labor force Archives - The Automatic Earth

In the face of persistent fears that the world could be facing a trade war and a synchronized slowdown, the U.S. economy enters June with a good deal of momentum. Friday’s data provided convincing evidence that domestic growth remains intact even if other developed economies are slowing. A better-than-expected nonfarm payrolls report coupled with a convincing uptick in manufacturing and construction activity showed that the second half approaches with a tail wind blowing. “The fundamentals all look very solid right now,” said Gus Faucher, chief economist at PNC. “You’ve got job growth and wage gains that are supporting consumer spending, and tax cuts as well. There’s a little bit of a drag from higher energy prices, but the positives far outweigh that. Business incentives are in good shape.”

The day started off with the payrolls report showing a gain of 223,000 in May, well above market expectations of 188,000, and the unemployment rate hitting an 18-year low of 3.8%. Then, the ISM manufacturing index registered a 58.7 reading — representing the%age of businesses that report expanding conditions — that also topped Wall Street estimates. Finally, the construction spending report showed a monthly gain of 1.8%, a full point higher than expectations. Put together, the data helped fuel expectations that first-quarter growth of 2.2% will be the low-water point of 2018. “May’s rebound in jobs together with yesterday’s report of solid income growth and the rise in consumer confidence points to the economy functioning very well,” the National Retail Federation’s chief economist, Jack Kleinhenz, said in a statement.

“Solid fundamentals in the job market are encouraging for retail spending, as employment gains generate additional income for consumers and consequently increase spending.” The most recent slate of widely followed barometers could see economists ratchet up growth expectations. Already, the Atlanta Fed’s GDPNow tracker sees the second quarter rising by 4.8%. While the measure also was strongly optimistic on the first quarter as well, at one point estimating 5.4% growth, other gauges are positive as well. CNBC’s Rapid Update, for instance, puts the April-to-June period at 3.6%.

The unemployment rate is meaningless. Is that why it keeps being reported?

• Record 95.9 Million Americans Are No Longer In The Labor Force (ZH)

In what was otherwise a solid jobs report – one which Donald Trump may or may not have leaked in advance – in which the establishment survey reported that a higher than expected 223K jobs were added at a time when numbers below 200K are expected for an economy that is allegedly without slack, the biggest surprise was not in the Establishment survey, but the household, where the unemployment rate tumbled once more, sliding to a new 18 year low of 3.8%, even as the participation rate declined once again, as a result of a stagnant labor force, which was virtually unchanged (161.527MM in April to 161.539MM in May, even as the total civilian non-inst population rose by 182K to 257.454LMM).

What was perhaps more interesting, however, is that for all the talk that the slack in the labor force is set to decline, precisely the opposite is taking place, because in May, the number of people not in the labor force increased by another 170K, rising to 95.915 million, a new all time high. Adding to this the 6.1 million currently unemployed Americans, there are 102 million Americans who are either unemployed or out of the labor force (and it is also worth noting that of those employed 26.9 million are part-time workers). In other words, contrary to prevailing economist groupthink, there is a lot of slack in the economy, and if as the latest Beige Book revealed, employers are now hiring drug addicts and felons to make up for the shortage of qualified candidates, a long time will pass before wages see significant gains.

Deutsche is dangerous.

• The Pause That Refreshes (Roberts)

As long as interest rates remain low and negative in some cases, debt can continue to be accumulated even with weaker rates of economic growth. More importantly, as long as rates remain low, the banking system can continue to play the “hide-the-debt game” through derivatives, swaps and a variety of other means. But rates are rising, and sharply, on the shorter-end of the curve. Historically, sharply rising rates have been a catalyst for a debt related crisis. As long as everything remains within the expected ranges, the complicated “math” behind trillions of dollars worth of financial instruments function properly. It is when those boundaries are broken that things “go wrong” and quickly so.

People have forgotten that in 2008 a major U.S. financial firm crashed as its derivative based exposure “blew up.” No, I am not talking about Lehman Brothers, the poster-child of the financial crisis, I am talking about Bear Stearns. In just 365-days, Bear Stearns stock went from $159 to $2, with about half of the loss occurring within a few weeks. Bear Stearns was the warning shot for the financial markets in early 2008 that no one heeded. Within a couple of months, the markets dismissed Bear Stearns as a “non-event” and rallied to a higher level than prior to the event, and almost back to highs for the year. Remember, there was “nothing to worry about” at the time, even though the Fed was increasing interest rates, as the “Goldilocks economy” could handle tighter monetary policy.

Sure, housing had been slowing down, mortgage delinquencies were rising, along with credit card defaults, but there wasn’t much concern. Today, we are seeing similar signs.Interest rates are rising, along with delinquencies, defaults, and a slowing housing market. But no one is concerned as the “Goldilocks economy” can clearly offset these mild risks. And no one is paying attention to, what I believe to be, one of the biggest risks to the global financial markets – Deutsche Bank.

Globalization in reverse.

• EU Joins Global Battle Against Trump Tariff Onslaught (AFP)

The EU on Friday launched its first counteroffensive against Washington’s punishing steel and aluminum tariffs while the US began meetings in Canada with outraged finance ministers from its top trading partners. Meanwhile in Washington, US President Donald Trump floated the possibility of scrapping the 24-year-old North American Free Trade Agreement in favor of separate bilateral deals with Canada and Mexico. And in another leg of Trump’s multi-front trade offensive, Commerce Secretary Wilbur Ross arrived in Beijing to continue fraught talks with Chinese officials. Trump has vowed to press ahead with tariffs on as much as $50 billion in imports from China.

Brussels and Ottawa on Friday filed legal challenges at the World Trade Organization against Washington’s decision. The EU, Canada and Mexico also threatened stiff retaliatory tariffs as they pushed back against Trump’s moves. Canadian Prime Minister Justin Trudeau said Friday he was dumbfounded by Washington’s national security basis for the tariffs, given that US and Canadian troops had fought together in World War II, Afghanistan and elsewhere. “This is insulting to them,” he told NBC News. British Prime Minister Theresa May said she was “deeply disappointed” and reiterated a call for Britain and the EU to be “permanently exempted” from the “unjustified” metals tariffs.

At the Group of Seven ministerial meeting in Canada, US Treasury Secretary Steven Mnuchin faced stern reactions from his counterparts, who accused Trump of jeopardizing the world economy with steps that would prove job killers for all concerned. “The French, British and Germans held firm,” French Finance Minister Bruno Le Maire told reporters. “Everyone expressed their complete incomprehension of the American decisions and everyone said it was up to the Americans to take the next step since they were the ones who imposed the tariffs.”

This is like the owner of a sports team publicly declaring the coach has their full support. Bad sign.

• Eurozone Not Facing New Debt Crisis – Juncker (R.)

There is no threat of a new sovereign debt crisis in the euro zone despite an anti-establishment coalition government taking power in Italy, European Commission President Jean-Claude Juncker said in remarks published on Saturday. Asked by the RND network of German newspapers if the single currency bloc faced a new crisis, Juncker said: “No. The reactions of the financial markets are irrational. People should not draw political conclusions from every fluctuation in the stock market. Investors have been wrong on so many occasions before.” A governing coalition comprising two parties hostile to the euro was installed in Italy on Friday, calming markets spooked by the possibility of a new election that might have become a referendum on quitting the single currency. “I am certain the Italians have a keen sense of what is good for their country,” Juncker said. “They will sort it out.”

It will just take one little spark.

• Three Critical Lessons From Europe’s Recent Mini-Meltdown (Black)

1) On the day that the finance minster was rejected, financial markets worldwide tanked. Italy’s stock market plunged 5%, which is considered a major drop. But curiously, the stock market in the US fell as well, with the Dow Jones Industrial Average shedding 400 points. Even markets in China and Japan had significant drops as a result of the Italy turmoil. Now, it’s easy to see why Italy’s markets fell. And even the rest of Europe. But the entire world? Granted, a lot of people made a really big deal out of this event, concluding that it signals the end of the euro.. or Europe itself… or some other such drama. Sure, maybe. But it’s almost impossible to foretell a trend as significant as ‘the end of the euro’ based on a single event.

