Nov 082017
 
 November 8, 2017  Posted by at 1:47 pm Finance Tagged with: , , , , , , , , , , ,  12 Responses »
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Salvador Dalí The oecumenial council 1960

 

Trying to figure out what on earth is happening in the Middle East appears to have gotten a lot harder. Perhaps (because) it’s become more dangerous too. There are so many players, and connections between players, involved now that even making one of those schematic representations would never get it right. Too many unknown unknowns.

A short and incomplete list of the actors: Sunni, Shiite, Saudi Arabia, US, Russia, Turkey, ISIS, Syria, Iran, Iraq, Libya, Kurds, Lebanon, Hezbollah, Hamas, Qatar, Israel, United Arab Emirates (UAE), Houthis, perhaps even Chechnya, Afghanistan, Pakistan. I know I know, add your favorites. So what have we got, or what do we know we’ve got? We seem to have the US lining up with Israel, the UAE and Saudi Arabia against Russia, Iran, Syria, Hezbollah. Broadly. But that’s just a -pun intended- crude start.

Putin has been getting closer to the Saudis because of the OPEC production cuts, trying to jack up the price of oil. Which ironically has now been achieved on the heels of the arrests of 11 princes and scores of other wealthy and powerful in the kingdom. But Putin also recently signed a $30 billion oil -infrastructure- deal with Iran. And he’s been cuddling up to Israel as well.

In fact, Putin may well be the most powerful force in the Middle East today. Well played?! He prevented the demise of Assad in Syria, which however you look at it at least saved the country from becoming another Iraq and Libya style failed state. If there’s one thing you can say about the Middle East/North Africa it’s that the US succeeded in creating chaos there to such an extent that it has zero control left over any of it. Well played?!

 

One thing seems obvious: the House of Saud needs money. The cash flowing out to the princes is simply not available anymore. The oil price is a major factor in that. Miraculously, the weekend crackdown on dozens of princes et al, managed to do what all the OPEC meetings could not for the price of oil: push it up. But the shrinkage of foreign reserves shows a long term problem, not some momentary blip:

 

 

Another sign that money has become a real problem in Riyadh is the ever-postponed IPO of Saudi Aramco, the flagship oil company supposedly worth $2 trillion. Trump this week called on the Saudi’s to list it in New York, but despite the upsurge in oil prices you still have to wonder which part of that $2 trillion is real, and which is just fantasy.

But yeah, I know, there’s a million different stocks you can ask the same question about. Then again, seeing the wealth of some of the kingdom’s richest parties confiscated overnight can’t be a buy buy buy signal, can it? Looks like the IPO delay tells us something.

And then you have the 15,000 princes and princesses who all live off of the Kingdom’s supposed riches (‘only 2,000’ profit directly). All of them live in -relative- wealth. Some more than others, but there’s no hunger in the royal family. Thing is, overall population growth outdoes even that in the royal family. Which means, since the country produces nothing except for oil, that there are 1000s upon 1000s of young people with nothing to do but spend money that’s no longer there. Cue mayhem.

 

 

And things are not getting better, Saudi Arabia loses money on every barrel it produces. There are stories about them lowering their break-even price, but let’s take that with a few spoonfuls of salt. A 25% drop in break-even prices in just one year sounds a bit too good. Moreover, main competitors like Iran would still have a much lower break-even price. So even if prices would rise further, the Saudi’s might only break even while Iran gets much richer. Running vs standing still.

 

Saudi Arabia Leads Gulf Nations in Cutting Break-Even Oil Price

Saudi Arabia, OPEC’s biggest oil producer, is also a leader when it comes to slashing the crude price the country needs to balance its budget. The kingdom will need oil to trade at $70 a barrel next year to break even, the IMF said Tuesday in its Regional Economic Outlook for the Middle East and Central Asia. That’s down from a break-even of $96.60 a barrel in 2016, the biggest drop of eight crude producers in the Persian Gulf. The break-even is a measure of the crude price needed to meet spending plans and balance the budget.

 

 

Gulf oil producers are cutting spending and eliminating subsidies after crude plunged from more than $100 a barrel in 2014 to average just over half that this year. The need to curb spending is more urgent with the Organization of Petroleum Exporting Countries cutting output to reduce a global glut. Oil will trade at $50 to $60 a barrel for the “medium term,” the IMF said.

 

 

So a thorough cleansing job of the royal family is perhaps inevitable, albeit very risky. King Salman and crown prince Mohammed bin Salman are up against a very large group of rich people. But there’s no way back now.

 

Saudi Banks Freeze More Than 1,200 Bank Accounts in Anti-Corruption Purge

Saudi Arabian banks have frozen more than 1,200 accounts belonging to individuals and companies in the kingdom as part of the government’s anti-corruption purge, bankers and lawyers said on Tuesday. They added that the number is continuing to rise. Dozens of royal family members, officials and business executives have been detained in the crackdown and are facing allegations of money laundering, bribery, extorting officials and taking advantage of public office for personal gain. Since Sunday, the central bank has been expanding the list of accounts it is requiring lenders to freeze on an almost hourly basis…

Much more will have to follow that. Doing a half way job is far too risky once the job has started. Not even $800 billion sounds like all that much. Separate families and factions within the royal family have had decades to accumulate wealth.

 

Saudi Crackdown Targets Up to $800 Billion in Assets

The Saudi government is aiming to confiscate cash and other assets worth as much as $800 billion in its broadening crackdown on alleged corruption among the kingdom’s elite, according to people familiar with the matter. Several prominent businessmen are among those who have been arrested in the days since Saudi authorities launched the crackdown on Saturday, by detaining more than 60 princes, officials and other prominent Saudis, according to those people and others. The country’s central bank, the Saudi Arabian Monetary Authority, said late Tuesday that it has frozen the bank accounts of “persons of interest” and said the move is “in response to the Attorney General’s request pending the legal cases against them.”

The most visible – and perhaps richest- of all those arrested -in western eyes- is Al-Waleed. The Bloomberg estimate of his wealth that came out this week is $19 billion. But their own article seems to indicate a much higher number. He owns 5% of Apple -says Bloomberg-, and that share alone would be worth $45 billion.

 

Alwaleed, Caught in Saudi Purge, Has Assets Across the World

Apple – Alwaleed bought 6.23 million shares, or 5 percent, of the computer and mobile-device maker for $115.4 million in 1997. He made these purchases between mid-March and April of that year while the company was still struggling to turn itself around. He has since continued to hold the stake while Apple’s valuation has soared to as high as $900 billion.

 

Going through all these numbers, you can imagine why the ruling family, or rather the rulers within that family, are getting nervous. And that’s where we get to an interesting piece by Ryan Grim at the Intercept, who says it’s not even 32-year-old crown prince Mohammed bin Salman, known as MBS, or King Salman, 81, who control the kingdom these days, it’s the United Arab Emirates (UAE) -and maybe Washington-.

The coup has already been perpetrated.

 

Saudi Arabia’s Government Purge – And How Washington Corruption Enabled It

The move marks a moment of reckoning for Washington’s foreign policy establishment, which struck a bargain of sorts with Mohammed bin Salman, known as MBS, and Yousef Al Otaiba, the United Arab Emirates ambassador to the U.S. who has been MBS’s leading advocate in Washington. The unspoken arrangement was clear: The UAE and Saudi Arabia would pump millions into Washington’s political ecosystem while mouthing a belief in “reform,” and Washington would pretend to believe that they meant it.

