Nov 192017
 
 November 19, 2017  Posted by at 10:04 am Finance Tagged with: , , , , , , , , ,  


Wyland Stanley Pontiac coupe at San Francisco Palace of Fine Arts 1935

 

A Fiscal Disappointment – Tax Bill (Lebowitz)
Mt. Gox’s Bitcoin Customers Could Lose Again (R.)
The Coming Economic Downturn In Canada (MN)
How a Half-Educated Tech Elite Delivered Us Into Chaos (Naughton)
Europe Turns On Facebook, Google For Digital Tax Revamp (AFP)
When Unpaid Student Loan Bills Mean You Can No Longer Work (NYT)
Subways May Be the Latest Casualty of China’s Crackdown on Debt (BBG)
Upsurge In Big Earthquakes Predicted For 2018 As Earth Rotation Slows (G.)
Will Puerto Ricans Return Home After Hurricane María? (Conv.)
600 African Migrants Rescued Near Spain (AFP)
First Child Refugee From Greek Camps Comes To UK (G.)
Lesvos Authorities Going On Strike Over Rising Migrant Population (K.)
Over 50,000 Yemeni Children Expected To Die By The End Of 2017 (Ind.)

 

 

This is about much more than the Tax bill. It’s about how much growth you get per dollar in debt added. That is crucial.

A Fiscal Disappointment – Tax Bill (Lebowitz)

The Committee For A Responsible Budget penned after the passage of the tax bill: “The House approved debt-financed tax cuts based on predictions of magical economic growth that defy history and all credible analyses. Tax reform should grow the economy and not add to the debt. Unfortunately, lawmakers are assuming faster economic growth will pay for that debt increase when there is no evidence it will cover more than a fraction of the tax bill’s costs. The last time Congress added 10-figures worth of tax cuts to the debt in 2001, it blew a hole in the budget and helped erase our surpluses — despite claims that economic growth would cover the cost.The growth fairy did not appear then, and it would be unwise to assume she will this time around.” Read that again. Despite claiming to be “fiscally conservative,” what is so amazing is that Republicans are considering doing this when debt is at the highest level in history and climbing.

When the “Reagan” tax cuts of were passed, debt was less than 50% of GDP, inflation and interest rates were high and falling, and the economy was just recovering from back to back recessions. When the “Bush” tax cuts were passed, debt to GDP was only slightly higher than under Reagan but despite the tax cuts, the economy slid into a recession compounded by the “dot.com” bust. Currently, debt is 104% of GDP — higher than any time in history, the economy has been in a 9-year expansion at the lowest rate of growth on record, and interest rates and inflation are low with the Fed hiking rates and reducing monetary support. The situation currently is much more like Bush versus Reagan. Lastly, despite the continuing “talking points” that “tax cuts” spur economic growth and will pay for themselves over time….there is no evidence to support that claim.

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A curious tale.

Mt. Gox’s Bitcoin Customers Could Lose Again (R.)

When Mt. Gox, the world’s largest bitcoin trading exchange, collapsed in early 2014, more than 24,000 customers around the world lost access to hundreds of millions of dollars’ worth of cryptocurrency and cash. More than three years later, with the price of bitcoin skyrocketing to more than $7,000, not a single customer has recouped a single cent, crypto or otherwise. It’s not clear when they will. The failed exchange has become stuck in a morass of litigation – a Russian doll of bankruptcies in Japan and New Zealand, four in all, plus lawsuits in the United States and competing claims from creditors. And although the Mt. Gox bankruptcy trustee recovered digital currency now worth more than $1.6 billion, under Japanese law the exchange’s customers likely will recover only a fraction of that.

Kim Nilsson, a Swedish software developer who had more than a dozen bitcoins at Mt. Gox, isn’t optimistic of a payout soon. “It’s a legal twilight zone,” he says. “I wouldn’t be surprised if it took several years more.” There are few better examples of the dangers of investing in cryptocurrencies than Mt. Gox. As Reuters reported in September, cryptocurrency exchanges – where digital coins are bought, sold and stored – are largely unregulated and have become magnets for fraud and deception. At least 10 of them have closed, often after thefts, leaving customers without their funds. In all, more than 980,000 bitcoins have been stolen from exchanges since 2011 – two-thirds of those from Mt. Gox. Today, all of the stolen coins would be worth more than $6 billion, Reuters has calculated.

Mt. Gox is one of the few collapsed exchanges that ended up in bankruptcy court; some just vanished. But the problem for Mt. Gox’s thousands of creditors is that under Japanese bankruptcy law, their claims were valued at the market price of bitcoin in April 2014 just before the Tokyo District Court ordered the exchange be liquidated. At that time, one bitcoin was worth $483. On the basis of the April 2014 value, the claims ultimately approved were fixed at 45.6 billion Japanese yen, currently about $400 million. Based on the current price of bitcoin, Mt. Gox’s bankruptcy trustee is sitting on enough cash to repay creditors whose claims have been approved more than three times that amount, according to Reuters’ calculation. But that likely won’t happen, according to two Japanese bankruptcy attorneys.

In Japan, by law any funds left over in a bankrupt company’s estate after creditors have been paid go to shareholders. Mt. Gox is 88% owned by a Japanese company called Tibanne. And Mark Karpeles, a 32-year-old French software engineer and Mt. Gox’s former chief executive, owns 100% of Tibanne. Karpeles is currently on trial in Tokyo, accused of embezzling money from Mt. Gox and manipulating its data, as well as breach of trust. He has pleaded not guilty to the charges, some of which carry sentences of up to 10 years. He served nearly a year in jail following his arrest in August 2015.[..] In a three-hour interview, Karpeles told Reuters he doesn’t want the money. The main reason: He expects he would be inundated with lawsuits. He says he already is facing about a half dozen. “I don’t want to be the beneficiary of this,” he said. “I don’t really need money. I work, I get by.”

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Bubbles all around.

The Coming Economic Downturn In Canada (MN)

Given its natural resource-based economy, Canada is a boom and bust kind of place. This year, the country has enjoyed a significant boom. Thanks to a government stimulus program, rising corporate capital expenditures and consumer spending, Canada’s GDP growth has been nothing short of spectacular in 2017. According to Statistics Canada, the latest reading for year-over-year GDP growth is a healthy 3.5% (as of August 2017). While this is stronger than all major developed countries, growth is decelerating from its most recent peak in May 2017 (when GDP growth was an astounding 4.7%). A visual overview of historical GDP growth is shown below for reference:

Following the crude oil bust in the second quarter of 2014, Canadian growth rates cratered. While the country avoided a technical recession, the economic outlook was poor until early 2016. After crude oil returned to a bull market in the first quarter of 2016, the fortunes of the country turned. Given limited growth in 2015, the economy had no problem delivering 2%+ year-over-year growth rates in 2016. As a substantial stimulus program ramped up government spending in 2017, growth rates have continued to accelerate this year. While Canada has delivered exceptional growth in the last two years, the future outlook is much more challenging.

Beyond the issue of base effects (mathematically, year-over-year GDP growth will be much tougher next year), key sectors including the oil & gas industry and Canadian real estate look ripe for a downturn. As WTI crude strengthens beyond $55, crude oil is clearly in a bull market today. Looking at figures from the International Energy Agency, global demand growth continues to run ahead of supply growth. Thus the ongoing bull market is supported by fundamentals. Thanks to the impact of hurricanes and infrastructure bottlenecks in 2017, US shale hasn’t entirely fulfilled its role as the global ‘swing producer’ this year. The dynamics of supply growth versus demand growth are shown below:

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It’s a good thing this is getting addressed. It may well be too late though.

How a Half-Educated Tech Elite Delivered Us Into Chaos (Naughton)

One of the biggest puzzles about our current predicament with fake news and the weaponisation of social media is why the folks who built this technology are so taken aback by what has happened. Exhibit A is the founder of Facebook, Mark Zuckerberg, whose political education I recently chronicled. But he’s not alone. In fact I’d say he is quite representative of many of the biggest movers and shakers in the tech world. We have a burgeoning genre of “OMG, what have we done?” angst coming from former Facebook and Google employees who have begun to realise that the cool stuff they worked on might have had, well, antisocial consequences.

