Jun 242017
 


Fred Lyon San Francisco Cable Car rounding the curve at Jones Street 1946

 

US New Home Sales Jump, Median Price Surges To Record High (R.)
Sydney Prices To Jump ‘Overnight’ As First-Home Incentives Kick In (D.)
The World Has Been Fitted With Two Debt Straightjackets (Steve Keen)
The Future Prospects For Japanese Banks Look Like Hell (Makoto Utsumi)
Europe’s Banking Union Is Dying in Italy (BBG)
Two Italian Zombie Banks Toppled Friday Night (WS)
‘Emmangela’ Show Reasserts EU’s Franco-German Alliance (AFP)
Schaeuble Says British Were ‘Lied To’, ‘Deceived’ In Brexit Campaign (R.)
UK MPs Plan Cross-Party Alliance To Defeat May, Hard Brexit (Ind.)
Corbyn Vows To Force Early British Election (Ind.)
May Blocked Plan To Guarantee Rights Of EU Citizens In UK After Brexit (Ind.)
The Fed Needs to Acknowledge the Slowing Economy (DDMB)
Unfunded Liabilities Have Turned Illinois Into A Banana Republic (Lang)
America’s Health-Care Rain Dance (Jim Kunstler)
US-Led Coalition Kills Almost 500 Syrian Civilians In One Month (NW)
The Unfinished Negotiations For A Greek “Super-Memorandum” (Press Project)

 

 

They are determined to get all the suckers they can get before the implosion. There’s a huge empty bag to be passed on.

US New Home Sales Jump, Median Price Surges To Record High (R.)

New U.S. single-family home sales rose in May and the median sales price surged to an all-time high, suggesting the housing market had regained momentum. The Commerce Department said on Friday new home sales increased 2.9% to a seasonally adjusted rate of 610,000 units last month. April’s sales pace was also revised sharply higher to 593,000 units from 569,000 units. Economists polled by Reuters had forecast new home sales, which make up about 10% of all home sales, rising 5.4% to a pace of 597,000 units last month. Sales were up 8.9% on a year-on-year basis in May.

“While the data quality of the new home sales report is notoriously poor, the general picture from this report and the existing home sales report is one of solid housing demand in the important spring selling season,” said Michael Feroli, an economist with J.P. Morgan. The housing market has been bolstered by continued strong job growth. The unemployment rate fell to a 16-year low of 4.3% in May and mortgage rates are still favorable by historical standards. However, an increase in the cost of building materials and shortages of lots and labor have crimped homebuilding. With demand outstripping supply, house prices remain elevated. The median house price rose to a record high of $345,800 in May, from $310,200 in the prior month. The average sales price last month was $406,400, also a record high.

Read more …

Ditto in Australia. This is from real estate broker Domain, responsible for ad campaigns like the one in the photo -which I took in Melbourne in 2011.

Sydney Prices To Jump ‘Overnight’ As First-Home Incentives Kick In (D.)

Property prices in affordable areas are expected to jump “overnight” on the back of changes to first-home buyer stamp duty concessions starting in July, experts say. Strategic vendors in these locations are holding off accepting offers until next month to take advantage of the expected surge in demand. First-home buyers in NSW are set to save up to $24,740 with stamp duty concessions for homes up to $800,000 and a full exemption for homes under $650,000. Among those anticipating they will benefit from the changes is Quakers Hill home owner Bhugol Kansakar who bought his house for $611,000 in March 2015 – then a first-home buyer himself. Since May his three-bedroom home at 9 Nyngan Street has been on the market for $730,000 to $760,000. “We’ve had offers around $720,000 to $730,000 … we’re holding out until next month as stamp duty will be off for the first-home buyers,” Mr Kansakar said.

In this price bracket, first-home buyers would get a partial exemption from July. “It is a big block of land, three-bedrooms, perfect for a first home.” He anticipates he will be likely to get $760,000 or more for the home when the new rules come in. And he’s far from the only one anticipating he’ll get a premium, his sales agent Raine & Horne Blacktown business development manager Edwin Almeida said. About 40% of inquiries on homes he had listed across the Blacktown Council area priced under $750,000 were first-home buyers asking if they could formally exchange next month. He expects local prices would jump by $20,000 to $40,000. “Easy money does not make the market more accessible for first-home buyers. It just means vendors and developers will increase the price of property to meet demand,” Mr Almeida said.

Read more …

Two pieces from a PDF by “The International Economy” site, entitled: “Has the World Been Fitted With a Debt Straightjacket? Nearly forty distinguished experts offer their wisdom”. Click the link to see all.

First, Steve Keen…

The World Has Been Fitted With Two Debt Straightjackets (Steve Keen)

T he world has been fitted with not just one but two debt straightjackets: one made of public debt and the other of private debt. The situation in the United States is typical. The total U.S. debt level at the end of World War II was equivalent to 130% of GDP, with public debt being three-quarters of the total and private debt one-quarter. Today, it is 250% of GDP, with public debt being two-fifths of the total and private debt three-fifths. But there is a simple trick that could let the United States, like Harry Houdini, magically escape from one of these two straightjackets in a flash. Like any magic act, it’s ruined by the telling: despite all the political hand-wringing over the burden the public debt imposes on future generations, public debt could be eliminated by the stroke of a proverbial pen, for two simple reasons.

First, this debt is exclusively in U.S. dollars; second, the government is the only institution in the nation that “owns its own bank,” the Federal Reserve, which can create U.S. dollars at will. The Fed could buy up—and effectively cancel—this debt overnight. You might not like this trick, but it’s both possible and perfectly legal. That leaves the second straightjacket: private debt. Here Houdini’s escape is not possible, because if any individual tried to do what the U.S. government can do, that person would be gaoled for counterfeiting. All U.S. private debt is, like public debt, owed in U.S. dollars; but only the U.S. government has the privilege of owning its own bank. For the private sector, it’s effectively the banks that own the debtors. But paradoxically, most economists obsess about the public debt trap and ignore the private debt one.

Why? Because they believe that banks do not originate loans, but instead act as “intermediaries” between savers and borrowers. Therefore, they say, private debt doesn’t matter, because if the debtor can’t spend, the lender can, and vice versa. They therefore believe that the level of private debt, and its rate of growth or decline, are economically irrelevant. They can’t see a private straightjacket. Several central banks have recently loudly declared that this model is nonsense—including Germany’s ultraconservative Bundesbank. Banks are not “intermediaries of debt” but originators. They don’t lend pre-existing money, but create money when they make an entry in the borrower’s deposit account, which is matched precisely by an entry in the borrower’s debt account.

Since debtors borrow to spend, rising private debt boosts demand while falling debt reduces it. Demand in the United States was therefore boosted substantially as private debt rose almost fivefold from 1945 until 2008. Now demand from credit is stagnant and as likely to subtract from demand as add to it. So private debt is the real straightjacket constraining the economy. But with mainstream economists ignoring it and fretting about government debt, the U.S. economy is likely to remain in its debt straightjacket indefinitely. As the public has started to realize since the 2008 crisis took them by surprise, mainstream economists are inept magicians.

Read more …

…second, Makoto Utsumi, Chairman of the International Advisory Board, Tokai Tokyo F.H., and former Vice Minister of Finance for International Affairs, Japan.

