Employment costs rose more than expected in the third quarter in a sign that more inflation could be brewing in the U.S. economy. The Labor Department’s employment cost index rose 0.8 percent for the period, ahead of the estimate of 0.7 percent from economists surveyed by Refinitiv. Wages and salaries rose 0.9 percent, well ahead of expectations for 0.5 percent. Benefit costs were up 0.4 percent. On a yearly basis, wages and salaries jumped 3.1 percent, the biggest increase in 10 years. Wage increases have been the missing link in the economy since the recovery began in mid-2008. Average hourly earnings have been rising steadily but have stayed below the 3 percent level as slack has remained in the labor market.
However the unemployment rate is now at 3.7 percent, the lowest since 1969, and wage pressures have begun to build. The Federal Reserve has been raising interest rates in an effort to stave off future inflationary pressures, though the central bank’s preferred gauge of inflation rose just 2.5 percent in the third quarter, including a 1.9 percent increase for health benefits. “The employment cost index data adds to the broader evidence that wage growth has continued to trend gradually higher over recent quarters,” Michael Pearce, senior U.S. economist at Capital Economics, said in a note. “And with labor market conditions still tightening, we expect wage growth will accelerate further from here.”
As Chinese markets began to wake, yuan just broke below 6.98/USD for the first time in this downswing, despite PBOC liquidity withdrawals sending money market rates spiking (to squeeze yuan shorts). [..] if former UBS Chief Economist George Magnus is right, any hopes for the G20 meeting between Trump and Xi should be extinguished. In a series of tweets, Magnus warned… “Trump and Xi are supposed to meet at the G20 in Buenos Aires at end month. Will they talk trade? They need to cos Trump has already threatened to subject the other of 50% of imports from China to punitive tariffs. This is how he prepares the ground, telling Fox News: “I think that we will make a great deal with China and it has to be great, because they’ve drained our country,”.
Designed to turn XJP frostier, be even less inclined to bring something to the table, and more anxious not to be seen to be succumbing to foreign pressure. So I think, barring something going on in the background, these talks are set up to fail, assuming they happen. The 10% tariff rate is due to go to 25% on 200bn $ of goods on 1 Jan anyway, and we shd probably expect WHY to go for the remaining 250bn $ of imports in new year… 2019 big year for China. centenary of founding of CCP. and rivals Soviet CP’s 72 years in power. Xi’s Chinese Dream of Rejuvenation of Chinese Ppl isn’t just a slogan. Being seen to succumb to Trump’s WH is just not on. Expect both sides to dig in further
Begs question as what China will do next. Xant tit for tat any more, as they have run out of room. @davidjlynch in @washingtonpost reminds us that tourism cd be a target. Targeting US firms also could be cranked up. Yuan depreciation also poss tho v risky at home too … Much longer discussion and background written up in Red Flags, just out in the US this month….the details change with the news and announcements, but the substance is sadly all too clear.
Should we pity the fools who bought the overpriced crap? The entire westernworld is filled with people who grossly overpaid on the back of ultra-low rates. They’re all going to claim they’re victims, and there’s so many of them they may actually be bailed out, at the cost of those who haven’t been so stupid.
Higher mortgage rates and overheated home prices hit Southern California home sales hard in September. The number of new and existing houses and condominiums sold during the month plummeted nearly 18 percent compared with September 2017, according to CoreLogic. That was the slowest September pace since 2007, when the national housing and mortgage crisis was hitting. Sales have been falling on an annual basis for much of this year, but this was the biggest annual drop for any month in almost eight years. It was also more than twice the annual drop seen in August. “The double whammy of higher prices and rising mortgage rates has priced out some would-be buyers and prompted others to take a wait-and-see stance,” said Andrew LePage, a CoreLogic analyst, in the release.
“There was one caveat to last month’s sharp annual sales decline — this September had one less business day for recording transactions. Adjusting for that, the year-over-year decline would be about 13 percent, still the largest in four years.” On a monthly basis, sales fell 22 percent in September compared with August. Sales usually fall about 10 percent from August to September. Sales of newly built homes are suffering more than sales of existing homes, likely because fewer are being built compared with historical production levels. Newly built homes also come at a price premium. Sales of newly built homes were 47 percent below the September average dating back to 1988, while sales of existing homes were 22 percent below their long-term average.
The median price of Southern California homes sold in September, $505,000, was still 3.6 percent higher than it was a year ago. That was the lowest annual gain for any month in more than three years. “Price growth is moderating amid slower sales and more listings in many markets,” LePage said. “This is welcome news for potential homebuyers, but many still face a daunting hurdle – the monthly mortgage payment, which has been pushed up sharply by rising mortgage rates.”
A rise in so-called “zombie firms,” alongside higher interest rates, has led several experts to warn of the impact it could have on employment in developed nations. Zombie firms, as they are often called, are companies that would have defaulted in a normal economic cycle but continue to function due to an ultra-low interest rate environment. “Like the characters after which they are named, zombie firms are creatures that really should have shuffled off to the next realm some time ago. Instead of embracing death, they soldier on, usually wreaking havoc on the rest of society,” Eoin Murray, head of investment at Hermes Investment Management, said in a research note Wednesday.
Economists define a zombie firm as one which is at least 10 years old but is unable to cover its costs with its profits. Murray described collapsed facilities management and construction services company Carillion as one. Ever since the financial crisis, these firms have taken on huge pile of debts as borrowing became so cheap on the back of low interest rates. The numbers of such firms are currently on the rise, according to a report from the Bank of International Settlements (BIS) released last month. Decades of falling interest rates have led to a sharp increase in the number of zombie firms that are potentially threatening economic growth and preventing interest rates from rising, the report stated.
“Our analysis suggests that this increase is linked to reduced financial pressure, which in turn seems to reflect in part the effects of lower interest rates,” the research said, adding that these “zombies” weigh on economic performance because they are “less productive and because their presence lowers investment in and employment at more productive firms.”
British Prime Minister Theresa May has struck a tentative deal with the European Union that would give UK financial services companies continued access to European markets after Brexit, the Times reported on Thursday. British and European negotiators have reached tentative agreement on all aspects of a future partnership on services, as well as the exchange of data, the British newspaper reported, citing government sources. The services deal would give UK companies access to European markets as long as British financial regulation remained broadly aligned with the EU’s, the Times reported. The British pound jumped as much as 0.5 percent against the dollar following the report.
Global banks operating in the UK have had to reorganize their operations around Britain’s departure from the European Union, due to take place in March next year. Many have set up new European hubs and begun to move operations, senior executives and staff to ensure they can continue to serve their continental clients if Britain leaves the bloc without a deal. According to the Times’ report, EU will accept that the UK has “equivalent” regulations to Brussels, and UK financial services companies will be allowed to operate as they now do in Europe. EU officials have said that the EU’s financial market access system, known as “equivalence,” under which Brussels grants access to foreign banks and insurers if their home rules converge with the bloc’s, is probably Britain’s best bet.
Five Republican senators have asked the Trump administration to suspend talks to transfer U.S. nuclear technology to Saudi Arabia following the killing of journalist Jamal Khashoggi at the kingdom’s consulate in Turkey. The lawmakers, led by Senator Marco Rubio, threatened to block any agreement to export civilian nuclear technology to Saudi Arabia, potentially setting up a showdown with the White House. The Trump administration has courted the Saudis as they seek to build 16 nuclear power reactors over the next 25 years, an endeavor that would generate tens of billions of dollars in economic activity.
In a letter to President Donald Trump, the senators say the slaying of Khashoggi, as well as other foreign policy issues, raise questions about whether the Saudi leadership should be entrusted with U.S. nuclear technology and know-how. “The ongoing revelations about the murder of Saudi journalist Jamal Khashoggi, as well as certain Saudi actions related to Yemen and Lebanon, have raised further serious concerns about the transparency, accountability, and judgment of current decisionmakers in Saudi Arabia,” the lawmakers wrote in a letter to Trump. “We therefore request that you suspend any related negotiations for a U.S.-Saudi civil nuclear agreement for the foreseeable future.”
New Zealand has topped the World Bank’s ranking of the best countries to start and run a business in 2018, ahead of Singapore, Denmark and Hong Kong. The World Bank said New Zealand had retained its position in its Doing Business report ahead of 190 other countries, despite not implementing any reforms in the last year. The UK slipped to ninth place while Norway climbed to seventh in a year when the World Bank said governments pressed ahead with a record number of reforms to business regulations and tax rules to support private businesses. Georgia, the former Soviet satellite state, retained its position at number six in the rankings, despite persistent criticism from aid agencies that the World Bank was rewarding a country with high levels of inequality, showing that a business-friendly environment is not in and of itself a means of alleviating poverty.
Macedonia, the United Arab Emirates, Malaysia and Mauritius are also among the business-friendly countries in the World Bank’s top 20 that rank among the highest in Oxfam’s list of unequal nations. The Organisation for Economic Cooperation and Development criticised Mauritius last year for acting as a tax haven and leaching tax revenues from mainland African nations. Singapore, often held up as a model for post-Brexit Britain, recently topped Oxfam’s list of unequal nations. The World Bank Group’s president, Jim Yong Kim, said the private sector played an important role in “creating sustainable economic growth and ending poverty around the world”.
For years, they heard little from daughters who went to join Islamic State. Now dozens of families across Europe have received messages from those same women, desperate to return home from detention in Syria. They are among 650 Europeans, many of them infants, held by U.S.-backed Kurdish militias in three camps since IS was routed last year, according to Kurdish sources. Unwanted by their Kurdish guards, they are also a headache for officials in Europe. In letters sent via the Red Cross and in phone messages, the women plead for their children to be allowed home to be raised in the countries they left behind. In one message played by a woman at a cafe in Antwerp, the chatter of her young grandchildren underscores their mother’s pleas.
Another woman in Paris wants to care for three grandchildren she has never met, born after her daughter left for Syria in 2014, at the age 18. “They are innocent,” she said. “They had no part in any of this.” Like other relatives of those held in Syria, the two mothers asked to remain anonymous – afraid of being linked to IS and worried their daughters may face reprisals. The United States has taken custody of some citizens, as have Russia and Indonesia, and wants Europe to do the same – fearing the camps may breed a new generation of militants. “We are telling European governments: ‘Take your people back, prosecute them. … They are more of a threat to you here than back home,’” a senior U.S. counterterrorism official said.
Silicon Valley technology giants such as Facebook and Google have grown so dominant they may need to be broken up, unless challengers or changes in taste reduce their clout, the inventor of the World Wide Web told Reuters. The digital revolution has spawned a handful of U.S.-based technology companies since the 1990s that now have a combined financial and cultural power greater than most sovereign states. Tim Berners-Lee, a London-born computer scientist who invented the Web in 1989, said he was disappointed with the current state of the internet, following scandals over the abuse of personal data and the use of social media to spread hate.
“What naturally happens is you end up with one company dominating the field so through history there is no alternative to really coming in and breaking things up,” Berners-Lee, 63, said in an interview. “There is a danger of concentration.” But he urged caution too, saying the speed of innovation in both technology and tastes could ultimately cut some of the biggest technology companies down to size. “Before breaking them up, we should see whether they are not just disrupted by a small player beating them out of the market, but by the market shifting, by the interest going somewhere else,” Berners-Lee said.
“I am disappointed with the current state of the Web,” he said. “We have lost the feeling of individual empowerment and to a certain extent also I think the optimism has cracked.” Facebook CEO Mark Zuckerberg apologized after the Cambridge Analytica scandal and pledged to do more to protect users’ data. But social media, Berners-Lee said, was still being used to propagate hate. “If you put a drop of love into Twitter it seems to decay but if you put in a drop of hatred you feel it actually propagates much more strongly. And you wonder: ‘Well is that because of the way that Twitter as a medium has been built?’”
The world has seriously underestimated the amount of heat soaked up by our oceans over the past 25 years, researchers say. Their study suggests that the seas have absorbed 60% more than previously thought. They say it means the Earth is more sensitive to fossil fuel emissions than estimated. This could make it much more difficult to to keep global warming within safe levels this century. According to the last major assessment by the Intergovernmental Panel on Climate Change (IPCC), the world’s oceans have taken up over 90% of the excess heat trapped by greenhouse gases.
But this new study says that every year, for the past 25 years, we have put about 150 times the amount of energy used to generate electricity globally into the seas – 60% more than previous estimates. That’s a big problem. Scientists base their predictions about how much the Earth is warming by adding up all the excess heat that is produced by the known amount of greenhouse gases that have been emitted by human activities. This new calculation shows that far more heat than we thought has been going into oceans. But it also means that far more heat than we thought has been generated by the warming gases we have emitted. Therefore more heat from the same amount of gas means the Earth is more sensitive to CO2.
More heat means less oxygen in the water which could have implications for many species. Photo Victor Huang
More than 70 per cent of our planet’s remaining areas of wilderness are contained in just five countries and are at the mercy of political decisions regarding their future, new research has warned. Urgent international action is required to ensure the preservation of these last pockets of intact ecosystems, the study says, which calls for mandated conservation targets. The places where the greatest remaining tracts of wilderness containing mixes of species at near-natural levels of abundance were identified as being in Russia, Canada, Australia, the US and Brazil.
Produced by the University of Queensland (UQ) and the Wildlife Conservation Society (WCS), the study published in the journal Nature, says these areas are “increasingly important buffers against changing conditions… Yet they aren’t an explicit target in international policy frameworks.” The study also examines the huge future value these areas are likely to have for our planet. “They are also the only areas supporting the ecological processes that sustain biodiversity over evolutionary timescales,” it says. “As such, they are important reservoirs of genetic information, and act as reference areas for efforts to re-wild degraded land and seascapes.”
Professor James Watson, from UQ’s School of Earth and Environmental Sciences, said the work provides the first full global picture of how little wilderness remains, and he was alarmed at the results. “A century ago, only 15 per cent of the Earth’s surface was used by humans to grow crops and raise livestock,” he said. “Today, more than 77 per cent of land – excluding Antarctica – and 87 per cent of the ocean has been modified by the direct effects of human activities. It might be hard to believe, but between 1993 and 2009, an area of terrestrial wilderness larger than India – a staggering 3.3 million square kilometres – was lost to human settlement, farming, mining and other pressures.”
Total consumer credit rose 5.4% in the fourth quarter, year over year, to a record $3.84 trillion not seasonally adjusted, according to the Federal Reserve. This includes credit-card debt, auto loans, and student loans, but not mortgage-related debt. December had been somewhat of a disappointment for those that want consumers to drown in debt, but the prior months, starting in Q4 2016, had seen blistering surges of consumer debt. Think what you will of the election – consumers celebrated it or bemoaned it the American way: by piling on debt. The chart below shows the progression of consumer debt since 2006 (not seasonally adjusted). Note the slight dip after the Financial Crisis, as consumers deleveraged – with much of the deleveraging being accomplished by defaulting on those debts. But it didn’t last long. And consumer debt has surged since. It’s now 45% higher than it had been in Q4 2008. Food for thought: Over the period, the consumer price index increased 17.5%:
Credit card debt and other revolving credit in Q4 rose 6% year-over-year to $1.027 trillion, a blistering pace, but it was down from the 9.2% surge in Q3, the nearly 10% surge in Q2, and the dizzying 12% surge in Q1. So the growth of credit card debt in Q4 was somewhat of a disappointment for those wanting to see consumers drown in expensive debt. The chart below shows the leap of the past four quarters over prior years. This pushed credit card debt in Q3 and Q4 finally over the prior record set in Q4 2008 ($1.004 trillion), before it came tumbling down via said “deleveraging.” These are not seasonally adjusted numbers, and you can see the seasonal surges in credit card debt every Q4 during shopping season (as marked), and the drop afterwards in Q1. But then came 2017. In Q1 2017, credit card debt skyrocketed to an even higher level than Q4, when it should have normally plunged – a phenomenon I have not seen before.
This shows what kind of credit-card party 2017 and Q4 2016 was. Over the four quarter period, Americans added $58 billion to their credit card debt. Over the five-quarter period, they added $109 billion, or 12%! Celebration or retail therapy. Auto loans rose 3.8% in Q4 year-over-year to $1.114 trillion. It was one of the puniest increases since the auto crisis had ended in 2011. Since then, the year-over-year increases were mostly in the 6% to 9% range. These are loans and leases for new and used vehicles. So the weakness in new-vehicle sales volume in 2017 was covered up by price increases in both new and used vehicles in the second half and strong used-vehicle sales:
[..] Student loans surged 5.6% in Q4 year-over-year. This seems like a shocking increase, but the year-over-year increases in Q3 and Q4 were the only such increases below 6% in this data series. Between 2007 – as far back as year-over-year comparisons are possible in this data series – and Q3 2012, the year-over-year increases ranged from 11% to 15%:
In a recent article, Yale scholar Stephen Roach points out that between 2008 and 2017 the combined balance sheets of the central banks of the U.S., Japan and the eurozone expanded by $8.3 trillion, while nominal GDP in those same economies expanded $2.1 trillion. What happens when you print $8.3 trillion in money and only get $2.1 trillion of growth? What happened to the extra $6.2 trillion of printed money? The answer is that it went into assets. Stocks, bonds, emerging-market debt and real estate have all been pumped up by central bank money printing. What makes 2018 different from the prior 10 years? The answer is that this is the year the central banks stop printing and take away the punch bowl. The Fed is already destroying money (they do this by not rolling over maturing bonds).
Last week, the Fed reduced its balance sheet by $22 billion. While that doesn’t seem like much when you’re talking about a $4 trillion balance sheet, it was the Fed’s largest cut to date. Funny how the market hit the skids just after this happened. But you haven’t heard the mainstream media mention that. By the end of 2018, the annual pace of money destruction will be $600 billion — if the Fed under new chairman Jerome Powell stays on course. The ECB and Bank of Japan are not yet at the point of reducing money supply, but they have stopped expanding it and plan to reduce money supply later this year. In economics everything happens at the margin. When something is expanding and then stops expanding, the marginal impact is the same as shrinking. Apart from money supply, all of the major central banks are planning rate hikes, and some, such as those in the U.S. and U.K., are actually implementing them.
Reducing money supply and raising interest rates might be the right policy if price inflation were out of control. But despite a recent uptick in some inflation measures, prices have mostly been falling. The “inflation” hasn’t been in consumer prices; it’s in asset prices. The impact of money supply reduction and higher rates will be falling asset prices in stocks, bonds and real estate — the asset bubble in reverse. [..] This will not be a soft landing. The central banks — especially the U.S. Fed, first under Ben Bernanke and later under Janet Yellen — repeated Alan Greenspan’s blunder from 2005–06. Greenspan left rates too low for too long and got a monstrous bubble in residential real estate that led the financial world to the brink of total collapse in 2008. Bernanke and Yellen also left rates too low for too long. They should have started rate and balance sheet normalization in 2010 at the early stages of the current expansion when the economy could have borne it. They didn’t.
What happened? Did the market sneeze, cough, or was something misread and today perceived in a different light? In my opinion this is what happened: The Plunge Protection Team, as they have done on previous equity market drops, or the Federal Reserve operating for the Working Group on Financial Markets, sent a purchase order for S&P futures to the trading floor. The hedge funds, seeing the incoming bid, front-ran the bid by stepping in and buying S&P futures. This pushed the market back up, ended the correction, and prevented financial panic.
The Plunge Protection Team was created in 1987, approaching the end of the Reagan administration, in order to prevent a market correction from costing George H. W. Bush the presidential election as Reagan’s successor. The Republican Establishment was desperate to reestablish its control over the party. The Republican Establishment, convinced by Wall Street that the Reagan tax cut would result in high inflation, found themselves instead confronted with a long economic expansion. In those days that meant that the expansion could be nearing its end, and a stock market correction could deny the presidency to George H.W. Bush. To prevent any such correction, the US Treasury and Federal Reserve created a “working group” to intervene in the stock market in order to support values. Whenever the market starts to drop, the team purchases S&P futures which halts the market decline.
We have witnessed this on several occasions. And, most likely, again this week. Pundits who speak about “market forces” are speaking about something that doesn’t exist. “Market forces” are the interventions that support existing values with money infusions. How long can the fraudulent valuation of equities continue? My sometimes coauthor Dave Kranzler and I think it can continue until the dollar as reserve currency comes under attack. Neither of us believed that the fraud could be perpetrated this long. The two other world powers, Russia and China, are moving away from use of the US dollar, but the consequence for the dollar could still be in the future. In the meantime, liquidity supplied by central banks and the interventions of the Plunge Protection Team could send equity prices higher.
The European Central Bank should wind down its giant bond-buying program after September despite a stronger euro currency and volatility on global financial markets, German central bank President Jens Weidmann said Thursday. Speaking at a conference in Frankfurt, Mr. Weidmann, who sits on the ECB’s 25-member rate-setting committee, said “substantial net [asset] purchases beyond the announced amount do not seem to be required” if economic growth “progresses as currently expected.” ECB officials are weighing how quickly to phase out their stimulus policies as the region’s economy heats up. The ECB has pledged to buy €30 billion a month of eurozone bonds at least through September under its €2.5 trillion quantitative easing program, and ECB President Mario Draghi has signaled that the program won’t end abruptly.
Mr. Weidmann didn’t rule out a short extension of QE. But he argued that the eurozone’s economic recovery might be more advanced than that in the U.S. when the Fed wound down its own QE program in 2014. “The favorable economic outlook lends credence to the expectation that wage growth and therefore domestic price pressures will gradually increase,” Mr. Weidmann said. This week’s pay deal in Germany’s engineering sector “is consistent with this picture,” suggesting that inflation will pick up in Germany as unemployment falls, he said. Crucially, he urged policy makers not to be distracted by a rising euro or the situation in financial markets, which have gyrated wildly in recent days amid concerns about the reduction of monetary stimulus from central banks. “U.S. equity prices rose over a prolonged period without any notable corrections, which was unusual given that valuations have been high overall, Mr. Weidmann said.
The tech billionaire Elon Musk sent one of his Tesla electric cars into space yesterday, a day before the company that built it announced its biggest ever quarterly loss. Musk’s Tesla electric car and energy storage company lost $675.4m in the three months ending 31 December, the company announced on Thursday, compared with a loss of $121m for the same period last year. The company has been spending heavily as it rolls out the next generation of electric cars, the Model 3 sedan, a semi truck and other products. The company has struggled to keep up with is production targets for the Model 3 but said it would probably build about 2,500 Model 3s per week by the end of the first quarter and that it plans to reach its goal of 5,000 vehicles per week by the end of the second quarter. On Wednesday Musk’s private aerospace company, SpaceX, blasted a cherry red Tesla Roadster sports car into space in a successful test of its Falcon Heavy rocket.
The car and its dummy driver are now heading towards the asteroid belt. Tesla delivered 101,312 Model S sedans and Model X SUVs last year, up 33% over 2016 and ahead of its targets, according to preliminary figures released last month. But it fell woefully short on the Model 3, which went into production in July. Tesla made just 2,425 Model 3s in the fourth quarter, and has pushed back production targets multiple times. At one point, Tesla had 500,000 people on a waiting list for the Model 3, but it’s not clear if all of them are continuing to wait. On a call with analysts Musk said production was getting back on track. “If we can send a Roadster to the asteroid belt we can probably solve Model 3 production,” he said. Musk is set to collect a $55.8bn (£40bn) bonus – probably be the largest ever – if he can build Tesla into a $650bn company over the next decade. In the meantime the 46-year-old has agreed to work unpaid for the next 10 years.
Turkey is recruiting and retraining Isis fighters to lead its invasion of the Kurdish enclave of Afrin in northern Syria, according to an ex-Isis source. “Most of those who are fighting in Afrin against the YPG [People’s Protection Units] are Isis, though Turkey has trained them to change their assault tactics,” said Faraj, a former Isis fighter from north-east Syria who remains in close touch with the jihadi movement. In a phone interview with The Independent, he added: “Turkey at the beginning of its operation tried to delude people by saying that it is fighting Isis, but actually they are training Isis members and sending them to Afrin.” An estimated 6,000 Turkish troops and 10,000 Free Syrian Army (FSA) militia crossed into Syria on 20 January, pledging to drive the YPG out of Afrin.
The attack was led by the FSA, which is a largely defunct umbrella grouping of non-Jihadi Syrian rebels once backed by the West. Now, most of its fighters taking part in Turkey’s “Operation Olive Branch” were, until recently, members of Isis. Some of the FSA troops advancing into Afrin are surprisingly open about their allegiance to al-Qaeda and its offshoots. A video posted online shows three uniformed jihadis singing a song in praise of their past battles and “how we were steadfast in Grozny (Chechnya) and Dagestan (north Caucasus). And we took Tora Bora (the former headquarters of Osama bin Laden). And now Afrin is calling to us”.