At face value, the rejection of a cabinet minister in Italy should have almost -zero- relevance on economies as large and diversified as the US, China, and Japan. To me, this is another sign that we’re near the peak of the bubble… and possibly already past it. Markets are so stretched, and investors are on such pins and needles, that even a minor, insignificant event induces panic. And it makes me wonder: if financial markets are so tightly wound that something so irrelevant can cause such an enormous impact, how big will the plunge be when something serious happens?

2) It wasn’t just stocks either. Bond markets were also keenly impacted. Bear in mind that stocks are volatile by nature; prices move much more wildly than other asset classes. But bonds, on the other hand, are supposed to be safe, stable, boring assets. Especially government bonds in highly developed nations. In Italy the carnage was obviously the worst. Investors dumped the 2-year Italian government bond, and yields (which move opposite to prices) surged from 0.9% to 2.4% in a matter of hours. Simply put, that’s not supposed to happen. And it hadn’t happened in at least three decades. Again, though, even in the United States, yields on the US 10-year note dropped 16 basis points overnight, from 2.93% to 2.77% (which means US bond prices increased).

That’s considered MAJOR volatility for US government bonds. To put it in context, the only day over the past few YEARS that saw 10-year yields move more than that was the day after Donald Trump won the US Presidential Election in 2016. So it was a pretty big deal. Again, this leads me to wonder: if safe, stable assets like government bonds can react so violently from such an insignificant event, how volatile will riskier assets be when there’s an actual crisis? Just imagine what’s going to happen to all the garbage assets out there (like unprofitable, heavily indebted businesses) when a real downturn kicks in.

No, they supported setting up a fund for countries in trouble.

• EU Lawmakers From Italy’s Coalition Parties Seek Funds To Quit Euro (R.)

European Union lawmakers from the two parties forming Italy’s new government coalition backed this week a rejected proposal to set up EU funds to help countries quit the euro, a sign of the Italian leadership’s ambivalent position on the common currency. Their vote came as the anti-establishment 5-Star Movement and far-right League were finalising a deal to form an executive in Rome, under pledges that leaving the euro was not in their government programme. The government was sworn in on Friday. An earlier attempt to form a government foundered after the parties proposed as economy minister an economist who had devised a plan for Italy’s departure from the euro zone, prompting his rejection by the head of state.

Despite the declared intentions to stay in the euro, all six EU lawmakers from the League and all but one of the 14 5-Star Members of the European Parliament voted on Wednesday for a document that called for the establishment of programmes of financial support “for member states that plan to negotiate their exit from the euro.” The document voted on by their EU lawmakers called for compensation for “the social and economic damages caused by the euro zone membership.” The document was an amendment to a European Parliament resolution on the EU budget for the 2021-2027 period. The proposal, advanced by three leftist MEPs, was backed by 90 lawmakers but was rejected by a majority of the 750 MEPs.

Sure this is very recognizable across the globe.

• Canada Auditor General To Public Service: Stop Ignoring My Reports (CBC)

Canada’s auditor general says he’s getting tired of filing annual reports recommending reforms to the way the government does business — only to see those recommendations disappear down the memory hole afterward. Michael Ferguson released his spring audits on Tuesday. They included scathing criticisms of the government’s performance on the Phoenix pay system, Indigenous services and military justice. Many of these problems have been highlighted in Ferguson’s reports in the past. And that, he told CBC News, is the problem. “We always get the department agreeing to our recommendation but then somehow we come back five years later, 10 years later and we find the same problems,” he told host Chris Hall on CBC Radio’s The House on Wednesday.

“It almost is like the departments are trying to make our recommendations and our reports go away by saying they agree with our recommendations.” His work has made one thing clear, he said: the federal government has a culture problem that makes meaningful change difficult. “They need to do things to make the results better.” Part of the problem stems from political pressure on the public service, said Ferguson. Politicians tend to think from election to election, he said, which can undermine public servants’ efforts to bring in a longer-term plan. “It seems like the political side of things ends up having more weight in the conversation.” In Parliament, he said — and particularly with respect to Indigenous Services — progress tends to be measured on the basis of how much money the government spends on a particular policy file, and not on measurable outcomes.

“.. it is clear there were strong interests to see Greece’s public wealth turned over into other peoples’ hands..”

• Greece’s Busiest Port Reveals the Perils of Privatization (Nation)

In 2015, as a condition of the $100 billion European Union bailout that followed the 2008 financial crisis, the Greek government agreed to privatize a number of state-held assets including the Piraeus Port Authority, which manages the port’s container and passenger terminals. The Greek state sold a majority stake for $330 million to COSCO. For the Chinese company, the purchase had a clear financial logic. About 80 percent of China’s imports and exports to and from Europe are transported by sea, and by avoiding the need to sail to busy Northern European ports like Rotterdam or Hamburg, COSCO could offload containers in Piraeus, reducing the time it takes cargo to get to Europe by nearly a week. Plus, by owning the port authority, COSCO could help determine how much its own ships would have to pay itself in port fees.

As part of the deal, COSCO pledged to participate in financing $410 million worth of investment in the port, including a repair of port equipment and the dredging of Piraeus’s central port. Supporters of privatization argue these improvements signal a coming maritime renaissance at Piraeus—already the busiest port in the eastern Mediterranean. Nektarios Demenopolous, the deputy manager for investor relations at Piraeus Port Authority, told me, “There are 300 million euros [$350 million] of investment to come in the next five years, followed by another 50 million. Privatization has made the port much more dynamic and will reboot activities at the port like ship repair that have been in recession. It will be remembered as a success story.”

But a “success story” for whom? The dockworkers of Piraeus say they and their families have seen little of the alleged gains brought by COSCO. As Piraeus Port Authority boasts of widening profit margins and increasing maritime traffic, wages for dockworkers haven’t budged since they were slashed from 1500 euros ($1,750) per month to 600 euros after the financial crisis. Beyond that, COSCO now hires few dockworkers as full-time employees, and tends to enlist unskilled laborers for complex container unloading. COSCO also primarily remunerates people on an ad hoc basis as subcontractors, leaving dockworkers and their families entirely dependent on the ebb and flow of traffic into Piraeus. It also means their traditional retirement benefits have disappeared.

The long list of Greek public assets in the privatization pipeline includes Athens International Airport, the oil refiner Hellenic Petroleum, and the electric-grid operator. To date, some roughly $5 billion in Greek state assets, including the Port of Piraeus and Greece’s regional airport network, have been sold, and it is expected that the Greek government will sell nearly $55 billion worth of state assets within the next decade. There is no conclusive evidence that privatized state assets are more efficiently managed than their state-owned predecessors, but privatization is undoubtedly an effective means for a cash-strapped government to raise funds when its creditors are getting impatient. “Piraeus was always a profitable port. However, it is clear there were strong interests to see Greece’s public wealth turned over into other peoples’ hands,” said Giorgos Gogos, head of the Piraeus dockworkers’ union.

How corrupt is Juncker?

• EU Scraps Plans To Tackle Antibiotics Abuse (G.)

The EU has scrapped plans for a clampdown on pharmaceutical pollution that contributes to the spread of deadly superbugs. Plans to monitor farm and pharmaceutical companies, to add environmental standards to EU medical product rules and to oblige environmental risk assessments for drugs used by humans have all been discarded, leaked documents seen by the Guardian reveal. An estimated 700,000 people die every year from antimicrobial resistance, partly due to drug-resistant bacteria created by the overuse, misuse and dumping of antibiotics. The UK’s chief medical officer, Dame Sally Davies, has warned that failing to act could lead to a post-antibiotic apocalypse, spelling “the end of modern medicine” as routine infections defy effective treatment.

Some studies predict that antimicrobial resistance could cost $100tn (£75tn) between now and 2050, with the annual death toll reaching 10 million over that period. An EU strategy for pharmaceuticals in the environment was supposed to propose ways to avert the threat, but leaked material shows that a raft of ideas contained in an early draft have since been diluted or deleted. Proposals that have fallen by the wayside include an EU push to have environmental criteria for antibiotic use included in international agreements as “good manufacturing practice requirements”. This would have allowed EU inspectors to visit factories in Asia or Africa, sanctioning them were evidence of pharmaceutical pollution found.

[..] The pharmaceutical industry spent nearly €40m on lobbying EU institutions in 2015, according to voluntary declarations, and enjoys infamously easy access to officials. Public records show that the European Federation of Pharmaceutical Industries and Associations had more than 50 meetings with the Juncker commission in its first four and a half months of office. In the same period, GlaxoSmithKline had 15 meetings with the commission, Novartis had eight engagements, Sanofi and Johnson & Johnson had six sessions apiece, while Pfizer and Eli Lilly both met with EU officials five times each.