The Future Prospects For Japanese Banks Look Like Hell (Makoto Utsumi)

Can Japan withstand the return to conventional monetary policy? The Bank of Japan has been conducting an unconventional monetary policy for almost two decades, drastically strengthening this policy since Governor Kuroda took office in 2013. As public debt accumulated to 250% of GDP and due to the massive holdings of Japanese Government bonds by the Japanese banking sector, some argue that Japan cannot withstand the return to conventional monetary policy. Here are my points of view: First, let us consider the impact of interest rates hikes on public finances. Many analysts argue that this move would be destructive to public finances due to increased interest payments. There is a point, however, almost all analysts neglect. When interest rates on the JGB rise, the rates on savings and deposits also rise.

As 20% of the interest income is withheld at source, the incremental tax revenue would offset to a great deal the increasing cost of the debt service to be paid by the government. Although the damage caused by the shift in monetary policy on the budget balance would be limited, the fiscal situation of Japan would become increasingly serious with a sustained lack of fiscal discipline. Japanese public finances seem to be on a path to breakdown and the Bank of Japan’s policy to purchase Japanese government bonds up to an amount equal to 80% of new issuances looks more and more like the monetization of the budget deficit. Next, let us see the impact on the banking sector. Two decades of unconventional monetary policy have been squeezing the banks’ profit margins through the extreme flattening of the yield curve.

From this view point, the return to conventional monetary policy is good news for the Japanese banking sector in the long run. On the other hand, in the short and medium terms, this would represent the harshest challenge for banks due to massive valuation losses on their bond holdings. According to the Bank of Japan’s survey, a 1 percentage point rise of interest rates on bonds would cause a loss of US$20 billion for mega-banks, US$25 billion for regional banks, and US$19 billion for credit unions. While the U.S. Federal Reserve is firmly committed toward exit and as the European Central Bank seems to be quietly probing a future exit strategy, where is the Bank of Japan going? If it continues to maintain zero or negative interest rates, current profits of the banking sector would be further squeezed.

If it starts to take steps toward conventional monetary policy, the banking sector would face serious valuation losses. Either way, the future prospects for Japanese banks look like hell. We will probably witness a clear distinction between two groups of banks: those who manage their business based on foresight and those who don’t. And we would see a deep reshuffle in the banking sector along with the exit process from the unconventional monetary policy of the Bank of Japan.

Read more …

To paraphrase Juncker: “When things get serious in Europe, no rules or laws are immune to lies.”

Europe’s Banking Union Is Dying in Italy (BBG)

The Italian government looks set to put Veneto Banca and Banca Popolare di Vicenza, two troubled regional lenders, into liquidation, selling off the good assets to a rival bank for a symbolic price. The toxic assets would be transferred to a bad bank, mostly funded by the government. Shareholders and junior bond-holders would contribute to the rescue, while senior creditors would be spared. The rival bank, Intesa Sanpaolo, would be getting a great deal for little risk. But for the Italian taxpayer, and the credibility of euro zone financial regulation, the plan is a loser and should be stopped. The Italian scheme is radically different from the one put in place two weeks ago, when the Spanish lender Banco Santander bought Banco Popular for one euro. In that case Santander also acquired Popular’s non-performing loans as well as all the future legal risks.

It also immediately went to the markets to raise capital to pay for it. Here, Intesa will only pick the assets it wants and insists that the operation not impact its capital ratio. This plan is a slap in the face of Italian taxpayers, who according to some estimates could end up paying around €10 billion ($11.1) for it. The government could have taken a less expensive route, involving the “bail in” of senior bondholders. It chose not to: Many of these instruments are in the hands of retail investors, who bought them without being fully aware of the risks involved. The government wants to avoid a political backlash and the risk of contagion spreading across the system. However, €10 billion is a whale of a premium to pay as an insurance against a contagion. And Rome may still face a backlash – from taxpayers who will feel defrauded.

Most importantly, this plan is a dagger in the heart of the euro zone banking union. This was one of Europe’s main responses to the sovereign debt crisis, designed to limit the contribution of taxpayers to bank rescues and to ensure all euro zone lenders faced a coherent set of rules. Italy is relying for its plan on its domestic liquidation regime. Rome will effectively by-pass the EU’s “single resolution board” which is supposed to handle bank failures in an orderly way and the “Banking Recovery and Resolution Directive,” which should act as the euro zone’s single rulebook. The advantage will be to spare senior bondholders but the cost will be huge: denting, perhaps irreversibly, the credibility of Europe’s newly formed institutions.

Read more …

And there we go. After years of trying to save them. One day we’ll realize just how epic this failure is.

Two Italian Zombie Banks Toppled Friday Night (WS)

When banks fail and regulators decide to liquidate them, it happens on Friday evening so that there is a weekend to clean up the mess. And this is what happened in Italy – with two banks! It’s over for the two banks that have been prominent zombies in the Italian banking crisis: Veneto Banca and Banca Popolare di Vicenza, in northeastern Italy. The banks have combined assets of €60 billion, a good part of which are toxic and no one wanted to touch them. They already received a bailout but more would have been required, and given the uncertainty and the messiness of their books, nothing was forthcoming, and the ECB which regulates them lost its patience. In a tersely worded statement, the ECB’s office of Banking Supervision ordered the banks to be wound up because they “were failing or likely to fail as the two banks repeatedly breached supervisory capital requirements.”

“Failing or likely to fail” is the key phrase that banking supervisors use for banks that “should be put in resolution or wound up under normal insolvency proceedings,” the statement said. This is the first Italian bank liquidation under Europe’s new Single Resolution Mechanism Regulation. The ECB explained: “The ECB had given the banks time to present capital plans, but the banks had been unable to offer credible solutions going forward. Consequently, the ECB deemed that both banks were failing or likely to fail and duly informed the Single Resolution Board (SRB), which concluded that the conditions for a resolution action in relation to the two banks had not been met. The banks will be wound up under Italian insolvency procedures.”

[..] nothing worked. Private sector money stayed away in droves. JP Morgan, which had been recruited to save the Italian banks, threw in the towel. These banks had been zombies for too long. Everybody knew it. But the government kept denying it. Just weeks ago, Italy’s Minister of Economy Pier Carlo Padoan insisted that the two banks would not be wound down. Last year, to dispel the mountain of evidence to the contrary, he insisted that that there would be no need of any future bail outs; and that, furthermore, Italy did not even have a banking problem. In early June, the two banks were instructed by the European Commission to raise an additional €1.25 billion in private capital. No one bit. Italy’s government then tried to persuade the European Commission and the ECB to water down the requirement to €600-800 million, and it urged Italian banks to chip in to the bank rescue fund. All that failed.

Read more …

That leaves 25 sovereign countries with nothing to say on issues that are vitally important to them. Who are we kidding?

‘Emmangela’ Show Reasserts EU’s Franco-German Alliance (AFP)

Emmanuel Macron and Angela Merkel used the French president’s first Brussels summit Friday to deliver an unmistakeable message: their countries intend to lead the EU’s post-Brexit revival. The Franco-German power couple held an unusual joint press conference after meeting their 26 European Union counterparts, against a backdrop of their respective flags and the bloc’s blue banner with yellow stars. “When France and Germany speak with one voice, Europe can move forward,” newcomer Macron told a room almost filled to bursting point with reporters as he stood alongside the German chancellor. “There can be no pertinent solution if it is not a pertinent solution for France and Germany,” the 39-year-old centre-right leader.