Livestock raised for food in the US are dosed with five times as much antibiotic medicine as farm animals in the UK, new data has shown, raising questions about rules on meat imports under post-Brexit trade deals. The difference in rates of dosage rises to at least nine times as much in the case of cattle raised for beef, and may be as high as 16 times the rate of dosage per cow in the UK. There is currently a ban on imports of American beef throughout Europe, owing mainly to the free use of growth hormones in the US. Higher use of antibiotics, particularly those that are critical for human health – the medicines “of last resort”, which the WHO wants banned from use in animals – is associated with rising resistance to the drugs and the rapid evolution of “superbugs” that can kill or cause serious illness.
The contrast between rates of dosage in the US and the UK throws a new light on negotiations on Brexit, under which politicians are seeking to negotiate trade deals for the UK independently of the EU. Agriculture and food are key areas, particularly in trading with the US, which as part of any deal may insist on opening up the UK markets to imports that would be banned under EU rules. When negotiating outside the EU for a new trade deal, the UK will come under severe pressure to allow such imports. Over the summer, a row broke out over the potential for imports of US chlorinated chicken – bleaching chicken, according to experts in the UK, is a dangerous practice because it can serve to disguise poor hygiene practices in the food chain.
But Ted McKinney, US under-secretary for trade and foreign agricultural affairs, told an audience of British farmers last month he was “sick and tired” of hearing British concerns about chlorinated chicken and US food standards, providing further indication that the US government is likely to strike a hard deal on agricultural products as part of any trade agreement. Antibiotic use in the US is three times higher in chickens than it is in the UK, double that for pigs, and five times higher for turkeys, according to research by the Alliance to Save Our Antibiotics [..]
Suzi Shingler, at the Alliance to Save Our Antibiotics, said: “US cattle farmers are massively overusing antibiotics. This finding shows the huge advantages of British beef, which is often from grass-reared animals, whereas US cattle are usually finished in intensive feedlots. Trade negotiators who may be tempted to lift the ban on US beef should not only be considering the impact of growth hormones, but also of antibiotic resistance due to rampant antibiotic use.”
Concerns are rising about conditions at reception centers for migrants on the islands of the eastern Aegean amid delays in much-needed infrastructure upgrades and increasingly cramped conditions, with reports of a spike in cases of mental health problems. Last summer, authorities completed a feasibility study for an upgrade of the drainage and sewerage systems at Moria, the main reception center on Lesvos. But the plan appears to have become mired in bureaucracy. Originally designed to house 1,000 migrants, the camp at Moria is currently hosting nearly seven times that number. The overcrowded and dirty conditions, and the uncertainty, are taking their toll on the mental health of many camp residents, Gavriil Sakellaridis, the head of Amnesty International’s Greek chapter, said on Wednesday.
Following a visit to camps on Lesvos and Chios, Sakellaridis expressed concern at the large number of migrants suffering from depression and called for the transfer of asylum seekers to the mainland. “The living conditions of asylum seekers at Moria and Vial [on Chios] are an open wound for Greece and Europe and for human rights,” Sakellaridis said. “The lives of those people have been put on hold for a period of up to two years in some cases and as a result the cases of despair and mental distress are growing,” he said.
The world’s richest 1% of families and individuals hold over half of global wealth, according to a new report from Credit Suisse. The report suggests inequality is still worsening some eight years after the worst global recession in decades. The release of the Paradise Papers, a trove of leaked documents uncovered by investigative journalists detailing the offshore tax holdings of the world’s super wealthy, has reinforced just how rampant the problem of wealth inequality has become. “The bottom half of adults collectively own less than 1% of total wealth, the richest decile (top 10% of adults) owns 88% of global assets, and the top percentile alone accounts for half of total household wealth,” the Credit Suisse report said.
Put another way: “The top 1% own 50.1% of all household wealth in the world.” This handy pyramid chart, which shows the relative number of people at different wealth levels and how much of the world’s assets each bracket controls, speaks volumes about the level of income concentration, which by some measures has not been seen since the early 20th century:
In most countries, including the United States, a large wealth gap translates into those at the top accruing political power, which in turn can lead to policies that reinforce benefits for the wealthy. President Donald Trump’s tax cut plan, for instance, has been widely criticized for favoring corporations and the wealthy over working families. Measured overall, Credit Suisse found total global wealth rose 6.4% in the year between mid-2016 and mid-2017 to $280.3 trillion. Stock market gains helped add $8.5 trillion to US household wealth during that period, a 10.1% rise. US inequality is considerably worse than in its more developed-country peers.
Given Americans’ ceaseless urge to borrow and spend, household debt in the third quarter surged by $610 billion, or 5%, from the third quarter last year, to a new record of $13 trillion, according to the New York Fed. If the word “surged” appears a lot, it’s because that’s the kind of debt environment we now have: Mortgage debt surged 4.2% year-over-year, to $9.19 trillion, still shy of the all-time record of $10 trillion in 2008 before it all collapsed. Student loans surged by 6.25% year-over-year to a record of $1.36 trillion. Credit card debt surged 8% to $810 billion. “Other” surged 5.4% to $390 billion. And auto loans surged 6.1% to a record $1.21 trillion. And given how the US economy depends on consumer borrowing for life support, that’s all good.
However, there are some big ugly flies in that ointment: Delinquencies – not everywhere, but in credit cards, and particularly in subprime auto loans, where serious delinquencies have reached Lehman Moment proportions. Of the $1.2 trillion in auto loans outstanding, $282 billion (24%) were granted to borrowers with a subprime credit score (below 620). Of all auto loans outstanding, 2.4% were 90+ days (“seriously”) delinquent, up from 2.3% in the prior quarter. But delinquencies are concentrated in the subprime segment – that $282 billion – and all hell is breaking lose there. Subprime auto lending has attracted specialty lenders, such as Santander Consumer USA. They feel they can handle the risks, and they off-loaded some of the risks to investors via subprime auto-loan-backed securities. They want to cash in on the fat profits often obtained in subprime lending via extraordinarily high interest rates.
The numbers: Household debt rose by $116 billion, or 0.9%, to $12.96 trillion in the third quarter, the New York Fed said Tuesday. Credit-card debt rose by 3.1% while home equity lines of credit, or HELOC, balances fell by 0.9%. There were small gains in mortgage, student and auto debt. Flows into credit-card and auto loans delinquencies rose, with 4.6% of credit card debt 90 days or more delinquent, up from 4.4% in the second quarter, and 2.4% of auto loan debt seriously delinquent, up from 2.3%. That’s still nowhere near the 9.6% of student loan debt that is delinquent, which itself is understated because about half of those loans are currently in deferment, grace periods or in forbearance.
What happened: U.S. households aren’t aggressively leveraging up, and the ones that are did so had better credit. The higher level of auto loan originations was mainly to prime borrowers, and the median credit score to individuals originating new mortgages ticked up to 760 from 754. [..] Auto loans have grown for 26 straight quarters. But there are some worries as subprime auto loan performance continues to deteriorate — the delinquency rate for auto finance companies have grown by more than 2 percentage points since 2014, the New York Fed said.
Can a central bank steer the housing market? Not so long ago, Sweden’s Riksbank decided: no. Now, there’s a risk that decision may backfire as the biggest property market in Scandinavia risks sinking into a correction. The evidence of price declines was so worrying on Tuesday that it contributed to a 1.5 percent slump in the krona against the euro. A weak currency puts the Riksbank’s inflation target at risk. So should it be looking at the housing market more closely? Developments in Sweden’s housing market “could spark some doubts at the Riksbank as it may affect the overall economic outlook and inflation,” Nordea analyst Andreas Wallstrom said in a note. Sweden’s Riksbank has thrown all its energy into fighting deflation and, earlier this year, finally regained credibility on its inflation mandate.
Policy makers now say they may be ready to start raising rates in the middle of next year. At the same time, the Riksbank may extend a bond purchase program due to end this year. But in the minutes of the Riksbank’s latest rate meeting, Deputy Governor Cecilia Skingsley suggested that monetary policy, “under certain circumstances, can be used to combat the effects of major household debt.” She also said the housing market “must be carefully monitored,” given the latest developments. Nordea’s Wallstrom says the central bank will probably need to see a “sharp drop” in house prices with a direct impact on the real economy before it will look into adding significant stimulus. But the bank might decided to signal rates will stay where they are for even longer.
The European Central Bank intensified its push for a tool that would hand authorities the power to stop deposit withdrawals when a bank is on the verge of failing. ECB executive board member Sabine Lautenschlaeger said that bank resolution cases this year showed that a so-called moratorium tool, which would temporarily freeze a bank’s liabilities to buy time for crucial decisions, is needed. Her comment comes as policy makers in Brussels debate how such measures should be designed, and just days after the ECB officially called for the moratorium to extend to deposits as well. “If we have a long list of exemptions and we have a moratorium that doesn’t work, I do not want to have a moratorium tool,” Lautenschlaeger told a conference in Frankfurt on Tuesday. “Then you will never use it.”
EU member states appear ready to heed the request, according to a Nov. 6 paper that develops their stance on a bank-failure bill proposed by the European Commission. They suggest giving authorities the power to cap deposit withdrawals as part of a stay on payments only after an institution has been declared “failing or likely to fail.” The power to install a moratorium “can in principle apply to eligible deposits,” the paper reads. “However, resolution authority should carefully assess the opportunity to extend the suspension also to covered deposits, especially covered deposits held by natural persons and micro, small and medium sized enterprises, in case application of suspension on such deposits would severely disrupt the functioning of financial markets.”
“At no point in the history of the world has the interest on money been so low as it is now.” Who can dispute the good Sen. Henry M. Teller of Colorado? For lo eight years, the Federal Reserve has waged a ceaseless warfare upon interest rates. Economic law, history, logic itself, stagger under the onslaughts. We suspect that economic reality will one day prevail. This fear haunts our days… and poisons our nights. But let us check the date on the senator’s declaration… Kind heaven, can it be? We are reliably informed that Sen. Teller’s comment entered the congressional minutes on Jan. 12… 1895. 1895 — some 19 years before the Federal Reserve drew its first ghastly breath! Were interest rates 122 years ago the lowest in world history? And are low interest rates the historical norm… rather than the exception?
Today we rise above the daily churn… canvass the broad sweep of history… and pursue the grail of truth. The chart below — giving 5,000 years of interest rate history — shows the justice in Teller’s argument. Please direct your attention to anno Domini 1895: Rates had never been lower in all of history. They would only sink lower on two subsequent occasions — the dark, depressed days of the early 1930s — and the present day, dark and depressed in its own right. A closer inspection of the chart reveals another capital fact… Absent one instance at the beginning of the 20th century and a roaring exception during the mid-to-late 20th century, long-term interest rates have trended lower for the better part of 500 years.
Paul Schmelzing professes economics at Harvard. He’s also a visiting scholar at the Bank of England, for whom he conducted a study of interest rates throughout history. Could the sharply steepening interest rates that began in the late 1940s be a historical one-off… an Everest set among the plains? Analyst Lance Roberts argues that periods of sharply rising interest rates like this are history’s exceptions — lovely exceptions. Why lovely? Roberts: Interest rates are a function of strong, organic, economic growth that leads to a rising demand for capital over time. In this view, rates rose steeply at the dawn of the 20th century because rapid industrialization and dizzying technological advances had entered the scenery.
Likewise, Roberts argues the massive post-World War II economic expansion resulted in the second great spike in interest rates: There have been two previous periods in history that have had the necessary ingredients to support rising interest rates. The first was during the turn of the previous century as the country became more accessible via railroads and automobiles, production ramped up for World War I and America began the shift from an agricultural to industrial economy. The second period occurred post-World War II as America became the “last man standing”… It was here that America found its strongest run of economic growth in its history as the “boys of war” returned home to start rebuilding the countries that they had just destroyed.
We know from the Snowden leaks on the NSA, the CIA files released by WikiLeaks, and the ongoing controversies regarding FBI surveillance that the US intelligence community has the most expansive, most sophisticated and most intrusive surveillance network in the history of human civilisation. Following the presidential election last year, anonymous sources from within the intelligence community were haemorrhaging leaks to the press on a regular basis that were damaging to the incoming administration. If there was any evidence to be found that Donald Trump colluded with the Russian government to steal the 2016 election using hackers and propaganda, the US intelligence community would have found it and leaked it to the New York Times or the Washington Post last year.
Mueller isn’t going to find anything in 2017 that these vast, sprawling networks wouldn’t have found in 2016. He’s not going to find anything by “following the money” that couldn’t be found infinitely more efficaciously via Orwellian espionage. The factions within the intelligence community that were working to sabotage the incoming administration last year would have leaked proof of collusion if they’d had it. They did not have it then, and they do not have it now. Mueller will continue finding evidence of corruption throughout his investigation, since corruption is to DC insiders as water is to fish, but he will not find evidence of collusion to win the 2016 election that will lead to Trump’s impeachment. It will not happen. This sits on top of all the many, many, many reasons to be extremely suspicious of the Russiagate narrative in the first place.
[..] If you attribute all your problems to Trump, you’re guaranteeing more Trumps after him, because you’re not addressing the disease which created him, you’re just addressing the symptom. The problem is not Trump. The problem is that America is ruled by an unelected power establishment which maintains its rule by sabotaging democracy, exacerbating economic injustice and expanding the US war machine. Stop listening to the lies that they pipe into your echo chambers and turn to face your real demons.
Lorry driver Abu Fawzi thought it was going to be just another job. He drives an 18-wheeler across some of the most dangerous territory in northern Syria. Bombed-out bridges, deep desert sand, even government forces and so-called Islamic State fighters don’t stand in the way of a delivery. But this time, his load was to be human cargo. The Syrian Democratic Forces (SDF), an alliance of Kurdish and Arab fighters opposed to IS, wanted him to lead a convoy that would take hundreds of families displaced by fighting from the town of Tabqa on the Euphrates river to a camp further north. The job would take six hours, maximum – or at least that’s what he was told. But when he and his fellow drivers assembled their convoy early on 12 October, they realised they had been lied to. Instead, it would take three days of hard driving, carrying a deadly cargo – hundreds of IS fighters, their families and tonnes of weapons and ammunition.
Abu Fawzi and dozens of other drivers were promised thousands of dollars for the task but it had to remain secret. The deal to let IS fighters escape from Raqqa – de facto capital of their self-declared caliphate – had been arranged by local officials. It came after four months of fighting that left the city obliterated and almost devoid of people. It would spare lives and bring fighting to an end. The lives of the Arab, Kurdish and other fighters opposing IS would be spared. But it also enabled many hundreds of IS fighters to escape from the city. At the time, neither the US and British-led coalition, nor the SDF, which it backs, wanted to admit their part. Has the pact, which stood as Raqqa’s dirty secret, unleashed a threat to the outside world – one that has enabled militants to spread far and wide across Syria and beyond?
Virtually unknown among large swaths the general public both in Britain and the U.S is the fact that Bashar-al Assad’s secular government won the first contested presidential election in Ba’athist Syria’s history on July 16, 2014, which was reported as having been open, fair and transparent. American Peace Council delegate, Joe Jamison, who was allowed unhindered travel throughout Syria, stated: “By contrast to the medieval Wahhabist ideology, Syria promotes a socially inclusive and pluralistic form of Islam. We [the USPC] met these people. They are humane and democratically minded…. The [Syrian] government is popular and recognised as being legitimate by the UN. It contests and wins elections which are monitored. There’s a parliament which contains opposition parties – we met them. There is a significant non-violent opposition which is trying to work constructively for its own social vision.”
Jamison added: “Our delegation came to Syria with political views and assumptions, but we were determined to be sceptics and to follow the facts wherever they led us”, he said. “I concluded that the motive of the US war is to destroy an independent, Arab, secular state. It’s the last of this kind of state standing.” The notion that the United States government and its allies and proxies, want to see the destruction of Syria’s pluralistic state under Assad destroyed, is hardly a secret. Indeed, one of Washington’s key allies in the region, Israel, has conceded as much. The claim by Israel’s defence minister, Avigdor Lieberman, that Assad’s removal is the empires “ultimate goal”, would appear to be consistent with the notion that the aim of the U.S government is to stymie the non-violent opposition inside Syria. Washington has been engaged in this strategy since early 2012 after having deliberately helped scupper Kofi Annan’s six point peace plan.
Members of the Syrian opposition within a newly reformed constitution who wanted to participate in democratic politics have instead been encouraged by the Western axis – as a result of bribing government forces to defect and through funding the Free Syrian Army – to overthrow the Assad government by violent means. As commentator Dan Glazebrook put it: “Within days of Annan’s peace plan gaining a positive response from both sides in late March, the imperial powers openly pledged, for the first time, millions of dollars for the Free Syrian Army; for military equipment, to provide salaries to its soldiers and to bribe government forces to defect. In other words, terrified that the civil war is starting to die down, they are setting about institutionalising it.”
The Russian Defense Ministry has said it has obtained evidence the US-led coalition provides support for the terrorist group Islamic State (outlawed in Russia). “The Abu Kamal liberation operation conducted by the Syrian government army with air cover by the Russian Aerospace Force at the end of the last week revealed facts of direct cooperation and support for ISIS terrorists by the US-led ‘international coalition,’” the Russian Defense Ministry said. The ministry showed photo shoots made by Russian unmanned aircraft on November 9 which show kilometers-long convoys of IS armed groups leaving Abu Kamal towards the Wadi es-Sabha passage on the Syrian-Iraqi border to avoid strikes by the Russian aviation and the government army.
The US refused to conduct airstrikes over the leaving IS convoy. “Americans peremptorily rejected to conduct airstrikes over the ISIS terrorists on the pretext of the fact that, according to their information, militants are yielding themselves prisoners to them and now are subject to the provisions of the Convention relative to the Treatment of Prisoners of War,” the Russian Defense Ministry said. The Defense Ministry specified that “the Russian force grouping command twice addressed the command of the US-led ‘international coalition’ with a proposal to carry out joint actions to destroy the retreating ISIS convoys on the eastern bank of the Euphrates.” The Americans failed to answer the Russian side’s question on why IS militants leaving in combat vehicles heavily equipped are regrouping in the area controlled by the international coalition to conduct new strikes over the Syrian army near Abu Kamal, the Russian Defense Ministry stressed.
Mugabe under house arrest and according to South African media ‘planning to step down’. Rumors that Emmerson Mnangagwa, the vice-president Mugabe fired recently, will be interim president. Which in turn would confirm that the army acted because it doesn’t want Grace Mugabe in power.
The armed forces seized power in Zimbabwe after a week of confrontation with President Robert Mugabe’s government and said the action was needed to stave off violent conflict in the southern African nation that he’s ruled since 1980. The Zimbabwe Defense Forces will guarantee the safety of Mugabe, 93, and his family and is only “targeting criminals around him who are committing crimes that are causing social and economic suffering in the country in order to bring them to justice,” Major-General Sibusiso Moyo said in a televised address in Harare, the capital. All military leave has been canceled, he said. Denying that the action was a military coup, Moyo said “as soon as we have accomplished our mission we expect the situation to return to normalcy.” He urged the other security services to cooperate and warned that “any provocation will be met with an appropriate response.”
The action came a day after armed forces commander Constantine Chiwenga announced that the military would stop “those bent on hijacking the revolution.” As several armored vehicles appeared in the capital on Tuesday, Mugabe’s Zimbabwe African National Union-Patriotic Front described Chiwenga’s statements as “treasonable” and intended to incite insurrection. Later in the day, several explosions were heard in the city. The military intervention followed a week-long political crisis sparked by Mugabe’s decision to fire his long-time ally Emmerson Mnangagwa as vice president in a move that paved the way for his wife Grace, 52, and her supporters to gain effective control over the ruling party. Nicknamed “Gucci Grace” in Zimbabwe for her extravagant lifestyle, she said on Nov. 5 that she would be prepared to succeed her husband.
Short-term rental website Airbnb, which has been challenging traditional hotel operators such as Accor and Marriott, said it would automatically cap the number of days its hosts can rent their property each year in central Paris. The decision, which goes into effect in January and mirrors initiatives already in place in London and Amsterdam, will force hosts to effectively comply with France’s official limit on short-term rentals of 120 days a year for a main residence. It comes as Airbnb, similar to its taxi-hailing peer Uber, is facing a growing crackdown from legislators worldwide – triggered in part by lobbying from the hotel industry, which sees the rental service as providing unfair competition. Airbnb and other rental platforms have also been criticized for driving up property prices and contributing to a housing shortage in some cities such as Paris or Berlin.
Airbnb, which has denied having a significant impact on housing shortages, has been trying to placate local authorities. “Paris is Airbnb number one city worldwide and we want to insure our community of hosts expands in a responsible and sustainable manner,” said Emmanuel Marill, Airbnb general manager for France. In Paris, the automatic rental cap will apply only to the city’s first four districts (“arrondissements”) unless the property owner has proper authorization. These districts include tourist hotspots such as the Marais, and landmarks such as the Louvre and the place de la Concorde square. Airbnb is implementing the cap as the Paris city council has made it mandatory from December for people renting their apartments on short-term rental websites to register their property with the town hall.
Ian Brossat, the housing advisor to the Paris Mayor, told Reuters that the cap should extend to the whole of Paris. “Under the law, websites must withdraw listings that do not comply with the law throughout Paris. One cannot accept that a website complies with the law only in the first four arrondissements of Paris,” said Brossat. With over 400,000 listings, France is Airbnb’s second-largest market after the United States. Paris, which is the most visited city in the world, is Airbnb’s biggest single market, with 65,000 homes.
Airbnb refused to provide the Greek Finance Ministry with information on property rentals thus delaying the launch of an online platform where owners should register the rental transactions and pay the necessary taxes. According to information obtained by economic news website economy365.gr, the Finance Ministry has tried for five months to get in touch with executives of the company in California as well as of other companies (Novasol etc). However, the companies showed no intention to cooperate with Greek authorities who have requested that the tax number of property owner is being registered to every property at the Airbnb platform. Owner’s tax number would facilitate the imposition of taxes on rentals via Airbnb. The tax legislation on short-term leases through digital platform like Airbnb was voted last year. The law foresees taxes of 15%-45% and a limited number of rentals per year.
Registration is mandatory. Authorities will provide the property owner with a certification number that has to be declared on any website and social media advert, including, of course, the Airbnb platform. Fines can reach up to 5,000 euros, if a property owner does not register on the Greek authorities registration platform and tries to evade taxes from short-term rentals. The state has estimated that revenues from Airbnb rentals could reach 48 million euros per year. According to the Finance Ministry property owners try to bypass the 3% commission to Airbnb and upcoming taxes by direct contact to customers via messenger or telephone. The payments are done cash at the arrival and not through the platform. In this way, property owners can bypass not only the commission but also registration of the rentals and future taxes. Just in case and even if one day, the Airbnb decides to hand over its Greek data to the tax authorities. For the time being it looks as the Greek goal to tax Airbnb properties has to be postponed.
We asked this question one week after Trump was elected: “What does history predict for the Trump presidency?” The answer we furnished — based on over a century of data — was this: “A 100% chance of recession within his first year.” Not a 90% chance, that is. Not even a 99% chance. But a 100% chance of recession. That answer came by way of a certain Raoul Pal. He used to captain one of the largest hedge funds in the world. And to prove his case he called the unimpeachable witness of history to the stand… Crunching 107 years worth of data, he showed the U.S. economy enters or is in a recession every time a two-term president vacates the throne: “Since 1910, the U.S. economy is either in recession or enters a recession within 12 months in every single instance at the end of a two-term presidency… effecting a 100% chance of recession for the new president.”
Obama was a two-term president – if memory serves. Only two incoming presidents were not treated to a recession within the first year of office. And both followed one-term reigns: “Not every single election sees a recession, only every two-term incumbent change… Only two presidents in history did not see a recession, and they were inaugurated after single-term presidents.” Mr. Pal couldn’t fully explain the phenomenon. Maybe it takes two terms for presidential mischief to work its way into the economic machinery. One-term presidents just can’t heave enough sand in the gears. Regardless of the reason, this fellow’s research pointed him to one conclusion: “It is not a coincidence.” Trump’s now five months into his first 12. Where does the prediction stand? By grace of God or Janet Yellen or neither or both, no recession yet.
But our pessimistic side reminds us that seven months remain. And anxiety riles the deeps of our being… For we’ve spotted ill omens… disturbing portents of recession among the recent economic data… Old Daily Reckoning hand Wolf Richter: Over the past five decades, each time commercial and industrial loan balances at U.S. banks shrank or stalled… a recession was either already in progress or would start soon. There has been no exception since the 1960s. Last time this happened was during the financial crisis. “Now,” Wolf says, “it’s happening again.” Last month commercial and industrial loans (C&I) outstanding fell to $2.095 trillion, according to the St. Louis Fed. That’s down 4.5% from their November 2016 peak, says Wolf. And it marked the 30th consecutive week of no growth in C&I loans. Wolf argues C&I loans matter because they directly reflect the real economy – unlike today’s stock market, which is crooked as a Brit’s teeth.