Put simply, what Google and Facebook have built is a pair of amazingly sophisticated, computer-driven engines for extracting users’ personal information and data trails, refining them for sale to advertisers in high-speed data-trading auctions that are entirely unregulated and opaque to everyone except the companies themselves. The purpose of this infrastructure was to enable companies to target people with carefully customised commercial messages and, as far as we know, they are pretty good at that. (Though some advertisers are beginning to wonder if these systems are quite as good as Google and Facebook claim.) And in doing this, Zuckerberg, Google co-founders Larry Page and Sergey Brin and co wrote themselves licences to print money and build insanely profitable companies.

It never seems to have occurred to them that their advertising engines could also be used to deliver precisely targeted ideological and political messages to voters. Hence the obvious question: how could such smart people be so stupid? The cynical answer is they knew about the potential dark side all along and didn’t care, because to acknowledge it might have undermined the aforementioned licences to print money. Which is another way of saying that most tech leaders are sociopaths. Personally I think that’s unlikely, although among their number are some very peculiar characters: one thinks, for example, of Paypal co-founder Peter Thiel – Trump’s favourite techie; and Travis Kalanick, the founder of Uber. So what else could explain the astonishing naivety of the tech crowd? My hunch is it has something to do with their educational backgrounds.

Take the Google co-founders. Sergey Brin studied mathematics and computer science. His partner, Larry Page, studied engineering and computer science. Zuckerberg dropped out of Harvard, where he was studying psychology and computer science, but seems to have been more interested in the latter. Now mathematics, engineering and computer science are wonderful disciplines – intellectually demanding and fulfilling. And they are economically vital for any advanced society. But mastering them teaches students very little about society or history – or indeed about human nature. As a consequence, the new masters of our universe are people who are essentially only half-educated. They have had no exposure to the humanities or the social sciences, the academic disciplines that aim to provide some understanding of how society works, of history and of the roles that beliefs, philosophies, laws, norms, religion and customs play in the evolution of human culture.

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It’s as much about the companies as it is about Europe’s own tax havens. The latter should be easier to tackle.

Europe Turns On Facebook, Google For Digital Tax Revamp (AFP)

They have revolutionised the way we live, but are US tech giants the new robber barons of the 21st century, banking billions in profit while short-changing the public by paying only a pittance in tax? With public coffers still strained years after the worst of the debt crisis, EU leaders have agreed to tackle the question, spurred on by French President Emmanuel Macron who has slammed the likes of Google, Facebook and Apple as the “freeloaders of the modern world”. As recently as March, five of the world’s top 10 valued companies were Silicon Valley behemoths: Apple, Google’s Alphabet, Microsoft, Amazon and Facebook. (Germany’s SAP was Europe’s biggest and 56th on the global list). But tax rules today are designed for yesterday’s economy when US multinationals -such as General Motors, IBM or McDonald’s- entered countries loudly, with new factories, jobs and more taxes for the taking.

These firms had what tax specialists call “permanent establishment”, when companies showed a clear physical presence measured and taxed through tangible, real world assets. But today in most EU nations, the US tech titans exist almost exclusively in the virtual world, their services piped through apps to smart phones and tablets from designers and data servers oceans away. Ghost-like, Silicon Valley has turned Europe’s economies upside down, but often with just a skeleton staff and some office space in markets with millions of users or customers. According to EU law, to operate across Europe, multinationals have almost total liberty to choose a home country of their choosing. Not surprisingly, they choose small, low tax nations such as Ireland, the Netherlands or Luxembourg. Thus, it is through Ireland that Facebook draws its wealth from millions of accounts across Europe.

There are 33 million accounts in France and 31 million in Germany, according to recent data. While users enjoy the platform, Facebook tracks likes, comments and page views and sells the data to companies who then target consumers. But unlike the economy of old, Facebook sells its data to French companies not from France but from a great, nation-less elsewhere, with no phone number, address or physical “presence” for a customer who probably cares little. It is in states like Ireland, whose official tax rate of 12.5% is the lowest in Europe, that the giants have parked their EU headquarters and book profits from revenues made across the bloc. Indeed, actual revenues from advertising are minimal in France and Germany, but at Facebook HQ Ireland they grew to 7.9 billion euros, even though the vast majority does not come from the tiny EU island-nation of a mere 2.5 million users.

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A crazy world.

When Unpaid Student Loan Bills Mean You Can No Longer Work (NYT)

Fall behind on your student loan payments, lose your job. Few people realize that the loans they take out to pay for their education could eventually derail their careers. But in 19 states, government agencies can seize state-issued professional licenses from residents who default on their educational debts. Another state, South Dakota, suspends driver’s licenses, making it nearly impossible for people to get to work. As debt levels rise, creditors are taking increasingly tough actions to chase people who fall behind on student loans. Going after professional licenses stands out as especially punitive. Firefighters, nurses, teachers, lawyers, massage therapists, barbers, psychologists and real estate brokers have all had their credentials suspended or revoked.

Determining the number of people who have lost their licenses is impossible because many state agencies and licensing boards don’t track the information. Public records requests by The New York Times identified at least 8,700 cases in which licenses were taken away or put at risk of suspension in recent years, although that tally almost certainly understates the true number. [..] With student debt levels soaring — the loans are now the largest source of household debt outside of mortgages — so are defaults. Lenders have always pursued delinquent borrowers: by filing lawsuits, garnishing their wages, putting liens on their property and seizing tax refunds. Blocking licenses is a more aggressive weapon, and states are using it on behalf of themselves and the federal government.

Proponents of the little-known state licensing laws say they are in taxpayers’ interest. Many student loans are backed by guarantees by the state or federal government, which foot the bills if borrowers default. Faced with losing their licenses, the reasoning goes, debtors will find the money. But critics from both parties say the laws shove some borrowers off a financial cliff.

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Politicians everywhere dream of big and grandiose projects.

Subways May Be the Latest Casualty of China’s Crackdown on Debt (BBG)

China’s frenzied construction of subway systems in cities all over the country may be easing, amid reports funding has been pulled for some projects as Beijing pushes to rein in debt levels. The National Development and Reform Commission, China’s top economic planning body, is revising a 2003 policy on subway development, Caixin reported on Saturday. The NDRC wants to “raise the bar” for approving local rail projects amid growing concern over a debt-driven infrastructure boom, the financial magazine said, citing sources that it didn’t identify. Population levels, as well as the economy and fiscal conditions of Chinese cities seeking permission for subway projects will be more closely scrutinized, Caixin said. Subway construction is a constant presence in China’s cities, with streets torn up to build the capacity needed to transport the swelling ranks of urban commuters.

Beijing alone has been testing three lines: a driverless subway, a maglev train, and a tram to be launched in the city’s western suburbs at the end of the year, the official Xinhua News Agency reported in September. But investment in the sector appears to be tapering off, just as China’s leaders make reining in financial risks a top priority. Fixed-asset investment in rail transportation has slowed almost to a standstill in 2017, increasing just 0.4% in January-October from a year earlier, statistics bureau data show. That’s down from 3.5% growth in the first four months of the year. Private rail transport investment – which makes up a tiny share of an industry that’s dominated by state-backed enterprises – slumped 58.6% January-October from a year earlier.

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Rotation slowing by a millisecond per day.

Upsurge In Big Earthquakes Predicted For 2018 As Earth Rotation Slows (G.)

Scientists have warned there could be a big increase in numbers of devastating earthquakes around the world next year. They believe variations in the speed of Earth’s rotation could trigger intense seismic activity, particularly in heavily populated tropical regions. Although such fluctuations in rotation are small – changing the length of the day by a millisecond – they could still be implicated in the release of vast amounts of underground energy, it is argued. The link between Earth’s rotation and seismic activity was highlighted last month in a paper by Roger Bilham of the University of Colorado in Boulder and Rebecca Bendick of the University of Montana in Missoula presented at the annual meeting of the Geological Society of America.

“The correlation between Earth’s rotation and earthquake activity is strong and suggests there is going to be an increase in numbers of intense earthquakes next year,” Bilham told the Observer last week. In their study, Bilham and Bendick looked at earthquakes of magnitude 7 and greater that had occurred since 1900. “Major earthquakes have been well recorded for more than a century and that gives us a good record to study,” said Bilham. They found five periods when there had been significantly higher numbers of large earthquakes compared with other times. “In these periods, there were between 25 to 30 intense earthquakes a year,” said Bilham. “The rest of the time the average figure was around 15 major earthquakes a year.”