Debt Rattle November 4 2017

Nov 042017

November 4, 2017 Posted by Raúl Ilargi Meijer at 9:27 am Finance Tagged with: Brexit, Catalonia, earnings, EU, FARA, labor force, Maduro, Manafort, payrolls, refugees 3 Responses »

Henri Cartier Bresson Shanghai 1947

• Funny Facts Friday (David Stockman)

• October Payrolls, Average Hourly Earnings Miss Big (ZH)

• Record 95.4 Million Americans Not in Labor Force, 968,000 Exit In 1 Month (ZH)

• Manafort Money Laundering Charge In Russia Probe May Face Challenges (R.)

• Swamp-O-Rama (Jim Kunstler)

• How Democrats Can Beat The Republican Tax Cut (Bartlett)

• European Arrest Warrant Issued For Catalan Leader Carles Puigdemont (G.)

• America’s Opioid Crisis Is About To Get Worse (ZH)

• ‘No Deal’ Brexit To Add £930 A Year To UK Shopping Bills (G.)

• Stalked By Default Fears, Venezuela Calls Creditor Meeting (AFP)

• The Greek Island Camp Where Only The Sick Or Pregnant Can Leave (G.)

“there has been no gain in employed prime age male workers during the entirety of this century!”

• Funny Facts Friday (David Stockman)

The funny numbers came in a veritable torrent today. For instance, the so-called U-3 unemployment rate dropped to a 17-year low of 4.1% for October. Yet the same BLS household survey which posted the lowest unemployment rate since early 2000 showed that the number of employed Americans actually sank by 484,000 last month. How’s that? Well, easy as pie according to the data mavens at the BLS. It seems that the number of persons not in the labor force soared by 969,000 in October. So, yes, with a smaller numerator and an even smaller denominator they came up with a better – nay, awesome – unemployment rate. Then again, none of the talking heads on bubblevision even mentioned the staggering loss of 484,000 jobs during the month because they ignore the household survey’s job count entirely in favor of the establishment survey number (up 261,000) – even though the former drives the unemployment rate, which they crow about endlessly.

This cherry-picking of the data is quite understandable, however, when you consider what is really buried in the household survey and is completely ignored by the stock peddlers. To wit, not so awesome at all is the fact that during October there was an all-time record of 95.4 million persons not in the labor force and another 6.5 million that were jobless – meaning 102 million Americans (16 and older) don’t have jobs. That compares to 42 million retired workers on social security. Consequently, there are 60 million adult Americans who are housewives, students, disabled, food stamp and welfare recipients, social security dependents, dwellers in mom’s basement or denizens of the illegal drug, gambling or sex trades.

To be sure, we don’t have any special opinion on the merits of these pursuits, but we do have a point of view on the societal and fiscal math. Namely, the diminishing relative ranks of workers and tax mules in American society are going to buckle under the weight of baby boom retirements and soaring welfare and public sector health care costs in the years just ahead. In that context, one of the most striking numbers in today’s report is that 53.0 million prime age men 25 to 54 years old were employed in October, 2017. As is evident in the chart below, that is down by 1.5 million jobholders since the pre-crisis peak in May 2007 and virtually identical to the number in January 2001. Stated differently, there has been no gain in employed prime age male workers during the entirety of this century!

“..on a monthly basis, there was no wage increase at all..”

• October Payrolls, Average Hourly Earnings Miss Big (ZH)

Well, with virtually everyone expecting a 300K+ payrolls number after last month’s negative hurricane-distorted print, and with whispers of a 400K print floating around, it only made sense that not only would payrolls disppoint, printing at 261K, one standard deviation below the 310K consensus estimate (and that even with a whopping 89,000 waiters and bartenders added) .. but also that the far more important average hourly earnings number, which was expected to rise at a 2.7% rate Y/Y, also missed, printing at 2.4% instead with September revised lower to 2.8%. Worse, on a monthly basis, there was no wage increase at all, printing at 0.0% (technically it was a 1 cent decline), below the 0.2% expected, and the lowest since June 2015.

Average weekly earnings also disappointed, declining by 35 cents to $912.63, the first decline since May. It is also notable that after the September surge, the number of employed Americans per the Household Survey tumbled by 484K in October, to 153.961 million. That said, the real action this time was found in previous months, where September was revised higher from -33.000 to +18,000 while August was revised up from +169,000 to +208,000, for a total two month revision of +90,000. Additionally, the unemployment rate dropped to a new cycle low, declining from 4.2% to 4.1%, below the 4.2% expected, while the underemployment rate declined to 7.9%, the lowest since the start of the century.

“..the civilian labor force shrunk by whopping 765,000 in one month.”

• Record 95.4 Million Americans Not in Labor Force, 968,000 Exit In 1 Month (ZH)

In what was otherwise a mediocre jobs report, in which the establishment survey reported that a lower than expected 261K jobs were added to the post-Hurricane economy, the biggest surprise was not in the Establishment survey, but the household, where the unemployment rate tumbled once more, sliding to a new cycle low of 4.1%, for all the wrong reasons, because a quick look at the participation rate metrics showed that in October there was a sharp decline, with the labor force part. rate sliding from 63.1% to 62.7%, back to 4 decade lows…… driven by one disturbing metric: the number of people who exited the labor force soared by a near record 968,000 in October – the third highest on record – pushing the total number of people not in the labor force to a record 95.385 million, as the civilian labor force shrunk by whopping 765,000 in one month.

This took place as the number of employed Americans declined by 484,000, however since the unemployment rate denominator dropped more, it translated into an actual decline in the unemployment rate! So much for economist hopes that potential workers from the fringes are coming back to the labor force. Of course, the implication is even worse: with more slack being created in the form of workers who are leaving, not entering, the labor force, this creates a buffer for wage growth, and suggests that any hope for rapidly rising wages has once again been derailed.

Not clear what they will be left with. FARA seems hard to prosecute.

• Manafort Money Laundering Charge In Russia Probe May Face Challenges (R.)

When the lawyer for the former campaign manager of President Donald Trump attacked the money laundering charge brought against his client as flimsy, some legal experts say he may have pinpointed a potential weakness in the indictment by U.S. special counsel Robert Mueller. Paul Manafort and his associate Rick Gates both pleaded not guilty on Monday to charges that they failed to disclose they were lobbying for pro-Russia former Ukrainian President Viktor Yanukovich between 2006 and 2015 and laundered tens of millions of dollars by funneling the money through dozens of companies, partnerships and bank accounts.

In a court filing on Thursday, Manafort defense lawyer Kevin Downing said the money laundering count, the most serious facing his client with a 20-year maximum sentence, was based on a “tenuous legal theory” tying it to his failure to register as a foreign agent of the former Ukrainian leader. [..] The language of the filing and defiant statements Downing made outside the courthouse following Manafort’s arraignment on Monday suggest the lawyer is planning an aggressive defense of the charges, the first to be made public from Mueller’s probe into Russian interference in the 2016 presidential election. The Kremlin has denied meddling and Trump has said there was no collusion. Neither Trump nor his campaign was mentioned in the indictments issued on Monday.

Downing will also be seeking to suppress evidence he said was improperly obtained by search warrant, according to an additional filing on Friday. Manafort’s Virginia home was raided by FBI agents over the summer. The money laundering statute targets financial transactions involving the proceeds of “specified unlawful activity.” According to the Manafort indictment, the unlawful activity was his violation of the U.S. Foreign Agent Registration Act (FARA). Though the money laundering statute includes FARA violations, Seattle tax lawyer John Colvin said the charge against Manafort was not as straightforward as most other cases. “It doesn’t fit the normal paradigm” of money-laundering cases involving criminal activity like drug trafficking, Colvin said. “It seems like a stretch to me.”

“Are there any like me out there who would like to see both parties tossed onto the garbage barge of history?”