MBS has won praise for some policies, like an openness to reconsidering Saudi Arabia’s ban on women drivers. Meanwhile, however, the 32-year-old MBS has been pursuing a dangerously impulsive and aggressive regional policy, which has included a heightening of tensions with Iran, a catastrophic war on Yemen, and a blockade of ostensible ally Qatar. Those regional policies have been disasters for the millions who have suffered the consequences, including the starving people of Yemen, as well as for Saudi Arabia, but MBS has dug in harder and harder. And his supporters in Washington have not blinked.

The platitudes about reform were also challenged by recent mass arrests of religious figures and repression of anything that has remotely approached less than full support of MBS. The latest purge comes just days after White House adviser Jared Kushner, a close ally of Otaiba, visited Riyadh, and just hours after a bizarre-even-for-Trump tweet. Whatever legitimate debate there was about MBS ended Saturday — his drive to consolidate power is now too obvious to ignore. And that puts denizens of Washington’s think tank world in a difficult spot, as they have come to rely heavily on the Saudi and UAE end of the bargain.

As The Intercept reported earlier, one think tank alone, the Middle East Institute, got a massive $20 million commitment from the UAE. And make no mistake, MBS is a project of the UAE — an odd turn of events given the relative sizes of the two countries. “Our relationship with them is based on strategic depth, shared interests, and most importantly the hope that we could influence them. Not the other way around,” Otaiba has said privately.

The kingdom’s broke. Not today, or tomorrow morning, but crown prince MBS is able to look at the numbers and go: Oh Shit! And if he doesn’t see it, he has Kushner (re: Israel) and Al-Otaiba to fill him in. All three relative youngsters -MBS is 32, Kushner is 36, Otaiba is 43- are exceedingly nervous by now.

And then you get war, or the threat of war. War in Yemen, a blockade of Qatar, and now ‘mingling’ in Lebanon with the somewhat mysterious removal of billionaire PM Hariri -allegedly on an Iran/Hezbollah assassination plot-, and outright threats against Iran and Hezbollah:

 

Lebanon’s Hariri Visits UAE As Home Crisis Escalates

Lebanon’s outgoing prime minister, Saad al-Hariri, made a brief visit to the United Arab Emirates from Saudi Arabia on Tuesday despite a deepening crisis back home and a rise in regional tensions triggered by his surprise resignation. Hariri announced his resignation on Saturday during a visit to his ally Saudi Arabia and has not yet returned to Lebanon. He said he believed there was an assassination plot against him and accused Iran, Saudi Arabia’s arch-rival, and its Lebanese ally Hezbollah of sowing strife in the Arab world.

His resignation has thrust Lebanon back into the frontline of the regional rivalry that pits a mostly Sunni bloc led by Saudi Arabia and allied Gulf monarchies against Shi‘ite Iran and its allies. Hariri’s office said he had flown to Abu Dhabi on Tuesday and then returned to Riyadh, but it gave no reason for the trip. It also did not say when he would return home. Hariri’s Future TV channel said he would also visit Bahrain but gave no reason.

In short: billionaire PM Hariri is a puppet. Just perhaps not of Saudi Arabia, but of Abu Dhabi. Whether he’s under house arrest in Riyadh, as has been suggested, is still unclear. But it’s a safe bet that he didn’t fly to Abu Dhabi -and back- alone, or of his own accord. He went to receive instructions.

 

Saudi Arabia Accuses Iran Of ‘Direct Military Aggression’ Over Yemen Missile

Saudi Arabia’s crown prince has accused Iran of “direct military aggression” by supplying missiles to Houthi rebels in Yemen, raising the stakes in an already tense standoff between the two regional rivals. Mohammed bin Salman linked Tehran to the launch of a ballistic missile fired from Yemen towards the international airport in the Saudi capital of Riyadh on Saturday. The missile was intercepted and destroyed.

“The involvement of the Iranian regime in supplying its Houthi militias with missiles is considered a direct military aggression by the Iranian regime,” the prince said on Tuesday during a phone conversation with the UK foreign secretary, Boris Johnson, according to the state-run Saudi Press Agency. He added that the move “may be considered an act of war against the kingdom”. Iran has called Riyadh’s accusations as baseless and provocative.

We have way of knowing what is true or not about this. We do know that Saudi Arabia have been executing a barbaric war in Yemen. With weapons from the US, UK, et al. So someone firing back wouldn’t be that far-fetched.

 

Regardless, Pepe Escobar, a journalist who knows much more than his peers, or at least doesn’t hold back as much as them, doesn’t see this end well for MBS, UAE, Israel, US, and whoever else is in their corner. Another losing war for the US in the Middle East? We’re losing count.

 

The Inside Story Of The Saudi Night Of Long Knives

A top Middle East business/investment source who has been doing deals for decades with the opaque House of Saud offers much-needed perspective: “This is more serious than it appears. The arrest of the two sons of previous King Abdullah, Princes Miteb and Turki, was a fatal mistake. This now endangers the King himself. It was only the regard for the King that protected MBS. There are many left in the army against MBS and they are enraged at the arrest of their commanders.” To say the Saudi Arabian Army is in uproar is an understatement. “He’d have to arrest the whole army before he could feel secure.”

[..] The story starts with secret deliberations in 2014 about a possible “removal” of then King Abdullah. But “the dissolution of the royal family would lead to the breaking apart of tribal loyalties and the country splitting into three parts. It would be more difficult to secure the oil, and the broken institutions whatever they were should be maintained to avoid chaos.” Instead, a decision was reached to get rid of Prince Bandar bin Sultan – then actively coddling Salafi-jihadis in Syria – and replace the control of the security apparatus with Mohammed bin Nayef. The succession of Abdullah proceeded smoothly.

Power was shared between three main clans: King Salman (and his beloved son Prince Mohammed); the son of Prince Nayef (the other Prince Mohammed), and finally the son of the dead king (Prince Miteb, commander of the National Guard). In practice, Salman let MBS run the show. And, in practice, blunders also followed. The House of Saud lost its lethal regime-change drive in Syria and is bogged down in an unwinnable war on Yemen, which on top of it prevents MBS from exploiting the Empty Quarter – the desert straddling both nations. The Saudi Treasury was forced to borrow on the international markets. Austerity ruled …

[..] aversion to MBS never ceased to grow; “There are three major royal family groups aligning against the present rulers: the family of former King Abdullah, the family of former King Fahd, and the family of former Crown Prince Nayef.” Nayef – who replaced Bandar – is close to Washington and extremely popular in Langley due to his counter-terrorism activities. His arrest earlier this year angered the CIA and quite a few factions of the House of Saud – as it was interpreted as MBS forcing his hand in the power struggle. According to the source, “he might have gotten away with the arrest of CIA favorite Mohammed bin Nayef if he smoothed it over but MBS has now crossed the Rubicon though he is no Caesar. The CIA regards him as totally worthless.”

[..] The source, though, is adamant; “There will be regime change in the near future, and the only reason that it has not happened already is because the old King is liked among his family. It is possible that there may be a struggle emanating from the military as during the days of King Farouk, and we may have a ruler arise that is not friendly to the United States.”

In the end, it all comes down to a familiar theme: follow the money. And we need to seriously question the economic reality of Saudi Arabia. That graph above of their foreign reserves looks downright grim.

With money comes power. Who loses money loses power. Saudi Arabia is bleeding money. The population surge is uncanny, and there are no jobs for all these young people. Perhaps the best they can do is be a US/Israel puppet in an attempt to ‘redo’ the map of the Middle East, but that has not been a very successful project off late -like the past 100 years-.

Then again, when you’re desperate you do desperate things. And when you’re a 32-year-old crown prince with more enemies than you can keep track of, you use what money is left to 1) keep up appearances, 2) steal what others have gathered, 3) buy weapons up the wazoo, and 4) go to war.