Despite her more pragmatic tone, the message from 62-year-old Merkel was the same. “This press conference shows that we are resolved to jointly find solutions to problems,” she said. The joint press conference came exactly a year after Britain’s shock referendum vote to become the first country to leave the European Union, which prompted dire predictions of the break-up of the bloc. But Europe has jumped on the bandwagon of Macron’s stunning election victory over French far-right leader Marine Le Pen to trumpet a newfound optimism after years of austerity and crisis despite Brexit. At the heart of that is the idea that Macron may be able to repair the traditional “engine” behind European integration – the post-war alliance of Paris and Berlin after centuries of conflict.

Read more …

Can the Greek finance minister please state that Schaeuble lies to Germans? Just to see the reaction?!

Schaeuble Says British Were ‘Lied To’, ‘Deceived’ In Brexit Campaign (R.)

British people were “endlessly lied to and deceived” in last year’s Brexit referendum campaign, German Finance Minister Wolfgang Schaeuble said on Friday. Speaking in Berlin on the first anniversary of the Brexit vote, Schaeuble was scathing about the “leave” campaigners who persuaded a majority of voters to opt to quit the EU. “The Britons were endlessly lied to and deceived,” Schaeuble told a conference of family-run companies. When the Brexit campaigners “happened to be successful, the ones who did it ran away because they said they can’t take responsibility”. The two sides in Britain’s referendum campaign swapped bitter accusations they were making misleading or untrue statements, such as the claim that leaving the EU would free up large sums for public health spending.

In the days after the vote, Prime Minister David Cameron, who called the referendum, resigned, and several prominent leave campaigners dropped out of the race to succeed him. Schaeuble said the 70 years of growth and prosperity Europe had known since World War Two was not based on pure majoritarianism but on sustainable democratic models. “(We need) not just mechanisms that consist of my promising something to a majority,” he said. “Then you only have to look at the demographics to see that you’ll end up with endless debates about redistribution that lead to jealousy.”

Read more …

May has become a very damaging force in Britain.

UK MPs Plan Cross-Party Alliance To Defeat May, Hard Brexit (Ind.)

MPs from all parties are already planning an alliance to defeat Theresa May’s plans for a hard Brexit, just days into the new Parliament. Strategies to amend future legislation – including a key immigration bill – to force ministers to listen to business groups and to show the EU that Parliament wants a “softer” exit are being drawn up, The Independent has learned. One Conservative MP said the aim was to give confidence to “bullied” ministers who are reluctant to “speak out”, despite sharing the view that the Prime Minister’s plans put Britain on the road to disaster. Another MP outlined the importance of convincing Brussels that Parliament can “coordinate” to present a different, more EU-friendly policy to that of the Government. “It would really show how power has shifted if Parliament can coordinate itself – and that’s not impossible,” the MP said.

Pro-EU Tory Anna Soubry told The Independent: “We are talking to each other and will continue to talk to each other – this is something that transcends normal party political considerations. “It doesn’t have to be about forcing votes, but it may come to that. Certainly, the threat of losing a vote will weigh very heavily on the Government’s mind.” Another MP spoke of giving voice to changing public opinion, amid the first evidence that some people who voted Leave a year ago are changing their minds. Ms Soubry added: “I am up for working with everybody. Hopefully something concrete will come out of it, because this is the most important thing that’s been done in decades.” She said she was in contact with some of the 34 Labour MPs who, this week, challenged Jeremy Corbyn to change course by fighting to stay in the single market.

Read more …

Noy much use, perhaps. Don’t say it out loud. Just wait for the Tories to blow up.

Corbyn Vows To Force Early British Election (Ind.)

Jeremy Corbyn has said he will look to “force an early general election” after claiming it was “ludicrous” to suggest Theresa May could stay in power. The Labour leader made the claim before speaking at Unison’s annual conference in Brighton and also added he was pleased with the party’s recent surge in opinion polls. Mr Corbyn’s approval rating has been on the rise since the general election and it appears he will now attempt to pile pressure on the Prime Minister. “Mrs May called the election so not to have a coalition of chaos, but that is exactly what we have got, they don’t seem to have come to an agreement with the DUP two weeks after the election,” Mr Corbyn told the Daily Mirror. “We will challenge this Government at every step and try to force an early general election.”

Read more …

George Osborne has some accounts to settle. And a very easy target to blame his own whoppers on.

May Blocked Plan To Guarantee Rights Of EU Citizens In UK After Brexit (Ind.)

Theresa May single-handedly blocked a plan to immediately guarantee the future rights of the 3m EU citizens in the UK last summer, George Osborne has revealed. The then-Home Secretary was the only member of the Cabinet to oppose David Cameron, who “wanted to reassure EU citizens they would be allowed to stay”, after Brexit. “All his Cabinet agreed with that unilateral offer, except his Home Secretary, Mrs May, who insisted on blocking it,” revealed the Evening Standard, now edited by Mr Osborne. The proposal was discussed “in the days immediately after the referendum” exactly one year ago, said the newspaper. Ms May has denied the accusation and said that “was certainly not my recollection” of events. But Tom Brake, the Liberal Democrat Brexit spokesman, said: “It is a badge of shame that Theresa May blocked attempts to guarantee the rights of EU nationals after the referendum.

“It shows how cold and heartless she is. “Now that mean-spirited decision is coming back to haunt her as we see an exodus of skilled EU workers, from nurses to academics.” The revelation comes after EU citizens in the UK protested that Ms May’s “generous” offer – outlined last night – will leave them with less rights after Brexit than “British jam”. The Prime Minister’s proposals also ran into trouble from other EU leaders who warned of “open questions” and a “long, long way to go” before agreement. Ms May was forced to defend her position and said she wants to give EU citizens in the UK “certainty” but the details of the arrangement would be outlined during the negotiation process. Since reaching No 10, Ms May has faced down pleas to act unilaterally, insisting she would only offer guarantees to EU citizens if British ex-pats in the EU were given the same protection.

Read more …

It’ll happen only after the round of rate hikes. There’s not enough room to go down right now.

The Fed Needs to Acknowledge the Slowing Economy (DDMB)

As any market veteran can tell you, those on the sell-side are the second-to-last to concede to a slowdown in economic activity. It’s unseemly to make negative calls when a firm’s main objective is keeping its clients fully invested in risky assets; the two aims naturally conflict. Hence the surprise when Bank of America Merrill Lynch said autos are headed for a “decisive downturn” that will trough in 2021 at around a 13-million-unit annualized rate, down from last year’s blistering record 17.6 million. A week earlier, Morgan Stanley, whose numbers are not quite as grim, also reduced its sales forecast, recognizing that the best days of the cycle have come and gone. The U.S. economy is consumption-centric. Growth in the current recovery has centered on three industries that have fed through to consumption in its various forms – autos, energy and financial services.

There’s something almost poetic in finance’s re-emergence, especially for those on Wall Street who’ve profited smartly from unprecedented levels of deal flow. Have a debt problem? Solve it with more debt. And why not? This system has worked for generations; insatiable demand for debt is why interest rates have staged their historic decline. Debt lit the fire that ignited the shale revolution. Debt put a floor under and then helped commercial real estate reach for the skies. Debt kept dying retailers alive. And debt made easier back-to-back years of record car sales. The question so many bullish economists must answer is what debt can do for the economy in the future. Much to the Saudis’ dismay, the energy industry is as lean and mean as it’s ever been; operating efficiency gains have been magnificent in a do-or-die environment. Energy is growth neutral going forward.