• Swamp-O-Rama (Jim Kunstler)

Now comes the news from Donna Brazille, on-again-off-again Democrat Party chair, that the primary elections were elaborately rigged by HRC functionaries to buy control of her nomination. Let’s not even go into the bidding for the Christopher Steele “dossier” alleging kinky sexual romps in Moscow by Donald Trump, or the activities in Ukraine of Tony Podesta’s DC lobbying company — that’s Tony, brother of John Podesta, Clinton campaign chief, whose emails remain a truffle cache for the rooting dogs of the DOJ, if they were actually on-the-task. I write this as a still-registered Democrat myself — though I consider myself their enemy now, yet hardly a Trump partisan. Are there any like me out there who would like to see both parties tossed onto the garbage barge of history?

Of course, to say that also means throwing out a cargo of terrible ideas and beliefs, not just two clown cars of personalities. Identity politics, zero interest rate policy, American Exceptionalism, endless debt, nation-building in foreign lands, FASB-157, sanctuary cities, Title IX coercion, racketeering in health care and higher ed, market interventions, ambiguous borders… is just some of the cargo that needs to be dumped overboard with both parties. Watergate begins to look as quaint and simple as a game of Chutes and Ladders compared to RussiaGate. Not only are both parties implicated one way or another in multiple nefarious schemes, plots, and intrigues, but the Department of Justice and its subsidiary, the FBI, look culpable in a range of cover-ups and mis-directions. If the DOJ becomes disabled, how does any of this get resolved?

The whole extravaganza is heading toward a constitutional crisis that might clean out the system like a Death Wish coffee enema. Sentiment may arise for Mr. Mueller to step aside, if President Trump doesn’t make the rash decision to simply fire him. The latter would certainly foment a constitutional crisis that could include an effort to run Trump over with the 25th amendment. In the event, we’ll be in a new kind of civil war.

New deal.

• How Democrats Can Beat The Republican Tax Cut (Bartlett)

To get back on offense, I think Democrats should stop trying to compete with Republicans on more distributionally fair tax cuts. When you can’t win, don’t play the game. Instead, they should say, if Republicans are willing to increase the deficit by $1.5 trillion, let’s use that money for something the country really needs that will create a vastly greater number of jobs. That is a giant infrastructure program. There is no need to detail the myriad of ways that the money could be spent without coming close to exhausting the available projects. Roads, bridges, schools, hurricane repair projects, sea walls and such to protect against future climate catastrophes, the power grid and many, many more. Civil engineers periodically publish long lists of urgent infrastructure needs.

Not only would a big infrastructure program be capital that will pay off for decades, just as Republican Dwight Eisenhower’s national highway program did, but it will create vastly more jobs than any kind of tax cut, especially the one Republicans are proposing that would largely benefit the wealthy while providing no incentives for job creation or investment. The Congressional Budget Office has long provided estimates to Congress showing that direct spending by government on infrastructure has a much more powerful effect on economic growth than any type of tax cut. A February 2015 report showed that purchases of goods and services by the federal government would raise GDP by as much as $2.50 for every $1 spent. Grants to state and local government for infrastructure could create as much as $2.20 for every $1 spent.

By contrast, according to the same report, a temporary tax cut for the wealthy, such as Republicans propose today, would create at most 60 cents of GDP for every $1 of foregone revenue. A tax cut for the middle class is much better, creating as much as $1.50 of GDP for every $1 of revenue loss. Corporate tax cuts are the worst, creating at most 40 cents of GDP for every $1 of revenue loss. Some may say that these estimates are high, given that we are close to full employment, according to many economists. But the additional stimulus would draw many discouraged workers back into the labor force, especially if it created upward pressure on wages, which workers desperately need. Higher wages will raise consumer spending that will further increase growth.

This is going spectacularly off the rails. Brussels can no longer insist it’s a domestic Spanish issue. Because Puidgemont is in …. Brussels.

• European Arrest Warrant Issued For Catalan Leader Carles Puigdemont (G.)

A Spanish judge has issued an international arrest warrant for Catalonia’s ousted president a day after she jailed eight members of the region’s separatist government pending possible charges over last week’s declaration of independence. In the latest twist in Spain’s worst political crisis in four decades, a national court judge on Friday issued a European arrest warrant for Carles Puigdemont in response to a request from state prosecutors. Puigdemont flew to Brussels earlier this week with a handful of his deposed ministers after Spanish authorities removed him and his cabinet from office for pushing ahead with the declaration despite repeated warnings that it was illegal. Puigdemont’s Belgian lawyer has already said his client will fight extradition without seeking political asylum.

Puigdemont was summoned to appear at Spain’s national court on Thursday to give evidence relating to possible charges of sedition, rebellion and misuse of public funds, but failed to appear. He has said he would only return to Spain if he were offered guarantees that the judicial process he would face were fair. Late on Friday, Puigdemont told the Belgian public TV channel RTBF that he would put his faith in the Belgian courts. He said: “I will not flee from justice. I will go towards justice, but real justice. I’ve told my lawyers to tell the Belgian justice system that I’m completely available to cooperate. “It’s obvious it’s politicised. The guarantees are not there for a fair, independent trial.”

It was Puigdemont first interview since arriving in Brussels on Monday and it he claimed there was “enormous influence of politics over the judiciary in Spain”. He said: “It’s not normal that we risk 30 years in prison, it’s extremely barbaric, we can not talk about democracy.” Puigdemont said he was ready to stand in the election, adding: “It’s possible to run a campaign from anywhere. We consider ourselves a legitimate government. “There must be a continuity to tell the world what’s going on in Spain … It’s not with a government in jail that the elections will be neutral, independent, normal.”

Better make it a national emergency right now.

• America’s Opioid Crisis Is About To Get Worse (ZH)

The simple chart below from the United Nation’s Office on Drugs and Crime beautifully illustrates the next leg up in America’s opioid crisis. If you thought today’s situation was bad – think again. Afghanistan, the world’s largest producer of opium just logged a record crop harvest this year doubling last year’s production. Some how – some way, Afghanistan’s opium will find its way into a neighborhood near you. According to VOANEWS, Last year, poppies were cultivated on 201,000 hectares, yielding 4,700 tons of opium, up 46% from 2015. Sources told VOA’s Pashto service more than 10,000 tons of opium were produced this year. Opium then can be refined into heroin. The U.N. Office on Drugs and Crime estimated that opium accounted for some 16% of the country’s GDP last year, including more than two-thirds of the entire agricultural sector. In addition to fueling insecurity, violence and insurgency, the drug production is discouraging private and public investment, a UNODC report said.

This is a bad sign for President Trump who opted to call the opioid crisis a ‘public emergency’ rather than a full-blown ‘national emergency’. Highlights from Trump’s opioid crisis speech: In 2016, more than two million Americans had an addiction to prescription or illicit opioids. Since 2000, over 300,000 Americans have died from overdoses involving opioids. Drug overdoses are now the leading cause of injury death in the United States, outnumbering both traffic crashes and gun-related deaths. In 2015, there were 52,404 drug overdose deaths — 33,091 of those deaths, almost two-thirds, involved the use of opioids. The situation has only gotten worse, with drug overdose deaths in 2016 expected to exceed 64,000. This represents a rate of 175 deaths a day.

What happens when you transfer your food production abroad. Look, Cuba and Russia used it to their advantage.

• ‘No Deal’ Brexit To Add £930 A Year To UK Shopping Bills (G.)

Households face increases of up to £930 in their annual shopping bills if Britain walks away from Brexit talks without a trade deal, according to new research that reveals a disproportionate impact on poorer families and the unemployed. Meat, vegetables, dairy products, clothing and footwear would be subject to the largest consumer price rises under a “no-deal” scenario, according to a study published in the authoritative National Institute Economic Review, adding to inflationary pressures that have already forced the first interest rate rise in a decade this week. Stalled negotiations resume next week in Brussels, but the government is also about to publish a trade bill that would result in Britain being required to apply swingeing new tariffs on European imports if it falls back on World Trade Organisation rules.

Since WTO tariffs are highest for fresh food – reaching 45% for dairy products and 37% for meat – and much of this is currently imported from Europe, the team of economists predict an inflationary surge that could match that already inflicted by the falling pound. This would impact most on those least able to afford it, as poorer households typically spend a much higher proportion of their income on food and other essentials. For the 2m worst-affected households, the study predicts their weekly expenditure will rise by 2-4.7%, equivalent to £400-930 extra a year. “The overall increase in price in the affected goods is estimated to be 2.7% and this translates into an increase in the overall cost of living of 0.8-1.1% for a typical family, with the unemployed and families, those with children and pensioners hit hardest,” conclude the economists from the University of Sussex and Resolution Foundation.