It all paints a very dark picture for the world. Russia won’t stand for attacks on Iran. And Iran won’t let attacks on Lebanon/Hezbollah go unanswered. All that is set to push up oil prices further, and all parties involved are just fine with that. Because they can buy more weapons with the additional profits.

I’ll leave you with Nassim Taleb’s comments on the situation. After all, Nassim’s from Lebanon, and knows that part of the world like the back of his hand:

 

 

 

Dec 292016
 
 December 29, 2016  Posted by at 10:36 am Finance Tagged with: , , , , , , , , ,  5 Responses »
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Esther Bubley Negro alley dwellings near the Capitol, Washington DC 1943

 

Trump On Russia Sanctions: ‘We Ought To Get On With Our Lives’ (R.)
Moscow Says It’s “Tired Of The Lie About The ‘Russian Hackers'” (Ptv)
Talking about Starwars: What is Henry Kissinger Up To? (PCR)
US Escalates Tensions With Israel (WSJ)
Hillary Clinton Could Face New Email Probe After Explosive Ruling
House Flipping Makes a Comeback as Home Prices Rise (WSJ)
A China-Watcher’s Guide to 2017 (Balding)
China’s ‘Godfather of Real Estate’ Pitches Reverse Mortgages (NYT)
China Slashes First Round Of Oil Products Export Quotas (R.)
China Fault Lines: Where Economic Turbulence Could Erupt in 2017 (BBG)
Trump Tax Reforms Could Depend On Little-Known ‘Scoring’ Panel (R.)
Greek Migration Minister Vows To Improve Conditions At Camps (Kath.)

 

 

It’s very simple: either the White House shows us prrof of hacking today when sanctions are announced, or all credibility is shot, across US intelligence.

Trump On Russia Sanctions: ‘We Ought To Get On With Our Lives’ (R.)

U.S. President-elect Donald Trump on Wednesday suggested that the United States and Russia lay to rest the controversy over Moscow’s computer hacking of Democratic Party computers, saying, “We ought to get on with our lives.” Trump has cast doubt on the findings of U.S. intelligence agencies that Russian hackers took information from Democratic Party computers and individuals and posted it online to help Trump win the election. The Obama administration plans to announce on Thursday a series of retaliatory measures against Russia for hacking into U.S. political institutions and individuals and leaking information, two U.S. officials said on Wednesday.

Asked by reporters if the United States should sanction Russia, Trump replied: “I think we ought to get on with our lives. I think that computers have complicated lives very greatly. The whole age of computer has made it where nobody knows exactly what’s going on.” Trump made his remarks at Mar-a-Lago, his seaside Florida resort where he is spending the Christmas and New Year’s holidays while also interviewing candidates for administration jobs. Trump said he was not familiar with remarks earlier on Wednesday by Republican Senator Lindsey Graham, who said Russia and President Vladimir Putin should expect tough sanctions for the cyber attacks. “We have speed. We have a lot of other things but I’m not sure you have the kind of security that you need. But I have not spoken with the senators and I certainly will be over a period of time,” he said.

Read more …

Again: proof or ridicule.

Moscow Says It’s “Tired Of The Lie About The ‘Russian Hackers'” (Ptv)

Moscow has vowed retaliation if Washington issues further economic sanctions over alleged Russian cyber attacks during the US presidential elections. “To be honest, we are tired of the lie about the ‘Russian hackers’, which is being poured down in the United States from the very top,” said Russian Foreign Ministry spokeswoman Maria Zakharova on Wednesday. She warned that her country would respond to any manner of “hostile steps” the US decides to undertake. “It concerns any actions against the Russian diplomatic missions in the US which will immediately ricochet the American diplomats in Russia,” she added.

Zakharova went on to stress that the US was attempting to intimidate Moscow with extending sanctions, taking diplomatic measures and sabotage against Russian computer systems, in retaliation for alleged Russian hacking interference during the US presidential elections in November. Earlier in the day, US Republican Senator Lindsey Graham of South Carolina said that Moscow needed to understand it had gone too far during the election, and that new sanctions would target Russian President Vladimir Putin. “It is now time for Russia to understand – enough is enough,” he said. “You can expect that the Congress will investigate the Russian involvement in our elections and there will be bipartisan sanctions coming that will hit Russia hard, particularly Putin as an individual,” he added.

Read more …

Oh, right, Starwars. Paul Craig Roberts contends the neocons are still as strong as ever in the US, even under Trump.

Talking about Starwars: What is Henry Kissinger Up To? (PCR)

The myth is widespread that President Reagan won the cold war by breaking the Soviet Union financially with an arms race. As one who was involved in Reagan’s effort to end the cold war, I find myself yet again correcting the record. Reagan never spoke of winning the cold war. He spoke of ending it. Other officials in his government have said the same thing, and Pat Buchanan can verify it. Reagan wanted to end the Cold War, not win it. He spoke of those “godawful” nuclear weapons. He thought the Soviet economy was in too much difficulty to compete in an arms race. He thought that if he could first cure the stagflation that afflicted the US economy, he could force the Soviets to the negotiating table by going through the motion of launching an arms race. “Star wars” was mainly hype. (Whether or nor the Soviets believed the arms race threat, the American leftwing clearly did and has never got over it.)

Reagan had no intention of dominating the Soviet Union or collapsing it. Unlike Clinton, George W. Bush, and Obama, he was not controlled by neoconservatives. Reagan fired and prosecuted the neoconservatives in his administration when they operated behind his back and broke the law. The Soviet Union did not collapse because of Reagan’s determination to end the Cold War. The Soviet collapse was the work of hardline communists, who believed that Gorbachev was loosening the Communist Party’s hold so quickly that Gorbachev was a threat to the existence of the Soviet Union and placed him under house arrest. It was the hardline communist coup against Gorbachev that led to the rise of Yeltsin. No one expected the collapse of the Soviet Union.

The US military/security complex did not want Reagan to end the Cold War, as the Cold War was the foundation of profit and power for the complex. The CIA told Reagan that if he renewed the arms race, the Soviets would win, because the Soviets controlled investment and could allocate a larger share of the economy to the military than Reagan could. Reagan did not believe the CIA’s claim that the Soviet Union could prevail in an arms race. He formed a secret committee and gave the committee the power to investigate the CIA’s claim that the US would lose an arms race with the Soviet Union. The committee concluded that the CIA was protecting its prerogatives. I know this because I was a member of the committee.

Read more …

Place this in the context of what’s being said about Russian hackers at the same time.

US Escalates Tensions With Israel (WSJ)

Secretary of State John Kerry rebuked Israel for its settlement policy and warned in unusually harsh terms that a two-state solution was in serious jeopardy as the Obama administration raced to preserve its approach to the Middle East weeks before President-elect Donald Trump takes power. Mr. Kerry’s speech on Wednesday—in which he defended a U.S. decision to allow a United Nations resolution condemning Israel’s settlements—was seen by Israeli leaders as a parting shot from an unfriendly American administration in its final weeks. But the address appeared equally intended as a message to the incoming Trump team.

Mr. Kerry spelled out principles that have long been largely consistent in American policy—the goal of Israel existing alongside a separate Palestinian state, the notion that the settlements are an impediment to peace, and the idea that Jerusalem should be the capital of both an Israeli and a Palestinian state. Mr. Trump has suggested he would consider breaking with those principles. “President Obama and I know that the incoming administration has signaled that they may take a different path,” Mr. Kerry said at the State Department. “But we cannot in good conscience do nothing, and say nothing, when we see the hope of peace slipping away.”