[..] It’s all good and well that strained industries want to extract what value remains from their CRE exposure as part of their exit strategies. But this only works in isolation. If motivated sellers move in tandem, you can bet teetering CRE valuations will be among the casualties, taking many over-exposed mid-size and small banks down with them. Call it a confluence of factors that bodes ill for the economic recovery, even as optimists hope the growth streak can stretch into a 10th year. By the way, leading the optimists’ charge is the Federal Reserve itself. Central bank policy makers’ expectations for future growth indicate the current economic recovery will unseat the record holder, the expansion that finally flamed out in 2001 after enjoying a life of exactly 10 years. But then it is the Fed that’s the very last to capitulate, to say nothing of forecast, a slowdown in economic activity.

Read more …

“The best thing to do is to break Illinois into pieces right now. Just wipe us off the map.”; “Illinois is merely the canary in the coal mine.”

Unfunded Liabilities Have Turned Illinois Into A Banana Republic (Lang)

Illinois is the perfect example of what happens when your state is run by fiscally irresponsible dunces for decades. The state is buried in debt, and hasn’t passed a budget in over 700 days. 100% of their monthly revenue is being consumed by court ordered payments, and the Illinois Department of Transportation has revealed that they may not be able to pay contractors (who are working on over 700 infrastructure projects) after July 1st if the state doesn’t pass a budget. To top it all off, the state’s credit rating is one step away from junk status, the lowest of any state. Because of these factors, Illinois may become the first state to declare bankruptcy since the Great Depression. Governor Bruce Rauner has gone so far as to call his state a “banana republic.” The state’s comptroller has admitted that “We are in massive crisis mode.”

And a reporter for the Chicago Tribune thinks Illinois has gone so far past the point of no return, that the state should be broken up. He recently wrote what basically sounds like a suicide note for Illinois. “Dissolve Illinois. Decommission the state, tear up the charter, whatever the legal mumbo-jumbo, just end the whole dang thing. We just disappear. With no pain. That’s right. You heard me. The best thing to do is to break Illinois into pieces right now. Just wipe us off the map. Cut us out of America’s heartland and let neighboring states carve us up and take the best chunks for themselves. The group that will scream the loudest is the state’s political class, who did this to us, and the big bond creditors, who are whispering talk of bankruptcy and asset forfeiture to save their own skins. But our beloved Illinois has proved that it just doesn’t deserve to survive.”

So how did it get to this point? The root of the problem is Illinois’ unfunded pension liabilities, which amount to $130 billion. The state’s leaders simply promised what could not be delivered. Most of their employees can retire in their 50’s, and many of them will receive 1-2 million dollars over the course of their retirements. As the debts associated with those pensions reached astronomical levels, the government increased taxes so much that many of the wealthiest and most productive citizens and businesses have moved away, leaving an even smaller tax base to draw from. In short, Illinois is in a death spiral, but it’s not alone. Illinois is merely the canary in the coal mine.

Read more …

Hopeless.

America’s Health-Care Rain Dance (Jim Kunstler)

The cost of everything medical is worked out in a private rain-dance between the aforementioned manifold concerned parties on the basis of what they think they can get away with in any particular case. In hospitals, this is enabled by the notorious ChargeMaster system which, to put it as simply as possible, allows hospitals to just make shit up. Any bill in congress that affects to reform the gross financial malfeasance in healthcare ought to start with the absolute requirement to publicly post the cost of everything that doctors and hospitals do, and enable the “service providers” to get paid only those publicly posted costs — obviating the lucrative rain-dance for dividing up the ransoms paid by hostage-patients who come to the “providers,” after all, in extremis. Notice that this crucial feature of the crisis is missing not only from the political debate but also from the supposedly public-interest-minded pages of The New York Times and other organs of the news media.

Perhaps this facet of the problem never entered the editors’ minds — in which case you really have to ask: how dumb are they? (The funniest claim about ObamaCare in today’s New York Times is the statement that 20 million citizens got access to health care under the so-called Affordable Care Act. Really? You mean they got health insurance policies with $8000-deductables, when they don’t even have $500 in savings to pay for car repairs? What planet do The New York Times editorial writers live on?) The corollary questions about deconstructing the insurance armature of the health care racket, and assigning its “duties” to a “single-payer” government agency is, of course, a higher level of debate. I’m not saying it would work, even if it was modeled on one of the systems currently working elsewhere, say in France.

But Americans have acquired an allergy to even thinking about that, or at least they’ve been conditioned to imagine they’re allergic by self-interested politicians. So, the current product of debate in the US Senate is just a scheme for pretending to reapportion the colossal flow of grift among the grifters. Spare yourself the angst of even worrying about the outcome of the current healthcare debate. It’s not going to get “fixed.” The medical system as we know it is going to blow up, and soon, just like the pension systems across the country, and the treasuries of the fifty states themselves, and the rest of the Potemkin US economy.

Read more …

“The coalition says it takes as many precautions as possible within the laws of warfare..”

US-Led Coalition Kills Almost 500 Syrian Civilians In One Month (NW)

The U.S.-led coalition’s strikes against the Islamic State militant group (ISIS) in two Syrian provinces killed 472 civilians in the last month, according to a monitor. The Syrian Observatory for Human Rights (SOHR), a U.K.-based monitoring group that has an extensive network of contacts on the ground in Syria, said the toll was more than double the month prior and the highest for a single month since raids began in September 2014. In Raqqa province, where the city of the same name is located, coalition strikes killed 250 civilians, including 53 children, SOHR said. In Deir ez-Zor, strikes killed 222 civilians, 84 of which were children. Rami Abdul Rahman, director of SOHR, told the AFP news agency that the total deaths caused by coalition strikes in Syria now amounted to 1,953. Of the deceased, 456 were children and 333 were women.

The coalition continues its bombing campaign in and around the eastern Syrian city of Raqqa, the largest under ISIS’s control in the country. It is supporting an Arab-Kurdish alliance waging a ground offensive against ISIS in the de facto capital of its self-declared caliphate that straddles the Iraqi-Syrian border. The coalition says it takes as many precautions as possible within the laws of warfare, but top coalition generals have admitted that civilian deaths are inevitable in the campaign to defeat ISIS. Some 100,000 civilians remain under ISIS control in the northern Iraqi city of Mosul, and thousands remain in Raqqa. Human rights groups have criticized the coalition for not exercising enough caution. One case in particular was a March 17 strike in Mosul that killed more than 100 civilians. The coalition investigated the incident and concluded that ISIS had placed booby traps in the building that maximized the damage on impact.

Read more …

Greece must refuse.

The Unfinished Negotiations For A Greek “Super-Memorandum” (Press Project)

They say that history repeats itself first as a tragedy then as a farce. It’s a commonplace expression that is nevertheless clearly true in crisis-ridden Greece. During the SYRIZA-AnEl coalition’s time in power(especially under the second mandate), even the seasons of the year have come to resemble each other. Winter is a time of tension, harsh disagreement and bluster. Spring is the season for gradual capitulation. May (2016 and 2017) is the month for government betrayal; June for further prerequisites and an “agreement.” The rest of the summer then marks a period of government euphoria, followed by an autumn of initial discussions with an eye to the next set of negotiations. By using what happened over the same span of time in 2016—along with the language of the Third (and “fourth”)Memorandum of Understanding—as a kind of textbook, it’s easy to tell where we are and where we’re headed.

The June 15 Eurogroup joint statement condenses all the results of the most recent set of negotiations. These are the most essential and specific points: “The reform measures cover areas such as pensions, income tax, the labour market as well as the financial and energy sectors. These should make Greece’s medium-term fiscal strategy more robust and support the growth-friendly rebalancing of the economy. The Eurogroup invited Greece together with the institutions and relevant third parties to develop and support a holistic, growth enhancing strategy.”