America takes revenge on Chavez.

• Stalked By Default Fears, Venezuela Calls Creditor Meeting (AFP)

Venezuela on Friday called foreign creditors to a November 13 meeting in Caracas aiming to restructure its estimated $150 billion debt, as credit-rating agencies dealt the crisis-stricken country another blow with double downgrades. Standard & Poor’s cut the nation’s long-term foreign currency rating to “CC” from “CCC-” over growing concerns of the risk of a debt default in the oil-producing country, while fellow agency Fitch cut the long-term debt rating to “C” from “CC.” The increasingly dire warnings followed President Nicolas Maduro’s calls to “investors across the whole world and to holders of Venezuelan debt” to attend a Caracas meeting November 13 “to start a process to refinance and renegotiate the external debt.”

His vice president, Tareck El Aissami, who is leading a commission tasked with the restructuring, said the government is seeking “sovereign commitments” for a debt renegotiation. Flanked by the ministers in charge of the economy, finance and energy, El Aissami confirmed the country had on Friday started to pay out $1.2 billion due to service the debt of state oil company PDVSA. Maduro announced Thursday that Venezuela would begin talks to refinance the debt immediately after that payment was made. El Aissami, one of the Venezuelan officials sanctioned by the United States due to alleged ties to drug trafficking, said the talks with creditors will “establish the groundwork to renegotiate the terms of the foreign debt of the Republic and of PDVSA.”

“We will begin a sovereign renegotiation of our debt and we will continue to comply fully, transparently, as our government has done historically,” he said in a televised statement. He noted that since 2014 Venezuela, which has the largest proven crude oil reserves in the world, has paid nearly $72 billion in principal and interest payments on the debt. Maduro has repeatedly blamed the United States for the country’s woes, saying Washington is trying to strangle Venezuela with sanctions. US sanctions imposed on Venezuela in August ban US trade in any new bonds issued by the Venezuelan government or PDVSA — a needed step in any restructuring. El Aissami denounced the “continued aggression, permanent sabotage, blockade and financial persecution” he said US President Donald Trump has imposed on the people of Venezuela.

But he said the sanctions really hurt bondholders and financial institutions. Much of Venezuela’s debt is held by China and Russia, to be paid off in oil – the resource that underpins the Venezuelan economy. The country has less than $10 billion in foreign currency reserves. Analysts were pessimistic about Venezuela’s chances of successfully restructuring its debt. “Venezuela’s options to keep up with its payments are shrinking rapidly, mainly because any restructuring needs to be matched with clear and credible economic reforms capable of winning the trust and support of bond-holders,” said Diego Moya-Ocampos, an analyst at London-based IHS Markit.

People will make themselves sick, self harm, just to get off the islands.

• The Greek Island Camp Where Only The Sick Or Pregnant Can Leave (G.)

Eida was two months pregnant when she suffered a miscarriage. A month later, the 18-year-old Syrian refugee still feels angry and despondent. Not just that she lost a child. But that being pregnant was her ticket off the Greek island of Samos – and out of a squalid, barren, barb-wired camp. The young woman is one of around 3,000 refugees in Samos, one of the five Greek “hotspot” islands in the eastern Aegean Sea, designated by the EU to act as a barricade against massive irregular migrant arrivals from Turkey. Since March 2016, when Brussels concluded a controversial agreement with Ankara to curb migrant flows, only vulnerable cases are transferred from the hotspots to the Greek mainland. Eida had hoped to become one of those cases.

The rest are left with two options: languish under deplorable conditions in the camps until their asylum claims are examined, or pay local smuggling networks €1,000 or more to get ferried to the mainland. Anastasia Theodoridou, head of social services at Samos state hospital, says she routinely deals with cases like Eida’s. “Dozens of women come to the hospital desperate to find out they are pregnant. Other refugees are eager for a diagnosis of any serious condition. And if there is nothing wrong with them, they bring their spouses and children. Maybe one of them might have a chance of a diagnosis.” According to internal documents, the Samos hospital has handled 7,857 visits by refugees since the start of the year.

The grotesque paradox of refugees hoping to be ill to get favourable treatment casts a shadow on the EU’s narrative about the success of its response to the refugee crisis.The rosy outlook from Brussels is often based on statistics that show a sharp reduction in irregular daily crossings and deaths in the Aegean. This in turn has resulted in a broad desertion of the tragedy by the international community: journalists have long since gone home, NGOs are packing up, volunteers are few and far between and official funding has been reduced. But despite substantial EU support to Athens – €430m has been contracted according to the European commission – conditions at the Greek hotspots remain appalling. With the focus now shifting to refugees crossing the sea from Libya, Tunisia or Algeria, the situation here is still no less dramatic than a year ago. It is still a massive crisis, albeit a somewhat forgotten one.

Debt Rattle April 4 2015

Apr 042015

April 4, 2015 Posted by Raúl Ilargi Meijer at 8:15 am Finance Tagged with: Buffett, Greece, Iran, jobs, labor force, quakes, Russia, Saudi, US, Yemen 4 Responses »

DPC Coaches at Holland House Hotel on Fifth Avenue, NY 1905

• Huge Miss: +126,000 Jobs, Labor Force -631,000 in Two Months (Mish)

• US Jobs Data: Winter of Discontent, Summer of Discomfort (WSJ)

• Americans Not In The Labor Force Soar To Record 93.2 Million (Zero Hedge)

• Michael Lewis: ‘I Knew Flash Boys Would Be A Bombshell’ (Guardian)

• German Bank Files Lawsuit To Challenge ECB Supervision (WSJ)

• Fannie Mae to Begin Auctioning Defaulted Home Loans to Investors (Bloomberg)

• Russia Said to Plan No Aid to Greece, May Ease Curbs on Food (Bloomberg)

• Saudi Arabia and Iran Vie for Regional Supremacy (Spiegel)

• Russia Calls UN Security Council Session On Yemen Crisis (RT)

• Donbass: ‘The War Has Not Started Yet’ (Pepe Escobar)

• Warren Buffett’s Mobile Home Empire Preys On The Poor (Public Integrity)

• Mediterranean Sea ‘Accumulating Zone Of Plastic Debris’ (BBC)

• As Quakes Rattle Oklahoma, Fingers Point to Oil and Gas Industry (NY Times)

• Half Of Urban California’s Water Is Used To Water The Grass (MarketWatch)

Not much recovery left.

• Huge Miss: +126,000 Jobs, Labor Force -631,000 in Two Months (Mish)

For a huge change we see the existing pattern of a strong establishment survey but a poor household survey has been replaced by weakness all around. Last month I stated “The household survey varies more widely, and the tendency is for one to catch up to the other, over time. The question, as always, is which way?” It is still difficult to say if this is the start of a new trend, but it could be. Last month the household survey showed a gain in employment of a meager 96,000 and much of that was teen employment. This month the household survey came in at an anemic 34,000.

The labor force declined in each of the last two months. Those “not in the labor force” rose by a whopping 631,000 in the last two months. The Bloomberg Consensus jobs estimate was for 247,000 jobs, missing by a mile. In fact, the number came in lower than any estimate. The estimate range was 200,000 to 271,000. Not only that, January and February were both revised lower. The net was 69,000 lower. Economists blame the weather. Bad weather in March? And not in January and February?

“Whichever way the economic data break in the months ahead, somebody is going to get caught badly offside.”

• US Jobs Data: Winter of Discontent, Summer of Discomfort (WSJ)

Friday’s jobs numbers made the Federal Reserve’s path over the next several months clearer. Just not in a good way. The Labor Department reported that the economy added just 126,000 jobs in March, far fewer than the 247,000 economists were looking for and the smallest gain in more than a year. Worse, downward revisions to January and February reduced America’s job count by 69,000. If there was any question that the Fed would pass up on raising rates at its June meeting, it has been resolved. Indeed, amid signs that global economic weakness has begun to weigh on the U.S. job market, even the September liftoff on rates that most economists have been forecasting is looking iffy. The labor market’s weakness last month was concentrated in what are known as the goods-producing sectors: manufacturing , construction and mining and logging.

