Jun 012018
 
 June 1, 2018  Posted by at 1:01 pm Finance Tagged with: , , , , , , , , , , , , ,  1 Response »


Nikolay Dubovsky Became Silent 1890

 

“European Stocks Surge Celebrating New Spanish, Italian Governments”, says a Zero Hedge headline. “Markets Breathe Easier As Italy Government Sworn In”, proclaims Reuters. And I’m thinking: these markets are crazy, and none of this will last more than a few days. Or hours. The new Italian government is not the end of a problem, it’s the beginning of many of them.

And Italy is far from the only problem. The new Spanish government will be headed by Socialist leader Pedro Sanchez, who manoeuvred well to oust sitting PM Rajoy, but he also recently saw the worst election result in his party’s history. Not exactly solid ground. Moreover, he needed the support of Catalan factions, and will have to reverse much of Rajoy’s actions on the Catalunya issue, including probably the release from prison of those responsible for the independence referendum.

Nor is Spain exactly economically sound. Still, it’s not in as bad a shape as Turkey and Argentina. A JPMorgan graph published at Zero Hedge says a lot, along with the commentary on it:

The chart below, courtesy of Cembalest, shows each country’s current account (x-axis), the recent change in its external borrowing (y-axis) and the return on a blended portfolio of its equity and fixed income markets (the larger the red bubble, the worse the returns have been). This outcome looks sensible given weaker Argentine and Turkish fundamentals. And while Cembalest admits that the rising dollar and rising US rates will be a challenge for the broader EM space, most will probably not face balance of payments crises similar to what is taking place in Turkey and Argentina, of which the latter is already getting an IMF bailout and the former, well… it’s only a matter of time.

 

And now Erdogan has apparently upped the ante once more yesterday. Last week he called on the Turkish population to change their dollars and euros into lira’s, last night he ‘suggested’ they bring in their money from abroad (to profit from ‘beneficial tax rules’). Such things have, by and large, one effect only: the opposite of what he intends. He just makes his people more nervous than they already were.

It’s June 1, and the Turkish elections are June 24. Will Erdogan be able to keep things quiet enough in the markets? It’s doubtful. He has reportedly already claimed that the US and Israel are waging an economic war on Turkey. And for once he may be right. A few weeks ago Erdogan called on all member states of the Organisation of Islamic Cooperation to boycott all Israeli products (and presumably America products too).

On April 30, the IMF warned that the Turkish economy is showing “clear signs of overheating”. On May 1, Standard & Poor’s downgraded the Turkish economy to double-B-minus. Economic war? Feels a bit more like a political war. Erdogan has three weeks left to win that election. Don’t expect things to quieten down before then. But as the graph above shows, Turkey itself is the problem here first and foremost.

Expect Erdogan to say interest rates -usury- are immoral in Muslim countries. Expect much more pressure from the west on him. Erdogan has also been busy establishing Turkish ‘enclaves’ in Syria’s Afrin territory (where he chased out the original population) and in the Turkish-occupied northern part of Cyprus (where he added 100s of 1000s of Turks).

No, the West wouldn’t mourn if the man were defeated in the vote. They can add a lot more pressure in three weeks, and they will. Will it suffice? Hard to tell.

 

Back to Italy. Where the optimism comes from, I can’t fathom. The M5S-Lega coalition has never made a secret of its program and/or intentions. Just because pronounced eurosceptic Paolo Savona was shifted from Finance to EU minister doesn’t a summer make. New Finance minster Tria may be less outspoken than Savona, but he’s no europhile, and together the two men can be a woeful pain in Europe’s behind. This is Italy. This is not Sparta.

The essence of the M5S-Lega program is painfully simple: they reject austerity as the basics of economic policy. And austerity is all that Europe’s policy has been based on for the past decade at least. That spells collision course. And there is zero indication that the new coalition is willing to give an inch on this. Tsipras may have in Greece, but Italy’s sheer size means it has a lot more clout.

To begin with, the program wants to do away with the Eurozone’s 3% deficit rule. It speaks of a 15-20% flat tax, and a €780 basic income. These two measures would cost between €109 billion and €126 billion, or 6 to 7% of Italian GDP. As Italy’s public debt stand at €2.4 trillion, 132% of GDP.