Read more …

“This ruling means that the Trump Justice Department will have to decide if it wants to finally enforce the rule of law..”

Hillary Clinton Could Face New Email Probe After Explosive Ruling

The U.S. Court of Appeals for the District of Columbia has ruled in favor of a conservative group’s lawsuit against the State Department over whether or not enough was done to try to restore Clinton’s missing emails, opening a potential further probe into Clinton’s emails by the Trump administration. Back in January, a District Court judge ruled that the lawsuit brought by the conservative group Judicial Watch, against the State Department, had no validity because it had there had been a “sustained effort” to recover the emails. In the new ruling, however, Judge Stephen Williams wrote that this wasn’t enough.

“The Department has not explained why shaking the tree harder – e.g., by following the statutory mandate to seek action by the Attorney General – might not bear more still,” wrote Williams. He added: “Absent a showing that the requested enforcement action could not shake loose a few more emails, the case is not moot.” Williams also said that it’s “abundantly clear that, in terms of assuring government recovery of emails” the conservative group that brought the lawsuit hasn’t “been given everything [they] asked for.” Additionally, because former State Secretary Clinton used her Blackberry email account during the first few weeks of her term, the judge felt that efforts to restore just the messages from Clinton’s private email server weren’t sufficient either.

“Because the complaints sought recovery of emails from all of the former Secretary’s accounts, the FBI’s recovery of a server that hosted only one account does not moot the suits,” he wrote. Judicial Watch president Tom Fitton issued a statement after the ruling, claiming “The courts seem to be fed up with the Obama administration’s refusal to enforce the rule of law on the Clinton emails.” Fitton added, “This ruling means that the Trump Justice Department will have to decide if it wants to finally enforce the rule of law and try to retrieve all the emails Clinton and her aides unlawfully took with them when they left the State Department,” he added.

Read more …

Homes are definitely not places for people to live in. Not in the US.

House Flipping Makes a Comeback as Home Prices Rise (WSJ)

House flipping, a potent symbol of the real-estate market’s excess in the run-up to the financial crisis, is once again becoming hot, fueled by a combination of skyrocketing home prices, venture-backed startups and Wall Street cash. After nearly being felled by real-estate forays almost a decade ago, a number of banks are now arranging financing vehicles for house flippers, who aim to make a profit by buying and selling homes in a matter of months. The sector is small—participants say roughly several hundred million dollars in financing deals have been made in recent months—but is expected to keep growing. In recent months, big banks, including Wells Fargo, Goldman Sachs and JP Morgan have started extending credit lines to companies that specialize in lending to home flippers.

[..] Over the past year, 37-year-old David Franco has collected profits of more than $200,000 on houses that he has quickly refurbished and resold, turning a hobby into an unexpectedly lucrative business. “There’s plenty of money to be made,” says Mr. Franco, who lives just outside of Los Angeles. House-flipping television shows and training “schools” for new investors are proliferating. One “super-intense, hardcore” house-flipping boot camp in Bourne, Mass., promised to teach students about real-estate investing in three days to make “REALLY MASSIVE PROFITS,” according to marketing literature. The increasing amount of speculative housing in recent months is “concerning,” ATTOM noted in a recent report. “We’re starting to see home flipping hit some milestones not seen since prior to the financial crisis.”

ATTOM said profit margins are getting squeezed in some markets. While house flippers typically aim to purchase a house at a 30% discount to the market, in some areas they’re buying homes at a 15% or 10% discount, said Senior Vice President Daren Blomquist. The research firm noted that the number of smaller, inexperienced house flippers entering the market is a sign of rising speculation. George Geronsin, 36, a Southern California real-estate agent and house-flipper who has been in the business since 2008, said he recently sold the majority of the homes he was working on and is sitting on cash “until the next big correction” in the housing market. “Anybody and everybody is getting into the business of house-flipping—that’s when you know it’s the end of the rope,” said Mr. Geronsin.

Read more …

Chris Balding confirms what I wrote yesterday.

A China-Watcher’s Guide to 2017 (Balding)

Last year, China’s leaders were touting plans for deleveraging and supply-side reform. This year, they’re touting yet more plans for deleveraging and supply-side reform. In between, total outstanding credit rose from 246% of gross domestic product to about 265%… Although reining in credit is essential for addressing many of China’s economic problems, the government is still targeting 6.5% growth next year, much of which will be reliant on yet more debt. So pay less attention to the talk and more to the data – specifically, metrics such as credit growth and real-estate prices.

Follow the Fed.China remains tied to the U.S. economy, whether it wants to be or not. Unfortunately, not everything that’s good for the U.S. is good for China. With the U.S. labor market tightening, and President-elect Donald Trump promising a $1 trillion economic stimulus, it is all but certain that the Federal Reserve will continue raising interest rates in 2017. That could have some positive effects for China’s real economy, but it will also put pressure on the People’s Bank of China to raise its own interest rates or risk breaking the soft peg of the yuan to the U.S. dollar. Higher rates, in turn, would raise borrowing costs for heavily indebted Chinese companies, many of which could end up in bankruptcy. How fast the U.S. economy grows, and how many times the Fed raises rates, could have as much impact on China’s economy as anything next year.

The cure can be worse than the disease. Rising asset prices in China have helped prop up everything from coal and steel firms to consumer sentiment. But with potential bubbles popping up everywhere, the government seems to be laying the groundwork for reform. That could mean raising interest rates, applying new restrictions on trading or tightening other regulations. Remember that such measures, however necessary, carry risks of their own. For example, given that China has some of the world’s most expensive housing relative to income, and extremely low turnover, withdrawing credit could result in a real-estate price shock. That might cause indebted developers to fail, or lead to much stronger government action to prevent a hard landing. As regulators try to rein in other asset prices, watch for similar turmoil in bonds and the yuan.

Expect the unexpected. China has long been plagued by poor-quality data, with even senior leadership expressing frustration at getting inaccurate information from the provinces. Unreliable data makes it nearly impossible to properly assess risk, which raises the probability of some type of internal shock. It could come from the nearly $4 trillion market in murky wealth-management products. It could come from social instability tied to hidden unemployment. It could come from something totally unexpected: With the bond market in turmoil, liquidity concerns mounting and defaults rising, there are many ways in which a panic could materialize.

Read more …

Prey on the elderly.

China’s ‘Godfather of Real Estate’ Pitches Reverse Mortgages (NYT)

He is known in China as the “godfather of real estate,” helping lay the groundwork for private homeownership in China, a move that enriched millions and laid the foundations for a vibrant and thriving Chinese middle class. Now, Meng Xiaosu wants a lot of Chinese — the older ones, specifically — to cash out. Older people need to mortgage their homes to address China’s looming demographic bust, Mr. Meng argues. Because of China’s now-defunct one-child policy and other social trends, the country has a rapidly graying population that someday soon may become too expensive for the Chinese government to support. Mr. Meng’s proposed solution is to bring reverse mortgages to China. Called a house-for-pension plan in China, a reverse mortgage allows homeowners to tap the equity in their homes by taking out loans against it.

His argument faces deep business and cultural opposition – mortgaging homes is a tough sell in a country where parents traditionally passed them on to their children – and only a few dozen people in all the country have signed up so far. But he argues that China may have little choice. “China’s elderly do not have much money,” said Mr. Meng, who drew much of his inspiration about the Chinese property market from a stint studying in America, “but they have valuable homes.” China is increasingly pondering tough questions as it looks to a graying future. Right now, China’s 215 million elderly people account for 15% of the total population. By 2050, that number is expected to rise to 350 million – nearly one-quarter of the population.