The researchers searched to find correlations between these periods of intense seismic activity and other factors and discovered that when Earth’s rotation decreased slightly it was followed by periods of increased numbers of intense earthquakes. “The rotation of the Earth does change slightly – by a millisecond a day sometimes – and that can be measured very accurately by atomic clocks,” said Bilham. Bilham and Bendick found that there had been periods of around five years when Earth’s rotation slowed by such an amount several times over the past century and a half. Crucially, these periods were followed by periods when the numbers of intense earthquakes increased. “It is straightforward,” said Bilham. “The Earth is offering us a five-year heads-up on future earthquakes.”

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Many will not.

Will Puerto Ricans Return Home After Hurricane María? (Conv.)

Even before this year’s devastating hurricane season, the team of demographers I work with at Penn State and the Puerto Rico Institute of Statistics had predicted that the population of Puerto Rico would decline over the next few decades. Have Hurricanes Irma and María accelerated this trend? Slowing population decline is central to the economic recovery plan drafted by the Puerto Rican government in March of this year. If migration off the island accelerates, it is likely that the government of Puerto Rico will face even greater challenges in meeting that plan’s milestones. Preliminary data from the Puerto Rican Diaspora Study, which I recently concluded, can help shed light on how many Puerto Ricans who have fled the island might return home – and how many are gone for good.

In the two months since María made landfall, Puerto Ricans have left the island in even higher numbers than before. Recent commercial flight passenger data indicate that between Sept. 20, the day Hurricane María made landfall, and Nov. 7, approximately 100,000 people left Puerto Rico. That number exceeds the 89,000 people who left island during all of 2015 and increases by the day. Lack of access to power, drinking water and health care are pushing people out. Recent forecasts of migration out of Puerto Rico from the Center for Puerto Rican Studies at CUNY suggest that, because of Hurricane María, the island may lose up to 470,335 residents, or 14% of its current population, by 2020. This would represent a doubling of migration off the island compared to previous years.

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3,000 died this year.

600 African Migrants Rescued Near Spain (AFP)

Around 600 African migrants were rescued off the coast of Spain in 24 hours, a sea rescue patrol said Saturday. The Guardia Civil and Salvamento Maritimo rescue service added that operations to recover further migrants were still under way. Spain is the third busiest gateway for migrants arriving in Europe, but far behind Italy and Greece. However, the number of people arriving by sea in Spain has nearly tripled over the last year to 17,687. Many Africans undertaking the long route to Europe are choosing to avoid crossing danger-ridden Libya to get to Italy along the so-called central Mediterranean route, and choosing instead to get there via Morocco and Spain.

On Saturday, most of the migrants arrived in the south-eastern region of Murcia, where 431 people aboard 41 makeshift boats were discovered. Patrols found more than 110 people in the Alboran Sea, between Morocco and Spain’s Andalusian coast. Operations were also conducted in the Strait of Gibraltar, recovering 48 people on four makeshift boats. The rescues were carried out by the Navy, the Guardia Civil police and Salvamento Maritimo. According to the International Organization for Migration (IOM) close to 160,000 people have made the dangerous crossing to Europe this year and almost 3,000 more died or went missing while trying.

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An irreversibly harmed child who has been waiting for a year for Britain to fulfill an already made pledge.

First Child Refugee From Greek Camps Comes To UK (G.)

More than a year after the UK government pledged to transfer hundreds of child refugees from Greece, the first unaccompanied minor from the country will arrive in London this week. However the 15-year-old Syrian is described by experts as profoundly traumatised because of the delay and has recently attempted to take his own life. Fourteen months have elapsed since the boy was first identified by the Home Office as especially vulnerable and eligible for immediate transfer. It has also emerged that Hammersmith and Fulham council in west London told the Home Office a year ago that it had a place for the teenager, but officials did not act on the offer – a decision that charities say has caused “irreversible damage” to the child, who has lost contact with his family in Syria.

Giannoula Kefala, the council’s principal social worker, said: “From my perspective, the impasse and likely irreversible harm already caused to this extremely vulnerable child is unbearably disturbing.” Kefala said that last December she informed the Home Office of her intention to travel to Greece to assess the boy. “It is absolutely clear from my visit that the long delay has caused this child terrible harm, and that it has been apparent for a long time that the available resources in Greece cannot cater for this child’s needs. Recent hospital records make clear that the ongoing uncertainty is having a devastating impact.” The teenager is currently on heavy psychiatric medication, which worries his doctor but which is believed to be necessary to prevent a fatal outcome.

Until last Monday the youngster was being detained in a police cell with no access to medical professionals, and forced to sleep on a mattress on the floor. On 22 October, police said the boy, after repeated self-harming, had made a suicide attempt and was at “imminent risk of killing himself”. Kefala said she was concerned the boy could die.

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They live in summer tents. It’s been pouring with rain for days. The UNHCR has many rolls of plastic sheeting just lying around.

Lesvos Authorities Going On Strike Over Rising Migrant Population (K.)

With reception centers for migrants on the Aegean islands reaching breaking point, local authorities on Lesvos go on strike on Monday to draw attention to the problem. The island’s mayor, Spyros Galinos, called the general strike last week, noting that the rising migrant population “has fueled insecurity among citizens.” Authorities on Lesvos want the government to move migrants from seriously overcrowded facilities on the islands to the mainland. Around 16,000 migrants have been relocated to the mainland since October last year, but more transfers are needed as dozens continue to reach the islands daily even as the pace of returns to Turkey remains slow. Concerns are also growing about hundreds of migrants living in tents around the reception centers amid worsening weather conditions. The Interior Ministry has said that measures to deal with the winter months will be implemented in phases through the end of December.

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Please stop.

Over 50,000 Yemeni Children Expected To Die By The End Of 2017 (Ind.)

More than 50,000 children in Yemen are expected to die by the end of the year as a result of disease and starvation caused by the stalemated war in the country, Save the Children has warned. Seven million people are on the brink of famine in the country, which is in the grips of the largest cholera outbreak in modern history. An estimated 130 Yemeni children are dying every day and an estimated 400,000 children will need treatment for acute malnutrition this year, the charity said. “These deaths are as senseless as they are preventable,” said Tamer Kirolos, Save the Children’s country director for Yemen. “They mean more than a hundred mothers grieving for the death of a child, day after day.”

Eighteen-month-old Nadhira from the Bani Qais district of Hajja, northern Yemen, is suffering from severe acute malnutrition and respiratory diseases. Her mother saved the family’s income for three days to afford to take her to Hajja city for treatment, but her condition deteriorated once again after they were left unable to afford the medicine. “I worry about my family’s food and medicine when they get sick. I want my daughter to live: she’s my biggest concern now. I wish my daughter recovers from her sickness soon,” her mother Shaika said.

The charity has warned the death toll as a result of starvation and disease could be even higher, as the calculations were made before Saudi Arabia tightened a blockade on rebel-held parts of the country in response to a missile fired from rebel territory towards Riyadh international airport this month. The blockade has closed the major entry ports of Hodeidah and Saleef, as well as the airport in the capital Sanaa, which has severely hindered the access of food and aid.

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Nov 032015
 
 November 3, 2015  Posted by at 9:45 am Finance Tagged with: , , , , , , , , , ,  


Jovcho Savov Guernica 2015

The Market May Have Had Enough of Share Buybacks (Bloomberg)
Debt Traders Send Warning On Corporate America’s Balance Sheet Fiesta (BBG)
Money Is Flooding Out Of Canada At The Fastest Pace In The Developed World (BBG)
The Self-Defeating, ‘Grand Delusion’ of Monetary Policy (WSJ)
Foreign Banks Use US Repo Deals To ‘Window-Dress’ Risk (FT)
China State Owned Enterprise Debt Explodes By $1 Trillion In September (Chiecon)
Six Ways to Gauge How Fast China’s Economy Is Actually Growing (Bloomberg)
China Financial Crackdown Intensifies as Funds, Banks Targeted (Bloomberg)
VW Emissions Scandal Widens To Include Porsche, Audi Claims (Guardian)
ECB Officials Met Regularly With Financial Institutions on Key Moments (WSJ)
Standard Chartered Cuts 15,000 Jobs And Raises $5.1 Billion (BBC)
TransCanada Requests Suspension of US Permit for Keystone XL Pipeline (WSJ)
Coywolf: Greater Than The Sum Of Its Parts (Economist)
Melting Ice In West Antarctica Could Raise Seas By 3 Meters (Guardian)
Abrupt Changes In Food Chains Predicted As Southern Ocean Acidifies Fast (SMH)
October’s Migrant, Refugee Flow To Europe Matched Whole Of 2014 (Reuters)
Merkel Rejects Shutting Border Amid Standoff With Party Critics (Bloomberg)
Erdogan’s Election Win Means He Can Dictate Terms To EU On Refugees (Guardian)
Winter Is Coming: The New Crisis For Refugees In Europe (Guardian)
No Place Left On Lesvos To Bury Dead Refugees (AP)
Powerful Gestures: America and Refugees (New Yorker)

What will Apple do now?