Much was made of the fact that Australia recently replaced The Netherlands as the world record holder for the longest period without a recession (using the colloquial definition of two consecutive quarters of negative growth). The Netherlands went just under 26 years (103 quarters between 1982 and 2008) without a recession, and Australia surpassed this when it recorded 0.3% growth in the March 2017 quarter (for an annual growth rate of 1.7%).
Rather less attention was given to another Australian record: household debt. Before its recession-free record was set, Australia had already overtaken The Netherlands for the record of the highest level of household debt ever recorded for a large country (one with more than 10 million people).
Australia’s household debt level of 123% of GDP has been exceeded only by Switzerland (population 8.3 million, household debt of 128% of GDP in 2016 Q3) and Denmark (population 5.6 million, 139% of GDP in 2009).2 Australia also stands apart from its household leverage competitors in another important respect: Denmark, Switzerland and The Netherlands also run significant current account surpluses—Switzerland’s average surplus since 2000 has been the highest on the planet at over 10% of GDP; Denmark’s has averaged 5.75% since 2005; The Netherlands’ average current account surplus is around 8% of GDP.
Australia, in contrast, has averaged a current account deficit of 3.2% of GDP since 1960, and 4.3% since 2000. Australia therefore holds the record of the highest level of household debt for a country running a trade deficit, and has done so since 2010, when it overtook the previous record-holder: Ireland. Ireland’s household debt level has also plunged since then, from a peak of 118% of GDP in 2010 to 54%. Australia’s closest competitor now is Canada, which has a household debt level 22% lower than Australia’s, and an average trade deficit of 1.4% of GDP, versus Australia’s long-run average of 3.2%.
Why does this matter? Because Australia’s two records are related: Australia avoided a recession in 2008 only by adding additional leverage to its already over-indebted household sector, and the only ways that Australia can keep its winning streak on GDP growth going (given that its government is obsessed with trying to run a surplus) is to either to achieve a huge trade surplus, or for the household sector to continue piling on debt faster than GDP itself grows. A trade surplus is one of three ways to increase both aggregate demand and the amount of money in an economy:3 goods you sell to foreigners are paid for in US dollars, which the exporter then effectively sells to its country’s Central Bank in return for domestic currency (on that front, The Netherlands is, like Germany, a huge beneficiary of the Euro).
If the British economy crashes as a result of Brexit, it will not vindicate economists. It will simply illustrate once again, their failure. I and my colleagues at Policy Research in Macroeconomics (PRIME) believe there is urgent need for an independent, public inquiry into the economics profession, and its role in precipitating both the financial crisis of 2007-9, the subsequent very slow ‘recovery’; and in the British European referendum campaign. Financial disarray is not unlikely under Brexit, but whether this turns into anything material depends in the first instance on economic policy. How can we trust economists at the Treasury not to impose more disastrous policies? Economists have once again proved themselves not only irrelevant, but a dangerous irrelevance. For too long they have resisted call after call for reform. If they will not do it themselves then it is time for others to take control.
The profession should be brought to account through a public inquiry into the this failure. In voting to leave the EU, England overwhelmingly has rejected economics – and in particular the dominant economic narrative. Unfortunately, the economics profession as a whole cannot resign, though perhaps the President of the RES, Andrew Chesher, should consider his position. Because this hardship is indirectly a consequence of the economics profession. Economists led the way to financial liberalisation of the past 40 years, which led to soaring levels of debt, crises and financial ruin. Economists dictated the terms for austerity that has so harmed the economy and society over the past years. As the policies have failed, the vast majority of economists have refused to concede wrongdoing, nor have societies been offered alternative economics policies.
While it is risky to second guess public opinion, it may just be that the prospect of hardship to come might not have been very compelling for those already suffering the hardship of low wages, insecure low-skilled jobs, bad housing, high rents, an under-resourced and increasingly privatised NHS, and other forms of public sector ‘austerity’. With this historic vote, the British people have not just rejected the EU. They have done something that should worry the British establishment, and their friends in the City of London, and internationally, far more. Perhaps most symbolically, even the Queen suggested they did not know what they were doing. It is hardly surprising, therefore, that the British public did not find the opinion of Remain ‘experts compelling’.
As the nightmare of the Grenfell Tower disaster continues to unfold, one of the many painful questions being asked by survivors is: ‘Where are we going to live now?’ Kensington & Chelsea Council have still been unable to give firm assurances that residents will be rehoused in the area, issuing a statement on Friday afternoon (later contradicted) that “Given the number of households involved, it is possible the council will have to explore housing options that may become available in other parts of the capital”. On Friday, the Times reported that Jeremy Corbyn had an alternative solution. “Corbyn: seize properties of the rich for Grenfell homeless” ran its above-the-fold headline (£). This was not, of course, what Corbyn had actually proposed, as the article itself revealed.
In a parliamentary debate, the Labour leader had suggested that “Properties must be found, requisitioned if necessary, to make sure those residents do get rehoused locally… It cannot be acceptable that in London you have luxury buildings and flats kept as land banking for the future while the homeless and the poor look for somewhere to live.” Not quite the State appropriation of private property conveyed by the sub-editor’s fevered headline, then – but a proposal for making better use of empty housing which happens to be supported by 59% of the British public, according to YouGov. So how many empty homes are there in Kensington? A lot, it turns out. The Department for Communities and Local Government regularly publishes statistics on vacant dwellings, broken down by local authority area.
The latest figures for Kensington & Chelsea reveal there are 1,399 vacant dwellings in the borough, as of April 2017 – and the number hasn’t dropped below a thousand for over a decade. 600 people lived in Grenfell Tower – so there are more than enough empty homes in the borough to house them all, if the properties could be accessed. But where are these empty homes? And who owns them? It turns out that Kensington Council themselves know precisely where they are. In a report published in July 2015, the council’s Housing and Property Scrutiny Committee examined in detail the problem of ‘buy to leave’ in the borough. ‘Buy to leave’ is the phenomenon of purchasing a property where the buyer has no intention to live in it; where the home is regarded purely as an investment – one that, in London’s super-heated property market, will rapidly accrue in value.
The council’s report used a variety of methods to locate empty housing, from council tax registers and payment data, to energy use and Land Registry records. Their findings broadly corroborate central government stats – that there are around a thousand long-term empty homes in Kensington & Chelsea. And on page 13 of the report, they display an extraordinary map of the 941 homes classified as unoccupied dwellings for the purposes of council tax:
Saying that you don’t care about privacy because you have nothing to hide is no different than saying you don’t care about freedom of speech because you have nothing to say.” That comment was made by famed whistleblower Edward Snowden during a recent interview on the Ron Paul Liberty Report. In his conversation with Dr. Paul and Daniel McAdams, published Tuesday, an articulate Snowden discusses the true meaning of freedom, the nature of the deep state, and even his upbringing as a child of a government family. “I’d like to know a little bit, what do you do all day long?” a genuinely curious Dr. Paul asks as his opening question. After talking about the insanity that erupted — both in the political spectrum and his personal life — following the revelations he made back in 2013, Snowden says he’s now become a hot commodity for groups championing causes.
“They want me to sort of front for these issues of privacy and civil liberties and protection of people’s rights,” Snowden replies. “And I want to do what I can, but I’m not a politician. I’m an engineer.” The whistleblower goes on to talk about how he’s now, at long last, finally able to devote time to more practical applications. For him, this means focusing on the area that holds the key to finding a balance between rights and laws in the digital age — technology. “How technically is this even happening?” Snowden poses, digging straight to the heart of the issue of mass surveillance. “How is it that so many governments are spying on so many people? Because even if we pass the best legal reforms in the world in the United States, that doesn’t do anything against China, or Russia, or Germany, or France or Brazil or any other country in the world.”
Continuing, Snowden says that future generations’ rights and protections will be dependent on the current generation’s ability to adapt to a constantly shifting environment: “We need to find new means, new mechanisms, for enforcing these rights in the new times. And I think that’s going to be primarily through science and technology.”
Brazil’s federal police has said that investigators have found evidence the president, Michel Temer, received bribes to help businesses, raising a new threat that the embattled leader could be suspended from office pending a corruption trial. Temer has been under investigation due to plea bargain testimony by the wealthy businessman Joesley Batista of the giant meatpacking company JBS that linked the president and an aide to bribes and the president to an alleged endorsement of hush money for jailed ex-House Speaker Eduardo Cunha. Temer has denied any wrongdoing and insists he will not resign. If Brazil’s top prosecutor agrees with the federal police recommendation, Congress will decide whether Temer should be investigated by the supreme court, which is the only body that can formally investigate the president.
If two-thirds of Congress voted to allow the investigation, Temer would be suspended from office pending trial. In a report published on Tuesday by Brazil’s top court, federal police investigators said they had enough evidence of bribes being paid to warrant a formal investigation of Temer for “passive corruption” – Brazil’s charge for the act of taking bribes. It said former Temer aide Rodrigo Rocha Loures directly received bribes from JBS on the president’s behalf. A previously released video made by investigators shows Loures carrying a suitcase filled with about $150,000 in cash allegedly being sent from JBS to the president. Loures later gave the bag and most of the money to Brazil’s federal police, authorities have said.
After recruiting Trump, the KGB and Moscow have clearly also managed to make all House Republicans their puppets, because the Senate bill that passed last week and slapped new sanctions on Russia (but really was meant to block the production on the Nord Stream 2 gas pipeline from Russia and which Germany, Austria and France all said is a provocation by the US and would prompt retaliation) just hit a major stumbling block in the House. At least that’s our interpretation of tomorrow’s CNN “hot take.” Shortly after House Ways and Means Chairman Kevin Brady of Texas said that House leaders concluded that the legislation, S. 722, violated the origination clause of the Constitution, which requires legislation that raises revenue to originate in the House, and would require amendments, Democrats immediately accused the GOP of delaying tactics and “covering” for the Russian agent in the White House.
“House Republicans are considering using a procedural excuse to hide what they’re really doing: covering for a president who has been far too soft on Russia,” Senate Minority Leader Chuck Schumer of New York said in a statement. “The Senate passed this bill on a strong bipartisan vote of 98-2, sending a powerful message to President Trump that he should not lift sanctions on Russia.” And, if the House does pass it, a huge diplomatic scandal would erupt only not between the US and Russia, but Washington and its European allies who have slammed this latest intervention by the US in European affairs… a scandal which the Democrats would also promptly blame on Trump. That said, the bill may still pass: Brady pushed back against Democrat suggestions that House GOP leadership is trying to delay the bill, stressing that he thought the Senate legislation was sound policy.
“I strongly support sanctions against Iran and Russia to hold them accountable. We were willing to work with the Senate throughout the process, but the final bill and final language violated the origination clause in the Constitution,” Brady told reporters on Tuesday. “I am confident working with the Senate and Chairman [Ed] Royce that we can move this legislation forward. So at the end of the day, this isn’t a policy issue, it’s not a partisan issue, it is a Constitutional issue that we will address.”
This is your fault, Clinton Democrats. You created this, and if our species is plunged into a new world war or extinction via nuclear holocaust, it will be your fault. You knuckle-dragging, vagina hat-wearing McCarthyite morons made this happen. American military provocations against the pro-Assad coalition in Syria are fast becoming a daily occurrence. In response to the US air force’s gunning down of a Syrian military plane on Sunday, Russia has cut off its hotline with which it was coordinating operations with America to avoid aerial collisions, and has warned that all US aircraft west of the Euphrates river will now be tracked and treated as potential targets. Today, 25 miles northwest of the Russian enclave of Kaliningrad, a US reconnaissance plane was intercepted by an armed Russian aircraft which came within five feet of the plane’s wingtip.
This on the same day that the US shot down yet another Iranian military drone in Syria. Clintonists have been working tirelessly since the election to manufacture these new Cold War tensions. Stephen Cohen, easily America’s foremost authority on US-Russia relations, has warned again and again that the political pressures being placed on the Trump administration to maintain escalations with Russia without conceding an inch has placed our species in a situation that is in some ways even more dangerous than those we faced at the height of the Cuban Missile Crisis. If Kennedy had had to negotiate that crisis while being pressured by his entire country to keep escalating tensions with the USSR without yielding an inch, there is no way any terrestrial life would have existed beyond 1962. The Clintonists (along with their neocon buddies on the other side of the aisle) are responsible for creating those pressures.
“You know it’s easy to joke about this, except that we’re at maybe the most dangerous moment in US-Russian relations in my lifetime, and maybe ever. And the reason is that we’re in a new cold war, by whatever name.
We have three cold war fronts that are fraught with the possibility of hot war, in the Baltic region where NATO is carrying out an unprecedented military buildup on Russia’s border, in Ukraine where there is a civil and proxy war between Russia and the west, and of course in Syria, where Russian aircraft and American warplanes are flying in the same territory. Anything could happen.”
~ Stephen Cohen
It wasn’t enough for these Democratic neocons to try and elect a woman who had been pushing for dangerous escalations with Russia since long before any hacking allegations and who campaigned on a promise to invade Syria and seize control of an airspace wherein Russian military planes were conducting operations. No, once their initial bid to start World War 3 failed, these deranged death cultists began attacking Trump for any movement away from escalations with Russia or regime change in Syria and showering him with praise when he launched a missile strike against a Syrian airbase. The current administration is culpable for its own actions and should be unequivocally condemned for bowing to these pressures instead of honoring Trump’s campaign promises of pursuing detente with Russia and avoiding regime change in Syria, but if Clintonists had been pushing for peace instead of war this entire time the situation would doubtless look very, very different.
Iran has accused the United States of interfering in its domestic affairs after calls by the US Secretary of State to support “elements” that would ensure a “peaceful transition” in the Islamic Republic. Tehran also officially delivered a note of protest to the UN. Speaking last Wednesday before the House Foreign Affairs Committee, Rex Tillerson said Washington will support efforts of a regime change in Iran. “Our policy towards Iran is to push back on this hegemony, contain their ability to develop obviously nuclear weapons, and to work toward support of those elements inside of Iran that would lead to a peaceful transition of that government. Those elements are there, certainly as we know,” Tillerson said on June 14. In addition to voicing Washington’s apparent support of a regime change, Tillerson also said the US could pursue sanctions on Iran’s entire Islamic Revolutionary Guard Corps.
Tillerson’s remarks sparked an avalanche of criticism and condemnation from Iran. In the latest development, the Iranian Foreign Ministry summoned the Swiss charge d’affaires to Tehran to protest Washington’s policy. The Embassy of Switzerland represents American interests in the Islamic Republic after the US cut diplomatic relations with Iran in April 1980 in the wake of the 400-day US Embassy hostage crisis of 1979-1981. “Following the interfering and meddling statements made by the US Secretary of State Rex Tillerson… the charge d’affaires of the European country was summoned to express Iran’s complaint about Tillerson’s anti-Iran remarks in the country’s House of Representatives,” Iran’s Foreign Ministry spokesperson said in a statement, Mehr News reported.
[..] Tillerson’s remarks “is a brazen interventionist plan that runs counter to every norm and principle of international law, as well as the letter and spirit of UN Charter, and constitutes an unacceptable behavior in international relations,” Iran’s UN Ambassador Gholamali Khoshroo said in the letter. Tehran further accused the US of violating the 1981 Algiers Accords, a set of agreements signed by Washington and Tehran to end the Iran hostage crisis. “The United States pledges that it is and from now on will be the policy of the United States not to intervene, directly or indirectly, politically or militarily, in Iran’s internal affairs,” Point I of the Accord reads.
On the ground, the Syrian army is now undertaking one of its most ambitious operations since the start of the war, advancing around Sueda in the south, in the countryside of Damascus and east of Palmyra. They are heading parallel with the Euphrates in what is clearly an attempt by the government to “liberate” the surrounded government city of Deir ez-Zour, whose 10,000 Syrian soldiers have been besieged there for more than four years. If they can lift the siege, the Syrians will have another 10,000 soldiers free to join in the recapture of more territory. More importantly, however, the Syrian military suspects that Isis – on the verge of losing Raqqa to US-supported Kurds and Mosul to US-backed Iraqis – may try to break into the garrison of Deir ez-Zour and declare an alternative “capital” for itself in Syria.
In this context, the American strike on Monday was more a warning to the Syrians to stay away from the so-called Syrian Democratic Forces – the facade-name for large numbers of Kurds and a few Arab fighters – since they are now very close to each other in the desert. The Kurds will take Raqqa – there may well have been an agreement between Moscow and Washington on this – since the Syrian military is far more interested in relieving Deir ez-Zour. The map is quite literally changing by the day. But the Syrian military are still winning against Isis and its fellow militias – with Russian and Hezbollah help, of course – although comparatively few Iranians are involved. The US has been grossly exaggerating the size of the Iranian forces in Syria, perhaps because this fits in with Saudi and American nightmares of Iranian expansion. But the success of the Assad regime is certainly troubling the Americans – and the Kurds.
So who is fighting Isis? And who is not fighting Isis? Russia claims it has killed the terrible and self-appointed “caliph of the Islamic State”, al-Baghdadi. Russia says it is firing Cruise missiles at Isis. The Syrian army, supported by the Russians, is fighting Isis. I have witnessed this with my own eyes. But what is America doing attacking first Assad’s air base near Homs, then the regime’s allies near Al-Tanf and now one of Assad’s fighter jets? It seems that Washington is now keener to strike at Assad – and his Iranian supporters inside Syria – than it is to destroy Isis. That would be following Saudi Arabia’s policy, and maybe that’s what the Trump regime wants to do. Certainly, the Israelis have bombed both the Syrian regime forces and Hezbollah and the Iranians – but never Isis.
Greece will need additional debt relief to regain the trust of investors, even though it’s likely to exit its bailout with a €9 billion ($10 billion) cash buffer, the European Commission said in a draft report obtained by Bloomberg. The country’s €86 billion third bailout program from the European Stability Mechanism, agreed by Prime Minister Alexis Tsipras and European creditors in 2015, will expire in August 2018 with €27.4 billion left unused, the commission estimates in the so-called “compliance report” dated June 16. Disbursements up to then should also “cater for the build-up of seizable cash buffer” of around €9 billion, according to the document. The report contains an analysis of the country’s public debt that points to potential wrangling with the IMF following an agreement last week to disburse bailout funds, in which the fund only agreed to a new program “in principle.”
Even as the commission’s analysis points “to serious concerns regarding the sustainability of Greek public debt,” its assumptions about the country’s future growth prospects are still more optimistic than those of the IMF. The IMF hasn’t disbursed funds to Greece in almost three years on fears that the country’s debt is unsustainable. Last week’s compromise deal averts a Greek financing crisis this summer by allowing release of €8.5 billion of ESM funds, while the IMF holds out for more Greek debt relief from European creditors at a later stage before it gives out new loans. The June 15 deal by euro-area finance ministers commits to capping gross financing needs at 15% of GDP for the medium term, and 20% thereafter. The country’s gross financing needs will drop to 9.3% of GDP in 2020 from 17.5% this year, before rising again and surpassing 20% after 2045, according to the baseline scenario of the commission’s debt sustainability report.
[..] The baseline scenario is based on nominal GDP growth rates between 3 and 4% until 2060, considerably higher than past IMF baseline estimates. The fund’s own assessment will be released before its executive board meets to approve the in-principle stand-by arrangement next month. The debt dynamics “become explosive” from the mid-2030s in the the most adverse scenario. In this scenario, which is still more optimistic than IMF assumptions, Greece’s gross financing needs exceed 20% in 2033, reaching 56% by 2060, while debt skyrockets to 241.4% of Greek GDP by 2060.
The deal struck last week between Greece and its euro-zone creditors is business as usual – and that’s not a good thing. This protracted game of “extend and pretend” serves nobody’s long-term interests: not those of the Greek government, the IMF or, most of all, the people of Greece. Euro-zone finance ministers have unlocked a payment of €8.5 billion ($9.5 billion), the newest installment of a rescue plan worth €86 billion. This will let Athens make debt repayments of €7 billion that fall due next month. But there’s still no agreement on how to get Greece’s debt burden under control. The IMF had previously insisted that this question should be settled now. It was right, and it should have stuck to that position. The new agreement fails to recognize what everybody knows: that Greece’s debt is unsustainable on the current terms.
In an effort to pretend otherwise, Athens has promised primary budget surpluses (meaning net of interest payments) of 3.5% of GDP until 2022, and then of “above but close to 2%” until 2060. True, the Greek economy achieved a better-than-expected primary surplus last year. As the European recovery gathers pace, there could be more good fiscal news. But the idea that Greece can maintain this degree of fiscal control for the next 40 years is ridiculous. For instance, at some point during the next four decades, there might be another recession. Stranger things have happened. The blow to the credibility of the IMF could prove to be lasting damage. The fund points to its refusal to disburse money at this point as proof it’s serious about debt relief. Yet it remains a partner in a project that, by its own analysis, is bound to fail.
It should have said, enough. Europe doesn’t need the fund’s money or expertise. Governments only sought the fund’s seal of approval – and should have been denied it. Granted, the euro zone has done a lot to support Greece since its fiscal crisis began. Athens has been granted no fewer three rescue packages, worth €326 billion€ in total. The euro zone has allowed generous grace periods for official loans, extended their maturities and lowered the interest rate. As a result, Greece’s debt repayments are actually quite manageable for now.
The value of the local property market has plummeted some €2 trillion since the outbreak of the financial crisis eight years ago, according to the calculations of a Greek real estate consultancy. CBRE-Atria calculated that the Greek market has lost 65% of its value in the years from 2009 to 2017, dropping from about €3 trillion to €1 trillion today. The head of the consultancy, Yiannis Perrotis, says the problem is that the majority of properties are not quality assets, which means that the economic crisis has affected them more by increasing their value loss. “Properties such as old apartments in less popular areas, fields in non-touristic areas, stores or offices of low standards in secondary spots,” Perrotis explains, have been hardest hit.
The drop in values has been aggravated by the imposition of high taxation. It’s easy to find examples of properties whose value has dropped 60-65% in the last few years: Data from estate agents show that a new fifth-floor apartment of 60 square meters in Kypseli, central Athens, which sold for €150,000 in 2008, was resold at end-2016 for just €60,000, a decline of 60%; a newly built apartment in Ambelokipi, also in Athens, was sold for €270,000 before the crisis, and today is for sale for just €120,000, down 55%.
More than 120 refugees are feared to have drowned in the Mediterranean after a boat sank off the Libyan cost on Friday, the International Organization for Migration (IOM) has said. Four survivors who were rescued by Libyan fishermen said the boat sank after its motor was stolen by human traffickers, according to IOM spokesman Flavio Di Giacomo. After drifting for a while, the boat, believed to have been carrying 130 refugees — most of them of Sudanese and Nigerian nationality — capsized. News of the deaths comes on World Refugee Day, during which NGOs encourage the world to commemorate and show support for those forced to flee persecution. But there is little sign of the plight of refugees in the Mediterranean abating.
The death toll passed 1,000 in April — marking a record high with that figure not reached until the end of May last year — and the latest count by the IOM shows at least 1,850 have lost their lives on the dangerous crossing. Up to 146 people drowned when a refugee boat sunk in March, and up to 250 refugees, including a baby, were reported to have drowned in May after two refugee boats sunk in the Mediterranean Sea. It comes after a report earlier this month accused the EU of disregarding human rights and international law in its desperation to slow refugee boat crossings across the Mediterranean Sea. The bloc has pledged tens of millions of euros in funding for authorities in Libya, despite the country’s ongoing civil war and allegations of torture, rape and killings earning it the moniker “hell on Earth” among migrants, according to the report, published by the US-based Refugees International (RI) group.
U.S. President Donald Trump has told “confidants,” including the head of the Environmental Protection Agency Scott Pruitt, that he plans to leave a landmark international agreement on climate change, Axios news outlet reported on Saturday, citing three sources with direct knowledge. On Saturday, Trump said in a Twitter post he would make a decision on whether to support the Paris climate deal next week. A source who has been in contact with people involved in the decision told Reuters a couple of meetings were planned with chief executives of energy companies and big corporations and others about the climate agreement ahead of Trump’s expected announcement later in the week. It was unclear whether those meetings would still take place.
“I will make my final decision on the Paris Accord next week!” he tweeted on the final day of a G7 summit in Italy at which he refused to bow to pressure from allies to back the landmark 2015 agreement. The summit of G7 wealthy nations pitted Trump against the leaders of Germany, France, Britain, Italy, Canada and Japan on several issues, with European diplomats frustrated at having to revisit questions they had hoped were long settled. [..] Although he tweeted that he would make a decision next week, his apparent reluctance to embrace the first legally binding global climate deal that was signed by 195 countries clearly annoyed German Chancellor Angela Merkel. “The entire discussion about climate was very difficult, if not to say very dissatisfying,” she told reporters. “There are no indications whether the United States will stay in the Paris Agreement or not.”