These saw a loss of 13,000 jobs, marking the worst month since July 2013. Some of that may be attributable to the cold: The number of people who said they had jobs but didn’t work because of the weather was elevated, and the goods-producing sectors are prone to such effects. But the more worrisome exposure is to weakness abroad. Struggling economies overseas have helped send oil and other commodity prices lower and the dollar higher. These are things that hurt the mining sector (which includes oil extraction) and manufacturers (which compete globally) in particular. Chances are the labor market will be able to handle these challenges. Low oil prices help America more than they hurt it and over time should add more jobs than they take away.

In the absence of the factors that weighed on it over the winter—including not just the weather but also the West Coast port dispute and companies working down inventories—the economy should improve in the spring. And that should give more impetus to hiring. But the Fed will want to be sure. That is particularly the case when, partly as a result of those same overseas factors, inflation is running well below its 2% target. The big question now is whether the Fed will gain such confidence, and raise rates, by September. Fed funds futures contracts now put nearly even odds of it foregoing an increase at that meeting. Even if a June rate rise is off the table, the market’s chronic state of uncertainty ahead of the Fed’s next move lingers. Whichever way the economic data break in the months ahead, somebody is going to get caught badly offside.

WIth 93 million people not counted, it’s not hard to get low jobless numbers.

• Americans Not In The Labor Force Soar To Record 93.2 Million (Zero Hedge)

So much for yet another “above consensus” recovery, and what’s worse it is, well, about to get even worse, because while the Fed keeps baning some illusory drum that slack in the economy is almost non-existent, the reality is that in March the number of people who dropped out of the labor force rose by yet another 277K, up 2.1 million in the past year, and has reached a record 93.175 million. Indicatively, this means that the labor force participation rate dropped once more, from 62.8% to 62.7%, a level seen back in February 1978, even as the BLS reported that the entire labor force actually declined for the second consecutive month, down almost 100K in March to 156,906.

“People are so cynical about Wall Street they don’t believe any of it.”

• Michael Lewis: ‘I Knew Flash Boys Would Be A Bombshell’ (Guardian)

Katsuyama noticed that large stock orders were being “scalped”. Moments after an order was placed, high-speed traders (our titular Flash Boys) were snapping up shares before the order could be fulfilled, using powerful algorithms and super-charged computers to force buyers to pay a higher price. The difference in cost can be counted in fractions of a penny – but on massive orders the numbers add up and the losers are the pension funds of millions of Americans. Katsuyama set up IEX, the Investors Exchange, as a market free from scalpers. While he had alerted many big investors about his concerns, he had not spoken to the media about his findings. “They were afraid that if there was a huge controversy, it would hurt their business as opposed to just quietly informing investors how badly they were getting screwed,” Lewis said.

Instead they decided to work with the author of Moneyball and Liar’s Poker to tell their story. They didn’t escape controversy. Trading floors came to a standstill in New York when Lewis and Katsuyama were confronted on CNBC, the financial news channel, by William O’Brien, president of Bats Global Markets, the second-largest stock exchange operator in the US. “Shame on both of you for falsely accusing literally thousands of people and possibly scaring millions of investors in an effort to promote a business model,” O’Brien said, accusing the pair of dishonesty and Lewis of writing a 300-page commercial for IEX. Days later, O’Brien was being hauled over the coals by regulators for claims he made on the show. Months later, he was gone. Wall Street’s fightback, however, has not stopped.

The opposition has launched what Lewis describes as “essentially a political campaign” to minimise the impact of his book and the work of IEX. Last month, the former commodities trading regulator Bart Chilton called Lewis’s assertions that the market was rigged “a big lie”. Chilton, again on CNBC, asserted high-frequency trading had contributed to making markets cheaper, faster and safer than ever before. The former boss of the Commodities Futures Trading Commission now works with the high-frequency trade association Modern Markets Initiative. He said Lewis’s claims were irresponsible and had been debunked by academic research. Visibly irritated by what he sees as a campaign to halt reform and serious discussion, Lewis said Chilton was “essentially a flack”. “He’s deceiving the public in order to make the markets less fair,” he said. “People are so cynical about Wall Street they don’t believe any of it.”

Interesting power struggle.

• German Bank Files Lawsuit To Challenge ECB Supervision (WSJ)

A small German lender has filed a lawsuit against the ECB in a bid to avoid coming under its supervision, marking the first legal challenge to the ECB’s new monitoring role. In November the ECB took over direct supervision of Europe’s 120 largest banks, assuming that responsibility from national supervisors such as Germany’s financial watchdog BaFin and the German Central Bank, or Bundesbank. The move has raised objections from some politicians and smaller banks that are concerned about the additional regulatory costs, among other issues. Development bank Landeskreditbank Baden-Württemberg filed a lawsuit with the European Court of Justice—the European Union’s highest court—to “legally challenge that it was put under direct supervision of the ECB,” the bank told the WSJ.

L-Bank, as it is known, claims ECB oversight entails significantly higher bureaucratic expenses. An ECB spokeswoman confirmed the central bank had received notice of the court case but declined to comment further. The lawsuit, filed March 12, is the most radical step by a European bank against ECB supervision, a cornerstone of the eurozone’s integration project. It highlights the headwinds the ECB is facing from some politicians and smaller lenders in Germany, Europe’s biggest economy. L-Bank said that higher costs tied to ECB supervision would undermine its ability to support local families and businesses. Instead it wants to be supervised by BaFin and the Bundesbank, which L-Bank says would be more appropriate, given its local focus.

L-Bank argues that its business model is simple and clear, while the ECB has been tasked with regulating more complex banks through a structure known as the single supervisory mechanism. Being under ECB scrutiny “goes against the guidelines of the single supervisory mechanism,” L-Bank said. The ECB is supposed to take direct responsibility for all banks whose assets either exceed €30 billion and/or make up more than 20% of their home country’s gross domestic product. In countries where banks don’t hit that threshold at least three banks will come under ECB oversight unless their assets are below €5 billion, as will any bank that has received help from one of the eurozone’s bailout funds. In addition, the ECB can claim supervisory powers over any bank that has significant operations in at least two countries.

L-Bank is one of 21 German banks under the ECB’s direct watch. It had around €70 billion in assets at the end of 2013, the most recent figures available, and recorded slightly more than €100 million in profit. In 2013, it supplied €7.4 billion in low-cost credit to support local projects, businesses and families.

“Freddie Mac has auctioned about $2 billion in defaulted debt in three separate sales since last year.”

• Fannie Mae to Begin Auctioning Defaulted Home Loans to Investors (Bloomberg)

Fannie Mae will begin bulk auctions of mortgages, including some sales targeted for non-profit groups and small investors, as the company moves to cut the number of non-performing loans on its books. “These transactions are intended to reduce the number of seriously delinquent loans that Fannie Mae owns, to help stabilize neighborhoods and to offer borrowers access to additional foreclosure prevention options,” Fannie Mae Senior Vice President Joy Cianci said in a statement Thursday. “Our goal is to market these loans to a diverse range of buyers”. The Federal Housing Finance Agency, which has overseen U.S. conservatorship of Freddie Mac and Fannie Mae since 2008, is requiring the companies to reduce the number of severely delinquent loans on their books this year.

In March, the agency released a set of new rules for the sale of troubled mortgages. Freddie Mac has auctioned about $2 billion in defaulted debt in three separate sales since last year. Fannie Mae’s first sale will happen “in the near future,” the company said. FHFA will require prospective investors to prove they’ve retained a loan servicer with a track record of handling delinquent debt, the agency said in a March 2 statement. Servicers also will have to offer aid to avoid foreclosures as a condition of sale. Demand for soured mortgages has been increasing as Wall Street firms compete to buy loans at a discount after a real-estate market rebound. Investment firms including Lone Star Funds, Bayview Asset Management and Selene Finance have been some of the biggest buyers of delinquent home loans.

“Russia-EU relations will be discussed in light of the sanctions policy applied by the EU and the rather cold attitude toward this sanctions policy from Athens..”

• Russia Said to Plan No Aid to Greece, May Ease Curbs on Food (Bloomberg)

Russia isn’t considering any financial assistance for Greece as Prime Minister Alexis Tsipras plans to visit Moscow next week, according to three Russian government officials with knowledge of the discussions. Even so, Russia is ready to discuss easing restrictions on Greek food products, which were imposed as as part of the retaliation for EU sanctions levied over the conflict in Ukraine, said two of the three officials. Russia has been building ties with European countries that may help it scuttle the sanctions. The 28-member bloc will need unanimous approval to prolong curbs targeting Russia’s financial and energy industries that expire in July. President Vladimir Putin will discuss the measures against Russia at the talks with Tsipras, according to the Kremlin.