The Market May Have Had Enough of Share Buybacks (Bloomberg)

It’s no secret that companies have been borrowing in the bond market to pay their shareholders through generous buybacks. But Citigroup credit analysts, led by Stephen Antczak, suggest that the robbing Peter to pay Paul dynamic that has dominated the investment landscape in recent years may be coming to an end as the credit cycle begins to turn and a meaningful pickup looms in the corporate default rate. In fact, they say, there is evidence this is already happening.

“The three-fold increase in share buybacks in the past five years has been the key driver of corporate re-leveraging. In large part, buybacks have been the result of strong incentives provided to corporate managers by activists in particular and equity investors in general … Companies that spent more on shareholder handouts and less on investments have tended to get higher price/earnings ratios in the market. But there are signs that this may be changing. Recent conversations that we’ve had with equity [portfolio managers] suggest that they have become far more focused on revenue growth, and are placing far less of a premium on any financially engineered EPS growth. The fact that a basket of stocks that [has] been reducing shares outstanding is meaningfully underperforming the S&P 500 on a beta-adjusted basis suggests that this view may not be that of just the investors we talk to, but far more broadbased (Figure 1).”

The theory here is that as the credit cycle turns and the prospect of an increase in the corporate default rate becomes a reality for the first time in many years, shareholders who have a claim on the future cash flows of companies will stop rewarding behavior that might meaningfully jeopardize those cash flows. Corporate leverage, or company indebtedness, has already been rising, much to the detriment of bond investors.

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If the Fed doesn’t raise rates, the markets will.

Debt Traders Send Warning On Corporate America’s Balance Sheet Fiesta (BBG)

Credit traders are sending an ominous message to U.S. companies: Either stop borrowing so much money or prepare to face some serious consequences. Investors are now demanding a 61% bigger premium over benchmark rates to own top-rated bonds of industrial companies compared with June 2014. Such debt has lost 4.2% in the period when stripping out gains from benchmark government rates, with relative yields rising to 1.8 percentage points from 1.1 percentage points 16 months ago, BoAML index data show. Part of this is just saturation in the face of yet another year of record-breaking bond sales. Investment-grade companies have issued more than a trillion dollars of bonds so far in 2015 on top of the $5 trillion in the previous five years, data compiled by Bloomberg show.

But this year’s weakness in credit markets isn’t just a technical blip; it highlights a significant deterioration in corporate balance sheets. After all, what have these companies done with the money they’ve raised? They’ve bought back their own shares and paid dividends to their shareholders. What they haven’t done is use the money to improve their businesses. It’s getting to the point where even stockholders are tiring of their companies’ repurchasing shares and borrowing money simply because it’s cheap. [..] equity investors are essentially asking corporations to be more conservative with their balance sheets. Here’s why: Top-rated non-financial companies have increased their median leverage to 2.2 times debt relative to income, compared with 1.6 times in 2011, according to JPMorgan Chase.

Bond investors, meanwhile, are still buying top-rated issues, because what else are they going to buy? Central banks from China to Europe are injecting more stimulus into their economies, driving yields lower even as the Federal Reserve debates raising benchmark rates in the U.S. All-in yields of 3.4% on U.S. investment-grade company bonds look pretty generous when compared with the 0.5% yields on 10-year German government bonds. “There are some fundamental problems here,” said Lisa Coleman, head of global investment-grade credit at JPMorgan Asset Management. “This is representative of late-cycle growth. We’re more cautious on credit.” Cracks are starting to form, and they’re getting deeper. This is the first year since 2009 that credit-rating downgrades are significantly outpacing upgrades. Also, the more debt these companies pile on, the more vulnerable they become to a bad blowup that will leave them with extremely bloated balance sheets relative to revenues.

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Where will the loonie go?

Money Is Flooding Out Of Canada At The Fastest Pace In The Developed World (BBG)

Money is flooding out of Canada at the fastest pace in the developed world as the nation’s decade-long oil boom comes to an end and little else looks ready to take the industry’s place as an economic driver. Canada’s basic balance — a measure of national accounts that spans everything from trade to financial-market flows – swung from a surplus of 4.2% of GDP to a deficit of 7.9% in the 12 months ending in June, according to analysis from Kamal Sharma at Bank of America Merrill Lynch. That’s the fastest one-year deterioration among 10 major developed nations. More recent data on where companies and mutual-fund investors are putting their money show the trend extended into the second half of the year, suggesting demand for the Canadian dollar and the country’s assets is still ebbing.

The currency is already down 11% this year, after touching an 11-year low against the U.S. dollar in September. “This is Canadian investors that are pushing money abroad,” said Alvise Marino at Credit Suisse in New York. “The policy in Canada the last 10 years has greatly favored investments in energy. Now the drop in oil prices made all that investment unprofitable.” Crude oil, among the nation’s biggest exports, has collapsed to about half its 2014 peak. The slump has derailed projects this year in Canada’s oil sands — one of the world’s most expensive crude-producing regions. Shell’s decision to put its Carmon Creek drilling project on ice last week lengthened that list to 18, according to ARC Financial.

Canadian companies, meanwhile, have been looking abroad for acquisitions. Royal Bank of Canada is expected to close its US$5.4 billion purchase of Los Angeles-based City National Corp. Monday, its biggest-ever takeover. It’s part of a net outflow of $73 billion this year for mergers and acquisitions, both completed and announced, according to Credit Suisse data. Nine of the 10 best-performing companies on the country’s benchmark stock index in the past two years have favored buying growth abroad rather than expanding at home. Individuals are following suit. While international appetite for Canadian financial securities has held steady this year, domestic mutual-fund investors have pulled money from Canada-focused funds and plowed it into global choices for six straight months, the longest streak in two years, according to data compiled by Bank of Montreal.

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Central banks need to have their powers cut.

The Self-Defeating, ‘Grand Delusion’ of Monetary Policy (WSJ)

Signs persist that the global economy isn’t well. In China, the official manufacturing PMI remained at 49.8, under the 50-line that delineates expansion and contraction. In the U.S., the ISM’s October manufacturing survey fell to 50.1, its lowest rate in two years. Both reports are just the latest in what has largely been a string of disappointing data. Six years after the market bottomed, the data also highlights the struggles the world’s central banks have had lighting a fire under the global economy. The Fed alone has pumped more than $3.5 trillion into the economy since the financial crisis. Yet economic growth has continually fallen short of expectations. Now a growing chorus is arguing that these central-bank policies appears to be self-defeating.

The zero-rate environment is hampering the economy, J.P. Morgan’s David Kelly argued in a paper last week, by short-circuiting the kinds of fundamental trends that usually attend to healthy economies – savings, for example, and the wealth that comes from investment income when rates are higher. It also sends a distinctive signal about the Fed’s own expectations for the economy. Why should anybody feel confident, invest in their future, if the Fed itself isn’t confident enough to take rates off the floor? Through a series of granular arguments, he arrives at the conclusion that the Fed needs to start raising rates. Not aggressively, but modestly. It will encourage savings, which will improve wealth growth, since higher rates will lead to higher interest income for savers. It will encourage borrowing, as borrowers will want to lock in lower rates while they can.

It will also send a strong message that the Fed is confident in the economy. All this will ultimately boost demand, Mr. Kelly says, not sap it. “The most urgent point is simply that, right now, the economy could do with a little more demand,” he said. “We believe that the positive impacts of income, wealth, confidence and expectations effects are only slightly offset by negative price effects and thus the first few rate increases would actually boost demand.” He isn’t holding his breath, however. He doesn’t expect the Fed will at all be swayed by his arguments.

“After almost seven years full years of a zero-interest rate policy, this seems like wishful thinking,” he said. “Sadly, it is probably more likely that we get stuck in a ‘stagnation equilibrium’ where a zero interest rate policy actually reduces demand in the economy, prompting the Federal Reserve to prescribe even further doses of a medicine that, for a longtime, has been impeding rather than promoting economic recovery.” Ultimately, he says the Fed is operating from a false premise: that raising rates will hurt demand. Or he could have stated it more bluntly, as Ed Yardeni of Yardeni Research did in his Monday note: the Fed’s notion that it can control the business cycle, he said, is a “grand delusion.”