The price of new homes is quickly diverging in Canada and the US. Data from the Canadian Housing and Mortgage Corporation (CMHC) show that new homes are selling for substantially more than the same time last year. Meanwhile south of the border, data from the US Bureau of Census show that new home prices are on the decline. This has lead to an even wider gap between the average price of a new home in Canada and the US. The price of a new home across Canada is up for the second month in a row. The average sale price in April was CA$751,881 (US$559,123). This represents an 11% increase from the same time last year, when measured in Canadian dollars. When compared in US dollars, that increase drops to a much more conservative 2.64%. Even after factoring in the loonie’s decreased buying power in Canada, new home prices still climbed.
American new home builders aren’t seeing such steep climbs in sale prices. Actually, they aren’t seeing climbs at all. The average price of a new home in the US was CA$495,271 (US$368,300). This represents a 3% decline from the same time last year, when measured in US dollars. In Canadian dollars, this was a 0.49% decline from the same time last year. Both forms of measurement show declining home prices in the US, curious since their economy is in a much better state than Canada right now. New homes are trading at substantially higher values in Canada than the US in April. The average new home in April 2017 was 51% higher in Canada than the US. The same time last year, prices in Canada were only 36% higher. It appears in a post-crash United States, new home buyers are taking much more conservative strides. In a hasn’t-crashed-in-decades Canada, new home buyers are optimistic about future values.
Of all the dangers in the world of finance, the enduring low level of market volatility is the most significant. How quiet is quiet? Recently, the six-month realized volatility for the S&P 500 dipped to 6.7 percent, lower than even the period leading up to the financial crisis of 2008-09. During the mid-’90s, volatility was as low as it is now, but the size, complexity and interlinkages of financial market exposures were far less significant. Now, fluctuations are severely muted, and thus send a false signal of safety to both investors and policy makers who misread the calm as an “all clear” sign, dismissing the events above as insufficiently relevant. The result is an inability to appreciate how quickly market conditions can change, especially as trading strategies that capitalize on quiet markets become vulnerable to unwind, serving to amplify a risk-off event.
[..] There is an important debate in markets now about the causes of low realized volatility. A decline in the correlation among stocks, a global economy on more stable footing and a decline in perceptions of systemic risk (a euro-zone unraveling, for example) are among the factors. We should appreciate the importance of money flows as well. According to ETF.com, the exchange-traded fund industry is on pace for $500 billion in new asset growth in 2017. These vehicles can provide cheap, liquid access to market risk exposures. They simply put the money received to work in passive fashion, without evaluating the risk/return trade-off. The flows themselves are a factor in the positive returns and the low volatility that, in turn, attract additional flows.
What results is a dangerous circularity. Recall the period of wonderful outcomes preceding the financial crisis. The demand for housing spurred price appreciation, which enabled mortgage credit to be supplied at increasingly generous terms. The most suspect credit cannot default if the value of the collateral keeps appreciating and, as a result, the supply of credit keeps expanding. The fear of missing out is also supremely powerful. The conservative individual becomes less so when he or she sees a neighbor flipping houses with success. Similarly, the conservative lender is forced to compete with more aggressive suppliers of credit. For lenders, not being accommodative enough during the go-go years can amount to an existential business question.
Today’s risks differ meaningfully from those of a decade ago. However, the excess amount of capital chasing opportunity at increasingly aggressive terms is similar. The competition to put money to work, then, like now, results in low volatility. Investors are in danger of misinterpreting this tranquility as conveying safety when crowded positioning is resulting in more, not less, risk. While spending money on hedging is especially difficult in a seemingly benign environment, investors should be actively vigilant to market risks, devoting time to an action plan that helps protect portfolio wealth against the inevitable return of volatility.
In the first week of the General Election campaign our ComRes poll for the Sunday Mirror gave Theresa May a magic 50% of the vote. She looked unstoppable. Today’s ComRes poll shows Jeremy Corbyn has narrowed her lead to 12 points , six points up on two weeks ago. As the man who invented the Swingometer says he’s never seen swings like it. If the PM goes into polling day on June 8th with this kind of lead she would not be unhappy. It would give her an overall majority of 62. Not the landslide she wished for perhaps, but with enough MPs to get her own way every time. But we are still 11 days from polling day – and on present form that’s enough for Mr Corbyn to pick up another 12 points. And that puts him in striking distance of No10. Our survey puts the Conservatives on 46%, Labour on 34% and the Lib Dems down two points on 8%.
Ukip are unchanged in fourth place at 5%. But the most striking findings are that the Labour leader’s personal ratings are up in every category while Mrs May’s are down in all but one. Mrs May’s Dementia Tax on the elderly and her U-turn over how to pay for it has clearly boomeranged. The Manchester bombing appears to have had little effect on voting intention. Mrs May is still way ahead of Mr Corbyn as being best to deal with terrorism. But she’s five points down on two weeks ago. Only a fifth of voters say she is most likely to protect elderly people dependent on social care while Mr Corbyn scores 43%. Curiously the mess she made of the Dementia Tax has not damaged her among voters aged 65 plus with nearly seven in ten saying they will still vote for her. But Mr Corbyn is ahead in every age group until pollsters get to those 44 or older.
From the Balkans to the US, walls are going up, not down, according to demographer and The Fourth Turning author Neil Howe. Speaking to a packed crowd at Mauldin Economics’ Strategic Investment Conference in Orlando, Howe said we are reliving many of the same trends and changes of the 1930s. “Worldwide, people are losing trust in institutions,” he said. “Trust in the military, small business, and police is still there. But trust in democracies, media, and politicians is dropping.” When was the last time we saw these changes and the rise of right-wing populism?” he asked. “The 1930s.” Howe’s statement is borne out of a June 2016 Gallup poll. When poll takers were asked how much confidence they had in institutions in American society, the results were troubling.
Just 15% said they had a “great deal” of confidence in the US Supreme Court. Banks trailed behind at 11%, followed by the criminal justice system (9%), newspapers (8%), and big business (6%). Meanwhile, just 16% expressed a “great deal” of confidence in the presidency, with that number plummeting to 3% for Congress. In his keynote, Howe shared his forecasting logic: “My method is to step back and realize one thing: There is something we know about the world in 20 years’ time. The people who live there will be all of us, 20 years older and playing a different role. I call this ‘looking along the generational diagonal.’ The critical thing to remember about the current crisis period is that what comes next will be an era in which there is a new order.
According to the Strauss-Howe generational theory, as this new order takes root, individualism declines and institutions are strengthened. “History is seasonal, and winter is coming,” Howe has said. But after winter, comes spring. As the American Revolution was followed by calm, as the Civil War was followed by reconstruction and a gilded age, and as the Great Depression and World War II were followed by an age of peace and prosperity, so too will this crisis period be followed by a calm, stable era. It’s simply a matter of time.
The “Russian interference in the 2016 United States elections” even exists as a factual event in Wikipedia, not as an allegation or a theory. But the factual nature of it is not so much asserted as brushed aside. Former CIA Director John Brennan, in the same Congressional testimony in which he took the principled stand “I don’t do evidence,” testified that “the fact that the Russians tried to influence resources and authority and power, and the fact that the Russians tried to influence that election so that the will of the American people was not going to be realized by that election, I find outrageous and something that we need to, with every last ounce of devotion to this country, resist and try to act to prevent further instances of that.” He provided no evidence. Activists have even planned “demonstrations to call for urgent investigations into Russian interference in the US election.”
They declare that “every day we learn more about the role Russian state-led hacking and information warfare played in the 2016 election.” (March for Truth.) Belief that Russia helped put Trump in the White House is steadily rising in the U.S. public. Anything commonly referred to as fact will gain credibility. People will assume that at some point someone actually established that it was a fact. Keeping the story in the news without evidence are articles about polling, about the opinions of celebrities, and about all kinds of tangentially related scandals, their investigations, and obstruction thereof. Most of the substance of most of the articles that lead off with reference to the “Russian influence on the election” is about White House officials having some sort of connections to the Russian government, or Russian businesses, or just Russians.
It’s as if an investigation of Iraqi WMD claims focused on Blackwater murders or whether Scooter Libby had taken lessons in Arabic, or whether the photo of Saddam Hussein and Donald Rumsfeld shaking hands was taken by an Iraqi. A general trend away from empirical evidence has been extensively noted and discussed. There is no more public evidence that Seth Rich (a Democratic National Committee staffer who was murdered last year) leaked Democratic emails than there is that the Russian government stole them. Yet both claims have passionate believers. Still, the claims about Russia are unique in their wide proliferation, broad acceptance, and status as something to be constantly referred to as though already established, constantly augmented by other Russia-related stories that add nothing to the central claim. This phenomenon, in my view, is as dangerous as any lies and fabrications coming out of the racist right.
A shadowy international mercenary and security firm known as TigerSwan targeted the movement opposed to the Dakota Access Pipeline with military-style counterterrorism measures, collaborating closely with police in at least five states, according to internal documents obtained by The Intercept. The documents provide the first detailed picture of how TigerSwan, which originated as a U.S. military and State Department contractor helping to execute the global war on terror, worked at the behest of its client Energy Transfer Partners, the company building the Dakota Access Pipeline, to respond to the indigenous-led movement that sought to stop the project. Internal TigerSwan communications describe the movement as “an ideologically driven insurgency with a strong religious component” and compare the anti-pipeline water protectors to jihadist fighters.
One report, dated February 27, 2017, states that since the movement “generally followed the jihadist insurgency model while active, we can expect the individuals who fought for and supported it to follow a post-insurgency model after its collapse.” Drawing comparisons with post-Soviet Afghanistan, the report warns, “While we can expect to see the continued spread of the anti-DAPL diaspora … aggressive intelligence preparation of the battlefield and active coordination between intelligence and security elements are now a proven method of defeating pipeline insurgencies.” More than 100 internal documents leaked to The Intercept by a TigerSwan contractor, as well as a set of over 1,000 documents obtained via public records requests, reveal that TigerSwan spearheaded a multifaceted private security operation characterized by sweeping and invasive surveillance of protesters.
As policing continues to be militarized and state legislatures around the country pass laws criminalizing protest, the fact that a private security firm retained by a Fortune 500 oil and gas company coordinated its efforts with local, state, and federal law enforcement to undermine the protest movement has profoundly anti-democratic implications. The leaked materials not only highlight TigerSwan’s militaristic approach to protecting its client’s interests but also the company’s profit-driven imperative to portray the nonviolent water protector movement as unpredictable and menacing enough to justify the continued need for extraordinary security measures. Energy Transfer Partners has continued to retain TigerSwan long after most of the anti-pipeline campers left North Dakota, and the most recent TigerSwan reports emphasize the threat of growing activism around other pipeline projects across the country.
The best hope yet of reuniting war-partitioned Cyprus has been dashed after reconciliation attempts were brought to an abrupt halt following two years of intense negotiations. The optimism engendered by talks seen as a once-in-a-generation opportunity to unite the Mediterranean island ended when the United Nations special envoy, Espen Barth Eide, announced that he was terminating negotiation efforts. “Without a prospect for common ground, there is no basis for continuing this shuttle diplomacy,” the Norwegian former foreign minister said in a short statement. Eide now enters the long list of diplomats who, for the best part of 50 years, have attempted to solve one of the world’s most intractable diplomatic disputes.
Split between the majority population of Greeks in the south and Turks in the north, Cyprus has been divided since 1974 when Ankara ordered troops to invade the island in response to an Athens-organised coup to unite it with Greece. In Nicos Anastasiades and Mustafa Akinci – the respective leaders of the island’s Greek and Turkish communities – the two sides had found men who were not only moderate and born in the same town – Limassol – but willing to make the sort of concessions necessary to find a solution. Both had got to the point of poring over maps outlining territorial adjustments in a envisaged bi-zonal, bi-communal federation. In January, the first international conference on Cyprus was held at the UN headquarters in Geneva with representatives from Greece, Turkey and Britain – the island’s three guarantor powers.
Dozens of relatives of Islamic State group fighters were killed Friday in Syria in US-led strikes, regime or Russian raids, after the UN urged nations striking the jihadists to protect civilians. Raids by the US-led coalition have pounded IS positions across Iraq and Syria since the jihadist group claimed responsibility for the devastating bombing of a concert in Manchester on Monday. Scores of civilians, many of them families of IS members, have been killed in bombing raids in recent days on the eastern Syrian town of Mayadeen, held by IS since 2014. Early Friday, at least 80 relatives of IS fighters were killed in US-led coalition bombardment, according to the Syrian Observatory for Human Rights.
“The toll includes 33 children. They were families seeking refuge in the town’s municipal building,” said Observatory head Rami Abdel Rahman. “This is the highest toll for relatives of IS members in Syria,” he told AFP. Coalition strikes on the town killed 37 civilians on Thursday night after 15 had been killed on Wednesday, according to the Britain-based Observatory. The US military on Friday confirmed that it had struck “near Mayadeen” on May 25 and 26, but said it was “still assessing the results of those strikes”, according to Pentagon spokesman Eric Pahon. The US military insists that it takes every precaution to avoid hitting civilians, but the United Nations on Friday urged parties bombing IS to do more.
Nearly 10,000 migrants were rescued off the coasts of Italy and Libya this week, as the leaders of G7 gathered for a summit coincidentally held in Sicily. And at least 54 people have drowned in the Mediterranean since Tuesday. Large-scale rescue efforts off the Italian coast on Friday saved 2,200 migrants who risked their lives traveling in unworthy sea vessels to reach Italy. Italian coastguard and commercial boats delivered those rescued to reception centers in Italy. A further 1,200 people were rescued by Libyan ships and taken to Tripoli or Zawiya. Some 6,400 migrants were rescued from the Mediterranean between Tuesday and Thursday. The Italian coastguard also discovered another 10 bodies, bringing to 54 the total number of officially registered deaths this week, officials told AFP.
The biggest tragedy occurred on Wednesday, when 35 migrants drowned, including at least 10 children, after they fell off an overloaded vessel that was hit by a huge wave while being rescued by an aid boat. At least 1,400 people have drowned so far this year trying to make the perilous journey across the sea to Italy, according to UN figures, while more than 50,000 migrants reached Italian coasts, most of them through Libya. Italy has on numerous occasions said that it barely has enough resources to deal with the migrant influx from Libya. The situation has become an EU-wide concern in recent years, with Brussels facing mounting pressure from human rights groups over its handling of the migrant crisis in the Mediterranean.
G7 leaders, who met in Sicily, discussed providing greater assistance to African countries to persuade migrants to stay at home rather than make the dangerous journey across the Mediterranean. However, no concrete plan of action was agreed upon at the end of the two-day summit in Taormina. The G7 only managed to “reaffirm the sovereign rights of states to control their own borders and set clear limits on net migration levels.”
“On April 28, HOOPP CEO Jim Keohane told BNN in an interview that “for every $1 we lend Home Capital, they’re going to provide us with $2 of mortgages as collateral. That’s where we get our protection from.” So the C$2 billion loan would be backed by C$4 billion in mortgages. In other words, in the eyes of Keohane, these mortgages might be actually worth, when push comes to shove, 50 cents on the dollar.”
Home Capital is Canada’s biggest “alternative” mortgage lender. It’s not a bank – which today is part of its problem because it cannot create money to lend out; it has to obtain it first by attracting deposits and borrowing money through other channels. Through its subsidiary, Home Trust, it specializes in high-profit mortgages to risky borrowers, with dented credit or unreliable incomes who don’t qualify for mortgage insurance and were turned down by the banks. This includes subprime borrowers. Since revelations of liar loans surfaced in 2015, things have gone to heck. Now it’s experiencing a run on its deposits. Teetering at the abyss, it obtained a $2 billion bailout loan on Thursday. The terms are onerous. And on Friday, the crux of the deal emerged – the amount of mortgages it has to post as collateral. It’s a doozie.
It sheds some light on what insiders think mortgages and the homes that back them are worth when push comes to shove. A bone-chilling wake-up call for the Canadian housing and mortgage market. This is when the whole construct started falling apart: On July 15, 2015, Home Capital announced that originations of high-margin uninsured mortgages had plunged 16% and originations of lower-margin insured mortgages had plummeted 55%, and that it had axed an unspecified number of brokers. Shares plunged 25% in two days. On July 30, 2015, it disclosed, upon the urging of the Ontario Securities Commission, the results of an investigation that had been going on secretly since September 2014 into “falsification of income information.” Liar loans. It suspended 45 mortgage brokers who’d together originated in 2014 nearly C$1 billion in residential mortgages, or 12.5% of its total.
The scandal festered. Short sellers circled in formation. On April 26, 2017, Home Capital announced that it’s experiencing a run on its deposits. As of the end of March, its subsidiary Home Trust sat on about C$2 billion in high-interest savings accounts (HISA) it is offering to regular savers. But these folks were pulling their money out, it said, and the pace of the run was accelerating. It also disclosed that it was finalizing a $2 billion bailout loan from the Healthcare of Ontario Pension Plan (HOOPP) which has about $70 billion in assets. The loan would “have a material impact on earnings….” So an expensive loan.
Home Trust would pay a non-refundable commitment fee of $100 million; would be required to make an initial draw of $1 billion at an interest rate of 10%; and would pay a 2.5% standby fee on undrawn funds. So the initial $1 billion for the first 12 months would cost it $225 million in fees and interest, a juicy 22.5%! Once the credit line is fully utilized, the cost of the loan would drop to 15%. Its shares collapsed by 65%. On Friday, April 28, it announced that another C$290 million in deposits were yanked out on Thursday, after C$472 had been yanked out on Wednesday. Its HISA deposits were down to C$521 million, having plunged 75% since late March.y
Congress gave itself one more week to agree on a spending bill to fund the U.S. government through September, leading into President Donald Trump’s 100th day in office Saturday by keeping the lights on. The 382-30 House vote Friday was followed quickly by unanimous Senate passage of the stopgap spending bill hours before the shutdown deadline. Trump signed the bill Friday evening, according to a White House official. “We feel very good” that lawmakers will be able to pass a full spending bill next week, White House press secretary Sean Spicer told reporters earlier in the day. Leaders of both parties say they’re close to agreement on a broader spending plan after Republicans signaled they would accept Democratic demands that the Trump administration promise to continue paying Obamacare subsidies and to drop its bid for immediate funds for a wall on the Mexican border.
“You shouldn’t create artificial deadlines,” Alabama Republican Representative Gary Palmer said in support of the short-term measure. “If there are things we need to work through, we need to take the time to work through them.” Vermont Senator Patrick Leahy, the top Democrat on the Appropriations Committee, said both sides have made progress on issues including more funds for the National Institutes of Health, opioid funding for states, Pell college grants and money for transit. But he said the talks remain snagged over Republican demands for policy “riders.” “Let’s not govern by partisan manufactured crisis,” he said on the Senate floor. “Stop posturing,” he added as he called for a speedy resolution on the bill sometime next week. “This is no way to govern,” Leahy said before the Senate vote.
Sixteen House Republicans voted against Friday’s stopgap measure. The short-term fix to ward off a government shutdown – on a deadline set months ago – shows the stubborn dysfunction of Congress even with a unified Republican government. House GOP leaders on Thursday abandoned efforts to vote this week on their plan to repeal and replace Obamacare for lack of support in their party. A vote is still possible next week.
“The King can do no wrong.”
—William Blackstone, Commentaries on the Laws of England
“When the president does it, that means that it is not illegal.”
—Ex-President Richard Nixon, interview with David Frost
The question at bar is why the U.S. Department of Justice has failed to prosecute any too-big-to-fail banks or—more importantly—their bankers, even for admitted crimes. It’s a crucial question, because after eight straight years of unremitting prosecutorial failure, it looks very much as if a select group of top banks can, in fact, do no wrong. If that’s the case, then our constitutional republic isn’t merely in trouble. It’s dead. A person or group of people who satisfy Blackstone’s criterion for ultimate sovereign power—the power to commit crimes with impunity—can’t exist in a nation where the law reigns supreme. And yet here we are a decade after the financial crisis began in earnest, and not one TBTF bank executive has gone to jail.
Legally, the TBTF banks are indistinguishable from the King, since the power to commit crimes with impunity swallows all other sovereign powers; such a power isn’t even supposed to exist in the U.S., and yet it does. Moreover, since there can’t be two kings in a kingdom, the entire U.S. government, from the president on down, is just one of the King’s men under this formulation of power. The real job of the U.S. government, then, isn’t to represent the will of the people at all, it’s to do the King’s bidding. A nation that isn’t governed by law is governed by instead by a king—it’s one or the other—and the president’s inferiority to such an above-the-law sovereign was confirmed over 40 years ago with Nixon’s ouster. The president, unlike the King, answers to the law (despite Nixon’s opinion).
Now, you may say that while the TBTF banks might arguably have the de facto power of the King, that’s a far cry from wielding such power formally (i.e., having de jure criminal immunity). The reply to that objection is set forth in this film, “All the Plenary’s Men,” which is a sequel to “The Veneer of Justice in a Kingdom of Crime.” Another objection, raised by the DOJ itself, is that it HAS prosecuted TBTF bankers, citing cases like that of Raj Rajaratnam. These cases, however, in fact reveal the DOJ acting on behalf of the criminal global banking cartel. On that score, the DOJ’s abysmal track record is by now so extensive and so thorough that it’s possible to spot legal patterns in the DOJ’s protracted miscarriage of justice, and, as you’re about to see, those patterns are very deeply disturbing indeed.
What’s been going on cuts right past a garden variety constitutional crisis like Watergate straight to a crisis of sovereignty. The backdrop for all of this is HSBC’s exoneration in December of 2012 for laundering money for drug dealers and terrorists, about which the House Financial Services Committee issued a report in July of 2016. Whether it was due to the political circus in town at the time, or to the Republican authorship of that report (albeit without dissent), it didn’t get nearly the scrutiny it deserved. You see, prosecutors working on the HSBC case were actually going to indict the bank, but they got overruled, and HSBC and its team of criminals skated. The story of how exactly that reversal came about reveals, if not the King himself, then certainly many of the King’s top men.
You can read it in the bodies of the people in the new town square, i.e. the supermarket: people prematurely old, fattened and sickened by bad food made to look and taste irresistible to con those sunk in despair, a deadly consolation for lives otherwise filled by empty hours, trash television, addictive computer games, and their own family melodramas concocted to give some narrative meaning to lives otherwise bereft of event or effort. These are people who have suffered their economic and social roles in life to be stolen from them. They do not work at things that matter. They have no prospects for a better life — and, anyway, the sheer notion of that has been reduced to absurd fantasies of Kardashian luxury, i.e. maximum comfort with no purpose other than to enable self-dramatization. And nothing dramatizes a desperate life like a drug habit. It concentrates the mind, as Samuel Johnson once remarked, like waiting to be hanged.
[..] The eerie thing about reading the landscape of despair is that you can see the ghosts of purpose and meaning in it. Before 1970, there were at least five factories in my little town, all designed originally to run on the water power (or hydro-electric) of the Battenkill River, a tributary of the nearby Hudson. The ruins of these enterprises are still there, the red brick walls with the roofs caved in, the twisted chain-link fence that no longer has anything to protect, the broken masonry mill-races. The ghosts of commerce are also plainly visible in the bones of Main Street. These were businesses owned by people who lived in town, who employed other people who lived in town, who often bought and sold things grown or made in and around town.
Every level of this activity occupied people and gave purpose and meaning to their lives, even if the work associated with it was sometimes hard. Altogether, it formed a rich network of interdependence, of networked human lives and family histories. What galls me is how casually the country accepts the forces that it has enabled to wreck these relationships. None of the news reports or “studies” done about opioid addiction will challenge or even mention the deadly logic of Wal Mart and operations like it that systematically destroyed local retail economies (and the lives entailed in them.) The news media would have you believe that we still value “bargain shopping” above all other social dynamics. In the end, we don’t know what we’re talking about.
I’ve maintained for many years that it will probably require the collapse of the current arrangements for the nation to reacquire a reality-based sense of purpose and meaning. I’m kind of glad to see national chain retail failing, one less major bad thing in American life. Trump was just a crude symptom of the sore-beset public’s longing for a new disposition of things. He’ll be swept away in the collapse of the rackets, including the real estate racket that he built his career on. Once the collapse gets underway in earnest, starting with the most toxic racket of all, contemporary finance, there will be a lot to do. The day may dawn in America when people are too busy to resort to opioids, and actually derive some satisfaction from the busy-ness that occupies them.