That has China scrambling to find a more sustainable pension system for its people. In the 1990s, the government dismantled the cradle-to-grave welfare system and borrowed money from younger workers to pay older ones. The country’s pension fund will be $116 trillion in the red by 2050, according to the Chinese Academy of Social Sciences, a top government think tank. Enter Mr. Meng.

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What I see between the lines is a huge glut building. They simply can’t sell it anymore. Oh, and what was that question? Market economy?

China Slashes First Round Of Oil Products Export Quotas (R.)

China has cut oil product export quotas to the nation’s four oil majors by 40% in the first round of licences for 2017, according to two sources who have seen the documents, even as traders expect allowances for overseas sales to meet or exceed this year’s record levels. The notice did not include quotas for independent refiners, known as “teapots”, in line with a report by Reuters earlier this month that the government has ditched the small refiners from its export program. In a notice dated Dec. 23, the Ministry of Commerce and the General Administration of Customs said the four state majors will be allowed to sell 12.4 million tonnes of gasoline, gasoil and jet fuel abroad next year.

That’s down from 20.54 million tonnes in the same round this year. Still, the cut is likely to bring little relief to the stubbornly saturated Asian oil market as China’s majors did not use up the huge quotas issued at the start of last year, and have simply applied for more realistic quotas this year, traders said. “The shrinking quota doesn’t reflect shrinking demand from overseas. Instead, it reflects a shift in company exporting strategy,” said a China-based trader who declined to be named, adding that companies were better matching exports to quotas. “We expect the total quota for 2017 to be on par or a bit higher than 2016,” the trader added. China issued allowances for a record 46.08 million tonnes of oil products in 2016, up 80% from 2015. In the first 11 months of the year, it exported 43 million tonnes of oil products – including products other than gasoline, gasoil and jet fuel – up 35% on a year earlier.

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“The real nightmare for Beijing – and for markets – is a vicious cycle of capital outflows triggering bigger devaluations of the yuan that in turn drive bigger and faster outflows..”

China Fault Lines: Where Economic Turbulence Could Erupt in 2017 (BBG)

China’s balancing act isn’t getting any easier. Policy makers are grappling with how to attack excessive borrowing and rein in soaring property prices while maintaining rapid growth. They’re also battling yuan depreciation and capital outflow pressures as U.S. interest rates rise, while on the horizon looms the risk of confrontation with America’s President-elect Donald Trump on trade and Taiwan. It’s a high-wire act with the potential to produce shocks, like the one erupting in the bond market as tighter liquidity threatens financing for small companies. President Xi Jinping told top officials he’s open to growth below the 6.5% target to 2020 if it carries too much risk, a person familiar with the situation said last week. Leaders have pledged to reduce hazards for 2017.

While forecasters have been raising growth estimates for next year and don’t expect major turbulence, the following are among areas they flag as having the potential to trigger a plunge in growth or systemic risk in the financial system: Outflows will exceed $200 billion in the fourth quarter and rise further in the first quarter, said Pauline Loong, managing director at research firm Asia-Analytica in Hong Kong. Capital is leaving for more fundamental reasons than rising U.S. rates and a stronger dollar, she said. Drivers include rising expectations of yuan weakness, fears of an abrupt policy U-turn trapping funds in the country, and a lack of profitable investment opportunities at home amid rising costs and slowing growth.

“The real nightmare for Beijing – and for markets – is a vicious cycle of capital outflows triggering bigger devaluations of the yuan that in turn drive bigger and faster outflows,” Loong said. “We expect capital outflows to increase in the coming months as Chinese money seeks to maximize exit quotas in case of more stringent restrictions later on.”

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Clueless prognosticators.

Trump Tax Reforms Could Depend On Little-Known ‘Scoring’ Panel (R.)

President-elect Donald Trump’s goal of overhauling the U.S. tax code in 2017 will depend partly on the work of an obscure congressional committee tasked with estimating how much future economic growth will result from tax cuts. Known as the Joint Committee on Taxation, or JCT, the nonpartisan panel assigns “dynamic scores” to major tax bills in Congress, based on economic models, to forecast a bill’s ultimate impact on the federal budget. The higher a tax bill’s dynamic score, the more likely it is seen as spurring growth, raising tax revenues and keeping the federal deficit in check. As Trump and Republicans in Congress plan the biggest tax reform package in a generation, the JCT has come under pressure from corporate lobbyists and other tax cut advocates who worry that too low a dynamic score could show the legislation to add billions, if not trillions of dollars to the federal deficit.

“The problem is that the Joint Committee staff has adopted a whole series of assumptions that truly minimize the effects and underestimate the impact that a properly done tax reform could have,” said David Burton at the conservative Heritage Foundation think tank. A low dynamic score could force Republicans to scale back tax cuts or make the reforms temporary, severely limiting the scope of what was one of Trump’s top campaign pledges. Other analysts warn that pressure for a robust dynamic score raises the danger of a politically expedient number that could help reform pass Congress but lead to higher deficits down the road. Until last year, JCT used a variety of economic models in its arcane calculations, reflecting the uncertainties in such work. But House of Representatives Republicans changed the rules in 2015 to require that a bill’s score reflect only a single estimate of the estimated impact on the wider economy and resulting impact on tax revenues.

Next year’s anticipated tax reform package would be the biggest piece of legislation that JCT has scored using this new, narrower approach, presenting the committee with a daunting challenge. JCT Chief of Staff Thomas Barthold acknowledged the challenge of dynamic scoring in an interview with Reuters. “The U.S. economy is so darn complex, you really can’t have one model that picks up all of the complexity and nuance. So the essence of modeling is to try to slim things down, try to emphasize certain points,” he said. Tax reform is still months away. But the initial legislation expected in 2017 is likely to fall somewhere between two similar but separate plans, one backed by Trump and the other by House Republicans including Speaker Paul Ryan.

[..]The Tax Foundation estimates that the House Republican tax plan would lead to a 9.1% higher GDP over the long term, 7.7% higher wages and 1.7 million new full-time-equivalent jobs. It predicts the plan would reduce government revenue by $2.4 trillion over a decade, not counting macroeconomic effects, but by only $191 billion once economic growth is taken into account. By contrast, the centrist Tax Policy Center estimates the House plan would add 1% to GDP over 10 years and erase $2.5 trillion of revenue, even with positive macroeconomic feedback, due to higher federal debt interest.

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Biometric data cards and €400 a month allowances in a country where many pensioners don’t even get that much.

Greek Migration Minister Vows To Improve Conditions At Camps (Kath.)

Migration Policy Minister Yiannis Mouzalas vowed on Wednesday to improve living conditions for migrants stranded on the islands, boost policing and create detention centers. “We are planning to have new, small venues on the islands, either by setting up small, two-story houses, in order to empty the tents, or by finding other places… to improve conditions,” he said, adding that it will take time but “we will do it.” Overcrowded conditions, coupled with the slow processing of asylum requests, have fueled tensions, while outbreaks of violence are not uncommon – especially on the islands, where some 15,000 migrants are crammed into ill-equipped camps. Mouzalas, however, insisted that the situation is better on the mainland and all refugees in the 36 camps there are staying in sheltered, heated areas.

The exception, he said, is the camp at Elliniko, southern Athens, where some migrants are still living outdoors in 70 tents. He also announced that by March, soup kitchens at camps around the country will be abolished. Instead, he said, migrants will be given money – no more than the minimum wage of €400. Mouzalas said Greece will hire more staff to deal with the slow pace of processing asylum requests, which he called an Achilles’ heel. Moreover, he said that migrants living legally in Greece will receive an electronic card that will replace their residence permits. The card, he said, will contain biometric data and other information, and will be given to migrants who want to renew their residence permits or to new arrivals.