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“..routinely cutting about $170bn of balances at the end of each quarter to appear safer and more profitable..”

Foreign Banks Use US Repo Deals To ‘Window-Dress’ Risk (FT)

Foreign banks operating in the US short-term debt markets are “window-dressing” their accounts, routinely cutting about $170bn of balances at the end of each quarter to appear safer and more profitable, says a new study. The study from the Office of Financial Research describes a pattern of behaviour that has prevailed since July 2008, and suggests that the banks are carrying more risk than their investors or customers can easily see. The study examines the vast market for repurchase agreements, or repos, where banks lend out assets in return for short-term financing. It finds that dealers sell heavily to customers in the last days of the quarter, and immediately buy assets back once the new quarter starts. By trimming their balance-sheets over that brief period, the foreign banks can report better quarter-end ratios of capital to total assets.

US banks, which have to report average daily balances over the quarter, do not make similar adjustments, the study found. This abrupt, seasonal rhythm .. is consistent with a pattern of ‘window-dressing’, wrote Greg Feldberg at the OFR, in a blog post. Analysts said the behaviour outlined in the study has shades of the notorious “Repo 105” trades that Lehman Brothers used to bring down its reported leverage in the quarters leading up to its collapse. In that programme, the broker accepted a relatively high 5% fee in order to count its repo transactions as true sales, even though it remained under a contractual obligation to buy the assets back. Joshua Ronen at New York Stern School of Business said the OFR’s study – which did not cite individual banks by name – showed that lenders with the lowest capital ratios were making the biggest quarter-end reductions.

One bank pointed out that foreign banks will have to adopt US-style daily leverage reporting requirements by January 2018, and that many had already begun to adjust their repo activities to comply with daily averaging — including reducing the absolute amounts and quarter-end adjustments. For now, though, outsiders should take the banks’ reported ratios with a pinch of salt, said Mayra Rodriguez Valladares of MRV Associates, a former official at the Federal Reserve Bank of New York. “If they’re moving assets around to look better it is a big problem for us, as we don’t get to see the day-to-day information,” she said.

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China is a Ponzi.

China State Owned Enterprise Debt Explodes By $1 Trillion In September (Chiecon)

China’s state owned enterprises added almost 6 trillion yuan (around 1 trillion dollars) of debt in September, described by Luo Yunfeng, an analyst at Essence Securities, as “an unprecedented increase in leverage”. This means that not only is the government abandoning its deleverage policy, it is actually increasing leverage. Latest Ministry of Finance data shows that by the end of September total SOE debt had reached 77.68 trillion yuan, representing a increase of 5.93 trillion yuan on August, and an increase of over 11 trillion yuan in 2015. According to Luo “it’s possible that debt that was originally classified as government debt, has been reallocated as SOE debt”. This might be a reflection of how the government plans to tackle its massive debt.

Luo mentions that one of the obstacles to managing government debt is that it remains difficult to draw a line between government and SOE debt. The crux of current reform plans to increase the role of market forces is aimed at resolving this issue. If it really is the case of shifting government debt to SOEs, then it represents a step forward for this reform, and the prospect of revaluing credit risk. Another implication, it seems unlikely there will be a pause in government debt increase over the fourth quarter. This raises the more important question of what will be the impact of this enormous debt? Over the past few years credit expansion has surpassed economic growth, and with the governments aggressive leverage, will this lead to a greater waste of resources?

In order to protect economic growth, the Chinese government has increased leverage since 2008. According to calculations by The Economist, the proportion of total debt to GDP has risen sharply, already standing at more than 240%, with total debt reaching 161 trillion yuan ($25 trillion). In the past four years, this debt to GDP ratio increased by nearly 50%. The Economist points out this is a double-edged sword, as the incremental growth effects diminish with increasing leverage. Whereas in the six years prior to the financial crisis an increase in debt of 1 yuan resulted in Chinese economic output increasing by 5 yuan, these days it only results in an increase of 3 yuan.

Even if this is the case, with China experiencing slowing economic growth, and no turnaround on the horizon, its seems likely the Chinese government will continue to increase leverage. In September, China Merchants Securities stated that since Chinese government debt leverage ratio is still low, lower than the US, Europe and Japan, there is still more room for leverage. Haitong Securities said at the start of the year that in order to prevent systemic risk the focus over the next few years will be on government leverage. Based on the experience of other countries, monetary easing almost certainly follows an increase in government leverage, with interest rates in the long term trending to zero.

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No, I will not apologize for picking the lowest two estimates. I’m too inclined to think the likes of Bloomberg will be reluctant to publish really bad numbers, lest Beijing will restrict their access.

Six Ways to Gauge How Fast China’s Economy Is Actually Growing (Bloomberg)

Statistics with Chinese characteristics make it difficult to get a handle on how well the world’s second-largest economy is doing. In particular, questions surrounding the way China adjusts its growth figures into real terms often leave investors searching for a better way to judge its economic momentum. Thankfully, Wall Street economists have developed a number of proxies, using an array of indicators, to gauge Chinese growth better. Recently, Bloomberg Intelligence Chief Asia Economist Tom Orlik compiled six of these metrics in a report for Bloomberg Briefs. “All of the proxies suggest growth in 2015 has been lower than the 6.9% reported by the National Bureau of Statistics for the third quarter,” he wrote.

“Most show an increasing divergence with the last year or two, suggesting the official numbers may be upward biased during downturns.” One common problem for economists in constructing these proxy indexes: the dearth of data on the Chinese services sector. Orlik notes that this may serve as a partial explanation for the difference between the proxy gauges and the official data, as the tertiary sector has been gaining ground on the industrial segments of the economy.

Capital Economics draws on five indicators to build its proxy for Chinese activity: freight volume, passenger numbers, electricity output, seaport cargo volume, and the area of floor space currently under construction. “The China Activity Proxy suggested that the official figures were broadly accurate until around 2012,” wrote chief Asia economist Mark Williams. “Since then, it has added weight to the view that the official GDP data overstate the true rate of economic growth—most recently by a couple of percentage points or more.” According to this metric, Chinese GDP growth came in at 4.4% in the third quarter, the slowest pace of expansion implied by all the proxies featured in the brief.

Lombard Street employs a novel approach in putting together its estimate for Chinese growth. The official statistics for real GDP growth have been too smooth over the years, economist Michelle Lam and head of research Diana Choyleva believe, suggesting that the manner in which the data are adjusted might be faulty. As such, the pair uses nominal GDP (not adjusted for price changes) as its starting point, then uses a range of price indexes to deflate the figures into “real” terms. “Our preliminary estimates show growth at an annual rate of just 2.9% in the third quarter of 2015, way lower than the official 7.4%,” they wrote.

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A typical newsline: “Agricultural Bank of China President Zhang Yun was taken away to assist authorities with an investigation..”

China Financial Crackdown Intensifies as Funds, Banks Targeted (Bloomberg)

China’s crackdown on its financial industry is intensifying as authorities investigate strategies blamed for exacerbating a $5 trillion stock-market rout. Shanghai police raided hedge fund Zexi Investment on Sunday, taking away computers and other materials, according to a person familiar with the matter. General manager Xu Xiang was detained, the official Xinhua news agency reported. Executives at Yishidun International Trading and Huaxin Futures were arrested, Xinhua said in a separate report. Adding to evidence that a clampdown on the financial industry is spreading, Agricultural Bank of China President Zhang Yun was taken away to assist authorities with an investigation, people familiar with the matter said on Monday, without giving details.

The Communist Party’s Central Commission for Discipline Inspection is carrying out its first broad checks on the finance industry since President Xi Jinping became the party’s head in November 2012. The summer’s stock-market rout in China has triggered investigations that have snared executives from the country’s biggest securities firm as well as a fund managers and a top regulatory official. “The biggest-ever storm is brewing for China’s financial industry and more heads will roll,” said Hu Xingdou, an economics professor at the Beijing Institute of Technology. Xu, who founded the top-performing hedge fund firm Zexi, was detained on charges including insider trading and stock manipulation, the Xinhua reported.

Two executives at Jiangsu-based Yishidun International Trading and the technical director at Shanghai-based Huaxin Futures were arrested after a police investigation showed they made 2 billion yuan ($316 million) in “illegal profit,” Xinhua reported separately, citing the Ministry of Public Security. Sina.com reported earlier on Monday that Agricultural Bank’s Zhang had been taken away and didn’t attend a disciplinary committee meeting. Assisting with an investigation doesn’t mean Zhang is accused of wrongdoing.