The month of April is a nightmare for anyone with a conscience, as we only have until “tax day” — which usually falls on April 15 — to give the taxman what he says he deserves. So if you pay taxes to Uncle Sam and you’re also aware you’re paying for mass murder in the Middle East and in U.S. streets due to the drug war, you should also feel sick to your stomach as you write that check. To a restaurant customer, this may have served as enough incentive to remind his server that taxation is always immoral — but he didn’t stop there. Last week, a customer at a Missouri restaurant gave the waitress a “personal gift” instead of a tip, writing the now popular line “Taxation is theft” in the tip section of the receipt. In a second note, the fiscally conscious customer added: “This is not a tip. This is a personal gift and not subject to federal or state income taxes.”
With major progressive news outlets like ATTN: reporting on this story, left-leaning reporters started to debate wages in the food and service industries, discussing the fact that tips end up being factored as wages, meaning they are always taxable. But as that discussion developed, reporters were quick to realize that when personal gifts are in the mix, the taxman can’t take part of those earnings away. After all, a gift would have to exceed $13,000 to be subject to taxation, meaning that even if the customer had spent hundreds, the “personal gift” would not amount to anything close to the requirements stipulated by the IRS.
With that, ladies and gentlemen, it becomes easier to not only tip with class, but also with substance, giving your waiter a lesson on what’s moral and how to legally go around the rules to make sure they enjoy their full tip — not just the percentage deemed to be fit by the federal government. As this story becomes part of the popular movement ignited by libertarians, expect to see more progressive news outlets becoming familiarized with the actual concept of taxation. What’s left for us to find out is if they are going to change their tune and start attacking people like this customer when the two-party pendulum swings once again and a fully Democratic slate takes over Washington. Are they going to remain consistent in discussing taxation from the point of view of the worker, or are they going to side with the leech? Only time will tell.
Turkish President Recep Tayyip Erdogan said on Saturday if Ankara and Washington were to join forces they could turn the Syrian city of Raqqa into a “graveyard” for Islamic State of Iraq and the Levant (ISIL). Erdogan also suggested he could launch cross-border operations against Kurdish rebels at any time, just days after the military carried out air strikes in Syria and Iraq, drawing concern from the United States. “America, the coalition, and Turkey can join hands and turn Raqqa into a graveyard for [ISIL],” Erdogan told a business summit in Istanbul. “They [ISIL] will look for a place to hide.” Erdogan’s comments come ahead of a meeting with US President Donald Trump on May 16 – their first face-to-face summit since the real estate mogul and reality TV star took office in January.
Ankara is hopeful about a relationship with Washington under Trump after ties frayed in the final years of Barack Obama’s administration, which limited cooperation between the NATO allies. The two countries have bitterly disagreed over the role of the Kurdish People’s Protection Units (YPG) in Syria. Turkey views the YPG as the Syrian extension of the Kurdish PKK group, which has waged a deadly insurgency against the Turkish state since 1984. But the US is concerned that Turkey’s military operations in Syria are more focused on preventing Syrian Kurds from forming an autonomous region in northern Syria, along Turkey’s border, that could embolden Turkey’s own Kurdish minority.
@Furiouskurd: When ISIS was winning Turkey was just watching. Now when ISIS is getting defeated by Kurds, Turkey starts attacking Kurds. Turkey = ISIS.
The Kurdish-led Syrian Democratic Forces (SDF) continued the anti-ISIL Euphrates Rage Operation in Western Raqqa and managed to drive the terrorists out of more neighborhoods in al-Tabaqa city, killing over 40 of them. The SDF engaged in heavy fighting with ISIL in al-Tabaqa city and managed to take control of the neighborhoods of al-Nababeleh, al-Zahra and al-Wahab, killing 23 militants. In the meantime, the Kurdish fighters managed to push ISIL back from al-Wahabah and Radio Station in al-Tabaqa, killing 20 militants and capturing 10 others. In relevant developments in the province on Tuesday, the SDF stormed ISIL’s defense lines and took full control over the villages and settlements of Kabash al-Sharqi, Um al-Tonok, Rayan, Tishrin farm, Mosheirehe al-Shamaliyeh, Mosheirefeh al-Janoubiyeh, al-Rahiyat, Beir Jarbou, Jarwa, al-Hattash, Hazimeh, Khalwa Abideh, Holo Abd, Abareh, al-Kaleteh, Sukriyeh and Zohra, inflicting major losses on ISIL.
The Kurdish forces also won back a key neighborhood in the Southern sector of Tabaqa city following a large advance on its Western urban. In the meantime, the SDF managed to seize control over the Alexandria suburb, and now the Kurds have swept through the adjacent Wahab neighborhood. Kurdish forces also secured the island of Jazirat al-Ayd, a few kilometers North of Lake Assad. According to latest reports, around 40% of Tabaqa city has been brought under Kurdish control with just a few hundred ISIL militants left in its Northern sector and around the city center.
Russia has supported a Chinese initiative in the UNSC intended to stabilize the situation on the Korean peninsula. It calls on the North to refrain from missile and nuclear testing, while the US and South Korea should halt military drills in the area.
“Members of the [UN] Security Council have unanimously called upon DPRK [Democratic People’s Republic of Korea] to stop missile and nuclear tests and to fulfil UNSC resolutions,” the Russian Foreign Ministry said in a statement on Saturday following a United Nations Security Council (UNSC) session held in New York earlier on Friday. The UNSC called for a political and diplomatic solution to the nuclear crisis on the Korean Peninsula, the ministry added.
“In this context, the Russian Federation supported a Chinese proposal for a ‘double suspension’ (Pyongyang is to stop missile and nuclear tests and the US and South Korean militaries are to halt drills near North Korea) as a starting point for political negotiations.” However, the council was not able to agree on a common solution, the ministry added. The UNSC session was joined by Russian Deputy Foreign Minister Gennady Gatilov, who urged Washington and Seoul to reconsider their decision to station a THAAD anti-missile system on the Korean Peninsula, warning that it will serve as a “destabilizing factor” in the region.
Gatilov said the Terminal High Altitude Area Defense (THAAD) had been deployed “in line with the vicious logic of creating a global missile shield,” while warning that it is also undermining the security and deterrent capacities of adjacent states, such as China, thus threatening “the existing military balance in the region.” “It is not only we who perceived this step very negatively. We are once again urging both the United States and the Republic of Korea to reconsider its expediency, and other regional states not to yield to the temptation of joining such destabilizing efforts,” the deputy foreign minister said. Ahead of the UNSC session, Chinese Foreign Minister Wang Yi told reporters that a peaceful solution to the Korean crisis is the “only right choice.” “Peaceful settlement of the nuclear issue on the Korean Peninsula through dialogue and negotiations represents the only right choice that is practical and viable,” Wang said.
Just over one year ago, Brazil’s elected President, Dilma Rousseff, was impeached – ostensibly due to budgetary lawbreaking – and replaced with her centrist Vice President, Michel Temer. Since then, virtually every aspect of the nation’s political and economic crisis – especially corruption – has worsened. Temer’s approval ratings have collapsed to single digits. His closest political allies – the same officials who engineered Dilma’s impeachment and installed him in the presidency – recently became the official targets of a sprawling criminal investigation. The President himself has been implicated by new revelations, saved only by the legal immunity he enjoys. It’s almost impossible to imagine a presidency imploding more completely and rapidly than the unelected one imposed by elites on the Brazilian population in the wake of Dilma’s impeachment.
The disgust validly generated by all of these failures finally exploded this week. A nationwide strike, and tumultuous protests in numerous cities, today has paralyzed much of the country, shutting roads, airports and schools. It is the largest strike to hit Brazil in at least two decades. The protests were largely peaceful, but some random violence emerged. The proximate cause of the anger is a set of “reforms” that the Temer government is ushering in that will limit the rights of workers, raise their retirement age by several years, and cut various pension and social security benefits. These austerity measures are being imposed at a time of great suffering, with the unemployment rate rising dramatically and social improvements of the last decade, which raised millions of people out of poverty, unravelling.
[..] During the past three years, Brazilians have been subjected to one revelation after the next of extreme corruption pervading the country’s political and economic class. Scores of corporate executives and long-time party leaders are imprisoned. They include the head of the Brazilian construction giant Odebrecht, the House Speaker who presided over Dilma’s impeachment, and the former governor of the state of Rio de Janeiro. The current House Speaker, and Senate President, and nine of Temer’s ministers are now targets of criminal investigations for bribery and money laundering, as are numerous governors.
In sum, the vast bulk of the top-shelf political and economic elite have proven to be radically corrupt. Billions upon billions of dollars have been stolen from the Brazilian public. Recently released recordings from the judicial confessions of Marcelo Odebrecht, scion of one of Brazil’s richest families, depict a country ruled almost entirely through bribes and criminality, regardless of the ideology or party of political leaders. And yet, even in the wake of this oozing and incomparable elite corruption, the price that is being paid falls overwhelmingly on the victims – ordinary Brazilians – while the culprits prosper.
The leader of a far-left movement who won nearly 20% of the vote in the first round of France’s presidential election, Jean-Luc Mélenchon, told his seven million voters in a YouTube address on Friday that he would not tell them how to vote in the final-round run-off next weekend. As for himself, Mélenchon said that he would cast a ballot, and that it would not be for Marine Le Pen, the candidate of the far-right National Front, who courted his voters in a video of her own on Friday. But Mélenchon also refused to say, like the leaders of other parties across the political spectrum – and celebrities including the French soccer legend Zinedine Zidane – that he would vote for Le Pen’s centrist rival, the former banker Emmanuel Macron, to stop the far-right from gaining power.
Instead, Mélenchon predicted that forcing France to choose between a candidate of “the extreme right” and one of “extreme finance” would led to a political crisis, and left open the possibility that he would submit a blank ballot, a form of protest vote permitted under French electoral law. (Mélenchon’s platform included provisions for voting to be made mandatory, and for blank ballots to be recognized under law.) The appeal for unity, to construct a barrage, or dam, against the rising tide of the far-right, Mélenchon said, was, in fact, a disguised attempt to force voters like him, who profoundly disagree with Macron’s economic policies, to endorse his project. Amid fears that widespread abstention and protest votes for neither candidate could lower the threshold for Le Pen to win with 50% of the valid votes cast, Mélenchon’s refusal to join the sort of united front against Le Pen that led to her father’s defeat in 2002 caused anxiety to spike.
Matteo Renzi toned down the EU-critical rhetoric of his final months as Italian prime minister during his visit to Brussels on Friday to drum up support for his bid to be restored as head of the Democratic Party (PD) in its primaries this weekend. With aides suggesting on social media that French presidential hopeful Emmanuel Macron’s pro-EU stance, which helped him beat Euroskeptic Marine Le Pen in the election’s first round, could be a boost for Renzi, he talked about “Angela, François and I” when referring to German Chancellor Angela Merkel and French President François Hollande. Renzi even stood in front of a display showing the EU flag, and felt the need to explain why, in the run-up to his failed constitutional referendum that cost him the prime ministership last December, he had removed the EU flag from behind his desk.
“It wasn’t anger, it was calculated gesture,” Renzi told PD followers at a hotel near the European Parliament, adding that it was in response to the European Commission demanding Italian action on its budget deficit when it had been hit by an earthquake. The Italian and international media have speculated about the similarities between Renzi and Macron, with Renzi’s slogan for the PD primary this Sunday — In Cammino (“on the way”) — almost a direct translation of the name of Macron’s centrist political movement, En Marche. One close Renzi aide, Giuliano Da Empoli, wrote on Facebook the day after Macron’s first-round victory on April 23 that the French result “shows that one can be at the same time a convinced pro-European and a harsh critic of the status quo.”
That was the tone Renzi tried to strike in Brussels on Friday, repeating his line that the EU “needs radical change” and taking a dig at Germany for its trade surplus, while warning about the dangers of populism. “With the radicals you win the primary elections but then you lose the elections,” he told the audience. In the French campaign, which comes to a head with the second-round vote on May 7, the candidate closest to Renzi’s Democratic Party was Benoît Hamon, who won the ruling Socialist Party’s primaries but took only 6% of the vote on election night. That must resonate for Renzi, who wants to regain control of the PD to prepare a bid for a new term as prime minister in elections due early next year.
European Union governments threw down the gauntlet to the U.K. ahead of Brexit talks, listing demands Prime Minister Theresa May must satisfy before they will discuss the trade deal she wants and urging her to be more realistic in her expectations. Any doubts about the scale of the task facing Britain in withdrawing from the EU after four decades were laid to rest at a Brussels summit of the region’s leaders on Saturday. A tough negotiating stance was endorsed unanimously, within minutes and to applause. The U.K. responded by saying it’s bracing for a confrontation. The complexity comes down to the fact that a departure from the world’s biggest trading bloc has never been done and was never supposed to happen. The EU is striving to ensure the U.K. is worse off outside it than inside, not least to avoid setting a precedent.
After agreeing to the terms of separation, then it’s a matter of getting down to the business of what a future relationship might look like. “Nobody has united here against the U.K.,” German Chancellor Angela Merkel told reporters as she left the meeting. “The British people have made a decision, which we will have to respect. But we remaining 27 now get together in order to speak with one voice.” The Brexit discussions will begin soon after the U.K.’s June election, which May called in part to strengthen her mandate going into talks. The first orders of business will be guaranteeing the rights of 3 million EU citizens living in the Britain and calculating a financial settlement one leader said would be at least €40 billion euros ($44 billion). Only once “sufficient progress’’ is made on those thorny topics and reinforcing the border between the two Irelands will the EU’s attention turn to trade. That looks unlikely to happen before December.
Merkel tries to deflect the blame for what’s gone wrong, blames local officials for sweeping things under the carpet. Yeah, she would never have had any reason to do just that herself. Plus, she blames ‘Europe’s haphazard policing of its outer borders’, something for which no-one carries more responsibility than … Merkel, the de facto boss of the EU. Mutti Merkel’s just another politician going wherever the wind blows.
German Chancellor Angela Merkel is talking tough on migrants and crime as she hits the campaign trail for two state elections next month, giving a foretaste of her bid for a fourth term in September. Merkel’s hardened rhetoric was on display in North Rhine-Westphalia, Germany’s most populous state, where her Christian Democratic Union is seeking to end seven years of Social Democratic rule on May 14. On Friday, she’s campaigning east of Hamburg in Schleswig-Holstein, where two polls this week suggest her party has a slim lead over the SPD ahead of a regional vote on May 7. At a CDU rally in the rural Westphalian town of Beverungen, Merkel reaffirmed her push to return migrants who don’t qualify for asylum and attacked the state’s Social Democrat-led government as soft on crime.
She said local officials “tried to sweep under the carpet” lapses in policing around mass sexual assaults on women in Cologne on New Year’s Eve in 2015, an incident that stoked an anti-immigration backlash. “The opportunity for improvement was there,” Merkel told the crowd on Thursday. “Things didn’t get better, so it’s time for a change.” As polls suggest that both Germany’s anti-immigration AfD party and her Social Democratic challenger Martin Schulz are in retreat for now, Merkel is using the opening to rally her CDU behind traditional themes of public safety. At a security conference this week, she said Europe’s haphazard policing of its outer borders compares unfavorably to U.S. immigration checks and must be strengthened.
PricewaterhouseCoopers gets the first half right: as I’ve said numerous times, Greece cannot recover under present conditions imposed by the Troika. But then PwC loses the thread. Pity but predictable.
The extent of the destruction the Greek economy has suffered in the last few years, also undermining the effort to restructure it, becomes clear when comparing specific data, not on a quarterly or annual basis, but over the longer term. The country remains in a vicious cycle of recession, the economy will not grow by more than 1% this year, and any positive signs have proved temporary or insufficient to alter the overall picture. According to “Economic Outlook for Greece 2017-2018,” a study by PricewaterhouseCoopers (PwC), investment in the country’s economy dropped from €60 billion in 2010 to €20 billion last year. Investments are showing no signs of sustainable recovery as savings remain in the red and banks continue to deleverage their financial reports.
Consumption has been in constant decline, with a small recovery last year followed by a fresh drop in recent months. The average disposable income has gone down primarily due to the increased taxation and hikes in social security contributions, while the capital controls remain and banks are dependent on emergency liquidity assistance (ELA) for their financing. PwC notes that disposable incomes are unlikely to grow significantly anytime soon. There are just a few domestic investments that could fuel a recovery and no significant funding for investments is expected from abroad. At the same time it will be hard for fiscal performance to post a significant improvement without any deep structural reforms, including in the social security system.
The banks’ lack of liquidity, the delayed repayment of the state’s dues to its suppliers and the capital controls are likely to persist. PwC further argues that despite the delays in the second bailout review, Greece could avoid any unforeseeable tension and political events and achieve some growth, but not any greater than 1%, and the same challenges will remain next year too. An exit from the vicious cycle, says PwC, will require not only a change in the Greek debt’s sustainability terms, but also a drastic acceleration of structural reforms and the boosting of competitiveness and growth.
Turkey and Russia have agreed on a proposal toward a general ceasefire in Syria, Turkey’s state-run Anadolu Agency said on Wednesday, and will aim to put it into effect by midnight. Anadolu, citing sources, said the two countries have reached a consensus that will be presented to participants in the conflict on expanding the ceasefire that was established in Aleppo earlier this month. Russia, Iran and Turkey said last week they were ready to help broker a peace deal after holding talks in Moscow where they adopted a declaration setting out the principles any agreement should adhere to. Arrangements for the talks, which would not include the United States and be distinct from separate intermittent U.N.-brokered negotiations, remain hazy, but Moscow has said they would take place in Kazakhstan, a close ally. Russia’s foreign minister on Tuesday said the Syrian government was consulting with the opposition ahead of possible peace talks, while a Saudi-backed opposition group said it knew nothing of the negotiations but supported a ceasefire.
The Turkish President Recep Tayyip Erdogan says he has uncovered evidence that US-led coalition forces have helped support terrorists in Syria – including Isis. American-led forces have been working alongside Syrian rebels fighting President Bashar al-Assad but have attempted to avoid helping Isis and other Islamist militant groups. However, speaking on Tuesday in the Turkish capital, Ankara, he said he believed they had given support to a variety of militant groups, including Isis Kurdish outfits YPG and PYD. “They were accusing us of supporting Daesh [Islamic State],” he told a press conference, according to Reuters. “Now they give support to terrorist groups including Daesh, YPG, PYD. It’s very clear. We have confirmed evidence, with pictures, photos and videos.”
Turkish President Recep Tayyip Erdogan says Saudi Arabia and Qatar should join its meeting with Russia and Iran to discuss Syrian peace efforts. Russia, Turkey and Iran, which helped broker the withdrawal of civilians and militants from the Syrian city of Aleppo, have agreed to hold talks on Syria in Kazakhstan next month. Erdogan said Tuesday the meeting of foreign ministers should include Saudi Arabia and Qatar, saying they had “shown goodwill and given support” to Syria. Turkey, Saudi Arabia and Qatar are the main backers of rebels seeking to topple Syrian President Bashar Assad, who is closely allied with Moscow and Tehran. Erdogan added, however, that Turkey would not take part if any “terror organizations” are also invited, referring to Syrian Kurdish groups affiliated with Kurdish insurgents in Turkey.
Washington appears unready to play a serious role in fighting Islamic State (IS, formerly ISIS/ISIL), as it has fostered terrorists itself and now wants them to remain in the Middle East, Iranian Defense Minister Hossein Dehghan told RT. “The Western coalition is of a formal nature, they have no real intention to fight neither in Syria nor in Iraq. We don’t see any readiness on their part to play a truly useful and meaningful role in fighting IS, because it’s them who have raised terrorists and they are interested in keeping them there,” Dehghan said. According to the Iranian defense minister, Tehran has never coordinated its operations with the Americans and “will never collaborate with them.”
“Maybe the coalition forces would like to see terrorists weakened, but certainly not destroyed, because those terrorists are their tool for destabilizing this region and some other parts of the world.” He also mentioned Al-Nusra Front (also known as Jabhat Fateh al-Sham) and said that terrorists in Syria receive support from the US, Saudi Arabia and Qatar. He also accused Turkey of supporting terrorists on the ground. “If Iran, Russia and Syria were to reach an agreement with Turkey to end Turkish support for those terrorist groups, particularly IS and Jabhat al-Nusra, and start fighting them, then I think we would see the situation in Syria improve,” he added. According to the minister, any ceasefire in Syria demands guarantees and all parties should agree to fulfill the conditions for a truce.
“We shouldn’t let Islamic State or Al-Nusra groups take part in the ceasefire. All other groups should start a political process and negotiations with the Syrian government.” He added that after the truce comes into force, it is important to separate terrorists and opposition groups ready to negotiate with the Syrian government. All sides should fight IS and Al-Nusra Front, Dehghan stated, adding that everyone should stop supporting terrorists in political, financial and military areas.
Toshiba shares dived more than 20% on Wednesday in their second straight double-digit plunge as the company said it may book a one-time loss of several billion dollars over its US nuclear business. Toshiba’s stock price dropped by 20.42% to 311.60 yen, the largest fall allowed for a single day, about 30 minutes after the opening bell, as the company failed to remove investor worries over the potential risk. On Tuesday the Tokyo-based conglomerate said costs linked to the acquisition in 2015 by its US subsidiary of a nuclear service company would possibly come to “several billion US dollars, resulting in a negative impact on Toshiba’s financial results”. The exact figure of the potential writedown was still being worked out, Toshiba president Satoshi Tsunakawa said after the announcement, apologising for “causing concern”.
The company statement suggested the figure would be released soon, citing an end-of-year deadline. Toshiba shares had closed nearly 12% lower on Tuesday on media reports about the potential loss. Analysts said uncertainty was fuelling investor anxiety. “Concerns have yet to be cleared away as they said they didn’t know the figure,” Yukihiko Shimada, senior analyst at SMBC Nikko Securities, told AFP. SMBC Nikko credit analysts Yutaka Ban and Kentaro Harada said in a report that investors “can’t be optimistic about the situation” even though the total writedown may not end up as big as the 500 billion yen (US$4.3bn) reported by local media. Nomura Securities analyst Masaya Yamasaki said in a report issued late on Tuesday that the expected loss “is negative for the company as its financial standing is fragile”.
Tsunakawa answered in the affirmative when asked if Toshiba was considering boosting capital. Its chief financial officer, Masayoshi Hirata, said that after the figure was confirmed the company would “explain and seek support” from financial institutions. Toshiba said the possible loss was related to the valuation of the purchase by subsidiary Westinghouse Electric of the nuclear construction and services business of Chicago Bridge and Iron.
Beijing has signalled plans to curb Chinese firms’ investment in foreign assets, after revealing that companies from China are on course to spend 1.12 trillion yuan (£130bn) on everything from British football clubs to a Hollywood film producer in 2016. Companies from China ramped up their spending on overseas assets during the year, as a weakening domestic economy saw investors turn their attention overseas. A diverse array of targets included the maker of Godzilla, Aston Villa Football Club and the pub in which former prime minister David Cameron and Chinese premier Xi Jinping once shared a pint. The spending spree boosted non-financial overseas investment 55% in the first 11 months of 2016, putting Chinese companies on course to spend £130bn this year, compared with £86bn in 2015, said commerce minister Gao Hucheng.
While foreign investment has soared, the amount of money flowing into the country is set to remain broadly flat at £92bn. This means the difference between investments abroad and those coming into China has reached an unprecedented £39bn. The widening gap has triggered concerns about capital flight, where investors send their money out of the country rather than investing it to spur domestic growth. Gao signalled that Beijing would move to address the investment gap by reining in Chinese firms’ overseas spending and making it easier for firms from abroad to access the Chinese economy.
He said the government would “promote the healthy and orderly development of outbound investment and cooperation in 2017”, in remarks at a conference that were published on the commerce ministry’s website. In November it was reported that China was preparing a clampdown on non-Chinese mergers and acquisitions. Separately, the ministry said on its blog that China would sharply reduce restrictions on foreign investment access in 2017 to make it easier for overseas firms to spend their cash in the People’s Republic. No details were given on what restrictions would be changed.
… when it comes to more traditional unsecured short-term funding markets, like the simple overnight repo, these reflect overall levels of liquidity in the interbank market, or as the case may be, complete absence thereof. And while China is notorious for suffering major liquidity shortages heading into a new year (including the non-lunar variety), what happened overnight in China is worth pointing out because according to Bloomberg data, the overnight repo rate traded on Shanghai Stock Exchange soared as much as 30.87% to 33%, the highest since September 29, before closing at 18.55%.
And while some of the liquidity squeeze was certainly calendar driven, what is more concerning for Chinese markets, where as we reported recently the local authorities, regulators and even press are confirming that the government crackdown on the credit and housing bubble may be serious for once due to fears about “rising social tensions”, much of the overnight repo rate spike was driven by the PBOC which pulled a net 150 billion yuan of funds in open-market operations today, the most since December 7. The result was another brief, but painful, freeze of the interbank lending market. Should the PBOC continue to not only not inject liquidity among banks, but aggressively withdraw it, it is possible that a repeat of the 2013 bank crisis when as a result of the government’s eagerness to delever the economy it almost crushed its financial sector (it ultimately gave up, with Chinese debt/GDP subsequently rising to 300% according to the IIF), should be one of the more notable risk factors for 2017.