The cards will be ready by April, he said, adding that they are part of the effort to modernize the system that processes residence permits, and to help fight forgeries. Roughly 60,000 migrants – mostly Syrians, Iraqis and Afghans fleeing war and poverty – are scattered throughout the country, many living in overcrowded and poor living conditions.

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Dec 272016
 
 December 27, 2016  Posted by at 9:47 am Finance Tagged with: , , , , , , , , , ,  4 Responses »
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Konstantinos Polychronopoulos, Athens Christmas Day 2016

Recession, Market Crash Next Year, Expect Rate Cuts: Rickards (CNBC)
Did Donald Trump Just Jump The ‘Dow 20,000’ Shark? (ZH)
Yuan Trading Volume Has Been Surging In December (BBG)
ECB: Monte dei Paschi Must Now Raise €8.8 Billion After Recent Withdrawals (R.)
War & The Rejection of Peace (Rossini)
Israel Claims ‘Evidence’ That Obama Orchestrated UN Resolution (G.)
Corbyn Hits Back After Obama Suggests Labour Is ‘Disintegrating’ (G.)
Hard Brexit ‘Could Boost UK Economy By £24 Billion’: Pro-Leave Group (Ind.)
Mervyn King: Britain Should Be More Upbeat About Brexit (G.)
EU Faces Two Major Problems – And Has Answers To Neither: King (Ind.)
Exit, Hope and Change (Jim Kunstler)
Cheetahs Heading Towards Extinction As Population Crashes (BBC)
The Automatic Earth in Greece: Big Dreams for 2017 (Automatic Earth)

 

 

“..a “head-on collision” between perception and reality…”

Recession, Market Crash Next Year, Expect Rate Cuts: Rickards (CNBC)

The Federal Reserve hiked interest rates just two weeks ago for the second time in a decade, but it will soon be cutting them again, said Jim Rickards on Tuesday. Speaking to CNBC’s Squawk Box, the director of The James Rickards Project said a stock market correction is coming as President-elect Donald Trump’s economic stimulus plans will not pan out, causing a “head-on collision” between perception and reality. “When the reality of no stimulus catches up with the perception of stimulus plus the Fed tightening: that’s the train wreck. Either we’re going to have a recession or a stock market correction,” he said. The markets have been rallying on the back of Trump’s win as investors bet on tax cuts and fiscal spending under the new administration.

However, “the stimulus is not going to come” as Trump’s proposed tax cuts will hit government revenue while the Congress is likely to block his stimulus plans as the U.S. is already $20 trillion in debt, Rickards added. This will lead to a recession or a “very severe correction” in the stock market, prompting rate cuts later next year, he said, prompting the Fed to cut rates. “They will raise (rates) in March and then something will hit the wall, either the economy or the stock market or both. Then the Fed will backpedal from there, starting with a forward guidance then perhaps a rate cut later in the year,” said Rickards, who recommends holding gold and U.S. 10-year Treasurys.

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Ominous.

Did Donald Trump Just Jump The ‘Dow 20,000’ Shark? (ZH)

It appears the sugar-high from holiday celebrations is still running through president-elect Trump's veins as his tweets took an even more narcisistic tone on this oh-so-aptly-named 'Boxing Day' in America. First Trump decided to take credit for the unprecedented short-squeeze in US stock markets – and the Christmas spending numbers…

We just wonder what he will sat if/when Goldman Sachs stops rising and stocks tumble ("never gonna happen", probably The Fed's fault after all), but perhaps even more importantly, how does he feel about the $1.2 trillion of value he has erased from global capital markets since his election?

 

The drop in global debt and equity values in Q4 2016 is very reminiscent of the drop into 2015's Fed rate hike… which did not end well…

 

But, the last time that global stocks and global bonds decoupled so aggressively was following the end of QE3… here's what happened next…

But it's probably different this time, right? China is fine (oh wait, failed auctions and liquidity crisis), Europe is fine (oh wait, Italian banks are collapsing), and the US economy is great (oh wait, automakers are shuttering plants due to credit-created excess inventory).

*  *  *

But Trump was not done there, he took on the arrogance of Obama, as we detailed earlier

Invincible politician and stock market savior…Let's just hope nothing goes wrong to break that narrative in the next 4 years (or 4 weeks).

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Beijing will be forced to take very unpopular decisions. Xi signaled tolerance for a lower growth target, and whoops goes the money. They’re stuck in their own bubbles.

Yuan Trading Volume Has Been Surging In December (BBG)

The onshore yuan’s surging trading volume is another piece of evidence that capital is fleeing China at a faster pace. 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. That’s up 51% from the first 11 months of the year. The increase suggests quickening outflows, given that data in recent months showed banks were net sellers of the yuan, according to Harrison Hu at RBS This month’s jump in trading volume signals sentiment has kept deteriorating since November, when the nation’s foreign-exchange reserves shrank by the most since January.

The Chinese currency is headed for its steepest annual slump in more than two decades and when the year turns, authorities will be faced with a triple whammy of the renewal of citizens’ $50,000 conversion quota, prospects of further Federal Reserve interest-rate increases, and concern that U.S. President-elect Donald Trump may slap punitive tariffs on China’s exports to the world’s largest economy. “Capital outflow pressures will stay, and in near term, we should monitor the impact upon the reset of the annual quota,” said Frances Cheung at Societe Generale. The pressures will likely ease toward the end of the first quarter as foreign flows into China’s bond market quicken, she said.

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If it quacks like a typical bank run… Don’t you think they could perhaps have done this deal in silence?

ECB: Monte dei Paschi Must Now Raise €8.8 Billion After Recent Withdrawals (R.)

The ECB has told Monte dei Paschi it needs to plug a capital shortfall of €8.8 billion, higher than a previous €5 billion gap estimated by the bank, the lender said on Monday, confirming what sources told Reuters. Last Friday the Italian government approved a decree to bail out Monte dei Paschi after Italy’s No. 3 lender failed to win investor backing for a desperately needed €5 billion capital increase. The bank said on Monday it had officially asked the ECB last Friday for go ahead for a “precautionary recapitalization”. A precautionary recapitalization is a type of state intervention in a struggling bank that is still solvent. It means only a modest bail-in of investors though the government can buy shares or bonds only on market terms endorsed by EU state aid officials in Brussels.

In its reply, the ECB said it had calculated the capital it believed the bank needed on the basis of a shortfall emerging from European stress test of large lenders earlier this year. In those tests Monte dei Paschi was the only Italian bank to come short under an adverse scenario. The ECB said the lender was solvent but signaled the bank’s liquidity position had rapidly deteriorated between the end of November and December 21, Monte dei Paschi said. [..] The European Commission said on Friday it would work with Rome to establish conditions were met for a bailout of Monte dei Paschi. But on Monday ECB policymaker Jens Weidmann said plans for a state bailout of Monte dei Paschi should be weighed carefully as many questions remain to be answered.

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“..He was awarded the Nobel Peace Prize, but ended up invading 7 countries. He also became the very first U.S. President to be at continuous war during his entire 8 years in office…”

War & The Rejection of Peace (Rossini)

Try to think of a time in your life when the U.S. government was not militarily involved somewhere in the world. It’s a sad fact that a vast majority of us can’t recall such a time. [..] When war is all that a population knows to exist, the idea of peace becomes an anomaly. We all know that people are habitual. We cling to our habits (good and bad) and resist the unknown where change can occur. Well, in America the unknown has become peace! How sad to think that the idea of peace actually terrifies so many people both in and out of government. One can at least understand why governments would want to avoid peace. As Randolph Bourne famously pointed: “War is the health of the state.” During times of war, government capitalizes on the fear that it generates and concomitantly seizes unbelievable powers for itself.