In this paragraph, the Eurozone Finance Ministers are essentially borrowing a page from 1984. In that legendary novel by George Orwell, war is peace; freedom is enslavement; ignorance is power. For the Eurogroup (as per usual), pension cuts, reductions in tax exemptions, an administration well-disposed to mass lay-offs, and the sale of Public Power Corporation shares all count as positive “reform measures.” Greece’s sentence to a “long-term memorandum,” requiring surpluses of 3.5% until 2022 and a little over 2% until 2060, constitutes “support [of] a holistic, growth enhancing strategy.” “The Eurogroup reconfirmed its approach to the sustainability of Greece’s public debt that was agreed in May 2016, while providing some further detail on the medium-term debt measures that could accrue to Greece. These measures would be implemented after successful completion of the programme, if a new debt sustainability analysis were to confirm that such measures are necessary.”

These two brief paragraphs finalize the results of the multi-month Greek debt negotiations. In short and as is plainly evident, the Greek government gained nothing in terms of its debt, while after months of Eurozone attempts to secure further relief the Eurogroup simply determined that everything decided back in May 2016 still holds. Even the government’s recent expectation that the (highly dangerous) phrase “if necessary” would be removed from the relief-program wording was ultimately frustrated. “The Eurogroup welcomed Greece’s commitment to maintain a primary surplus of 3.5% of GDP until 2022, and a fiscal path consistent with the European fiscal framework thereafter. According to analysis by the European Commission, such compliance would be achieved with a primary surplus of equal to or above but close to 2.0% of GDP in the period of 2023-2060.”

Read more …

Sep 022016
 
 September 2, 2016  Posted by at 8:55 am Finance Tagged with: , , , , , , , , , ,  


John Collier Grandfather Romero, 99 years old. Trampas, New Mexico 1943

August US Auto Sales Fall 4.2%; Carmakers Say Industry Has Peaked (R.)
Bill Gross Says Negative Interest Rates Are Nothing But Liabilities (MW)
Goldman: The Fed Might Have a New, Big Idea (BBG)
BOJ Must ‘Do Something Meaningful,’ Former Official Says (BBG)
Is the ECB Buying Bonds From Itself? (WSJ)
Bond Buyers Leave Europe to the ECB, Head to US (WSJ)
The Fed Poses a Big Risk to the Emerging Market Inflow Party (BBG)
Hanjin Shipping Bankruptcy Causes Turmoil In Global Sea Freight (G.)
Don’t Criticize Europeans For Standing Up To Apple – Thank Them (Robert Reich)
Apple Boss Tim Cook Should Stop Whinging And Pay Up (Ind.)
US Imposes Sanctions On ‘Putin’s Bridge’ To Crimea (R.)
Putin Says DNC Hack Was a Public Service, Russia Didn’t Do It (BBG)
The Italian Referendum Could Result In The Death Of The Euro (Andrews/Capacci)
France Vows To Dismantle ‘Jungle’ Refugee Camp In Calais (G.)
Greece On Edge, As Turkish Coup Prompts Surge In New Arrivals (Omaira Gill)
The Death Of Aylan Kurdi: One Year On, Compassion Towards Refugees Fades (G.)

 

 

It’s funny to see how fast the subprime car loan schemes are falling apart.

August US Auto Sales Fall 4.2%; Carmakers Say Industry Has Peaked (R.)

U.S. auto sales fell 4.2% in August as some major automakers said a long-expected decline due to softer consumer demand had begun, possibly sparking a shift to juicer customer incentives and slower production. The top three sellers, General Motors, Ford and Toyota on Thursday reported declines of at least 5%. Of the seven top manufacturers by sales, only Fiat Chrysler reported a gain versus a year ago, when sales were restated to about 11,000 fewer than originally reported. Monthly spending on new cars and trucks is closely watched as the U.S. auto industry accounts for about one-fifth of U.S. retail sales. August sales, said Autodata, totaled 1.51 million vehicles, or 16.98 million vehicles at a seasonally adjusted annualized rate, versus a surprisingly strong 17.88 million vehicles in July.

Ford Chief Economist Bryan Bezold said sales had hit a plateau after steadily rising following the 2008-2009 recession. The auto industry outperformed the overall U.S. economy in those years largely due to pent-up demand that has now played out, he said. Wall Street has pressured automaker shares all year amid expectations of falling sales at some point. [..] Ford, whose sales tumbled 8.4%, said its U.S. inventory was at 81 days of supply versus 61 days a year earlier, suggesting Ford may have to cut production, increase profit-eroding incentives, or boost fleet sales.

Read more …

“This watch is ticking because of high global debt and out-of-date monetary/fiscal policies that hurt rather than heal real economies.”

Bill Gross Says Negative Interest Rates Are Nothing But Liabilities (MW)

Call bond-market veteran Bill Gross a “broken watch.” He doesn’t care. His gripe about negative interest rates and a flood of debt, which he considers a risk, not a fix, for a global economy that’s still limping out of the financial crisis, is challenged daily by resilient demand for the bonds he’s bearish on. But even if being “right” eventually is a hard sell right now, he’s not backing down, Gross said in his latest monthly commentary. “The problem with Cassandras, such as Gross and Jim Grant and Stanley Druckenmiller, among a host of others, is that we/they can be compared to a broken watch that is right twice a day but wrong for the other 1,438 minutes,” Gross wrote. “But believe me: This watch is ticking because of high global debt and out-of-date monetary/fiscal policies that hurt rather than heal real economies.”

Germany, Switzerland, France, Spain and Japan are among countries that have negative yields on government-issued debt. Their hope is that cheap, even free, borrowing raises inflation and revives asset prices that can filter through economies; they argue extreme policies have been needed. Gross and others have argued that rates, including those at the Federal Reserve, at near zero or below won’t create sustainable economic growth and actually undermine capitalism. The U.S. has not tipped rates quite as low as other central banks and the Federal Reserve weaned markets off its quantitative-easing program well ahead of its big-economy brethren. Still, Federal Reserve Chairwoman Janet Yellen said last week at the Fed’s Jackson Hole retreat that she wants her policy kit to include all tools, including further asset purchases if necessary.

Divergence with the rest of the world only complicates the debate over when and how aggressively the Fed should dial back accommodative policy. Was that enough to scare off most bond investors? Apparently not. Treasury yields logged their largest daily drop in nearly two months to kick off this week, taking back their Fed-spooked gain from hawkish comments at Jackson Hole. Yields, of course, fall when prices rise, and vice versa. At that mountain gathering, Fed second-in-command Stanley Fischer opened the door to more than one rate increase this year, depending on economic data. And Fischer himself said Fed Chairwoman Janet Yellen’s stance appears in line with that mind-set.

But Gross questions the long-term effects of the world’s unprecedented yield conditions and central banker reluctance to let them go. “Capitalism, almost commonsensically, cannot function well at the zero bound or with a minus sign as a yield,” wrote Gross, who manages the Janus Global Unconstrained Bond Fund, up just over 4% year to date. “$11 trillion of negative yielding bonds are not assets — they are liabilities. Factor that, Ms. Yellen, into your asset price objective.”

Read more …

Well, that makes us feel much better…

Goldman: The Fed Might Have a New, Big Idea (BBG)

The Death Star is a fictional space station popularized by the Star Wars franchise. The r-star (r*) is the natural rate of interest that sometimes crops up in economics texts. It also might be the Federal Reserve’s newest, biggest idea, according to strategists at Goldman Sachs. The notion that the natural or neutral rate of interest has been stuck at ultra-low levels might help the U.S. central bank square a dilemma between hiking interest rates and strengthening the U.S. dollar, they said.