China bulls could be facing a grim New Year’s eve. The first day of 2017 is when an annual $50,000 quota to convert the yuan into foreign exchange resets, stoking concern there will be a rush to sell the local currency. With tax payments and a regulatory assessment also tightening liquidity in the money market toward year-end, January may bring scant relief as lenders prepare for stronger cash demand before Lunar New Year holidays, which are only a month away. China’s markets are seeing renewed pressure this month as the Federal Reserve projects a faster pace of rate increases for 2017 and its Chinese counterpart tightens monetary conditions to spur deleveraging and defend the exchange rate. The declines are capping off a tough year for investors during which bonds, shares and currency all slumped.
“You have Chinese New Year quite early, and because of that one-month window, most of the banks will try to lock the money in a three-month cycle,” said Arthur Lau, Hong Kong-based head of Asia ex-Japan fixed income at PineBridge Investments. “The current situation in the bond market is partly because of year-end and because of Chinese New Year.” The week-long Lunar New Year holidays are traditionally a time when people give out cash gifts and companies pay employee bonuses. China’s 10-year government bond yield has surged 21 basis points in December, poised for its biggest monthly increase since August 2013, and its first annual gain since that same year. The yuan’s 6.6% decline in 2016 puts it on course for its worst year since 1994, while the Shanghai Composite Index is headed for its largest drop in five years.
The three-month interbank rate known as Shibor rose for a 50th day, its longest streak since 2010, to an 18-month high on Wednesday. The overnight repurchase rate on the Shanghai Stock Exchange jumped to as high as 33% the day before, the highest since Sept. 29. As banks become more reluctant to offer cash to other types of institutions, the latter have to turn to the exchange for money, said Xu Hanfei at Guotai Junan Securities in Shanghai. Bond and money markets may stabilize after Lunar New Year holidays – which start Jan. 27 and end Feb. 2 – though they’re unlikely to return to levels before the latest rout owing to yuan weakness and tighter monetary policy, said Lau. The People Bank of China’s yuan position – a gauge of capital flows – dropped the most in 10 months in November amid expectations for faster U.S. rate increases.
The onshore yuan’s surging trading volume suggests outflows are quickening, according to Harrison Hu, chief greater China economist at RBS. The daily average value of transactions in Shanghai climbed to $34 billion in December as of Monday, the highest since at least April 2014, according to data from China Foreign Exchange Trade System. “In the new year, the new foreign-exchange purchase quota starts, so we expect yuan positions in January to drop significantly,” Liu Dongliang at China Merchants Bank wrote in a note this month. “Within the foreseeable future, the market will be pessimistic about funding conditions. It happens to be near year-end now, where money markets are tight, and after New Year’s Day it’s almost Chinese New Year.”
Greek taxpayers are obliged to pay some €4 billion in taxes by New Year Eve, as outstanding debts to the state have soared to more than €94 billion by November, according to Finance Ministry data. However, some recession-hit taxpayers seem unable to pay the full taxes within deadlines and apply for settlements to pay their debts in more installments. To collect as much as possible to reach bailout targets, the Greek state has launched confiscation procedures for debtors. According to official data, in the first 10 months of 2016, the procedures had been applied onto 108,729 debtors. And another 1.6 million debtors are facing confiscation in early 2017 should they do not immediately settle their debts to the Tax office.
However, some debtors complained about the levies, saying they can not afford any more as they have been struggling to make ends meet amid seven-year austerity. Many financial analysts also warned that Greek society has reached a breaking point due to over-taxation combined with salary, pension cuts and high unemployment rates. Despite the levies, the country’s tax evasion still exists. According to a recent study conducted by the independent Greek research organization diaNEOsis, tax evasion in Greece is estimated range between 6% and 9% of the country’s GDP, which means a loss of some €16 billion in taxes a year. Experts as well as ordinary citizens urge the government to do more to address widespread tax evasion instead of adding more burdens on those who are trying to pay their share.
While mentioning the tax obligations due by Friday, the Hellenic Confederation of Commerce and Entrepreneurship (ESEE), which represents small and medium-sized companies in Greece, wishes in an e-mailed card to its members on Tuesday “Happy New Year with fewer taxes!”
Romania tumbled toward a new political crisis after President Klaus Iohannis rejected a prime minister nominee from the Social Democratic Party, which threatened to suspend him after winning a landslide election victory this month. Iohannis called on the party to pick someone else to lead a government after Sevil Shhaideh, a former development minister with little previous political influence, was picked by Social Democrat leader Liviu Dragnea last week. Dragnea, who can’t take the post himself because he was previously convicted of rigging a referendum, called the decision unjustified. He said he’ll consider his options, including potentially starting the procedure to suspend Iohannis, and will announce a decision by Dec. 29.
“It seems the president clearly wants to be suspended,” Dragnea said in a speech in Bucharest on Tuesday. “We’ll weigh our options very carefully, because we don’t want to take emotional decisions. We don’t want to trigger a political crisis for nothing, but if we come to the conclusion that the president must be suspended, I won’t hesitate.” The standoff in the European Union’s second-poorest country raises the risk of returning to the type of crisis that led to months of bickering between top leaders and culminated in Traian Basescu’s suspension from the presidency in 2012. It may also undermine one of the fastest paces of growth in the EU by delaying investment and the tapping of development funds, an area where Romania has ranked last in the 28-member club.
Iohannis has the constitutional right to reject any premier candidate that he doesn’t consider fit for the job. He didn’t give a reason for his decision. The choice of Shhaideh, a member of the mainly Orthodox country’s tiny Muslim minority, had fueled speculation that Dragnea may try to run the government himself from the sidelines.
There is inequality and inequality. The first is the inequality people tolerate, such as one’s understanding compared to that of people deemed heroes, say Einstein, Michelangelo, or the recluse mathematician Grisha Perelman, in comparison to whom one has no difficulty acknowledging a large surplus. This applies to entrepreneurs, artists, soldiers, heroes, the singer Bob Dylan, Socrates, the current local celebrity chef, some Roman Emperor of good repute, say Marcus Aurelius; in short those for whom one can naturally be a “fan”. You may like to imitate them, you may aspire to be like them; but you don’t resent them.
The second is the inequality people find intolerable because the subject appears to be just a person like you, except that he has been playing the system, and getting himself into rent seeking, acquiring privileges that are not warranted –and although he has something you would not mind having (which may include his Russian girlfriend), he is exactly the type of whom you cannot possibly become a fan. The latter category includes bankers, bureaucrats who get rich, former senators shilling for the evil firm Monsanto, clean-shaven chief executives who wear ties, and talking heads on television making outsized bonuses. You don’t just envy them; you take umbrage at their fame, and the sight of their expensive or even semi-expensive car trigger some feeling of bitterness. They make you feel smaller.
There may be something dissonant in the spectacle of a rich slave. The author Joan Williams, in an insightful article, explains that the working class is impressed by the rich, as role models. Michèle Lamont, the author of The Dignity of Working Men, whom she cites, did a systematic interview of blue collar Americans and found present a resentment of professionals but, unexpectedly, not of the rich. It is safe to accept that the American public –actually all public –despise people who make a lot of money on a salary, or, rather, salarymen who make a lot of money. This is indeed generalized to other countries: a few years ago the Swiss, of all people almost voted a law capping salaries of managers . But the same Swiss hold rich entrepreneurs, and people who have derived their celebrity by other means, in some respect.
In this chapter I will propose that effectively what people resent –or should resent –is the person at the top who has no skin in the game, that is, because he doesn’t bear his allotted risk, is immune to the possibility of falling from his pedestal, exiting the income or wealth bracket, and getting to the soup kitchen. Again, on that account, the detractors of Donald Trump, when he was a candidate, failed to realize that, by advertising his episode of bankruptcy and his personal losses of close to a billion dollars, they removed the resentment (the second type of inequality) one may have towards him. There is something respectable in losing a billion dollars, provided it is your own money.
If you’ve paid into Social Security, become injured or sick, and can no longer earn more than $1,130 a month, you can get a monthly subsidy from the Disability Insurance Trust Fund. As Bloomberg notes, in 1990 fewer than 2.5% of working-age Americans were “on the check;” by 2015 the number stood at 5.2%, with geographical “disability belts” appearing across America. That growth has left the fund in periodic need of rescues by Congress – most recently in 2015, when the Bipartisan Budget Act shifted money from Social Security’s old-age survivors’ fund to extend the solvency of the disability fund to 2023. Something changed in 2000…
“None of us should be surprised that the cost of the program was rising,” says Stephen Goss, Social Security’s chief actuary. He says the program’s growth is mostly a consequence of demographic change. Older workers are more likely to get sick, and as women have entered the workforce, they too have become eligible for benefits.”
In 1956, when the disability insurance fund was created, qualification was based on a list of accepted medical conditions. In 1984, Congress broadened the criteria, giving more weight to chronic pain and mental disorders. The qualification process also became more subjective. Now, rather than check diagnostic conditions against a list, the process determines whether applicants are able to perform work that’s available. It’s not as if you go to the doctor, the doctor says, “I’m sorry, son, you’ve got disability, Autor says. “It’s a social construct, because it’s about whether you can work.”
Headlines about antibiotic resistance – the increase in so-called “superbugs” – have been persistent in 2016. The issue of infection-causing bacteria becoming increasingly resistant to the drugs used to fight them poses a pressing risk to public health worldwide, and according to a 2014 report from the World Health Organization, “threatens the achievements of modern medicine.” The Review on Antimicrobial Resistance, commissioned by the U.K. government, estimated that “by 2050, 10 million lives a year and a cumulative $100 trillion of economic output are at risk due to the rise of drug resistant infections.” For perspective, cancer currently kills 8.2 million people annually. In September of this year, the United Nations agreed on a declaration to fight antibiotic resistance.
This was only the fourth time in the organisation’s 71-year history that a health issue has been treated with such gravity, putting antibiotic resistance on par with HIV and ebola. “It’s hard to be too dramatic,” Prof. Michael Gardam, associate professor of medicine at the University of Toronto, told CNBC via telephone. Echoing this severity, Prof. Toby Jenkins, a biophysical chemist at the University of Bath, said that “a Doomsday scenario is that transplant surgery will be impossible, chemotherapy likewise.” “Even a dental abscess could become deadly, or at least very painful,” he added. The overprescription of antibiotics is one cause of the problem, with Gardam saying that it is “becoming the norm to use last line drugs” in treating bacterial infections, and that “just in case” prescriptions should be handled with care. The U.S.-based Centers for Disease Control and Prevention estimates that half of antibiotic use in humans is unnecessary.
But, other contributing factors well integrated into daily life are also to blame. Gardam also criticized antibacterial soap and toothpaste, particularly prevalent in North America. Deeming such products unnecessary, Gardam warned that “your mouth is not meant to be a sterile zone.” He also stressed the importance of “not messing around with the natural flora of the body,” as such consumer products are wont to do. The food industry also plays a significant part in the antibiotic resistance dilemma, with healthy food-producing animals fed drugs to both prevent disease and promote growth. According to 2012 data from the U.S. Food and Drug Administration and research firm IMS Health, more than 70% of the antibiotics considered medically important for human health sold in the U.S. are actually used in livestock.
The S&P 500 ended lower on Friday for a ninth straight day, the longest losing streak for the benchmark index in more than 35 years, as investors stayed on edge ahead of an uncertain U.S. election. The Nasdaq also ended lower for a ninth-consecutive session, while the Dow industrials closed down for a seventh straight day. Investors have been unnerved by signs of a tightening presidential race between Clinton and Trump. Clinton had been thought to have a clear lead until the re-emergence last week of a controversy over her use of a private email server while secretary of state. “Investors are uncertain about the outcome of the election, and they have grown more uncertain since last Friday,” said Walter Todd, CIO with Greenwood Capital.
The Dow Jones industrial average fell 42.39 points, or 0.24%, to 17,888.28, the S&P 500 lost 3.48 points, or 0.17%, to 2,085.18 and the Nasdaq Composite dropped 12.04 points, or 0.24%, to 5,046.37. Despite the historic run, the S&P has pulled back by only about 3.1% over that time. For the year, the index is up 2%. It was the 14th time since 1928 that the S&P 500 had declined for nine sessions in a row, according to S&P Dow Jones Indices. On Friday, Wall Street had posted solid gains as of the afternoon, spurred by a strong U.S. employment report, but then lost steam and sold off into the close.
“Obviously the big concern this week has been the shift in the polls in the election. We did have a bounce for a period of time, but when it didn’t hold and people just decided to liquidate going into the close to reduce exposure in case any more news hits over the weekend,” said Michael O’Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut. “There’s a lot of headline risk out there.”
In the last week the so-called FANG stocks (FB, AMZN, NFLX, GOOGL) have stumbled. As earnings and outlooks disappointed, shareholders have awoken to the new normal low growth world and wiped over $100 bilion in market capitalization of the four horsemen of the Fed’s wealth creation bubble. FANGs are now down 8 days in a row…
Losing a massive $108 billion in that time…
This is the biggest drop since the February growth scare – which was only saved by massive coordinated global central bank money-printing… which is simply not about to happen this time.
On the surface, the establishment survey print of 161K jobs was just good enough when taking into account the 44,000 in upward revisions to August and September jobs. However, the household survey was less impressive, with the number of workers employed declining by 43,000 to 151,925 even as the number of persons unemployed declined from 7,939K to 7,787K.
So how did the unemployment rate drop? Because contrary to expectations that people are rushing back into the labor force, in October the number of Americans who were not in the labor force rose by a substantial 425,000 to 94,609, the highest print in the series since May, and suggests that the exodus of Americans out of the labor force has resumed.
Theresa May’s government has been accused of failing to restrain the furious backlash against this week’s high court judgment about article 50, as one of her own MPs resigned, stepping up the political pressure as she battles to stick to her Brexit timetable. Stephen Phillips, the MP for Sleaford and North Hykeham in Lincolnshire, stepped down on Friday with immediate effect. He was unhappy that the government had not planned to consult parliament before triggering article 50 – the issue that led to Thursday’s ruling. Former ministers warned that the febrile tone of media coverage, which included the judges who ruled against the government being condemned as “enemies of the people” by the Daily Mail, risked poisoning public debate.
Dominic Grieve, the Conservative former attorney general, said reading hostile coverage in the Mail and the Daily Telegraph “started to make one think that one was living in Robert Mugabe’s Zimbabwe .. I think there’s a danger of a sort of mob psyche developing – and mature democracies should take sensible steps to avoid that”. Labour also raised concerns about the absence of a ministerial response to the media coverage. Lord Falconer, who was lord chancellor under Labour between 2003 and 2007, said faith in the “independence and quality” of the judiciary was being undermined “by this Brexit-inspired media vitriol” in an article written for the Guardian. Jeremy Corbyn will accuse the government of opposing democratic scrutiny because “frankly, there aren’t any plans, beyond the hollow rhetoric of Brexit means Brexit”.
In a speech on Saturday, the Labour leader will say: “Thursday’s high court decision underlines the necessity that the prime minister brings the government’s negotiating terms for Brexit to parliament without delay. “Labour accepts and respects the decision of the British people to leave the European Union. But there must be transparency and accountability to parliament about the government’s plans.” May called European leaders to tell them again that she would meet her self-imposed deadline and trigger article 50 by the end of March 2017, despite losing the high court case. The prime minister otherwise refused to be drawn into the row. Her spokesman refused to condemn the media coverage on Friday, saying: “I don’t think the British judiciary is being undermined.” But the pro-remain former business minister Anna Soubry told the Guardian: “I think we have to call this out and say ‘not in my name’.”
Wealthy officials from Qatar and Saudi Arabia who donated money to Hillary Clinton’s charitable foundation also provided financial support to Isis, WikiLeaks founder Julian Assange has claimed. In an extended interview at the Ecuadorian embassy in London with documentary maker John Pilger for RT, Mr Assange said the same Saudi and Qatari officials could be seen to be supporting both the Clinton Foundation – founded by Mrs Clinton’s husband Bill – and funding the activities of Isis. Mr Pilger asked if Mr Assange believed that “this notorious jihadist group, called Isil or Isis, is created largely with money from people who are giving money to the Clinton Foundation” “Yes,” Mr Assange replied.
The WikiLeaks founder pointed to an email exchange between presidential hopeful Ms Clinton and her campaign manager John Podesta, leaked by his organisation last month, which he believes “is the most significant email in the whole collection”. In the email sent on August 17 2014, Ms Clinton asked Mr Podesta, who at that time worked under president Barack Obama, to help put “pressure” on Qatar and Saudi Arabia regarding the countries’ alleged support for the terrorist group Isis. “We need to use our diplomatic and more traditional intelligence assets to bring pressure on the governments of Qatar and Saudi Arabia, which are providing clandestine financial and logistic support to Isil and other radical Sunni groups in the region,” Ms Clinton wrote.
Mr Assange noted the US government had never acknowledged governments of Middle East nations had financially supported Isis, instead arguing such support was isolated to “some rogue princes using their cut of the oil money to do whatever they like, although the government disapproves”, according to the WikiLeaks founder. According to the Clinton Foundation, the Saudi Arabian government has donated between $10m (£8m) and $25million since the foundation was set up in 1997. Last month it was reported the government of Qatar offered to donate $1m to the foundation in celebration of Bill Clinton’s birthday. Representatives from the Clinton Foundation have repeatedly denied accusations Ms Clinton has solicited funds and used donations to boost her campaign.
There were no donations from Saudi Arabia while she was acting as secretary of state between 2009 and 2013. Mr Assange also used the interview to dismiss the prospect of a Donald Trump victory in next week’s election, which the polls show will be close. “My analysis is that Trump will not be permitted to win. Why do I say that? Because he has had every establishment against him. Trump does not have one establishment, maybe with the exception of the Evangelicals, if you can call them an establishment. “Banks, intelligence, arms companies, foreign money, etc are all united behind Hillary Clinton. And the media as well. Media owners, and the journalists themselves.”
A majority of voters believe Hillary Clinton has done something illegal, according to a new McClatchy-Marist Poll days before the presidential election. A total of 83% of likely voters believe that Clinton did something wrong – 51% saying she did something illegal and 32% saying she something unethical but not illegal. Just 14% said she’s done nothing wrong. By comparison, 79% think Donald Trump did something wrong, though not nearly as many think he did something illegal. Just 26% think he’s done something illegal, while 53% think he’s dome something unethical but not illegal. Just 17% think he’s done nothing wrong. The deep suspicion of Clinton is likely a top reason she’s lost much of her lead and the race for the White House has tightened in the race’s closing days.
In a four-way race, the two are neck and neck with Clinton supported by 44% and Trump by 43%. Libertarian Gary Johnson has 6%, and the Green Party’s Jill Stein has 2%. In a two-way match up, Clinton has 46%, Trump 44%. Both candidates are disliked. Clinton gets a favorable rating from just 40% while 57% have unfavorable views of her. Voters have a 61% to 36% unfavorable-favorable rating of Trump. “This is practically off the charts,” said Lee Miringoff, the director of the Marist Institute for Public Opinion in New York, which conducted the nationwide survey. “You have candidates coming before the electorate with enormous baggage.”
Even 57% of those who are supporting Trump and 58% of Republicans think he acted unethically. 55% of voters said the accusations against Trump would make a difference in how they vote. At the same time stories about the FBI inquiry may have raised more suspicion about Clinton, they also may have energized the vote for Trump. The poll shows Trump gaining support among Republicans, as running mate Mike Pence and others have urged GOP voters in recent weeks to “come home.” Trump enters the final weekend with the support of 92% of Republicans. That’s more than Clinton, who has 89% support of Democrats.
The Clinton Foundation has confirmed it accepted a $1 million gift from Qatar while Hillary Clinton was U.S. secretary of state without informing the State Department, even though she had promised to let the agency review new or significantly increased support from foreign governments. Qatari officials pledged the money in 2011 to mark the 65th birthday of Bill Clinton, Hillary Clinton’s husband, and sought to meet the former U.S. president in person the following year to present him the check, according to an email from a foundation official to Hillary Clinton’s presidential campaign chairman, John Podesta. The email, among thousands hacked from Podesta’s account, was published last month by WikiLeaks. Clinton signed an ethics agreement governing her family’s globe-straddling foundation in order to become secretary of state in 2009.
The agreement was designed to increase transparency to avoid appearances that U.S. foreign policy could be swayed by wealthy donors. If a new foreign government wished to donate or if an existing foreign-government donor, such as Qatar, wanted to “increase materially” its support of ongoing programs, Clinton promised that the State Department’s ethics official would be notified and given a chance to raise any concerns. Clinton Foundation officials last month declined to confirm the Qatar donation. In response to additional questions, a foundation spokesman, Brian Cookstra, this week said that it accepted the $1 million gift from Qatar, but this did not amount to a “material increase” in the Gulf country’s support for the charity. Cookstra declined to say whether Qatari officials received their requested meeting with Bill Clinton.
[..] At least eight other countries besides Qatar gave new or increased funding to the foundation, in most cases to fund its health project, without the State Department being informed, according to foundation and agency records. They include Algeria, which gave for the first time in 2010, and the United Kingdom, which nearly tripled its support for the foundation’s health project to $11.2 million between 2009 and 2012. Foundation officials have said some of those donations, including Algeria, were oversights and should have been flagged, while others, such as the UK increase, did not qualify as material increases. The foundation has declined to describe what sort of increase in funding by a foreign government would have triggered notification of the State Department for review.
The internal war we have warned is unfolding with Intelligence and Law Enforcement standing against Obama and the corrupt DOJ under Lynch is really heating up. The FBI realizes that Lynch’s DOJ will protect Hillary at all costs and will never allow her to be criminally charged. They have no choice now but to leak everything they can to show the corruption going on in the Department of Justice (see Daily Mail). There are 650,000+ emails on Weiner’s laptop. Meanwhile, Huma Abedin is preparing for her own criminal changes of obstruction of justice. She did not turn over that laptop when ordered to do so. She is now crying “she doesn’t know how her emails wound up on her husband’s computer” according to the Washington Post. She is saying that and it is not plausible. She had to be using that computer.
Oh she may try to claim that her husband hacked her emails to escape the criminal charges. But that will get really messy. It would also mean there was a MAJOR breach of security. Now the FBI is letting the press know that Clinton’s server was hacked by at least five foreign intelligence agencies. There are now also two addition investigations into Hillary on that score. State Department has revealed there were 10 attempts to hack Hillary in just 2 days. Let’s face it, if Hillary is elected, she will most likely be IMPEACHED as was her husband, but this time she would be removed. This is not a Monica deal. This election is going down in history as the tipping point for the United States. It has revealed how corrupt Congress really is. We have even former Bush Sr saying he will vote for Hillary.
He just lost all my respect for he has chosen the status quo to save the politicians rather than his country. This is just over the top. Even Podesta began a lobbying firm with his brother, which now collects $120,000 PER MONTH in a fee from Saudi Arabia. Hillary has tried to slander Assange saying all these hacks came from Russia. Assange has come out and bluntly said the hacked Clinton emails didn’t come from Russia government. They may be coming from sources inside the USA. Do not forget, to my surprise, there is one source that has EVERYTHING. Hello – NSA! Anyone remember they are storing everyone’s emails, text messages, and phone calls? Nobody want to order the NSA to turn it all over because it will reveal treason, where Hillary took money from foreign government and they approved arms deals.
If Hillary is elected, it will be by rigging the election. Our computer has NEVER been wrong on this score. So if she takes office, this will be the worst administration in history and may very will set in motion the phase transition where capital flees to bonds and we see a significant rise in civil unrest.
An attorney for Chelsea Manning says the transgender soldier imprisoned in Kansas has tried to kill herself for the second time in recent months. Vincent Ward said Friday that Manning attempted suicide last month at the military prison at Fort Leavenworth, though the attorney declined to divulge specifics. Manning also tried to take her own life in July. Wayne Hall, an Army spokesman, on Friday would not discuss the latest attempt, citing medical privacy laws. Manning is serving a 35-year sentence. She was arrested in 2010 as Bradley Manning and was convicted in 2013 in military court of leaking more than 700,000 secret military and State Department documents to WikiLeaks. Manning was an intelligence analyst in Iraq at the time.