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The lies keep coming. A sign that things are set to get much worse, that there’s lots more in the closet?

VW Emissions Scandal Widens To Include Porsche, Audi Claims (Guardian)

The Volkswagen diesel emissions scandal has deepened after US authorities accused the carmaker of installing defeat devices into luxury sports cars including Porsches. The Environmental Protection Agency (EPA), which uncovered the initial emissions rigging at VW, claims the carmaker installed defeat devices in VW, Audi and Porsche vehicles with three-litre engines in models with dates ranging from 2014 to 2016 This marks the first time that Porsche, which is owned by VW, has been dragged into the scandal. It is troubling for the new chief executive of VW, Matthias Müller, because he ran Porsche before becoming boss of the group.

The EPA has made the allegations after conducting further tests on diesel vehicles in the US since VW admitted in September it had used defeat devices to cheat emissions tests. The new allegations include the 2015 Porsche Cayenne as well as the 2014 VW Touareg and the 2016 Audi A6 Quattro, A7 Quattro, A8, A8L, and Q5. In total, it involves 10,000 vehicles in the US. In a statement VW denied it had fitted any devices on the vehicles. The statement said: “Volkswagen AG wishes to emphasise that no software has been installed in the 3-liter V6 diesel power units to alter emissions characteristics in a forbidden manner. Volkswagen will cooperate fully with the EPA clarify this matter in its entirety.”

VW has already admitted fitting a defeat device to 11m vehicles worldwide, but this related to cars with smaller engines and did not include any Porsche cars or SUVs. Cynthia Giles, assistant administrator for the office for EPA’s enforcement and compliance assurance, said: “VW has once again failed its obligation to comply with the law that protects clean air for all Americans. All companies should be playing by the same rules. EPA, with our state, and federal partners, will continue to investigate these serious matters, to secure the benefits of the Clean Air Act, ensure a level playing field for responsible businesses, and to ensure consumers get the environmental performance they expect.”

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Almost normal.

ECB Officials Met Regularly With Financial Institutions on Key Moments (WSJ)

Top officials from the European Central Bank met regularly with representatives from financial institutions over the past 15 months, including one meeting that occurred on the same day as a key gathering of the ECB’s governing board, according to documents released Monday by the ECB. The disclosure of the appointment calendar of the ECB’s six-member executive board, as part of a public-access request, came amid changes to the ECB’s communications policies following the release of market-sensitive information in May to a closed-door conference that included hedge-fund managers. Such meetings aren’t unusual, but the calendar points to the delicate balance for officials who benefit from the market intelligence provided by private-sector economists and investors but must also avoid the perception that individual banks are benefiting from this access.

According to the calendars, ECB executive board member Benoît Coeuré met with representatives of BNP Paribas on the morning of Sept. 4, 2014, hours before the ECB announced a reduction in its interest rates and the creation of a new four-year lending program for banks. The day before that two-day meeting began, Mr. Coeuré met with UBS on Sept. 2, as did another executive board member, Yves Mersch, according to the meeting calendars. Mr. Mersch also met with BNP Paribas on Sept. 4 last year, although that was after the ECB meeting concluded. “The ECB does not operate in a vacuum. Regular contacts with different groups, including representatives from the financial sector help us understand the dynamics of the economy and financial markets. We make sure that at such meetings no financial market-sensitive information is disclosed,” an ECB spokeswoman said.

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Banks no longer need bankers.

Standard Chartered Cuts 15,000 Jobs And Raises $5.1 Billion (BBC)

Standard Chartered, the Asia-focused UK bank, is to cut 15,000 jobs and raise $5.1bn to create a “lean, focused and well-capitalised” group. About $3bn being raised in the rights issue will cover restructuring costs. The strategic review was announced as Standard Chartered reported a “disappointing” third-quarter operating loss of $139m for the three months to September. That figure compared with a profit of $1.5bn a year earlier. Bill Winters, who replaced Peter Sands as Standard Chartered’s chief executive in June this year, announced a strategic review of the bank’s organisational structure when he took over. He put a new management team in place in July and analysts have been expecting the bank to seek additional capital to shore up its balance sheet for some time.

Standard Chartered shares fell 4% on the Hang Seng stock exchange in Hong Kong. Mr Winters acknowledged the challenging business environment within which the lender was operating. Growing regulatory costs and controls in the wake of the financial crisis have weighed on big lenders in the UK, US and Australia. Standard Chartered has already shed some businesses, in Hong Kong, China and Korea, to help improve its capital position. Among its various plans outlined on Tuesday, Standard Chartered said a “step-up in cash investment” by more than $1bn would be used to help reposition its retail banking, private banking and wealth management businesses, as well as upgrade its Africa franchise and yuan services.

“This comprehensive programme of actions will result in a lean, focused and well capitalised international bank, poised for growth across our dynamic and growing markets in Asia, Africa and the Middle East,” Mr Winters said. Temasek, Singapore’s state investor and Standard Chartered’s largest shareholder, supported the share sale, the bank said. Standard Chartered employs 86,000 people and makes about 90% of its profits from operations across Asia, the Middle East and Africa.

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It’s dead.

TransCanada Requests Suspension of US Permit for Keystone XL Pipeline (WSJ)

The company behind the Keystone XL pipeline on Monday asked the U.S. government to suspend its permit application, throwing the politically fraught project into an indefinite state of limbo, beyond the 2016 U.S. elections. In a letter, TransCanada asked the State Department, which reviews cross-border pipelines, to suspend its application while the company goes through a state review process in Nebraska it had previously resisted. The move comes in the face of an expected rejection by the Obama administration and low oil prices that are sapping business interest in Canada’s oil reserves. “In order to allow time for certainty regarding the Nebraska route, TransCanada requests that the State Department pause in its review of the presidential permit application,” the Calgary, Alberta, company said in the letter.

TransCanada’s move comes as the State Department was in the final stages of review, with a decision to reject the permit expected as soon as this week, according to people familiar with the matter. It must now decide whether to accept the company’s request or proceed with a final decision. TransCanada in September signaled it was shifting its strategy when it dropped state legal challenges and efforts to seize land in Nebraska for the pipeline. Company officials hoped those moves would extend the review process in Washington—perhaps until a potential Republican administration in 2017 would approve the project—while details on the Nebraska portion of the route were worked out.

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“As well as having small territories, coywolves have adjusted to city life by becoming nocturnal. They have also learned the Highway Code, looking both ways before they cross a road.”

Coywolf: Greater Than The Sum Of Its Parts (Economist)

Like some people who might rather not admit it, wolves faced with a scarcity of potential sexual partners are not beneath lowering their standards. It was desperation of this sort, biologists reckon, that led dwindling wolf populations in southern Ontario to begin, a century or two ago, breeding widely with dogs and coyotes. The clearance of forests for farming, together with the deliberate persecution which wolves often suffer at the hand of man, had made life tough for the species. That same forest clearance, though, both permitted coyotes to spread from their prairie homeland into areas hitherto exclusively lupine, and brought the dogs that accompanied the farmers into the mix Interbreeding between animal species usually leads to offspring less vigorous than either parent—if they survive at all.

But the combination of wolf, coyote and dog DNA that resulted from this reproductive necessity generated an exception. The consequence has been booming numbers of an extraordinarily fit new animal spreading through the eastern part of North America. Some call this creature the eastern coyote. Others, though, have dubbed it the “coywolf”. Whatever name it goes by, Roland Kays of North Carolina State University, in Raleigh, reckons it now numbers in the millions. The mixing of genes that has created the coywolf has been more rapid, pervasive and transformational than many once thought. Javier Monzón, who worked until recently at Stony Brook University in New York state (he is now at Pepperdine University, in California) studied the genetic make-up of 437 of the animals, in ten north-eastern states plus Ontario. He worked out that, though coyote DNA dominates, a tenth of the average coywolf’s genetic material is dog and a quarter is wolf.

The DNA from both wolves and dogs (the latter mostly large breeds, like Doberman Pinschers and German Shepherds), brings big advantages, says Dr Kays. At 25kg or more, many coywolves have twice the heft of purebred coyotes. With larger jaws, more muscle and faster legs, individual coywolves can take down small deer. A pack of them can even kill a moose. Coyotes dislike hunting in forests. Wolves prefer it. Interbreeding has produced an animal skilled at catching prey in both open terrain and densely wooded areas, says Dr Kays. And even their cries blend those of their ancestors. The first part of a howl resembles a wolf’s (with a deep pitch), but this then turns into a higher-pitched, coyote-like yipping.

