demand. China. Told ya. And only afterwards did it turn into a supply issue as well, when every producer began pumping for their lives because demand was shrinking.

All the talk about Saudi Arabia’s ‘tactics’ being aimed at strangling US frackers never sounded very bright. By November 2014, the notorious OPEC meeting, the Saudi’s, well before most others including ‘analysts’, knew to what extent demand was plunging. They had first-hand knowledge. And they had ideas, too, about where that could lead prices. Alarm bells in the desert.

There are alarm bells ringing in many capitals, there’s not a single oil producer sitting comfy right now. And that’s why ‘official’ prices need to be taken with a bag of salt. Bloomberg puts the real price today at $26:

The Real Price of Oil Is Far Lower Than You Realize

While oil prices flashing across traders’ terminals are at the lowest in a decade, in real terms the collapse is even deeper. West Texas Intermediate futures, the U.S. benchmark, sank below $30 a barrel on Tuesday for the first time since 2003. Actual barrels of Saudi Arabian crude shipped to Asia are even cheaper, at $26 – the lowest since early 2002 once inflation is factored in and near levels seen before the turn of the millennium. Slumping oil prices are a critical signal that the boom in lending in China is “unwinding,” according to Adair Turner, chairman of the Institute for New Economic Thinking.

Slowing investment and construction in China, the world’s biggest energy user, is “sending an enormous deflationary impetus through to the world, and that is a significant part of what’s happening in this oil-price collapse,” Turner, former chairman of the U.K. Financial Services Authority, said. The nation’s economic expansion faltered last year to the slowest pace in a quarter of a century. “You see a big destruction in the income of the oil and commodity producers,” Turner said. “That is having a major effect on their expenditure across the world.”

Zero Hedge does one better and looks at 1998 dollars:

The ‘Real’ Price Of Oil Is Below $17

“You see a big destruction in the income of the oil and commodity producers,” exclaims an analyst but, as Bloomberg notes, while oil prices flashing across traders’ terminals are at the lowest in a decade, in real terms the collapse is considerably deeper. Adjusted for inflation, WTI is its lowest since 2002 and worse still Saudi Light Crude is trading at below $17 (in 1998 dollar terms) – the lowest since the 1980s… Slumping prices are a critical signal that the boom in lending in China is “unwinding,” according to Adair Turner, chairman of the Institute for New Economic Thinking.

In fact, while sub-$30 per barrel oil sounds very scary, Saudi prices would be less than $17 a barrel when converted into dollar levels for 1998, the year oil sank to its lowest since the 1980s. Slowing investment and construction in China, the world’s biggest energy user, is “sending an enormous deflationary impetus through to the world, and that is a significant part of what’s happening in this oil-price collapse,” Turner, former chairman of the U.K. Financial Services Authority, said.

But this still covers only light sweet crude. Heavier versions are already way below even those levels. Question: what does tar sands oil go for in 1998 dollars? $5 perhaps? A barrel’s worth of it fetched $8.35 in 2016 US dollars on Tuesday. And that does not stop production, because investment (sunk cost) has been spent so there’s no reason to cut, quite the contrary.

Crude At $10 Is Already A Reality For Canadian Oil-Sands Miners

Think oil in the $20s is bad? In Canada they’d be happy to sell it for $10. Canadian oil sands producers are feeling pain as bitumen – the thick, sticky substance at the center of the heated debate over TransCanada’s Keystone XL pipeline – hit a low of $8.35 on Tuesday, down from as much as $80 less than two years ago. Producers are all losing money at current prices, First Energy Capital’s Martin King said Tuesday at a conference in Calgary. Which doesn’t mean they’ll stop. Since most of the spending for bitumen extraction comes upfront, and thus is a sunk cost, production will continue and grow.

Another interesting question is where the price of oil would be right now if the perception of low prices had not made 2015 such a banner year for filling up storage space across the globe, including huge amounts of tankers that are left floating at sea, awaiting a ‘recovery’. But that is so last year:

Tanker Rates Tumble As Last Pillar Of Strength In Oil Market Crashes

If there was one silver-lining in the oil complex, it was the demand for VLCCs (as huge floating storage facilities or as China scooped up ‘cheap’ oil to refill their reserves) which drove tanker rates to record highs. Now, as Bloomberg notes so eloquently, it appears the party is over! Daily rates for benchmark Saudi Arabia-Japan VLCC cargoes have crashed 53% year-to-date to $50,955 (as it appears China’s record crude imports have ceased). In fact the rate crashed 12% today for the 12th straight daily decline from over $100,000 just a month ago…

China imported a record amount of crude last year as oil’s lowest annual average price in more than a decade spurred stockpiling and boosted demand from independent refiners. China’s crude imports last month was equivalent to 7.85 million barrels a day, 6% higher than the previous record of 7.4 million in April, Bloomberg calculations show.

China has exploited a plunge in crude prices by easing rules to allow private refiners, known as teapots, to import crude and by boosting shipments to fill emergency stockpiles. The nation’s overseas purchases may rise to 370 million metric tons this year, surpassing estimated U.S. imports of about 363 million tons, according to Li Li, a research director with ICIS China, an industry researcher. But given the crash in tanker rates – and implicitly demand – that “boom” appears to be over.

The consequences of all this will be felt all over the world, and for a long time to come. All of our economic systems run on oil, so many jobs are related to it, so many ‘fields’ in the economy, and no, things won’t get easier when oil is at $20 or $10, it’ll be a disaster of biblical proportions, like a swarm of locusts that leaves precious little behind. Squeeze oil and you squeeze the entire economic system. That’s what all the ‘low oil prices are great for the economy’ analysts missed (many still do).

Entire nations will undergo drastic changes in leadership and prosperity. Norway, Canada, North Dakota, Russia. But more than that, Middle East nations that rely entirely on oil, a dependency that won’t allow for many of their rulers to remain in office. Same goes for all OPEC nations, and many non-OPEC producers.

We can argue that a war of some kind or another can be the black swan that sets prices ‘straight’, but black swans are supposed to be the things you can’t see coming, and Middle East warfare for obvious reasons doesn’t even qualify for that definition.

The world is full of nations and rulers that are fighting for bare survival. And things like that don’t play out on a short term basis. For that reason alone, though there are many others as well, oil prices will remain under pressure for now.

Even a war will be hard put to turn that trend around at this point. Unless production facilities are destroyed on a large scale, war may just lead to even more production as demand keeps falling. The fact that Iran is preparing to ‘come back online’, promising an even steeper glut in world markets, is putting the Saudi’s on edge. Rumors of Libya wanting to return for a piece of the pie won’t exactly soothe emotions either.

And when, in a few years’ time, all the production cuts due to shut wells become our new reality, and eventually they must, then no, there will still not be an oil shortage. Because the economy will be doing so much worse by then that demand will have fallen more than supply.

Barring large scale warfare in the Middle East there is nothing that can solve the low oil price conundrum. But think about it, which Gulf nation can even afford such warfare in present times? For that matter, which nation in the world can?

The US may try and ignite a proxy war with Russia, but that would lead to an(other) endless and unwinnable war theater. Which would carry the threat of dragging in China as well. The US and its -soon even officially- shrinking economy can’t afford that. Which of course by no means guarantees it won’t try.