We can at least see the benefit to government and those with a lust for power and the ability to dominate others. But what’s in it for the people? Here we can quote Samuel B. Pettengill who said: “War – after all, what is it that the people get? Why – widows, taxes, wooden legs and debt.” Sounds like a raw deal for the people. And yet, Americans have sat idly by, and have turned a blind eye to an incredible list of military interventions over the years. More war, less liberty …. More war, less liberty …. If it happens over an administration or two, it can be spun as government losing its way to a few bad apples. But 100+ years of more war, less liberty? That’s a system!

[..] There is a tremendous amount of upside to war for those who are in power. It provides them with an opportunity to swipe away liberties at an exponential pace. The populace will give up virtually everything. Is it any wonder that those in power run away from even the prospect of peace? We’re soon about to have a new president, and he’s coming into office with a lot of expectations. The outgoing president had high expectations as well. He was awarded the Nobel Peace Prize, but ended up invading 7 countries. He also became the very first U.S. President to be at continuous war during his entire 8 years in office. Will this new president keep the boots of war firmly pressed against American throats? Will he continue the asphyxiation of the American Dream?

So far, when it comes to the insane idea of confronting a nuclear Russia, he has shown admirable qualities of restraint and cordial behavior. Will that continue through his presidential term? Or will he keep the century old American tradition of military adventurism overseas? The world is much bigger than Russia. There are plenty of other places that America can mire itself. There are other nuclear powers (like China) where trouble can be fomented. The president-elect has already shown that he has a bone to pick with the Chinese. Are we merely exchanging trouble with one nuclear power for another? Let’s hope that Donald Trump doesn’t repeat the mistakes of history. Let’s hope that he doesn’t become just another bad example for future generations to study.

Wouldn’t it be nice for Americans to someday be born into a life of liberty and peace? That was the original idea in the ‘land of the free’. A return to a foreign policy of non-interventionism and peace is desperately needed.

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Quite the allegation.

Israel Claims ‘Evidence’ That Obama Orchestrated UN Resolution (G.)

Israel has escalated its already furious war with the outgoing US administration, claiming that it has “rather hard” evidence that Barack Obama was behind a critical UN security council resolution criticising Israeli settlement building, and threatening to hand over the material to Donald Trump. The latest comments come a day after the US ambassador to Israel, Dan Shapiro, was summoned by Netanyahu to explain why the US did not veto the vote and instead abstained. The claims have emerged in interviews given by close Netanyahu allies to US media outlets on Monday after the Obama administration denied in categorical terms the claims originally made by Netanyahu himself.

However, speaking to Fox News on Sunday, David Keyes – a Netanyahu spokesman – said Arab sources, among others, had informed Jerusalem of Obama’s alleged involvement in advancing the resolution. “We have rather iron-clad information from sources in both the Arab world and internationally that this was a deliberate push by the United States and in fact they helped create the resolution in the first place,” Keyes said. Doubling down on the claim a few hours later the controversial Israeli ambassador to Washington, Ron Dermer, went even further suggesting it had gathered evidence that it would present to the incoming Trump administration. “We will present this evidence to the new administration through the appropriate channels. If they want to share it with the American people, they are welcome to do it,” Dermer told CNN.

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Curious things for Obama to say. It’s not obvious enough yet that his own party has fallen apart?

Corbyn Hits Back After Obama Suggests Labour Is ‘Disintegrating’ (G.)

A spokesman for Jeremy Corbyn has hit back after Barack Obama appeared to suggest that the Labour party has moved away from “fact and reality” and is disintegrating. The spokesman said the Labour leader “stands for what most people want” and suggested that the outgoing president’s Democratic party needed to “challenge power if they are going to speak for working people”. Obama had earlier said he was not worried when asked if the US Democrats could undergo “Corbynisation” and “disintegrate” like Labour in the wake of Hillary Clinton’s election defeat by Donald Trump. The departing US president was giving an in-depth interview, in which he also said he would have won the 8 November contest if he ran for a third term, to David Axelrod, formerly an adviser to Corbyn’s predecessor as Labour leader, Ed Miliband.

The 55-year-old compared the way the Labour party and the US Republicans had chosen to swing away from the middle ground and claimed even left-wing senator Bernie Sanders was a centrist compared to Corbyn. Asked about a potential “Corbynisation” of his party, he said: “I don’t worry about that partly because I think that the Democratic party has stayed pretty grounded in fact and reality.” He added: “[The Republican party] started filling up with all kinds of conspiracy-theorising that became kind of common wisdom or conventional wisdom within the Republican party base. That hasn’t happened in the Democratic party. I think people like the passion that Bernie brought, but Bernie Sanders is a pretty centrist politician relative to … Corbyn or relative to some of the Republicans.” In response Corbyn’s spokesman said: “Both Labour and US Democrats will have to challenge power if they are going to speak for working people and change a broken system that isn’t delivering for the majority.

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They’re going to continue to fight over this for much longer.

Hard Brexit ‘Could Boost UK Economy By £24 Billion’: Pro-Leave Group (Ind.)

The UK economy could benefit by £24bn a year – more than £450m a week – by leaving the European single market and customs union, a pro-Brexit pressure group has claimed. The Change Britain group said that the option – which it describes as “clean Brexit” – is likely to deliver annual savings of almost £10.4bn from contributions to the EU budget and £1.2bn from scrapping “burdensome” regulations, while allowing the UK to forge new trade deals worth £12.3bn. The group said its estimate was “very conservative” and that the benefits of withdrawal from the single market and customs union could be as much as £38.6bn a year. Even the lowest forecast within its range of likely outcomes was a boost of £20bn.

But the figure does not factor in the possibility of large-scale loss of exports to the remaining 27 EU nations, which advocates of a “soft Brexit” argue could happen if the UK faces tariff and non-tariff barriers to trade as a result of leaving the single market. Britain exported around £220bn of goods and services to the EU in 2015, while imports from the EU totalled around £290bn. Change Britain said that the biggest prize on offer was in potential trade agreements outside the EU which Britain could strike if it left the customs union, which requires it to take part only in deals negotiated by the European Commission. Depending on how many deals the UK secures, GDP could be boosted by between £8.5bn and £19.8bn, said Change Britain.

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Might as well. It’s just that King has been ‘unlucky’ in his predictions for years.

Mervyn King: Britain Should Be More Upbeat About Brexit (G.)

Britain may be better off going for a hard Brexit that would mean leaving the single market and customs union, Mervyn King, the former governor of the Bank of England, has suggested. Lord King, who has been more optimistic about leaving the EU than many economic commentators, acknowledged that Brexit would bring great political difficulties and would not be a “bed of roses”. Speaking to BBC Radio 4’s Today programme, he also said there would be many opportunities economically for the UK striking out on its own. The crossbench peer, who led the bank for a decade until 2013, said the UK should leave the European single market and warned there were “real question marks” over whether it should seek to remain in the customs union, which would limit its ability to forge trade deals on its own.