[..] three major events prove how widespread, and dangerous, mass surveillance has become in the west. Standing alone, each event highlights exactly the severe threats which motivated Edward Snowden to blow his whistle; taken together, they constitute full-scale vindication of everything he’s done. Earlier this month, a special British court that rules on secret spying activities issued an emphatic denunciation of the nation’s domestic mass surveillance programs. The court found that “British security agencies have secretly and unlawfully collected massive volumes of confidential personal data, including financial information, on citizens for more than a decade.” Those agencies, the court found, “operated an illegal regime to collect vast amounts of communications data, tracking individual phone and web use and other confidential personal information, without adequate safeguards or supervision for 17 years.”
On Thursday, an even more scathing condemnation of mass surveillance was issued by the Federal Court of Canada. The ruling “faulted Canada’s domestic spy agency for unlawfully retaining data and for not being truthful with judges who authorize its intelligence programs.” Most remarkable was that these domestic, mass surveillance activities were not only illegal, but completely unknown to virtually the entire population in Canadian democracy, even though their scope has indescribable implications for core liberties: “the centre in question appears to be the Canadian Security Intelligence Service’s equivalent of a crystal ball – a place where intelligence analysts attempt to deduce future threats by examining, and re-examining, volumes of data.”
The third scandal also comes from Canada – a critical partner in the Five Eyes spying alliance along with the U.S. and UK – where law enforcement officials in Montreal are now defending “a highly controversial decision to spy on a La Presse columnist [Patrick Lagacé] by tracking his cellphone calls and texts and monitoring his whereabouts as part of a necessary internal police investigation.” The targeted journalist, Lagacé, had enraged police officials by investigating their abusive conduct, and they then used surveillance technology to track his calls and movements to unearth the identity of his sources. Just as that scandal was exploding, it went, in the words of the Montreal Gazette, “from bad to worse” as the ensuing scrutiny revealed that police had actually “tracked the calls and movements of six journalists that year after news reports based on leaks revealed Michel Arsenault, then president of Quebec’s largest labour federation, had his phone tapped.”
Ken Rogoff is by all accounts a brilliant man. The Harvard professor and former IMF chief economist is a chess grandmaster. His thesis committee included current Fed vice-chair Stanley Fischer. But like many survivors of Ivy League hoop jumping, the poor fellow appears to have emerged punch drunk. That’s the only conclusion to be drawn from Rogoff’s new book, The Curse of Cash , which, in effect, proposes a ban on paper currency. It’s terrifying piece of work, for several reasons. [..]
Rogoff’s “cashless society” is an elegant solution to a key problem bedeviling the Federal Reserve: with interest rates at the zero bound, the US central bank has no ammunition left to fight the next recession – because if cuts rates below zero, savers will withdraw their cash and put it under their mattresses. “In principle, cutting interest rates below zero ought to stimulate consumption and investment in the same way as normal monetary policy,” Rogoff writes. “Unfortunately, the existence of cash gums up the works.” That argument is spurious at best. By now, it is fairly clear from experiences in Japan and the US since 2008 that below neutral level interest rates provide little or no net new economic stimulus. At best, easy monetary policy brings forward spending and investment from the future into the present.
However, the US government and the Federal Reserve have spent, borrowed, and printed so much that there is no future left to mortgage. Rogoff, one of the country’s top economists, knows this; which is an important clue that there is much more to his proposals than meet the eye. It seems clear that Rogoff’s negative interest rate/cashless society proposal is structured to engineer a back-door US government debt default. Over the long term, by forcing savers, businesses, and banks to give the US government their money, and allowing Washington to repay less of that money each year, the US can legally default – on all that it owes. More worrying for investors: the fact that Rogoff, Ben Bernanke and others are proposing negative rates despite the considerable evidence that they will do no economic good suggests that they believe that the US government cannot pay back its debts – that it is already insolvent.
[..] maybe Rogoff is just as good a player on the public policy front as he is on the chess board. There is a possibility that he wrote The Curse of Cash as a quasi-job application for a higher government post, possibly as Treasury Secretary in a Clinton Administration. “If you give me the job, I’ll help make sure that government can borrow all it wants and it won’t have to pay any of it back,” may be the sub-text to Rogoff’s book. There is a precedent for this. Ben Bernanke’s 2002 “helicopter money” speech is widely credited with having set the ground for his appointment as Fed Chairman several years later. Brilliant? Cynical? Delusional? Or maybe all three? Take your pick. Either way, you haven’t heard the last of Ken Rogoff.
News reports paint a picture of a Bank of Japan board that remains solidly in favor of maintaining an ultra-easy monetary policy, but is sharply divided over the best way to proceed as the country’s banking sector feels the pinch of low rates and a flat yield curve. Ideas the Bank of Japan could ultimately move to adjust its program in a way designed to further steepen the yield curve are behind recent market moves, analysts said, and could pave the way for further steepening of yield curves around the world, including U.S. Treasurys. Speculation has mounted that the Bank of Japan could undertake an “inverse twist,” shifting its bond purchases away from the longer end of the yield curve.
That would be a mirror image of a Federal Reserve maneuver dubbed “Operation Twist” that the central bank used in 1961 and 2011 to flatten the yield curve by buying long-term debt and selling short term debt. Bond yields move inversely to prices. There are other measures the Bank of Japan could take to try to steepen the yield curve, including simply changing the mix of maturities it buys or setting a yield target. Christoph Rieger at Commerzbank urged against undertaking an inverse twist, noting that Kuroda has expressed concerns that a “bear steepening” of the yield curve—a phenomenon in which long-term rates rise faster than short term rates—tends to tighten monetary conditions. Obviously, that would blunt the impact of the BOJ’s easing efforts and prove unwelcome in an economy that’s contracting.
Housing in major cities in China has seen price hikes over the last year that resemble the famous Dutch “Tulip Fever” bubble of 1637, according to new research by economic consultancy firm Longview Economics. “I think what’s going on in China is troubling … some of the valuations there are really quite extraordinary,” Chris Watling, the CEO of Longview Economics, told CNBC Thursday. “We’ve double checked these numbers about seven times, because I found them quite hard to believe.” The firm’s research found that only San Jose in the Silicon Valley is more expensive than Shenzhen. The Chinese city has seen prices rise 76% since the start of 2015, with the acceleration beginning in April 2015 as the country’s stock market was nearing its peak.
The situation in Beijing and Shanghai is similar, albeit less extreme, the company states. “Housing in some of the tier 1 cities is more expensive than it is in London, which I think itself is on a bubble, Watling added. “The (stock) market exploded to the upside and then crashed dramatically. That money had to go somewhere, so it washed around the system … so a lot of it has gone into housing.” The analysis suggests that the typical home in Shenzhen costs approximately $800,000. Watling said that the house-income ratio in Shenzhen is now running at 70 times, compared to around 16 times in somewhere like London.
China, the biggest economic story of the last 30 years, has soured in the eyes of many analysts. A stock market crash that began in the country last summer has highlighted the vast difficulties Chinese lawmakers are now facing. Watling said Chinese housing was a story built on credit, lots of liquidity and lots of debt. He added that all bubbles, though, once established, will eventually burst and deflate. “It’s simply a question of when,” Watling said in a research note earlier this week, adding that the removal of cheap money would be the likely scenario that would lead to the beginning of the tightening and subsequent prices falls.
[..] for Monte dei Paschi’s latest rescue plan to have any chance of working, both parts of the plan — Part A and Part B — must succeed. Part A consists of a €28 billion bad-loan sale for which JP Morgan Chase, Citi and Italian investment bank Mediobanca are already assembling a bridge loan, in return for very handsome fees. Atlante, Italy’s deeply opaque, Luxembourg-based bank rescue fund, has reportedly agreed to buy the so-called mezzanine tranche in Monte dei Paschi’s bad loan securitization. Apparently demand for heavily discounted, slowly-decomposing bank debt in Italy is high, which is great news considering Italy is purportedly home to roughly a third of all of the bad debt at EU banks.
In a perfect sign of our yield-starved times, last week saw around 250 global investors converge on Venice to attend Banca Ifi s SpA’s “Non-performing Loan” conference. That’s twice as many as last year, reports Bloomberg. In other words, Part A of the rescue plan seems to be coming along nicely — as long as no one asks who will make up the difference between the book value of the bank’s toxic assets and the discount value at which they’re now being sold. As for Part B of the Plan — MPS’ €5 billion cash call scheduled for the end of this year — it’s going nowhere fast. Twice-bitten, thrice-shy investors are no longer buying the hype. Gennaro Pucci at London-based PVE Capital said that even if a significant proportion of MPS’ bad loans were “spun off into a special vehicle,” he would not buy more MPS shares out of fear that the bank could suffer further losses from the remaining soured debt.
This is a serious problem in today’s Italy: as long as the economy continues to stagnate, much of the supposedly good debt currently on the banks’ books will also, sooner or later, end up putrefying. It’s already happened to Banca Popolare di Vicenza, a regional lender that was rescued from bankruptcy late last year by the Atlante fund, but which is already in need of fresh funds. So, too, is Italy’s biggest and only global systemically important financial institution, Unicredit, which has a staggering €80 billion in bad debt on its balance sheets — more than any other European bank. While the downfall of MPS would be enough to cause serious damage to Italy’s already fragile financial system, the collapse of Unicredit, which has vast, sprawling operations across Germany and Eastern Europe, would threaten the stability of the entire Eurozone.
Debt-ridden Hanjin Shipping is working on a restructuring plan that calls for the drastic reduction of its owned fleet and returning the vast majority of the ships it charters to their owners, according to people with direct knowledge of the matter. Despite the efforts, these people say the most likely scenario is still that the Korean operator— the world’s seventh-biggest in terms of capacity—will be liquidated, marking one of the shipping industry’s biggest failures. Hanjin filed for bankruptcy protection last month. The South Korean government has strongly indicated it has no plans to bail out the company. A Korean court will decide in December whether to accept the plan or let the company go under, according to court officials in Seoul.
One person with knowledge of Hanjin’s efforts to restructure said the operator is considering a number of scenarios but focusing on one that involves Hanjin keeping up to 15 of its 37 ships, and returning to owners almost all of the 61 chartered vessels. Under that scenario, which is subject to approval by the bankruptcy court, “Hanjin will emerge as a small regional operator in Asia that will move a small part of Korea’s exports,” the person said. [..] Hanjin’s main charterers, including Danaos, Navios and Seaspan, with a combined exposure of more than $1 billion to Hanjin, were hoping for a last-minute intervention by the Korean government that would allow Hanjin to honor its vessel-leasing commitments. That looks less and less likely.
“Hanjin now has two alternatives: either to drastically downsize or to liquidate,” said Iraklis Prokopakis, Danaos’s COO. “We have eight ships chartered to Hanjin and five will be returned. The other three still have cargo on them so I don’t know what will happen.” Danaos has a $560 million exposure to Hanjin. Mr. Prokopakis said the key issue at the December court hearing will be whether Hanjin has enough cash to continue operating, even at a much smaller scale.
The US military has bombed Syrian government positions in the eastern province of Deir el-Zour today, where the Syrian military had been battling ISIS. According to the report, the US attack on Syrian troops “enabled an [ISIS] advance on the hill overlooking the air base.” This is the second time US forces have directly targeted Syrian government troops inside Syria. It would be the first time such an attack produced a battlefield advantage to ISIS. The US attack has killed at least 62 and perhaps as many as 100 Syrian government troops. Earlier today it was reported that the Syrian government had sent some 1,000 members of the elite Republican Guard into the Deir el-Zour province, as battles with ISIS in the area increase.
This US attack has wiped out perhaps 10% of this force and has obliterated Syrian army weapons and other materiel. The US government has admitted to the attack, but claims it was all a mistake. As some observers have pointed out, however, ISIS does not behave as traditional military units. They do not generally gather in large numbers like this or establish “bases.” The US Central Command released a statement earlier today claiming that the US coordinated the strike with the Russians, but Moscow has vehemently denied the claim. In fact, spokesman for the Russian Foreign Ministry Maria Zakharova was quoted by the state news agency Tass as saying that “after today’s attack on the Syrian army, we come to the terrible conclusion that the White House is defending the Islamic State.”
This dramatic development comes as the latest ceasefire begins to crumble. Russia has condemned Washington’s refusal to implement a key component of the agreement, to press US-backed rebels to cease fighting alongside al-Qaeda; and the main US-backed “moderate” Islamist group, Ahrar al-Sham, has refused to take part in the ceasefire at all. Yesterday, US-backed FSA “moderate” opposition troops chased US Special Forces out of one town in Syria. Is today’s attack a turning point in the war, where the US will begin to strike Syrian government forces more frequently? If so, how will Russia and Iran react to this overt shift in US strategy? Is this the flashpoint?
Italian Prime Minister Matteo Renzi blasted the latest European Union summit in Bratislava on Saturday, effectively labeling Friday’s high-level meeting a waste of time. “I don’t think it would be right for Italy to pretend not to notice when things are not getting any better,” Renzi said at a conference in Florence. Hours earlier, he criticized the summit in an interview with TV broadcaster RTV38. “As Italy, we strongly believe that the EU has a future, but we need to be doing things for real, because we have no use for staged events,” he said. Renzi also said he did not partake in the closing press conference with Angela Merkel and Francois Hollande because he was unhappy with the decisions reached concerning economic and migrant policy.
Renzi said Italy would not “serve as a fig leaf” for the likes of France or Germany. In what was the first European summit without the United Kingdom in over four decades, European leaders sought to show unity in the wake of this summer’s Brexit vote. This, Renzi said, “signals a small step forward, but it is still a rather long way away from the idea of Europe that we have in mind.” Renzi castigated the summit for not raising the African migrant issue. The documents “didn’t even mention Africa,” he said. As the first European destination for migrants arriving from Africa, Italy has been left to cope with the influx of refugees largely on its own while politicians debate how to address refugees in Turkey and along the so-called Balkan Route though Greece, eastern and central Europe.
Italy has long pushed for an international agreement with African states that would close migrant routes to Europe in exchange for increased investment. Renzi repeated his critiques of the EU’s austerity policy. While the country is respecting the EU’s strict budget disciplinary rules, he said Italy retains the right to stress that the rules are not working and it is not prepared “to pretend not to notice.”
Public properties, including real estate assets, are very often sold for extremely low prices, as the political risk factor supersedes even the crucial financial risk that comes with investing in Greece. The Hellenic Federation of Enterprises (SEV) this week commented on the issue, saying that this institutional shortfall of the Greek state and the lack of trust this generates in the three pillars of power (legislative, executive, judiciary) have turned the optimum utilization of state property into “a political point-scoring battle among parties.” As SEV pointed out, “in many instances we see the state’s assets devalued, owing to the delays that political tensions bring about in privatizations, so that they are sold off at particularly low prices. In other instances the prevailing criterion becomes the price of the privatization, without taking into consideration any distortions created in the market from incomplete planning.”
For the industrialists’ association there is no doubt that “the correct utilization of public property along clear and stable rules and terms of economic efficiency, both for state revenues and for the operation of markets, can become a key growth factor for the economy.” All this becomes clearer when one considers the tenders that the state privatization fund (TAIPED) has been conducting for the concession of real estate assets. As property market professionals observe, in most cases the prices investors offer – particularly in instances of plot development – are just a fraction of each asset’s actual value. The reason for that is not to be found in the financial crisis and the drop in market prices, but in investors’ need to factor the political risk into their calculations regarding the sustainability of their chosen investment, in order to secure the desired returns.
CNBC tries an odd twist by claiming it’s not really a TTiP protest, but a form of general ‘easy anti-Americanism’. The same tactics as used in Brexit and the US elections. Curious to see when these people will realize these are losing tactics.
Hundreds of thousands of Germans took to the streets Saturday, in protest of pending trade deals with the United States and Canada. The deals in question are the Transatlantic Trade and Investment Partnership (TTIP) between the U.S. and the European Union and the Comprehensive Economic and Trade Agreement (CETA) for the Canadian-EU relationship. Neither free trade agreement has been ratified yet, but popular outcry has been growing for the last few years. The demonstrations took place in seven cities throughout Germany: Berlin, Frankfurt, Hamburg, Cologne, Leipzig, Munich and Stuttgart. Organizers told CNBC that the official estimate is 320,000 demonstrators across Germany.
In Berlin, where discussions of trade policy are frequently overheard in cafes and most available surfaces are plastered in posters and stickers against the deals, the largest demonstration of the day took place with about 70,000 attendees, according to the organizers. Earlier, local reports had indicated there could be as many as 80,000 in the German capital, but a heavy downpour close to the start time may have depressed turnout. A broad coalition of organizations helped plan the event, but the stated rationale for opposing the agreements centers on the belief that such deals “primarily serve the interests of powerful economic interest groups, and thus only cement the imbalance between the common good and economic interests,” according to one organization.
France has passed a new law to ensure all plastic cups, cutlery and plates can be composted and are made of biologically-sourced materials. The law, which comes into effect in 2020, is part of the Energy Transition for Green Growth – an ambitious plan that aims to allow France to make a more effective contribution to tackling climate change. Although some ecologists’ organisations are in favour of the ban, others argue that it has violated European Union rules on free movement of goods. Pack2Go Europe, a Brussels-based organization representing European packaging manufacturers, says it will keep fighting the new law and hopes it doesn’t spread to the rest of the continent. “We are urging the European Commission to do the right thing and to take legal action against France for infringing European law,” Pack2Go Europe secretary general Eamonn Bates told AP. “If they don’t, we will.”
The danger lurking in the risk asset markets was succinctly captured by MarketWatch’s post on overnight action in Asia. The latter proved once again that the casino gamblers are incapable of recognizing the on-rushing train of global recession because they have become addicted to “stimulus” as a way of life:
Shares in Hong Kong led a rally across most of Asia Tuesday, on expectations for more stimulus from Chinese authorities, specifically in the property sector…….The gains follow fresh readings on China’s economy, which showed further signs of slowdown in manufacturing data released Tuesday (which) remains plagued by overcapacity, falling prices and weak demand. The dimming view casts doubt that the world’s second-largest economy can achieve its target growth of around 7% for the year. The central bank has cut interest rates six times since last November.
More stimulus from China? Now that’s a true absurdity – not because the desperate suzerains of red capitalism in Beijing won’t try it, but because it can’t possibly enhance the earnings capacity of either Chinese companies or the international equities. In fact, it is plain as day that China has reached “peak debt”. Additional borrowing there will not only prolong the Ponzi and thereby exacerbate the eventual crash, but won’t even do much in the short-run to brake the current downward economic spiral. That’s because China is so saturated with debt that still lower interest rates or further reduction of bank reserve requirements would amount to pushing on an exceedingly limp credit string. To wit, at the time of the 2008 crisis, China’s “official” GDP was about $5 trillion and its total public and private credit market debt was roughly $8 trillion.
Since then, debt has soared to $30 trillion while GDP has purportedly doubled. But that’s only when you count the massive outlays for white elephants and malinvestments which get counted as fixed asset spending. So at a minimum, China has borrowed $4.50 for every new dollar of reported GDP, and far more than that when it comes to the production of sustainable wealth. Indeed, everything is so massively overbuilt in China – from unused airports to empty malls and luxury apartments to redundant coal mines, steel plants, cement kilns, auto plants, solar farms and much, much more – that more borrowing and construction is not only absolutely pointless; it is positively destructive because it will result in an even more destructive adjustment cycle. That is, it will only add to the immense already existing downward pressure on prices, rents and profits in China, thereby insuring that even more trillions of bad debts will eventually implode.
[..] When peak debt is reached, additional credit never leaves the financial system; it just finances the final blow-off phase of leveraged speculation in the secondary markets.
Manufacturing in the U.S. unexpectedly contracted in November at the fastest pace since the last recession as elevated inventories led to cutbacks in orders and production. The Institute for Supply Management’s index dropped to 48.6, the lowest level since June 2009, from 50.1 in October, its report showed Tuesday. The November figure was weaker than the most pessimistic forecast in a Bloomberg survey. Readings less than 50 indicate contraction. The report showed factories believed their customers continued to have too many goods on hand, indicating it will take time for orders and production to stabilize.
Manufacturers, which account for almost 12% of the economy, are also battling weak global demand, an appreciating dollar and less capital spending in the energy sector. “There are some clear signs of weakness — industries that are tied to oil and gas, agriculture or are heavily dependent on exports are all clearly slowing,” Mark Vitner at Wells Fargo Securities said before the report. “It wouldn’t surprise me if the manufacturing numbers remain soft for the next five to six months.”
It’s seven years after the financial crisis and the banking industry is still in receipt of state support – support that will be available for two more years, and perhaps for longer. The Treasury and the Bank of England have decided to extend their Funding for Lending Scheme (FLS), which supplies banks with cheap money with the aim of keeping the supply of credit flowing. What ought, in theory, to be the scheme’s final outing will be very specifically targeted at lending to small and medium-sized enterprises (SMEs). This is a sector which is still struggling to obtain the funding it needs at a time when lending to other sectors has largely recovered. The Bank says that things are improving, and its figures bear that out. But not quickly, and the growth in small business lending pales by comparison to the growth in consumer lending.
The expansion of the latter is starting to cause concern, with the Bank’s chief economist, Andy Haldane, fretting about personal loans. He says they’re picking up at a rate of knots. Britain has long nursed an addiction to the drug of debt that it’s never really addressed and the growth in unsecured lending is an indication of a return to bad habits. Given that Mr Haldane and his colleagues are engaged in the unenviable task of walking an economic tightrope, it’s no wonder that he’s getting twitchy. But consumers are not, as yet, shooting up with the sort of wild abandon they exhibited in the run-up to the crisis. And, as Investec’s Philip Shaw points out, it wasn’t so long ago that we were still talking about the need to make more credit available.
Workers in the UK will have the worst pensions of any major economy and the oldest official retirement age of any country, according tothe Organisation for Economic Co-operation and Development. The typical British worker can look forward to a pension worth only 40% of their pay , once state and private pensions are combined. The Paris-based thinktank said on Tuesday that this compares with about 90% in the Netherlands and Austria and 80% in Spain and Italy. Only Mexico and Chile offer their workers a worse prospect after retirement, although Turkey is the surprise table-topper, giving its retirees an average pension equal to 105% of average wages, according to the OECD report. Britain has begun an auto-enrolment scheme that will offer millions of low-paid workers a private pension for the first time.
But with contribution rates low, the payouts will not be generous. Last week the chancellor, George Osborne, gave employers a six-month delay to planned increases in their contribution rates. Pensions expert Tom McPhail of Hargreaves Lansdown said: “This analysis makes embarrassing reading for the politicians who have been responsible for the UK’s pensions over the past 25 years. “The state pension was in steady decline for years. Even though it is improving for lower earners now, average payouts will not be rising. It is in the private sector though where the real damage has been done; the collapse in final salary pensions has not yet been replaced with well-funded alternatives.” The age at which workers qualify for a state pension in the UK will, at 68 years old, be the highest of any country in the world, equalled only by Ireland and Czech Republic.
The prize for earliest retirees goes to France and Belgium. “Workers stay the longest in the labour market in Korea, Mexico, Iceland and Japan; men exit the soonest in France and Belgium while women leave the earliest in the Slovak Republic, Slovenia and Poland,” said the OECD. While many European countries offer significantly better pensions than in Britain, the cost is now close to sustainable, said the OECD. In recent years there have been frequent warnings about the “demographic timebomb” that will wreck the finances of ageing European nations. But the OECD said that changes to taxation, contribution rates and pensionable ages means that the burden of paying pensions will rise from the current level of 9% of GDP to just 10.1% by 2050.
Standard and Poor’s cut Volkswagen’s credit rating to “BBB+” from “A-” on Tuesday, shortly after the automaker reported that an emissions-cheating scandal took a serious bite out of its U.S. sales last month. The German automaker said that November U.S. sales fell almost 25% from a year ago. The company blamed the decline on stop-sale orders for diesel-powered vehicles that the government says cheated on pollution tests. The VW brand sold just under 24,000 vehicles last month compared with almost 32,000 a year ago.
S&P noted the emissions scandal also contributed to its ratings cut. The agency said it expects Volkswagen to “experience ongoing adverse credit impacts.” The U.S. is a relatively small market for Volkswagen. The VW brand sold 490,000 vehicles worldwide in October, 5% below a year ago. VW has admitted that 482,000 2-liter diesel vehicles in the U.S. contained software that turned pollution controls on for government tests and off for real-world driving. The government says another 85,000 six-cylinder diesels also had cheating software.
Thomas Piketty is out with a new argument about income inequality. It may prove more controversial than his book, which continues to generate debate in political and economic circles. The new argument, which Piketty spelled out recently in the French newspaper Le Monde, is this: Inequality is a major driver of Middle Eastern terrorism, including the Islamic State attacks on Paris earlier this month — and Western nations have themselves largely to blame for that inequality. Piketty writes that the Middle East’s political and social system has been made fragile by the high concentration of oil wealth into a few countries with relatively little population.