“The government’s actions will target a programme of public debt reduction not through revenue based on taxes and austerity, policies that have not achieved their goal, but rather through increased GDP by the revival of internal demand,” the program says. Yes, that is the opposite of austerity.

The parties want a roll-back of previously announced pension measures to a situation where the sum of a person’s age and years of social security contributions reach 100. If someone has worked, and contributed to social security for 40 years, they will be able to retire at 60, not at 67 as the present plans demand.

In an additional plan that will make them very popular at home amongst the corrupt political class, the parties want to slash the number of parliamentarians to 400 MPs (from 630) and 200 senators (from 318). They would be banned from changing political parties during the legislature.

 

And then there are the mini-Bots, a parallel currency system very reminiscent of what Yanis Varoufakis proposed for Greece. Basically, they would allow the government to pay some of its domestic obligations (suppliers etc.) in the form of IOUs, which could then in turn be used to pay taxes and -other- government services. They would leave what is domestic, domestic.

There’s a lot of talk about this being a first step towards leaving the euro, but why should that be so? The main ‘threat’ lies in the potential independence from Brussels it may provide a country with. But it’s a closed system: you can’t pay with mini-Bots for trade or other international obligations.

Italy, like an increasing number of Eurozone nations, is looking for a way to get its head out of the Brussels/Berlin noose that’s threatening to suffocate it. If the EU doesn’t react to this, and soon, and in a positive manner it will blow itself up. Yes, if Italy started to let its debt balloon, the European Commission could reprimand it and issue fines. But the Commission wouldn’t dare do that. This is Italy. This is not Sparta.

Anyway, risk off, as the markets suggest(ed) this morning? Surely you’re joking. And we haven’t even mentioned Trump’s trade wars yet. Risk is ballooning.

 

 

May 292018
 


Theodoor Rombouts( 1597-1637) Prometheus

 

On Friday, in This is the End of the Euro, I said: The euro has become a cage, a prison for the poorer brethren. The finance minister proposed by 5-Star/Lega and refused by Italian president Mattarella, Paolo Savona, has called the euro a German cage.

There are now stories spreading that the coalition, Savona first of all, were secretly planning an exit from the euro. A series of slides Savona prepared in 2015 on how to exit the euro is used as evidence of that secret plan. But the slides are not secret. Yes, he has said that it’s good to have a plan to leave ‘if necessary’. But that’s not the same as secretly planning such a move.

Every country should have such a plan, and you would hope they do. A government that doesn’t is being very irresponsible. But it’s true, this is how both the EU and the euro have been designed: not just as a prison, but as a prison without any doors or windows. No way to get out. And that will prove to be its fatal flaw.

It has more such flaws, for sure. The inequality of its members, which allows for the richer to feed on the poorer, is a big one. The US founders were smart enough to provide for transfer payments from rich to poorer, the EU founders couldn’t be bothered with that lesson. They must have studied it, though, and rejected it.

Credit were credit’s due: Yanis Varoufakis said it best when he compared the EU to the Eagles’ Hotel California. A few lines:

Mirrors on the ceiling
The pink champagne on ice
And she said “We are all just prisoners here, of our own device”
And in the master’s chambers
They gathered for the feast
They stab it with their steely knives
But they just can’t kill the beast

Last thing I remember
I was running for the door
I had to find the passage back to the place I was before
“Relax,” said the night man
“We are programmed to receive
You can check-out any time you like
But you can never leave!”

The EU was set up as some kind of eternal prison, a concept most familiar to us in the way Christian churches depict Hell, or the ancient Greek mythological story of Prometheus, who, as punishment for providing man with fire, was condemned by Zeus to being tied to a rock, with an eagle feeding on his liver every day, for eternity.

Rule number 1 for any organization: there must always be an escape, a way out. If there isn’t, that’s what will break the whole thing in the end. Think Leonard Cohen’s “There a crack in everything; that’s where the light comes in.” Every system must always be designed with inbuilt redundancy.

Paolo Savona understands that, and he said there must be a way to leave the euro. For Brussels and Rome, that means he’s not acceptable as a finance minister, no matter his competence, experience or credentials. It reeks of desperation on the ‘establishment’ side more than anything.