“For the FOMC, this is a genuine conundrum, because it means that too hawkish a message could send the Dollar sky-rocketing, a deflationary shock that would also weigh on growth, thereby – in a way – undermining the very rationale for shifting hawkish in the first place,” write Goldman strategists led by Robin Brooks. “To deal with this conundrum, the framework that many at the Fed seem to be converging around is that ‘r-star’ is low, so that the degree of monetary policy accommodation is only moderate, despite policy rates being so low.” Such a stance could allow the central bank to justify keeping benchmark interest rates lower for longer. While the strategists don’t judge the notion on its merits, they do compare it to some previous big ideas that have been discussed at the central bank in recent years.

Among these is the concept that the effects of the U.S. housing crisis would not be material – a theme that dominated in the two years before the 2008 financial crisis (and shown in the pink line below). That idea soon gave rise to concerns that the bursting of the housing bubble would have a negative impact on the U.S. economy (shown in blue). Subsequently, policymakers’ collective imaginations were captured by the notion that quantitative easing would prove positive for economic growth (in red), while the notion that forward guidance (in yellow) is a useful policy tool soon gained in popularity.

Read more …

Yeah, dismantle itself.

BOJ Must ‘Do Something Meaningful,’ Former Official Says (BBG)

The Bank of Japan should abandon the monetary base target that’s driving its unsustainable bond purchases while pursuing a negative-rate loan program to help companies and consumers, said a former BOJ executive director. “The BOJ can’t get out of this struggle as long it has this cursed monetary base target,” Hideo Hayakawa, who retired from the central bank in 2013, said in an interview on Thursday. “Once they drop it, they can take a variety of other easing measures.” Hayakawa, 61, contends that there is no evidence that the monetary base target championed by Governor Haruhiko Kuroda is effective in spurring inflation. It should be dropped, and bond purchases scaled back and managed via a range rather than aiming for a specific number, he said.

“As long as they make it very clear that their goal is to keep a lid on bond yields, and the yields stay low, they can gradually lower the range of bond purchases,” said Hayakawa, who also served as the central bank’s chief economist. At the same time, he said Kuroda ought to avoid taking a deeper dive on the existing negative interest rate charged on some funds commercial banks park at the BOJ. It should simultaneously take rates on its lending facilities from zero into negative territory, which would effectively pay some borrowers who take out loans. People familiar with talks at the BOJ said in April that the central bank may consider minus rates on the Stimulating Bank Lending Facility.

Read more …

Can it still get crazier than this?

Is the ECB Buying Bonds From Itself? (WSJ)

The European Central Bank may be buying bonds from itself as it runs out of debt to sate its massive quantitative easing program. That’s according to economists at Jefferies. The ECB’s bond-buying program has been running for nearly 18 months, and investors and analysts have often asked whether the central bank is running out of debt to buy. Now, the ECB may be indirectly buying bonds from itself, according to Marchel Alexandrovich and David Owen at Jefferies, in a research note published Thursday. But here’s how Jefferies thinks it may work. The ECB’s QE program is implemented through several national central banks, like Germany’s Bundesbank and Spain’s Banco de Espana. National central banks buy bonds according to rules set by the ECB.

The problem is that these constraints narrow the stock of debt the banks can buy from. These rules prevent the purchase of too much debt from any one country and stop central banks from buying debt with steeply negative yields. Portuguese and Irish debt, for instance, is now becoming scarce. But the national central banks also sell sovereign bonds. They sometimes reduce their holdings as a part of their reserve management activities, which aim to ensure that banks, state institutions and other organizations “manage their euro-denominated reserve assets comprehensively, efficiently, and in a safe, confidential and reliable environment,” according to the ECB’s website. That means, for example, that while the German Bundesbank bought €209 billion in sovereign bonds between March and July, they also sold off €43 billion of such debt, according to Jefferies.

Read more …

Because why would they invest in liabilities?

Bond Buyers Leave Europe to the ECB, Head to US (WSJ)

The ECB recently started buying corporate bonds to boost the eurozone economy. One of the big beneficiaries so far: U.S. credit markets. Faced with dwindling returns in Europe, a growing number of investors are selling their corporate bonds to the ECB and heading across the Atlantic where yields are higher and they aren’t so vulnerable to changes in expectations around central bank buying habits. The extra yield investors demand to hold corporate bonds over safe government debt—or credit spread—has declined more rapidly in Europe than the U.S. since the ECB announced its buying plans in March. But that trend has reversed in recent weeks, with U.S. credit markets outperforming the eurozone in August, according to Bloomberg Barclays bond indexes.

That comes as investors have sold European corporate bonds and shifted funds into the U.S. as they fan out in search of returns. Net inflows into U.S. corporate bond funds have outpaced inflows to similar European funds by almost $2 billion since the start of the ECB’s program in early June, according to the latest available data from EPFR Global. As a result, borrowing costs for large U.S. companies have remained near record lows even as expectations have mounted that the Federal Reserve will soon resume raising interest rates. Mark Kiesel at PIMCO said he had been buying euro and sterling corporate bonds in anticipation of the ECB and, more recently, the Bank of England entering these markets. Now, he’s selling and moving more into U.S. credit markets.

Read more …

Modern colonialism.

The Fed Poses a Big Risk to the Emerging Market Inflow Party (BBG)

Battle-hardened emerging-market investors have seen this movie before: A U.S. Federal Reserve interest-rate hike triggers a jump in nominal local rates in emerging markets, especially those with fixed or semi-fixed exchange rate regimes. Hot money flows out of developing nations, across FX, equity and fixed-income markets. Local currencies weaken against the dollar. And the ensuing jump in the cost of dollar liquidity, and declining portfolio flows, spark fears over the debt-servicing capacity of emerging-market borrowers. In short, the boom-and-bust capital-flow cycles in emerging markets over the past three-decades have roughly followed this script.

Fast-forward to September 2016: markets are raising their bets that the Fed will hike rates this year – raising fears the post-Brexit-vote inflow party in emerging markets might ease, while international financial conditions, more generally, might tighten. Now, analysts say that the outlook for EM asset classes hinges on how the U.S. yield curve reprices in the coming months. In short, the shape of the Treasury yield curve and the level of long-term U.S. real rates, in particular – rather than the absolute level of U.S. short-end rates – will be crucial in driving capital flows into emerging markets, analysts say. Sebastian Raedler, equity strategist at Deutsche Bank, is one analyst who urges caution, citing EMs’ dependence on U.S. monetary policy.

EM portfolio flows tend to follow developments in the U.S. yield curve with a two-year lag, he says, suggesting financial conditions could tighten significantly in emerging markets if the Fed becomes notably more hawkish. “It’s very clearly the case that low U.S. rates are historically a push factor for foreign capital flows into emerging markets,” Raedler says. “The best scenario to support continued inflows into emerging markets is that financial conditions remain benign. But, thinking about the 30-year history, investors tend to love EM the most when the party in U.S. monetary policy — low rates — is in full swing.”

Read more …

I’m waiting for the next domino to fall. Only then will people recognize what’s going on.

Hanjin Shipping Bankruptcy Causes Turmoil In Global Sea Freight (G.)