If you look at the region between Egypt and Iran — which includes Syria — you find several oil monarchies controlling between 60 and 70% of wealth, while housing just a bit more than 10% of the 300 million people living in that area. (Piketty does not specify which countries he’s talking about, but judging from a study he co-authored last year on Middle East inequality, it appears he means Qatar, the United Arab Emirates, Kuwait, Saudia Arabia, Bahrain and Oman. By his numbers, they accounted for 16% of the region’s population in 2012 and almost 60% of its gross domestic product.) This concentration of so much wealth in countries with so small a share of the population, he says, makes the region “the most unequal on the planet.”
Within those monarchies, he continues, a small slice of people controls most of the wealth, while a large — including women and refugees — are kept in a state of “semi-slavery.” Those economic conditions, he says, have become justifications for jihadists, along with the casualties of a series of wars in the region perpetuated by Western powers. His list starts with the first Gulf War, which he says resulted in allied forces returning oil “to the emirs.” Though he does not spend much space connecting those ideas, the clear implication is that economic deprivation and the horrors of wars that benefited only a select few of the region’s residents have, mixed together, become what he calls a “powder keg” for terrorism across the region.
Piketty is particularly scathing when he blames the inequality of the region, and the persistence of oil monarchies that perpetuate it, on the West: “These are the regimes that are militarily and politically supported by Western powers, all too happy to get some crumbs to fund their [soccer] clubs or sell some weapons. No wonder our lessons in social justice and democracy find little welcome among Middle Eastern youth.” Terrorism that is rooted in inequality, Piketty continues, is best combated economically.
All totlly legal, no doubt. “..an emerald and diamond jewellery set containing a ring, earrings, bracelet, and necklace, which was valued at $780,000 [was given to] Teresa Heinz Kerry, wife of US Secretary of State John Kerry.
Three quarters of the value of all official gifts given to the US administration in 2014 came from Saudi Arabia, according to US government records. US President Barack Obama, First Lady Michelle Obama, their daughters and US federal government employees received official gifts estimated to be worth a total of $3,417,559 last year. Analysis of the annual disclosure, released by the US Department of State’s Office of the Chief of Protocol, found Saudi Arabia gave the US gifts valued at around $2,566,525. It dominated the report and represented 75% of the value of all gifts received by Obama and his government employees last year.
When all other Arab countries are added to the mix the total value rises to nearly $3 million, with the Arab region accounting for 87% of the value of all gifts. The most lavish gift was an emerald and diamond jewellery set containing a ring, earrings, bracelet, and necklace, which was valued at $780,000. It was not given to Obama, his wife Michelle or his children, but Teresa Heinz Kerry, wife of US Secretary of State John Kerry. The jewels were given to Mrs Kerry in January 2014 by the late King Abdullah bin Abdulaziz Al-Saud. First Lady Michelle Obama is included in the top five with two gifts of jewels from Saudi Arabia, each worth well over half a million dollars.
The president himself is further down the list, behind his children and wife, and ranked 7th with a white gold men’s watch worth $67,000. The six other Gulf states also gave lavish gifts to the Obama administration. Qatar gave Eric Holder, US Attorney General, a $24,150 gold and silver ship depicting United States and the State of Qatar flags in a case, in addition to an engraved Cartier bracelet. The UAE also gifted a gold necklace and earring set with white stones worth around $3,200 to Deborah K. Jones, Ambassador of the US to the State of Libya. The gift was presented in March 2014 on behalf of Sheikh Khalifa bin Zayed Al Nahyan, President of the UAE.
Soon after launching a brutal air and ground assault in Yemen, the Kingdom of Saudi Arabia began devoting significant resources to a sophisticated public relations blitz in Washington, D.C. The PR campaign is designed to maintain close ties with the U.S. even as the Saudi-led military incursion into the poorest Arab nation in the Middle East has killed nearly 6,000 people, almost half of them civilians. Elements of the charm offensive include the launch of a pro-Saudi Arabia media portal operated by high-profile Republican campaign consultants; a special English-language website devoted to putting a positive spin on the latest developments in the Yemen war; glitzy dinners with American political and business elites; and a non-stop push to sway reporters and policymakers. That has been accompanied by a spending spree on American lobbyists with ties to the Washington establishment.
The Saudi Arabian Embassy, as we’ve reported, now retains the brother of Hillary Clinton’s campaign chairman, the leader of one of the largest Republican Super PACs in the country, and a law firm with deep ties to the Obama administration. One of Jeb Bush’s top fundraisers, Ignacio Sanchez, is also lobbying for the Saudi Kingdom. Saudi Arabia’s relationship with the U.S. has come under particular strain in recent years as the government has not only launched the brutal war in Yemen, but has embarked on a wave of repression. Following the appointment of Salman bin Abdulaziz Al-Saud to the Saudi throne in January, the Kingdom sharply increased the number of people executed — often by beheading and crucifixion — for daring to protest or criticize the government or for crimes as minor as adultery or “witchcraft.” On November 17, a Saudi court sentenced Ashraf Fayadh, a famed poet, to death for “apostasy.”
There have also been reports that Saudi Arabia continues to be a leading driver of Sunni terror networks worldwide, including in Syria and Iraq. The Saudi Arabian government is currently supplying weapons to a Syrian rebel coalition that includes the Nusra Front, al Qaeda’s affiliate in the region. As the New York Times has reported, private donors in Saudi Arabia have also worked as fundraisers for the Islamic State, or ISIS. And there is a renewed, bipartisan push by lawmakers to declassify the 28 pages of the 9/11 Commission Report, a censored section that reportedly relates to Saudi state support for al Qaeda’s operation.
Pope Francis, galvanized by a scandal over Vatican finances, has ordered the most powerful bodies in the city-state to launch an unprecedented audit of its wealth and crack down on runaway spending. At the suggestion of his economic chief, Cardinal George Pell, Francis has set up a “Working-Party for the Economic Future” which brings together the Secretariat of State, or prime minister’s office, the Vatican Bank and other agencies. Francis has told the panel “to address the financial challenges and identify how more resources can be devoted to the many good works of the Church, especially supporting the poor and vulnerable,” Danny Casey, director of Pell’s office at the Secretariat for the Economy, said in an interview.
The pope’s initiatives come as five people stand trial in the Vatican over the leak of confidential documents in two books published last month that described corruption, mismanagement and wasteful spending by church officials. Those on trial deny wrongdoing. Francis, 78, has pushed for more openness and transparency in Vatican financial and economic agencies but he has faced resistance from the Rome bureaucracy. On the flight back to Rome on Monday after a visit to Africa, Francis told reporters that the so-called Vatileaks II scandal was an indication of the mess that he’s trying to sort out.
The trial of two former Vatican employees alongside the books’ authors highlighted Church efforts “to seek out corruption, the things which aren’t right,” he said, according to a transcript provided by the Vatican. The working group, which held its first meeting last week, will study measures to cut costs and raise revenue as part of a long-term financial plan. “This will include comparing actual expenditure against budgets at a consolidated level, which is a new initiative,” Casey said.
The IMF’s decision to add China’s yuan to its reserves basket is a triumph for Beijing, but the fund’s verdict that the currency met its “freely usable” test will have little financial impact unless Beijing recruits more users. The desire of Chinese reformers to internationalize the currency has a clear economic rationale; a yuan in wide circulation overseas would reduce China’s dependence on the dollar system and on policy set in Washington. It would also make it easier for Chinese firms to invoice and borrow offshore in yuan, reducing the risk of exchange rate fluctuations and prompting China’s inefficient state-owned banks to improve their performance or lose business. Those concerned about a potential global liquidity crisis caused by overdependence on the United States might also welcome the yuan as an alternative to the dollar, as would countries locked out of dollar capital markets by sanctions.
But to serve these purposes, there needs to be a much bigger pool of yuan outside China, which requires offshore institutions – and not just in Hong Kong – to buy and hold yuan. Few believe the IMF decision alone, which economist Alicia Garcia-Herrero called a “beauty contest”, will change investor behavior much. For that, says Swiss bank UBS, Beijing needs to continue financial reforms and capital account liberalization to improve the efficiency of capital allocation in China. Foreign investors want Beijing to provide predictable and transparent legal and taxation treatment, and drop its penchant for pilot programs and quotas in favor of consistency. They also want to know they can freely sell their yuan assets, not just buy, a concern that only grew over the summer, when Beijing stepped into its stock markets to stop a sell-off.
Foreign investors aren’t making full use of the existing channels to buy Chinese assets that Beijing allows – quotas for the two Qualified Foreign Institutional Investor programs (QFII and RQFII) and the Shanghai-Hong Kong Stock Connect have yet to be used up. And for all the impressive trade statistics, much of the “offshore” yuan isn’t traveling the globe but bouncing to and fro across the internal border with Hong Kong, largely traded between Chinese companies. “The number one thing we would like to see changed is that the QFII and RQFII quotas are dropped, just as they dropped in July the quotas for central banks, sovereign wealth funds and supernationals. It’ll make it a lot easier for global institutional investors,” said Hayden Briscoe at AllianceBernstein in Hong Kong.
Why would China want the IMF to put the yuan in the SDR? It may want to engineer a bump in capital inflows, at a time when money is trying to leave China. Generating some foreign demand for yuan-denominated assets might help stabilize the Chinese currency, which is expected to depreciate a bit in the months ahead. The IMF might be motivated to help China limit the moves in its currency in order to promote global macroeconomic stability, or it might want to lure China into making sovereign loans through the fund instead of on its own. Ultimately, the yuan’s status as a reserve currency will be driven by China’s further liberalization of its capital account. The easier it becomes to move money in and out of yuan, the more asset managers will be willing to put their money in.
And if China ascends to true reserve currency status, the most important effects will be in the long term – not all of them good. True reserve currency status makes it cheaper for a government to borrow, which means that – all else equal – more borrowing will happen. That will increase net capital inflows. And as many countries have learned during the last decade, capital inflows can cause trouble. That doesn’t make a lot of sense, intuitively. How could it harm a country to allow it to borrow cheaply? If countries were rational and foresighted, they would borrow no more than is healthy. But sovereign borrowing decisions are the result of government decisions not market ones, and no one would argue that governments always make wise choices. Even the private sector, though, could be harmed by capital inflows.
As economists Gianluca Benigno, Nathan Converse, and Luca Fornaro have found, large influxes of foreign money can lead to booms and busts. They can also cause a country to shift resources out of manufacturing, where productivity growth is often high, into service-oriented industries where productivity is relatively stagnant. Over the past several decades, the U.S. dollar has been the main reserve currency, and the U.S. has experienced huge capital inflows, especially from countries such as China. Those capital inflows in turn have caused a large, persistent trade deficit. Perhaps not coincidentally, U.S. manufacturing hasn’t grown very fast since the late 1990s. In the year ahead, reserve-currency status might help cushion the country’s economic slowdown. But in the long term, it might be a poisoned chalice for China.
The EU is warning Greece it faces suspension from the Schengen passport-free travel zone unless it overhauls its response to the migration crisis by mid-December, as frustration mounts over Athens’ reluctance to accept outside support. Several European ministers and senior EU officials see the threat of pushing out Greece over “serious deficiencies” in border control as the only way left to persuade Alexis Tsipras, Greece’s prime minister, to deliver on his promises and take up EU offers of help. If the EU follows through on its threat, it would mark the first time a country has been suspended from Schengen since its establishment in 1985. The challenge to Athens comes amid a bigger rethink on tightening joint border control to ensure the survival of the Schengen zone.
The European Commission will this month propose a joint border force empowered to take charge of borders, potentially even against the will of frontline states such as Greece. Greece’s relatively weak administration has been overwhelmed by more than 700,000 migrants crossing its frontiers this year. Given the severity of the crisis, EU officials are vexed by Athens’s refusal to call in a special mission from Frontex, the EU border agency; its unwillingness to accept EU humanitarian aid; and its failure to revamp its system for registering refugees. EU home affairs ministers, who meet on Friday, are to make clear that more drastic measures will be considered if Greece fails to take action before a summit of EU leaders in mid-December, according to four senior European diplomats.
The suspension warning has been delivered repeatedly to Greece this week, including through a visit to Athens by Jean Asselborn, foreign minister of Luxembourg, which holds the EU’s rotating presidency. One Greek official strongly denied accusations of being unco-operative and said claims Mr Tsipras has failed to meet pledges made at a summit of western Balkan leaders last month were “untrue”. But another official acknowledged the foot-dragging. He said it stemmed from a legal requirement that only Greeks were allowed to patrol the country’s borders as well as sensitivity over the long-running dispute over Macedonia’s name and suspicions about Turkish designs on certain Greek islands, including Lesbos, point of entry for many migrants.
As Greece shares no land borders with Schengen , Greek officials point out it will have no impact on migrant flows. “There are no refugees leaving Greece who are flying ,” he said. EU officials acknowledge this but say the withdrawal of travel rights for Greeks is one of their few points of leverage over Mr Tsipras. Athens has recently turned down a deployment of up to 400 Frontex staff to immediately reinforce its border with Macedonia, complaining in a letter to the European Commission that their mandate was too broad and went beyond registration. Greek officials have yet to accept an invitation to invoke an emergency aid scheme – the EU civil protection mechanism — that would rush humanitarian support to islands and border areas.
Danes head to the polling stations on Thursday (3 December) for their eighth EU referendum since a majority voted Yes to join the club back in 1972. So far, they voted five time Yes and two times No, with a narrow lead for the No side this time around. A Gallup poll published on Saturday in the Berlingske Tidende daily showed 38% intend to vote No, with 34% Yes, and 23% undecided. You need to go back to the Maastricht treaty referendum over 20 years ago to find the reason for this week’s plebiscite. Maastricht was initially rejected by the Danes in 1992. In order to save the entire treaty, Denmark, at a summit in Edinburgh, was offered a handful of treaty-based opt-outs, preserving Danish sovereignty over EU-policy areas, such as the euro and justice and home affairs.
The Maastricht treaty was then approved together with the opt-outs in a re-run of the vote in 1993. EU legislation in the area of justice and home affairs has ballooned in the 20 years which followed. Today, it includes important areas such as cybercrime, trafficking, data protection, the Schengen free-travel system, refugee and asylum policy, and closer police co-operation on counter-terrorism. Bound by the old treaty opt-out, Denmark automatically stays out of all the supra-national EU justice and home affairs policies and doesn’t take part in EU Council votes in these areas. A frustrated majority in the Danish parliament, nick-named “Borgen” (The Castle), in August voted to call the referendum asking citizens to scrap the old arragement. They wanted permission from voters to opt in to the justice and home affairs policies over time, without having to consult people, each time, in a referendum.
The Yes parties identified 22 existing EU initiatives they want Denmark to join right after a Yes vote. They also promised Denmark won’t take part in 10 other EU initiatives – including the hot-button issue of asylum and immigration. The day after the referendum was announced, Gallup polled that a safe majority of 58% would vote Yes. But something happened during the campaign. First, the refugee crisis hardened public opinion. Liberal prime minister Lars Loekke Rasmussen promised there would be a new referendum before Denmark ever joins EU refugee and asylum policies. The move confused voters, who saw no reason to scrap the opt-out if Denmark was to stay out of key policies anyway. Then more terror attacks hit Paris in November.
The European People’s Party (EPP) has reiterated its opposition to EU membership for Turkey, despite the agreement that was reached on Sunday (29 November). EurActiv Germany reports. The deal that was struck with Ankara in relation to providing aid to tackle the refugee crisis and reopening accession talks has done nothing to quell the scepticism of the conservative EPP. “For us in the EPP, it is clear that we want a close partnership, but not full membership,” Manfred Weber (CSU), the EPP’s group leader, told Bavarian television on Monday (30 November). Although supporting the financial pledge made by the EU, he called the decision to allow Turks visa-free travel a “bitter pill” to swallow.
On Sunday evening (29 November), the EU and Turkey concluded talks that had been made necessary by the ongoing refugee crisis. Ankara committed itself to strengthening its land and sea borders, as well as stepping up its efforts against traffickers. In return, the EU pledged €3 billion to be used exclusively to care for refugees, to remove the visa-requirement for Turkish travellers and to re-energise accession talks. Alexander Graf Lambsdorff (FDP), Vice-President of the European Parliament, criticised the reopening of accession talks, given the civil and human rights situation in Asia Minor. It is not right that the EU have thrown their “values overboard” in dealing with the refugee crisis, the liberal politician said in a radio interview. Lambsdorff accused the German Chancellor of kowtowing to Turkish President Erdogan.
Secret official documents about the searching of three trucks belonging to Turkey’s national intelligence service (MIT) have been leaked online, once again corroborating suspicions that Ankara has not been playing a clean game in Syria. According to the authenticated documents, the trucks were found to be transporting missiles, mortars and anti-aircraft ammunition. The Gendarmerie General Command, which authored the reports, alleged, “The trucks were carrying weapons and supplies to the al-Qaeda terror organization”. But Turkish readers could not see the documents in the news bulletins and newspapers that shared them, because the government immediately obtained a court injunction banning all reporting about the affair.
When President Recep Tayyip Erdogan was prime minister, he had said, “You cannot stop the MIT truck. You cannot search it. You don’t have the authority. These trucks were taking humanitarian assistance to Turkmens”. Since then, Erdogan and his hand-picked new Prime Minister Ahmet Davutoglu have repeated at every opportunity that the trucks were carrying assistance to Turkmens. Public prosecutor Aziz Takci, who had ordered the trucks to be searched, was removed from his post and 13 soldiers involved in the search were taken to court on charges of espionage. Their indictments call for prison terms of up to 20 years. In scores of documents leaked by a group of hackers, the Gendarmerie Command notes that rocket warheads were found in the trucks’ cargo. According to the documents that circulated on the Internet before the ban came into effect, this was the summary of the incident:
Russia is working with the UN Security Council on a document that would enforce stricter implementation of Resolution 2199, which aims to curb illegal oil trade with and by terrorist groups, Russian ambassador to the UN Vitaly Churkin told RIA Novosti. The draft resolution intends to quash the financing of terrorist groups, including Islamic State (IS, formerly ISIS/ISIL) extremists. “We are not happy with the way Resolution 2199, which was our initiative, is controlled and implemented. We want to toughen the whole procedure,” Churkin said. “We are already discussing the text with some colleagues and I must say that so far there is not a lot of contention being expressed.” US Ambassador Samantha Power said that America has “a shared objective” with Russia on this, since it is also working towards bringing the financing of terrorism to a halt.
The new document is a follow-up to Russian-sponsored Resolution 2199, which was adopted by the UN on February 12 to put a stop to illicit oil deals with terrorist structures using the UN Security Council’s sanctions toolkit. February’s resolution “has become an integral part of efforts by the UN Security Council, with Russia’s active involvement, to consolidate the international legal framework for countering the terrorist threat from ISIS and Jabhat al-Nusra,” Dr Alexander Yakovenko, Russian Ambassador to the United Kingdom of Great Britain and Northern Ireland, wrote for RT. “Its urgency is prompted by the considerable revenues that the terrorists are receiving from trade in hydrocarbons from seized deposits in Syria and Iraq.” More specifically, it bans all types of oil trade with IS and Jabhat al-Nusra.
If such transactions are discovered, they are labeled as financial aid to terrorists and result in targeted sanctions against participating individuals or companies. Back in July, the UN Security Council expressed “grave concern” over reports of oil trading with IS militant groups in Iraq and Syria. The statement came after IS seized control of oilfields in the area and was reportedly using the revenues to finance its nascent “state.” While Ambassador Churkin has proposed sanctioning states trading with IS terrorists, a retired US army general, believes that Churkin should be more specific in identifying the state actors involved in the illegal oil trade. Retired US Army Major General Paul E. Vallely, who has recently been lobbying for the Syrian rebels to cooperate with Russia against Islamic State, as well as for Washington to take a more active role in the war on IS, says Turkish President Recep Tayyip Erdogan should be singled out as a “negative force” for supporting Islamic State’s black market oil revenues.
While the rebels in eastern Syria where the oil fields are located “could align with certain forces that are there – the Russians, if they were so inclined to do so… the key is to destroy ISIS, and one of the initiatives that ambassador Churkin should be moving toward with the Security Council is Erdogan in Turkey,” Vallely told RT. “He [Erdogan] has been supporting ISIS since I was over there several years ago. I’ve met some of the black-marketeers along the Syrian border there in [Turkish] Hatay province, and so they’re alive and well. But Erdogan is a problem, he really is, and if I was ambassador Churkin, not only would I propose something in the Security Council for cutting off the finances, but also doing some kind of action against Erdogan. He is a very, very negative force in that area.”
Russia may freeze work on the Turkish Stream gas pipeline project for several years in retaliation against Ankara for the shooting down of a Russian Air Force jet, two sources at Russian gas giant Gazprom have told Reuters. The project is to involve, initially, building a new gas pipeline under the Black Sea to Turkey, and in subsequent phases the construction of a further line from Turkey to Greece, and then overland into Southeastern Europe. Even before the row with Ankara, the project had been delayed and reduced in scale, leading some industry insiders to doubt if it would ever happen.
Virtually out of cash and with its revenues fast deteriorating, Puerto Rico is moving toward default on $7 billion in loans owed by its public corporations to free up money to repay loans backed by the territory’s full faith and credit, Gov. Alejandro Garcia Padilla told a Senate hearing Tuesday. The move allowed Puerto Rico to make a $355 million bond payment due today. Still, the financial gimmick, which violates the terms of some of those bond deals, only provides a short-term fix for the island’s liquidity problems. With at least $687 million in payments due on Jan. 1 and others to follow, it will only be a matter of time before Puerto Rico misses large payments on its $73 billion in outstanding debt, officials said.
“In simple terms we have begun to default on our debt in an effort to attempt to repay bonds issued with full faith and credit of the commonwealth and secure sufficient resources to protect the life, health, safety and welfare of the people of Puerto Rico,” Garcia Padilla told the Senate Judiciary Committee. If Congress does not pass legislation to allow Puerto Rico to reorganize its debts in bankruptcy, Tuesday’s financial move will just be “the beginning of a very long and chaotic process” that will harm the island’s creditors and allow a budding humanitarian crisis on the island to grow out of control, the governor said.
Human Rights Watch called on the Obama administration on Tuesday to investigate 21 former U.S. officials, including former President George W. Bush, for potential criminal misconduct for their roles in the CIA’s torture of terrorism suspects in detention. The other officials include former Vice President Dick Cheney, former CIA Director George Tenet, former U.S. Attorney General John Ashcroft and National Security Adviser Condoleezza Rice. Human Rights Watch argued that details of the Central Intelligence Agency’s interrogation program that were made public by a U.S. Senate committee in December 2014 provided enough evidence for the Obama administration to open an inquiry.
“It’s been a year since the Senate torture report, and still the Obama administration has not opened new criminal investigations into CIA torture,” Kenneth Roth, executive director of Human Rights Watch, said in a statement. “Without criminal investigations, which would remove torture as a policy option, Obama’s legacy will forever be poisoned.” Representatives for Bush and Tenet declined comment. Representatives for Cheney, Ashcroft and Rice could not immediately be reached for comment. Former Bush administration officials and Republicans have argued that the CIA used “enhanced interrogation techniques” that did not constitute torture. They argue that the Senate report was biased.
“It’s a bunch of hooey,” James Mitchell, one of the architects of the interrogation program told Reuters nearly a year ago after the release of the Senate Intelligence Committee’s findings. “Some of the things are just plain not true.” In a video released in conjunction with the report, “No More Excuses” “A Roadmap to Justice for CIA Torture,” the president of the American Bar Association calls for a renewed investigation as well. In June, the ABA sent a letter to U.S. Attorney General Loretta Lynch also saying that the details disclosed in the Senate report merited an investigation. “What we’ve asked the Justice Department to do is take a fresh look, a comprehensive look, into what has occurred to basically leave no stone unturned into investigating possible violations,” said American Bar Association President Paulette Brown.
“And if any are found to take the appropriate action as they would in any other matter.” CIA interrogators carried out the program on detainees who were captured around the world after the Sept. 11, 2001 hijacked plane attacks on the United States. In 2008, the Bush administration opened a criminal inquiry into whether the CIA destroyed videotapes of interrogations. After taking office in 2009, the Obama administration expanded the inquiry to include whether the interrogation program’s activity involved criminal conduct. In 2012, the Obama administration closed the criminal inquiry. Then Attorney General Eric Holder said that not enough evidence existed for criminal prosecution, including the death of two detainees.
A 4-year-old child was reported drowned in the early hours of Tuesday as she and 28 fellow passengers tried to swim to the shore of Rho, a small islet off the coast of Kastellorizo in the southeastern Aegean. The coast guard says it was able to rescue the other 28 passengers on board the craft that had set sail from Turkey as they tried to reach Europe, but the young girl drowned in the final scramble. Greek coast guard officers have rescued over 200 refugees and migrants from Greece’s seas since Monday.