The animal’s range has encompassed America’s entire north-east, urban areas included, for at least a decade, and is continuing to expand in the south-east following coywolves’ arrival there half a century ago. This is astonishing. Purebred coyotes never managed to establish themselves east of the prairies. Wolves were killed off in eastern forests long ago. But by combining their DNA, the two have given rise to an animal that is able to spread into a vast and otherwise uninhabitable territory. Indeed, coywolves are now living even in large cities, like Boston, Washington and New York. According to Chris Nagy of the Gotham Coyote Project, which studies them in New York, the Big Apple already has about 20, and numbers are rising.

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Interesting seemingly contradictory reports.

Melting Ice In West Antarctica Could Raise Seas By 3 Meters (Guardian)

A key area of ice in west Antarctica may already be unstable enough to cause global sea levels to rise by 3m, scientists said on Monday. The study follows research published last year, led by Nasa glaciologist Eric Rignot, warning that ice in the Antarctic had gone into a state of irreversible retreat, that the melting was considered “unstoppable” and could raise sea level by 1.2m. This time, researchers at Germany’s Potsdam Institute for Climate Impact Research pointed to the long-term impacts of the crucial Amundsen Sea sector of west Antarctica, which they said “has most likely been destabilised.” While previous studies “examined the short-term future evolution of this region, here we take the next step and simulate the long-term evolution of the whole west Antarctic ice sheet,” the authors said in the Proceedings of the National Academy of Sciences.

They used computer models to project the effects of 60 more years of melting at the current rate. This “would drive the west Antarctic ice sheet past a critical threshold beyond which a complete, long-term disintegration would occur.” In other words, “the entire marine ice sheet will discharge into the ocean, causing a global sea level rise of about 3m,” the authors wrote. “If the destabilisation has begun, a 3m increase in sea level over the next several centuries to millennia may be unavoidable.” Even just a few decades of ocean warming can unleash a melting spree that lasts for hundreds to thousands of years. “Once the ice masses get perturbed, which is what is happening today, they respond in a non-linear way: there is a relatively sudden breakdown of stability after a long period during which little change can be found,” said lead author Johannes Feldmann.

The authors noted that Antarctica’s situation presents the largest uncertainty in sea level projections for the coming centuries, and that studying the vast region poses many challenges. And indeed, just days before the PNAS study was released, another scientific paper used Nasa satellite data form 2003 to 2008 to show that Antarctic ice had gained mass, and had packed on enough to exceed the amount lost in other areas. “We’re essentially in agreement with other studies that show an increase in ice discharge in the Antarctic peninsula and the Thwaites and Pine Island region of west Antarctica,” said a statement by Jay Zwally, a glaciologist with Nasa Goddard Space Flight centre whose study was published on 30 October in the Journal of Glaciology.

“Our main disagreement is for east Antarctica and the interior of west Antarctica – there, we see an ice gain that exceeds the losses in the other areas.” According to climatologist Michael Mann, who was not involved in either study, the use of older satellite data could be the cause for the disconnect. “It sounds to me as if the key issue here is that the claims are based on seven-year-old data, and so cannot address the finding that Antarctic ice loss has accelerated in more recent years,” he told AFP.

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We would do well to get a lot more material on acidification.

Abrupt Changes In Food Chains Predicted As Southern Ocean Acidifies Fast (SMH)

The Southern Ocean is acidifying at such a rate because of rising carbon dioxide emissions that large regions may be inhospitable for key organisms in the food chain to survive as soon as 2030, new US research has found. Tiny pteropods, snail-like creatures that play an important role in the food web, will lose their ability to form shells as oceans absorb more of the CO2 from the atmosphere, a process already observed over short periods in areas close to the Antarctic coast. Ocean acidification is often dubbed the “evil twin” of climate change. As CO2 levels rise, more of it is absorbed by seawater, resulting in a lower pH level and reduced carbonate ion concentration. Marine organisms with skeletons and shells then struggle to develop and maintain their structures.

Using 10 Earth system models and applying a high-emissions scenario, the researchers found the relatively acidic Southern Ocean quickly becomes unsuited for shell-forming creatures such as pteropods, according to a paper published Tuesday in Nature Climate Change. “What surprised us was really the abruptness at which this under-saturation [of calcium carbonate-based aragonite] occurs in large areas of the Southern Ocean,” Axel Timmermann , a co-author of the study and oceanography professor at the University of Hawaii told Fairfax Media. “It’s actually quite scary.” Since the Southern Ocean is already close to the threshold for shell-formation, relatively small changes in acidity levels will likely show up there first, Professor Timmermann said: “The background state is already very close to corrosiveness.”

Below a certain pH level, shells of such creatures become more brittle, with implications for fisheries that feed off them since pteropods appear unable to evolve fast enough to cope with the rapidly changing conditions. “For pteropods it may be very difficult because they can’t run around without a shell,” Professor Timmermann said. “It’s not they dissolve immediately but there’s a much higher energy requirement for them to form the shells.” Given the sheer scale of the marine creatures involved, “take away this biomass, [and] you have avalanche effects for the rest of the food web”, he said.

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“Certainly in 2016, we have to expect this level of arrivals to continue, and that’s because the facts that are causing people to move aren’t going away..”

October’s Migrant, Refugee Flow To Europe Matched Whole Of 2014 (Reuters)

The number of migrants and refugees entering Europe by sea last month was roughly the same as that for the whole of 2014, United Nations refugee agency UNHCR said on Monday. The monthly record of 218,394 also outstripped September’s 172,843, UNHCR spokesman Adrian Edwards said. “That makes it the highest total for any month to date and roughly the same as the entire total for 2014,” he said. The UNHCR puts 2014 arrivals by sea at about 219,000. At the peak, 10,006 arrived in Greece’s shores on a single day, Oct. 20. The vast majority of refugees and migrants to Europe have traveled via Turkey to Greece, a switch from the previously more popular African route via Libya to Italy. The largest group by nationality are Syrians, accounting for 53% of arrivals, as a result of the civil war that has driven hundreds of thousands from their homes.

Afghans come second, making up 18% of the total. The flow of refugees into Europe, however, is still dwarfed by the numbers in Syria’s neighbors. Turkey, Lebanon and Jordan have Syrian refugee numbers exceeding 2 million, 1 million and 600,000 respectively. Globally, 60 million people are refugees or displaced within their own country, not counting economic migrants. UNHCR said in October that it was planning for up to 700,000 refugees in Europe this year and a similar or greater number in 2016. But that plan has already been eclipsed, with 744,000 arriving so far. Some 3,440 are estimated to have died or gone missing in the attempt to escape to Europe. “Certainly in 2016, we have to expect this level of arrivals to continue, and that’s because the facts that are causing people to move aren’t going away,” said Edwards. “It is the new reality that we all have to deal with.”

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Merkel needs to call a ‘heavy’, highest-level UN emergency summit. Obama needs to be there, and Putin, Xi Jinping. Assad perhaps, Erdogan. Tsipras. Tens of billions of dollars must be assigned.

Merkel Rejects Shutting Border Amid Standoff With Party Critics (Bloomberg)

Angela Merkel refused to bow to pressure to shut borders even as the German leader struggles to fix a rift in her governing coalition over how to tackle the country’s biggest influx of migrants since World War II. Facing unrest from within her Christian Democratic Union, the chancellor fielded questions from party members at an event Monday in the western city of Darmstadt. “I’m working, just as you expect, to ensure that the number of refugees goes down,” Merkel told CDU members. “But to all those who say we should shut the German border to Austria, I don’t think that will solve the problem.”

As Germany braces for as many as a million people seeking shelter from war and poverty this year, Merkel said the country can’t afford to turn inward, but has to instead embrace geopolitical challenges “much more actively.” The refugee crisis shows that Germany can’t resist the globalizing forces around it. “We’re experiencing something we’ve never experienced before, that conflicts that appear to be far away suddenly are here on our doorstep,” Merkel said. With public concern mounting and party support on the slide, the political veteran is navigating yet another stormy week as lawmakers return to Berlin for a parliamentary session that will again be dominated by the crisis. A Tuesday caucus meeting will provide a baromoter of anti-Merkel sentiment even if she’s in no immediate political danger.