[..] Hanjin’s banks decided to end financial support for the shipper this week and many of its vessels were denied entry to ports or left unable to dock as container lashing providers worried they would not be paid. This included the port of Busan, South Korea’s largest. The Korea International Trade Association said on Thursday that about 10 Hanjin vessels in China have been either seized or were expected to seized by charterers, port authorities or other parties. That adds to one other ship seized in Singapore by a creditor earlier in the week. The collapse comes at a time of high seasonal demand for the shipping industry ahead of the year-end holidays. In the US, at the ports of Los Angeles and Long Beach, the nation’s busiest port complex, three Hanjin container ships, ranging from about 700 feet to 1,100 feet long, were either sitting offshore or anchored away from terminals on Thursday.

A fourth vessel that was supposed to leave Long Beach on Thursday morning remained anchored inside the breakwater. The National Retail Federation, the world’s largest retail trade association, wrote to the US secretary of commerce, Penny Pritzker, and the Federal Maritime Commission chairman, Mario Cordero, on Thursday, urging them to work with the South Korean government, ports and others to prevent disruption. Hanjin represents nearly 8% of the trans-Pacific trade volume for the US market and the bankruptcy was having “a ripple effect throughout the global supply chain” that could cause significant harm to both consumers and the US economy, the association wrote.

[..] Other shipping lines were moving to take over some of the Hanjin traffic but at a price, with vessels already are operating at high capacity because of the season. The price of shipping a 40ft container from China to the US jumped by up to 50% in a single day, said Nerijus Poskus, director of pricing and procurement for Flexport, a licensed freight forwarder and customs broker based in San Francisco, who predicted the higher prices would last a month or two. The price from China to west coast ports rose from $1,100 per container to as much as $1,700 on Thursday, while the cost from China to the East Coast jumped from $1,700 to $2,400, he said.

Read more …

There is no one answer here. Applying tax laws retroactively is thin ice. But so is allowing companies to pay 0.005% in taxes

Don’t Criticize Europeans For Standing Up To Apple – Thank Them (Robert Reich)

For years, Washington lawmakers on both sides of the aisle have attacked big corporations for avoiding taxes by parking their profits overseas. Last week the European Union did something about it. The EU’s executive commission ordered Ireland to collect $14.5 billion in back taxes from Apple. But rather than congratulate Europe for standing up to Apple, official Washington is outraged. Republican House Speaker Paul Ryan calls it an “awful” decision. Democratic Senator Charles Schumer, who’s likely to become Senate majority leader next year, says it’s “a cheap money grab by the European Commission.” Republican Orrin Hatch, chairman of the Senate Finance Committee, accuses Europe of “targeting” American businesses. Democratic Senator Ron Wyden says it “undermines our tax treaties and paints a target on American firms in the eyes of foreign governments.”

P-l-e-a-s-e. These are taxes America should have required Apple to pay to the U.S. Treasury. But we didn’t – because Ryan, Schumer, Hatch, Wyden and other inhabitants of Capitol Hill haven’t been able to agree on how to close the loophole that has allowed Apple, and many other global American corporations, to avoid paying the corporate income taxes they owe. Let’s be clear. The products Apple sells abroad are designed and developed in the United States. So the foreign royalties Apple collects on them logically should be treated as corporate income to Apple here in America. But Apple and other Big Tech corporations like Google and Amazon – along with much of Big Pharma, and even Starbucks – have avoided paying hundreds of billions of dollars in taxes on their worldwide earnings because they don’t really sell things like cars or refrigerators or television sets that they make here and ship abroad.

[..] over the last decade alone Apple has amassed a stunning $231.5 billion cash pile abroad, subjected to little or no taxes. This hasn’t stopped Apple from richly rewarding its American shareholders with fat dividends and stock buybacks that raise share prices. But rather than use its overseas cash to fund these, Apple has taken on billions of dollars of additional debt. It’s a scam, at the expense of American taxpayers. Add in the worldwide sales of America’s Big Tech, Big Pharma and Big Franchise operations, and the scam is sizable. Over €2 trillion of U.S. corporate profits are now parked abroad – all of it escaping the U.S. corporate income tax. To make up the difference, you and I and millions of other Americans have to pay more in income taxes and payroll taxes to finance the U.S. government.

Read more …

Meanwhile, the opinions are fun to read.

Apple Boss Tim Cook Should Stop Whinging And Pay Up (Ind.)

Having been handed a €13bn bill for back taxes – it is not a fine as some would have you believe – Apple boss Tim Cook has gone on the offensive. The under fire tech giant’s chief executive chose Ireland’s state broadcaster RTE as the venue for a broadside against the European Commission in the wake of its ruling that the tax deal arranged between Apple and Ireland amounted to illegal state aid. What he said was, well, hard for me to read without inflicting damage on my, erm, Apple Mac. So read on at your own computer’s risk: “When you’re accused of doing something that is so foreign to your values, it brings out an outrage in you, and that’s how we feel. Apple has always been about doing the right thing.”

Oh Mr Cook. It’s not you who should be feeling outraged. It’s us. Even if you think that what the EC did was pushing it, this is is still a company that has cynically gamed the international tax system with the aim of depriving nation states from whose citizens Apple makes its living, the tax they are due. Taking advantage of loopholes, employing accountants to manipulate the rules; Apple’s defenders might call that pragmatic. But it’s hard to see how anyone not in the business of creating propaganda for Apple could describe its behaviour as “doing the right thing”. Mr Cook, it appears, has no shame. “Total political crap,” he ranted. “Maddening.”

What’s maddening is the way multinational companies like Apple utilise their resources to avoid paying their share at a time of austerity. What’s maddening is the way tax authorities bring the hammer down on individual citizens for making honest mistakes while shrugging their shoulders when it comes to policing wealthy corporations. As for “political crap”? This is a man who has hosted fundraisers for Hilary Clinton. If that’s not political crap, I’d really like to know what is.

Read more …

Victoria Nuland is still around. In fact, under a potential Hillary presidency, she’s set to acquire a whole lot more power (Secretary of State?). That’s very scary.

US Imposes Sanctions On ‘Putin’s Bridge’ To Crimea (R.)

Companies building a multi-billion dollar bridge to link the Russian mainland with annexed Crimea, a project close to the heart President Vladimir Putin, were targeted by the United States in an updated sanctions blacklist on Thursday. The U.S. Department of the Treasury added dozens of people and companies to the list, first introduced after Russia annexed the Crimean peninsula from Ukraine in 2014 and expanded over its support for separatist rebels in the east of the country. As well as multiple subsidiaries of Russian gas giant Gazprom and 11 Crimean officials, the Treasury named seven companies directly involved in the construction of the 19 km (11.8 miles) road-and-rail connection across the Kerch Strait, dubbed “Putin’s bridge” by some Russians.

Chief among those were SGM-Most, a subsidiary of lead contractor Stroygazmontazh which is already under U.S. sanctions, and sub-contractor Mostotrest, one of Russia’s biggest bridge builders. “Treasury stands with our partners in condemning Russia’s violation of international law, and we will continue to sanction those who threaten Ukraine’s peace, security and sovereignty,” said John Smith, acting director of the Treasury’s Office of Foreign Assets Control, which levies sanctions.

The Russian Foreign Ministry was not immediately available for comment, but Moscow has previously said sanctions levied over its actions in Ukraine undermine efforts to resolve the conflict. Set to be the longest dual-purpose span in Europe when completed, the Kremlin sees its 212-billion rouble ($3.2 billion) bridge as vital to integrating Crimea into Russia, both symbolically and as an economic lifeline for the region. Putin has called the undertaking an historic mission.