Theresa May’s cabinet is split on the issue of the single market and customs union, with the most pro-Brexit ministers seeking a clean break and others warning of the economic dangers of being cut adrift from the UK’s closest trading partners. King said before the referendum that warnings of economic doom about leaving the EU were overstated. Since then, he has welcomed the fall in the pound and said he believes Britain can be better off out than in the EU. He told the BBC on Boxing Day: “I think the challenges we face mean it’s not a bed of roses – no one should pretend that – but equally it is not the end of the world and there are some real opportunities that arise from the fact of Brexit we might take. “There are many opportunities and I think we should look at it in a much more self-confident way than either side is approaching it at present. Being out of what is a pretty unsuccessful European Union – particularly in the economic sense – gives us opportunities as well as obviously great political difficulties.”

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At least he’s right on this.

EU Faces Two Major Problems – And Has Answers To Neither: King (Ind.)

The European Union is facing “existential problems” over migration and the single currency for which it does not yet have the answers, former Bank of England governor Lord King has warned. Lord King said the scale of the crises was such that Brexit amounted to little more than “minor irritant” by comparison. And he suggested that the factor which could bring the problems to a head was German voters asking whether they want to remain part of a project which involves them propping up less competitive eurozone economies like Italy, Portugal and France. Lord King said that the single currency project was flawed from the start, and that it would probably have been better to create two monetary unions for “premier league” and “second division” economies. But he said it was too late to move to this model now.

Speaking to BBC Radio 4’s Today programme, the former governor said: “I think the EU is facing two existential problems and it has answers to neither of them. “The first is the fate of the monetary union, which even the ECB is saying is in a critical position and needs major reform. “Secondly, migration from outside the EU into the EU and the knock-on consequences of that for the free movement of people. “I don’t think they have answers for either of those issues and it is a real crisis for the EU. “British membership is irrelevant to these two questions and from that perspective I think they regard our decision to leave the EU as a minor irritant.” Lord King said it was impossible to put any timescale on when the problems of the eurozone might come to a head. But he said: “They simply haven’t put in place the framework to make it a success, desperately trying to struggle from one month to the next.

“For a long period they were relying on the confidence that financial markets had in the words of (ECB) president Mario Draghi that they would do ‘whatever it takes’. But I think words in the end run out and you need to back them up by actions. “The problem now is that people in Germany and other countries in the northern part of the EU are deeply reluctant – understandably – to pay for countries in the south. That wasn’t the prospectus they were offered when they joined the monetary union. “In the long run, it would make some sense to recognise that it was a mistake to go to monetary union as early as 1999. I think they might have been able to divide it into two divisions – a premier league and a second division – but I think it may be too late to do. If you look at economies like Italy, Portugal and even France, they are really struggling.

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Excellent from Jim, and that’s before his predictions for 2017.

Exit, Hope and Change (Jim Kunstler)

From the get-go, he made himself hostage to some of the most sinister puppeteers of the Deep State: Robert Rubin, Larry Summers, and Tim Geithner on the money side, and the Beltway Neocon war party infestation on the foreign affairs side. I’m convinced that the top dogs of both these gangs worked Obama over woodshed-style sometime after the 2008 election and told him to stick with the program, or else. What was the program? On the money side, it was to float the banks and the whole groaning daisy chain of their dependents in shadow finance, real estate, and insurance, at all costs. Hence, the extension of Bush Two’s bailout policy with the trillion-dollar “shovel-ready” stimulus, the rescue of the car-makers, and a much greater and surreptitious multi-trillion dollar hand-off from the Federal Reserve to backstop the European banks with counter-party obligations to US banks.

In April of 2009, Obama’s new SEC appointees, strong-armed by bank lobbyists, pushed the Financial Accounting Standards Board (FASB) into suspending their crucial Rule 157, which had required publically-held companies to report their asset holdings based on standard market-based valuation procedures — called “mark-to-market.” After that, companies like Too-Big-Too-Fail banks could just make shit up. This opened the door to the pervasive accounting fraud that allowed the financial sector to pretend it was healthy for the eight years that followed. The net effect of their criminal fakery was to only make the financial sector artificially larger, more dangerously fragile, and more prone to cataclysmic collapse.

[..]in foreign affairs, there is Obama’s mystifying campaign against the Russian Federation. The US had an agreement with Russia after the fall of the Soviet Union that we would not expand NATO if they gave us a quantity of nuclear material that was in danger of falling into questionable hands in the disorder that followed the collapse. Russia complied. What did we do? We expanded NATO to include most of the former eastern European countries (except the remnants of Yugoslavia), and then under Obama, NATO began holding war games on Russia’s border. For what reason? The fictitious notion that Russia wanted to “take back” these nations — as if they needed to adopt a host of dependents that had only recently bankrupted the Soviet state. Any reasonable analysis would call these war games naked aggression by the West.

Then there was the 2014 US State Department-sponsored coup against Ukraine’s elected government and the ousting of President Viktor Yanukovych. Why? Because his government wanted to join the Russian-led Eurasian Customs Union instead of an association with European Union. We didn’t like that and we decided to oppose it by subverting the Ukrainian government. In the violence and disorder that ensued, Russia took back the Crimea — which had been gifted to the former Ukraine Soviet Socialist Republic (a province of Soviet Russia) one drunken night by the Ukraine-born Soviet leader Nikita Khrushchev. What did we expect after turning Ukraine into another failed state? The Crimean peninsula had been part of Russia for longer than the US had been a country. Its only warm water naval ports were located there.

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One by one they leave us.

Cheetahs Heading Towards Extinction As Population Crashes (BBC)

The sleek, speedy cheetah is rapidly heading towards extinction according to a new study into declining numbers. The report estimates that there are just 7,100 of the world’s fastest mammals now left in the wild. Cheetahs are in trouble because they range far beyond protected areas and are coming increasingly into conflict with humans. The authors are calling for an urgent re-categorisation of the species from vulnerable to endangered. According to the study, more than half the world’s surviving cheetahs live in one population that ranges across six countries in southern Africa. Cheetahs in Asia have been essentially wiped out. A group estimated to number fewer than 50 individuals clings on in Iran.


ZSL

Because the cheetah is one of the widest-ranging carnivores, it roams across lands far outside protected areas. Some 77% of their habitat falls outside these parks and reserves. As a result, the animal struggles because these lands are increasingly being developed by farmers and the cheetah’s prey is declining because of bushmeat hunting. In Zimbabwe, the cheetah population has fallen from around 1,200 to just 170 animals in 16 years, with the main cause being major changes in land tenure. [..] “The take-away from this pinnacle study is that securing protected areas alone is not enough,” said Dr Kim Young-Overton from Panthera, another author on the report. “We must think bigger, conserving across the mosaic of protected and unprotected landscapes that these far-reaching cats inhabit, if we are to avert the otherwise certain loss of the cheetah forever.”

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We had a great Christmas Day live cooking event in Monastiraki square in Athens (see photos). I’ll get back to you on that. Donations through Paypal -top left hand corner of this page- of course remain welcome.

The Automatic Earth in Greece: Big Dreams for 2017 (Automatic Earth)

Both Konstantinos and myself -and all the other volunteers at O Allos Anthropos- want to thank you so much for all the help you’ve given over the past year -and in 2015-. If I may make a last suggestion, please forward this ‘dream’ to anyone you know -and even those you don’t-, by mail, Twitter, Facebook, Instagram, word of mouth, any which way you can think of. Go to your local mayor or town council, suggest they can help and get -loudly- recognized for it. There may be a dream involved for 2017, but that was our notion a year ago as well, and look what we’ve achieved a year later: it is very real indeed. And anyone, everyone can become part of that reality for just a few bucks. If the institutions won’t do it, perhaps the people themselves should. That doesn’t even sound all that crazy or farfetched. There’s a lot of us.


Konstantinos Polychronopoulos, Athens Christmas Day 2016

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