After meeting for some 10 hours over the weekend with Bavarian Prime Minister Horst Seehofer, her biggest internal critic, Merkel offered qualified support for so-called transit zones to weed out economic migrants. Sending back migrants from safe-origin countries wouldn’t end the turmoil because “there are so many” making their way to Germany, she said. With Bavaria the main gateway to Germany for those pouring over the border from Austria, Seehofer has said the state government would take unspecified action if Merkel didn’t meet his demands. In the last two months, 344,000 refugees entered Bavaria, according to the state’s interior ministry. “The number of refugees has to be urgently limited or reduced,” Seehofer said.

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The EU is prepared to sell European souls and refugees’ lives to the devil.

Erdogan’s Election Win Means He Can Dictate Terms To EU On Refugees (Guardian)

Europe is praying that the return of Turkey s ruling Justice and Development party (AKP) to a solid parliamentary majority will help it cope with the mass movement of people northwards and westwards from the Middle East. There is a strong chance the prayers will end in tears. On Monday the European commission had only good things to say about the triumph of Recep Tayyip Erdogan, Turkey s irascible leader. Sunday’s election ‘reaffirmed the strong commitment of the Turkish people to democratic processes’, Brussels said. The EU will work with the future government to enhance the EU-Turkey partnership and cooperation across all areas.

The main area is immigration since Turkey is the pivotal country between Europe and Syria and is the main source of the hundreds of thousands trekking up the Balkans to the gates of the EU. Brussels and Berlin are desperate to get Erdogan onside to stem the flow. At home, he is walking tall again. Thirteen years after leading his party into power, he has secured another parliamentary majority despite suffering a major setback to his ambitions in a stalemated poll in June. The power equation in the troubled Ankara-Brussels relationship has also just tilted decisively in his favour. The three weeks preceding Sunday s election saw an unseemly rush to Turkey by European politicians, the busiest bout of diplomacy between the two sides in years, solely driven by the migration crisis.

The German chancellor, Angela Merkel, cleared her diary to get to Istanbul. Erdogan came to Brussels. The commission watered down and delayed publication of a critical report on Turkey s authoritarian drift under Erdogan, while drafting in record time an ‘action plan for immigration control with Turkey’. Jean-Claude Juncker, the commission president, brushed aside concerns about human rights abuses and media crackdowns. He tried to get Turkey added to an EU list of third countries deemed to be safe for refugees. Merkel, too, is known to believe that when it comes to the immigration emergency and Turkey, European interests may have to hold sway over European values. It is arguable whether the sudden EU wooing of Erdogan helped him to his surprise majority.

The photo opportunities with Merkel, at the very least, did no harm. But while there was no proper government sitting in Ankara (which had been the case since June), it was clear there could be no quick deal on refugees. That has now changed. Erdogan rules the roost at home and he is a strong exponent of the winner-takes-all school of politics. He will also be dictating the terms for the Europeans. The price for any pact to contain the flow will be extortionate.

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How can Europe survive this?

Winter Is Coming: The New Crisis For Refugees In Europe (Guardian)

Record numbers of migrants and refugees crossed the Mediterranean to Europe in October – just in time for the advent of winter, which is already threatening to expose thousands to harsh conditions. The latest UN figures, which showed 218,000 made the perilous Mediterranean crossing last month, confirm fears that the end of summer has not stemmed the flow of refugees as has been the pattern in previous years, partly because of the sheer desperation of those fleeing an escalating war in Syria and other conflicts. The huge numbers of people arriving at the same time as winter is raising fears of a new humanitarian crisis within Europe’s borders. Cold weather is coming to Europe at greater speed than its leadership’s ability to make critical decisions.

A summit of EU and Balkan states last week agreed some measures for extra policing and shelter for 100,000 people. But an estimated 700,000 refugees and migrants, have arrived in Europe this year along unofficial and dangerous land and sea routes, from Syria, Eritrea, Afghanistan, Iraq, north Africa and beyond. Tens of thousands, including the very young and the very old, find themselves trapped in the open as the skies darken and the first night frosts take hold. Hypothermia, pneumonia and opportunistic diseases are the main threats now, along with the growing desperation of refugees trying to save the lives of their families. Fights have broken out over blankets, and on occasion between different national groups. Now sex traffickers are following the columns of refugees, picking off young unaccompanied stragglers.

The United Nations refugee agency, UNHCR, is distributing outdoor survival packages, including sleeping bags, blankets, raincoats, socks, clothes and shoes, but the number of people it can reach is limited by its funding, which has so far been severely inadequate. Volunteer agencies have tried to fill the gaping hole in humanitarian provisions in Europe. Peter Bouckaert, the director of emergencies for Human Rights Watch, said that all the way along the route into Europe through the Balkans “there is virtually no humanitarian response from European institutions, and those in need rely on the good will of volunteers for shelter, food, clothes, and medical assistance”.

Europe has found itself ill-prepared to deal with its biggest influx of refugees since the second world war. It is hurriedly improvising new mechanisms so that it can respond collectively as a continent rather than individual nations, but it is a race against time and the elements – a race Europe is not guaranteed to win. “There is a risk of collapse”, said Federica Mogherini, the EU foreign policy chief. “Because when you’re facing a challenge and you don’t have the instruments to do it, you risk failing. So it could be that if we don’t manage to create common instruments to deal with this on a European level, we fall back on the illusion that we can face it through national instruments, which we see very clearly doesn’t work. Mogherini added: “Either we take this big step and adapt or yes, we do have a major crisis. I would say even an identity crisis”.

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Can it get any sadder?

No Place Left On Lesvos To Bury Dead Refugees (AP)

The mayor of the Greek island of Lesvos says theres no more room to bury the increasing number of asylum-seekers killed in shipwrecks of smuggling boats coming in from nearby Turkey. Mayor Spyros Galinos told Greece’s Vima FM radio Monday there were more than 50 bodies in the morgue on his eastern Aegean island that he was still trying to find a burial location for. Galinos said he was trying to fast-track procedures so a field next to the main cemetery could be taken over for burials. Hundreds of thousands of people have made the short but dangerous crossing from Turkey to Greek islands this year. With rougher fall weather coming on, the bodies of 19 people were recovered from the Aegean in three separate incidents on Sunday alone.

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“In the end, the U.S. admitted more than a million Southeast Asian refugees.”

Powerful Gestures: America and Refugees (New Yorker)

President Jimmy Carter championed human rights, but his Administration had been reluctant to open America’s doors to Cambodians fleeing starvation and fighting between Vietnam’s army of occupation and the guerrillas of the Khmer Rouge. In late 1979, as the crisis turned catastrophic, Carter came under pressure from his Democratic rival, Senator Edward Kennedy, and he sent his wife to the chaotic border camps. Rosalynn Carter walked among the hungry and the dying, trailed by a hundred and fifty reporters. She held a starving baby in her arms while speaking to the infant’s mother, who lay on the ground. “Give me a smile,” she told another woman, kissing her forehead. Afterward, Mrs. Carter said that she wanted to hurry home “and tell my husband.” The spotlight that her trip shone on the camps helped to mobilize international aid and resettlement efforts.

In the end, the U.S. admitted more than a million Southeast Asian refugees. Most of them proved adaptable to American values. It’s easy to forget that every act of American generosity toward refugees has had to overcome stiff resistance based in ignorance. Historically, Presidential action has made the difference. After the Second World War, Congress passed legislation that made resettlement in the U.S. harder for Jewish victims of Nazism than for Germans uprooted by the war Hitler started. The chairman of the Senate’s immigration subcommittee, Chapman Revercomb, of West Virginia, wrote, “Many of those who seek entrance into this country have little concept of our form of government. Many of them come from lands where Communism had its first growth and dominates the political thought and philosophy of the people.”

It took the angry persistence of President Harry Truman to get Congress to expand the numbers and remove the discriminatory provisions. There are four million refugees from the Syrian civil war, surpassing the staggering Indochinese numbers, and making this one of the biggest humanitarian crises since the end of the Second World War. Last month, as many as nine thousand people a day were crossing the Mediterranean to Europe. But the U.S. has accepted fewer than two thousand Syrians. In September, President Obama announced an increase in the quota for the coming year to ten thousand. That figure represents just half the monthly total of Indochinese refugees brought here in 1980. One refugee advocate called it “an embarrassingly low number.” And yet even this humble goal is unlikely to be reached.

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