Read more …

Note: all of the Hillary campaign’s allegations about Russia hacking the DNC remain wholly unsubstantiated. That’s some flimsy ground to stand on, if that’s all you got. Innuendo can’t carry you all the way.

Putin Says DNC Hack Was a Public Service, Russia Didn’t Do It (BBG)

Vladimir Putin said the hacking of thousands of Democratic National Committee emails and documents was a service to the public, but denied U.S. accusations that Russia’s government had anything to do with it. “Listen, does it even matter who hacked this data?’’ Putin said in an interview at the Pacific port city of Vladivostok on Thursday. “The important thing is the content that was given to the public.’’ U.S. officials blame hackers working for the Russian government for the attacks on DNC servers earlier this year that resulted in WikiLeaks publishing about 20,000 private emails just before Hillary Clinton’s nominating convention in July.

The documents showed attempts by party officials to undermine her chief Democratic rival, Bernie Sanders, and led to the resignation of the head of the DNC, Representative Debbie Wasserman Schultz of Florida. Putin, in power since 2000 and facing re-election in 18 months, and Clinton have had an acrimonious relationship since her failed attempt to “reset” relations as secretary of state in 2009. Putin in 2011 blamed her personally for stoking the biggest protests of his rule by sending an activation “signal” to “some actors” inside Russia. Clinton has compared his annexation of Crimea in 2014 to actions taken by Adolf Hitler before World War II.

Read more …

No doubt about it. The euro makes no more sense for Italy than it does for Greece.

The Italian Referendum Could Result In The Death Of The Euro (Andrews/Capacci)

Prime ministers come and go in Italy—four since the financial crisis—but precious little seems to change. The latest incumbent, Matteo Renzi, has pursued structural reform more energetically than his predecessors. But for all the progress he has made, he might as well have been wading through molasses. Now, in a bid to secure a popular mandate for his restructuring program, Renzi has bet his premiership on a referendum over badly-needed constitutional reforms. It is a high stakes gamble. If Renzi wins the vote, which is due in either October or November, his proposed measures will streamline Italy’s legislative process, breaking the parliamentary gridlock which has crippled successive governments, and opening the way to far-reaching economic reforms.

If he loses, Renzi has promised to step down—a pledge that has turned the referendum into a popular vote of confidence in the unelected prime minister, his Europhile policies, and—by extension—Italy’s membership of the eurozone itself. As a result, a “no” vote in October will not just precipitate the fall of Renzi’s government; it could throw Italy’s long-term membership of the eurozone into doubt, plunging the single currency area once again into crisis. Italy’s fundamental problem is that it’s stuck in a policy no man’s land. Its old economic model, in place for much of the last three decades of the 20th century, relied on a combination of currency devaluation to maintain international competitiveness together with fiscal spending to support the poorer regions of the country’s south.

Signing up to the euro put an end to all that, preventing devaluations and prohibiting budget deficits at 10% of gross domestic product. However, the design of Italy’s bicameral parliamentary system, in which the upper and lower house—the Senate and the Chamber of Deputies—wield equal legislative power, made it almost impossible for any government to push through the structural reforms necessary for Italy to compete and prosper within the eurozone. The result has not just been depressed growth and relative impoverishment, but an outright decline in living standards as Italy’s real GDP per capita has slumped to a 20-year low.

Read more …

Problem is, the refugees don’t want to say in France.

France Vows To Dismantle ‘Jungle’ Refugee Camp In Calais (G.)

France is to gradually dismantle the “Jungle” refugee camp in Calais, the interior minister, Bernard Cazeneuve, has vowed. Cazeneuve told regional newspaper the Nord Littoral he would press ahead with the closure of the camp “with the greatest determination”, dismantling the site in stages, clearing the former wasteland where record numbers of refugees and migrants are sleeping rough in dire sanitary conditions as many hope to reach Britain. He said France would create accommodation for thousands elsewhere in the country “to unblock Calais”.

French authorities have made repeated efforts to shut down the camp, which the state was responsible for creating in April 2015 when authorities evicted migrants and refugees from squats and outdoor camps across the Calais area and concentrated them into one patch of wasteland without shelter. Less than six months ago, the authorities demolished a large area of the southern part of the camp, saying the aim was to radically reduce numbers. But this month the number of people in the camp reached an all-time high of almost 10,000 people, aid organisations estimate. The French authorities put the official number of people in the camp at almost 7,000. Authorities have said over the past year more than 5,000 asylum seekers have left the northern French town for 161 special centres set up around France.

Read more …

Beware the numbers. The relocation scheme has been one big EU failure, one among far too many.

Greece On Edge, As Turkish Coup Prompts Surge In New Arrivals (Omaira Gill)

After dropping for several months, the numbers of refugees pouring through Greece have started to increase again in recent weeks. When an EU-Turkey deal was hacked out in March 2016, it was hailed by EU governments as a success. The massive numbers that had transited through Greece in 2015 and early 2016 quickly whittled down to almost nothing. But people have not stopped coming, and the failed coup in Turkey on 15 July seems to have had consequences. The EU-Turkey deal came into effect on 20 March 2016. In February, UNHCR data showed 55,222 arrivals in Greece. This had fallen to 26,623 in March and 3,419 in April. The numbers for May and June were more or less steady at 1,465 and 1,489, respectively. But in July, the pattern began to change.

There were 1,855 arrivals recorded for the month of July. This could be written off as part of the settling down period for the deal, until the numbers are broken down and matched with events which took place that month. On 15 July, an attempted putsch took place in Turkey. The number of arrivals from 1 July to 14 July came to 560. But that number jumped to 1,295 for the period 15 July to 31 July – an increase of 131%. Taking a step further back, between 15 June and 14 July, 1,438 arrivals were registered in Greece. But from 15 July to 14 August, the number was 2,675, representing an 86% increase in arrivals. In the face of this data, it is hard to ignore Turkey’s current instability as a driving factor behind refugee flows. Between 1 and 28 August, the latest available date for arrivals by the UNHCR, 2,810 refugees and migrants arrived on Greek shores.

Read more …

We will be judged on this.

The Death Of Alan Kurdi: One Year On, Compassion Towards Refugees Fades (G.)

Sitting in a refugee camp in northern Greece, Mohammad Mohammad, a Syrian taxi driver, holds up a picture of three-year-old Alan Kurdi. It is nearly a year since the same photograph of the dead toddler sparked a wave of outrage across Europe, and heightened calls for the west to do more for refugees. Twelve months later, Mohammad uses it to highlight how little has changed. Alan may have died at sea, he says, “but really there is no difference between him and the thousands of children now dying [metaphorically] here in Greece”. Tens of thousands have been stranded in squalid conditions in Greece since March, when Balkan leaders shut their borders. “It is,” says Mohammad, “a human disaster.” A year ago, Alan’s tragic death seemed to have shifted the political discourse on refugees.

European leaders appeared to have been shocked into forming more compassionate policies, while previously hostile media outlets took a more conciliatory tone. Two days after Alan’s death, Germany agreed to admit thousands of refugees who had been stranded in Hungary. The move encouraged the leaders of central and eastern Europe to create a humanitarian corridor from northern Greece to southern Bavaria, while Canada promised to resettle 25,000 Syrians. In the UK David Cameron agreed to accept 4,000 refugees a year until 2020. It was less than the number landing each day on the Greek islands at that point, but far more than Cameron had previously dared to offer. He was cheered on by the Sun, whose opinion pages had previously described migrants as cockroaches, but now mounted a front-page campaign in Kurdi’s name: “For Aylan [sic]”.

Read more …