The EU’s most-indebted state is locked in negotiations with euro-area countries and the IMF over the terms of its €240 billion rescue. The standoff, which has left Greece dependent on ECB loans, risks leading to a default within weeks and the nation’s potential exit from the euro area. “Russia-EU relations will be discussed in light of the sanctions policy applied by the EU and the rather cold attitude toward this sanctions policy from Athens,” Putin’s spokesman, Dmitry Peskov, told reporters Friday on a conference call. Putin and Tsipras will also hold talks on the economic situation in the Balkan country, Peskov said. Greece hasn’t yet asked Russia for any financial aid, he said.

Russia would consider a request from Greece if it’s made, Finance Minister Anton Siluanov said in an interview in February. Greece this week failed to win support from creditors for proposals to cut spending and receive €7 billion in bailout funds in return. Greece needs the money as government coffers empty and bills come due, such as a debt payment to the International Monetary Fund on April 9, the day after Tsipras visits Putin in Moscow. Greece is asking for money and a discount on natural gas supplies from Russia, neither of which is possible right now, one official said.

More US induced mess.

• Saudi Arabia and Iran Vie for Regional Supremacy (Spiegel)

The Saudi military coalition began its intervention in Yemen in the name of security. But after just a week, it has become clear that the top priority of the alliance is not that of creating a balance of power between the two adversarial camps in the Yemen conflict – which pits Shiite Houthi rebels, who have joined together with former Yemeni President Ali Abdullah Saleh (who was ousted in a 2011 “Arab Spring” uprising), against Saudi-backed government troops. Indeed, the conflict is more of a complicated domestic struggle than a purely sectarian fight. Still, the Saudi monarchy’s intervention is primarily aimed at its ideological rival: Iran.

At the same time, the military operation is a chance for Saudi King Salman bin Abdulaziz Al Saud to demonstrate his independence from the US – as well as to perhaps prove his country’s military leadership in the region as a complement to its longstanding economic strength. What is clear, however, is that the brewing Sunni-Shiite struggle in the Middle East is extremely dangerous. And the most recent escalation has the potential for not just destroying Yemen, but also for turning into a disaster for Saudi Arabia. It was only last fall that Riyadh badly miscalculated in Yemen by cutting off financial aid to Hadi, who has since fled his country for the Saudi capital. The Saudi monarchy believed that Hadi, a Sunni, was being far too lenient with the Shiite Houthis, which make up a third of the population of Yemen.

But Hadi had only been striving for political survival between the various fronts – a task made all the more difficult by the return of his Shiite predecessor Saleh, who was trying to regain power at the forefront of his own militia. Without support from Riyadh, Hadi didn’t have a chance. Even if the Iranians are confessional brothers to the Houthis and have allegedly supplied them with weapons, it is ex-president Saleh who has been the primary reason for their triumphant march through the country. It is an ironic development, given that Saleh, while in power, waged a campaign of his own against Houthi insurgents. Now, however, he has placed his own elite troops – which he once equipped with the help of hundreds of millions of dollars from the US – at their disposal. The troops are akin to a private army, and Saleh has a fortune of billions he can use to finance them.

And they’re right.

• Russia Calls UN Security Council Session On Yemen Crisis (RT)

As fighting in Yemen intensifies Russia has called up an emergency UN Security Council session to put on pause Saudi-led coalition airstrikes for humanitarian purposes in an effort to quell the violence that is impacting civilians. Russia insists it is necessary for the international community to discuss the establishment of regular and mandatory “humanitarian pauses” in the ongoing coalition air strikes on Yemen, Russian UN mission’s spokesman Aleksey Zaytsev told Sputnik. An extraordinary meeting is scheduled for Saturday, at 3pm GMT at the UN headquarters in NYC. A coalition of Arab states, led by Saudi Arabia, has been engaging Houthi militias from the air for over a week now, after the Yemeni President Abd Rabbuh Mansur Hadi was forced to flee the country and asked for an international intervention to reinstate his rule.

Moscow is calling for a diplomatic solution to the conflict emphasizing that foreign military intervention would only lead to more civilian deaths. On Friday, Russia’s Deputy Foreign Minister Mikhail Bogdanov met with the newly appointed Saudi ambassador, conveying the “necessity of a ceasefire” to create favorable conditions for a peaceful national dialogue. Russia has already taken steps to evacuate all of its personnel from its Yemeni consulate, which was damaged in the conflict. It has also taken an active role evacuating Russian nationals and other civilians from the country.

On Thursday Russia proposed amendments to a UN Security Council draft resolution on Yemen. The world security body “should speak in a principled manner for ending any violence…in the Yemen crisis,” Russian Foreign Minister Sergey Lavrov said, adding that a draft resolution on the crisis has already been submitted to the UNSC. Echoing Lavrov’s words, Foreign Ministry spokesman Aleksandr Lukashevich also called on immediate cessation of hostilities, adding that Russia will continue active diplomatic efforts in dealing with all Yemeni factions and Middle Eastern partners in order to restart political process. Lukashevich also called on the UN special envoy to Yemen, Jamal Benomar, to play a bigger role in the settlement of the crisis.

“Kiev’s army, after the recent IMF loan, was allocated no less than $3.8 billion for weapons…”

• Donbass: ‘The War Has Not Started Yet’ (Pepe Escobar)

Two top Cossack commanders in the People’s Republic of Donetsk and a seasoned Serbian volunteer fighter are adamant: the real war in Donbass has not even started. It’s a spectacular sunset in the People’s Republic of Donetsk and I’m standing in the Cossack ‘holy land’ – an open field in a horse-breeding farm – talking to Nikolai Korsunov, captain of the Ivan Sirko Cossack Brigade, and Roman Ivlev, founder of the Donbass Berkut Veterans Union group. Why is this Cossack ‘holy land’? They take no time to remind me of the legendary 17th century Cossack military hero Ivan Sirko, a.k.a. “The Wizard”, credited with extra-sensory powers, who won 55 battles mostly against Poles and Tatars.

Only three kilometers from where we stand a key battle at a crossroads on the ancient Silk Road called Matsapulovska Krinitsa took place, involving 3,000 Cossacks and 15,000 Tatars. Now, at the dawn of the Chinese-driven 21st century New Silk Road – which will also traverse Russia – here we are discussing the proxy war in Ukraine between the US and Russia whose ultimate objective is to disrupt the New Silk Road. Commander Korsunov leads one of the 18 Cossack brigades in Makeevka; 240 of his soldiers are now involved in the Ukrainian civil war – some of them freshly returned from the cauldron in Debaltsevo. Some were formerly part of the Ukrainian Army, some worked in the security business. Korsunov and Ivlev insist all their fighters have jobs, even if unpaid – and have joined the Donetsk People’s Republic army as volunteers. “Somehow, they manage to survive.”

What’s so special about Cossack fighters? “It’s historical – we’ve always fought to defend our lands.”Commander Korsunov was a miner, now he’s on a pension – although for obvious reasons he’s receiving nothing from Poroshenko’s Kiev set up; only support from the Berkut group, the Ministry for Youth and Sports of the People’s Republic, and humanitarian food convoys from Russia. Korsunov and Ivlev are convinced Minsk 2 will not hold; fierce fighting should resume “in a matter of weeks.” According to their best military intelligence, Kiev’s army, after the recent IMF loan, was allocated no less than $3.8 billion for weapons.

“After Odessa”, they say – a reference to the massacre of civilians in May last year – Ukraine as we know it “is finished”. So what would be the best political solution for Donbass? Their priority is “to free all Ukraine from fascism.” And after victory, referenda should be held in all regions of the country.“People should vote for what they want; whether to remain in Ukraine, whether to align with Europe, or with Russia.” This implies advancing towards Western Ukraine across hostile territory; “We’re ready for five, seven years of war, it doesn’t matter.” So even if a political solution might be possible on a distant horizon, they are preparing for a long war. The EU is “mistaken” to treat them as separatists and even terrorists. As for those elusive Russian tanks and soldiers relentlessly denounced by NATO, where are they? Hiding in the bushes? They laugh heartily – and we’re off to a countryside Cossack banquet.

“.. loan terms that changed abruptly after they paid deposits or prepared land for their new homes; surprise fees tacked on to loans; and pressure to take on excessive payments based on false promises that they could later refinance.”

• Warren Buffett’s Mobile Home Empire Preys On The Poor (Public Integrity)

The families’ dealers and lenders went by different names – Luv Homes, Clayton Homes, Vanderbilt, 21st Mortgage. Yet the disastrous loans that threaten them with homelessness or the loss of family land stem from a single company: Clayton Homes, the nation’s biggest homebuilder, which is controlled by its second-richest man – Warren Buffett. Buffett’s mobile home empire promises low-income Americans the dream of homeownership. But Clayton relies on predatory sales practices, exorbitant fees, and interest rates that can exceed 15 percent, trapping many buyers in loans they can’t afford and in homes that are almost impossible to sell or refinance, an investigation by The Center for Public Integrity and The Seattle Times has found.

Berkshire Hathaway, the investment conglomerate Buffett leads, bought Clayton in 2003 and spent billions building it into the mobile home industry’s biggest manufacturer and lender. Today, Clayton is a many-headed hydra with companies operating under at least 18 names, constructing nearly half of the industry’s new homes and selling them through its own retailers. It finances more mobile home purchases than any other lender by a factor of six. It also sells property insurance on them and repossesses them when borrowers fail to pay. Berkshire extracts value at every stage of the process. Clayton even builds the homes with materials — such as paint and carpeting — supplied by other Berkshire subsidiaries.

And Clayton borrows from Berkshire to make mobile home loans, paying up to an extra percentage point on top of Berkshire’s borrowing costs, money that flows directly from borrowers’ pockets. More than a dozen Clayton customers described a consistent array of deceptive practices that locked them into ruinous deals: loan terms that changed abruptly after they paid deposits or prepared land for their new homes; surprise fees tacked on to loans; and pressure to take on excessive payments based on false promises that they could later refinance. Former dealers said the company encouraged them to steer buyers to finance with Clayton’s own high-interest lenders.

“The Mediterranean Sea represents less than 1% of the global ocean area, but is important in economic and ecological terms. It contains between 4% and 18% of all marine species..”

• Mediterranean Sea ‘Accumulating Zone Of Plastic Debris’ (BBC)

Large quantities of plastic debris are building up in the Mediterranean Sea, say scientists. A survey found around one thousand tonnes of plastic floating on the surface, mainly fragments of bottles, bags and wrappings. The Mediterranean Sea’s biological richness and economic importance means plastic pollution is particularly hazardous, say Spanish researchers. Plastic has been found in the stomachs of fish, birds, turtles and whales. Very tiny pieces of plastic have also been found in oysters and mussels grown on the coasts of northern Europe. “We identify the Mediterranean Sea as a great accumulation zone of plastic debris,” said Andres Cozar of the University of Cadiz in Puerto Real, Spain, and colleagues.

“Marine plastic pollution has spread to become a problem of planetary scale after only half a century of widespread use of plastic materials, calling for urgent management strategies to address this problem.” Plastic is accumulating in the Mediterranean Sea at a similar scale to that in oceanic gyres, the rotating ocean currents in the Indian Ocean, North Atlantic, North Pacific, South Atlantic and South Pacific, the study found. A high abundance of plastic has also been found in other seas, including the Bay of Bengal, South China Sea and Barents Sea in the Arctic Ocean. Commenting on the study, published in the journal PLOS ONE, Dr David Morritt of Royal Holloway, University of London, said scientists were particularly concerned about very small pieces of plastic (less than 5mm in length), known as microplastics.

The study found more than 80% of plastic items in the Mediterranean Sea fell into this category. “These very small plastic fragments lend themselves to being swallowed by marine species, potentially releasing chemicals into the gut from the plastics,” Dr Morritt, of the School of Biological Sciences, told BBC News. “Plastic doesn’t degrade in the environment – we need to think much more carefully about how we dispose of it, recycle it, and reduce our use of it.” The Mediterranean Sea represents less than 1% of the global ocean area, but is important in economic and ecological terms. It contains between 4% and 18% of all marine species, and provides tourism and fishing income for Mediterranean countries. “Given the biological wealth and concentration of economic activities in the Mediterranean Sea, the effects of plastic pollution on marine and human life could be particularly relevant in this plastic accumulation zone,” said Dr Cozar.

“Shutting down disposal wells and the industry they serve, he added, “will make ‘The Grapes of Wrath’ look like a cheery movie.”

• As Quakes Rattle Oklahoma, Fingers Point to Oil and Gas Industry (NY Times)

From 2010 to 2013, Oklahoma oil production jumped by two-thirds and gas production rose by more than one-sixth, federal figures show. The amount of wastewater buried annually rose one-fifth, to nearly 1.1 billion barrels. And Oklahoma went from three earthquakes of magnitude 3.0 or greater to 109 — and to 585 in 2014, and to 750-plus this year, should the current pace continue. In the United States, only Alaska is shaken more. The Corporation Commission lacks explicit authority to regulate earthquake risks. So it is trying to contain the risks posed by roughly 3,200 active wastewater disposal wells using laws written to control water pollution. Last spring, the commission began trying to weed out quake risks by scrutinizing wells near larger quakes for operational problems and permit violations.

A few dozen wells made modifications; four shut down. It is now difficult to win approval for new wells near stressed faults, active seismic areas or the epicenters of previous quakes above 4.0 magnitude. Regulators significantly expanded the areas under scrutiny last month. Yet the quakes continue. Privately, some companies are cooperating with regulators and scientists by offering proprietary information about underground faults. Publicly, the industry wants Oklahomans to beware of killing the golden goose. Many in the industry were reluctant to comment for this article. But Kim Hatfield, the regulatory chairman of the Oklahoma Independent Petroleum Association and president of Crawley Petroleum, warned: “A reaction of panic is not useful.” Shutting down disposal wells and the industry they serve, he added, “will make ‘The Grapes of Wrath’ look like a cheery movie.”

The mechanics of wastewater-induced earthquakes are straightforward: Soaked with enough fluid, a layer of rock expands and gets heavier. Earthquakes can occur when the pressure from the fluid reaches a fault, either through direct contact with the soaked rock or indirectly, from the expanding rock. Seismologists have documented such quakes in Colorado, New Mexico, Arkansas, Kansas and elsewhere since the 1960s. But nowhere have they approached the number and scope of Oklahoma’s quakes, which have rocked a fifth of the state. One reason, scientists suspect, is that Oklahoma’s main waste disposal site, a bed of porous limestone thousands of feet underground, lies close to the hard, highly stressed rock containing the faults that cause quakes.

“..while green lawns may be at risk, urban water use accounts for a minority of the state’s total water use, PPIC noted. About 80% of human water use is in agriculture.”

• Half Of Urban California’s Water Is Used To Water The Grass (MarketWatch)

As California searches for ways to dramatically cut its water use, the lawn may have to go, or at least shrink. About half of water usage in the state’s urban areas goes for landscaping, said Jeffrey Mount, a senior fellow at the Public Policy Institute of California and a water expert. “We have a lot of room in the urban sector to adjust,” and the most obvious place is in landscaping. Reducing the amount of water devoted to lawns won’t have a major negative impact on the economy or on lifestyle, he said. On Wednesday, California Gov. Jerry Brown ordered statewide water reductions of 25% for the first time ever, as California’s drought worsens. Previously he had sought voluntary cuts of 20%. The State Water Resources Control Board is expected to decide on new regulations over the next month.

Brown’s announcement said campuses, golf courses, cemeteries and other large landscapes will have to make significant cuts in water use. But it did not mention residential lawns. PPIC says outdoor residential use accounts for one-third of urban water use, twice that of commercial and institutional landscapes, including golf courses and cemeteries. While homeowners may face further curbs of their water use, the state has already made strides in conserving water. Per-capita water use dropped more than 23% from 1990 to 2010, based on data compiled by the U.S. Geological Survey that is collected every five years. Some of that has come through low-flow shower heads, low-flush toilets, new standards for washing machines and dishwashers, and other water-saving technologies.

The state’s population has increased in that time, leaving overall urban water use essentially unchanged. And while green lawns may be at risk, urban water use accounts for a minority of the state’s total water use, PPIC noted. About 80% of human water use is in agriculture.