And now the entire financial world is in panic and turmoil. It’s ironic to see people decrying the sudden weakness in Italian “sovereign debt” at the same time they see pointed out, as if that were still necessary, that Italy is no longer a sovereign country. Think maybe there’s a clue to be found somewhere in there?

 

 

Italian bonds are falling so fast traders get vertigo. At what point will Mario Draghi be held accountable for the enormous losses this causes on the ECB’s books?

But fear not: the elites simply blame the whole thing on the people elected in Italy. Yes, that means they blame democracy. For daring to provide an election result that threatens their powers. And no, there is no other way to define what is happening than as a coup.

Italy will soon have all the characteristics of an emerging market. Which is a market from which no one can emerge in an emergency, according to one Don Cowe. I read that the six largest Italian banks together have €143 billion in Italian debt securities on their balance sheet. Systemic banks in the rest of Europe, mainly France, Spain and Germany, have €137 billion of Italian debt on their balance sheet. God only knows how much Mario Draghi holds:

 

 

That is one scary chart. And no, that is not the fault of 5-Star/Lega. It’s the fault of the European Union founders, and of its present ‘leadership’. What 5-Star/Lega have done is expose the stark-naked emperor. And the little boy who called out that sovereign didn’t undress him; he went out without any clothes on all by himself.

Varoufakis called out the naked emperor Brussels in 2015. Paolo Savona did so multiple times as well. The emperor’s reaction? Shut up the little boy, not get dressed. But the lesson contained in The Naked Emperor story is that there will always be another little boy to call him out. Shutting up the boy doesn’t solve the problem.

 

Greece and Italy are where western civilization was born. It appears wonderfully fitting to picture the EU at present as the German eagle picking at the southern European Prometheus’s liver for eternity. All the more so because Prometheus in Greek mythology was the champion of man: he first made man from clay, stood against the gods in favor of mankind, stole fire to provide it to man, and got punished for eternity for it.

The EU and euro cannot survive in their present state. But those who benefit most from both are also the ones who can stop either from undergoing desperately needed changes. That’s Hotel Europa.

 

 

May 282018
 


Brassaï La Bande du Grand Albert 1931-32

 

President Mattarella Of Italy: From Moral Drift To Tactical Blunder (Varoufakis)
Italy President Vetoes Savona As Economy Minister, May Mean New Election (R.)
Italy’s President Calls In Former IMF Official Amid Political Turmoil (R.)
First Greece, Now Italy, Portugal Next? (ZH)
Corporate Debt Soars While Credit Ratings Fall (Harry Dent)
Fed Relies On Biased Data That Makes ‘B- Economy’ Look Like ‘A+’ – Bianco (CNBC)
Blowing Up the Iran Deal Brings Eurasia Closer to Integration (Pieraccini)
Sudden Chaos In Spanish Politics (Spain Report)
Spain Struggling To Deal With Escalating Migration Crisis (G.)
Google, Facebook Hit With $8.8 Billion In Lawsuits on New EU Privacy Rules (ZH)
US Congressman: F-35s Could Be ‘Used Against Greece’ If Sold To Turkey (K.)
Huge Rise In Food Redistribution To People In Need Across UK (G.)
In Britain, Austerity Is Changing Everything (NYT)
‘We’re Gonna Keep Riding Till We Get Everybody Back Home, From All Wars’ (AFP)

 

 

“The formation of another ‘technical’ government, under a former IMF apparatchik, is a fantastic gift to Mr Salvini.”

President Mattarella Of Italy: From Moral Drift To Tactical Blunder (Varoufakis)

I concede that there are issues over which I would welcome the Italian President’s use of constitutional powers that (in my humble opinion) he should not have. One such issue is the outrageous policy of the Lega and the promise of its leader, Mr Salvini, to expel five hundred thousand migrants from Italy. Had President Mattarella refused Mr Salvini the post of Interior Minister, on the basis that he rejects such a monstrous project, I would be compelled to support him. But, no, Mr Mattarella had no such qualms. Not even for a moment did he consider vetoing the formation of a 5S-Lega government on the basis that there is no place in a European country for scenes involving security forces rounding up hundreds of thousands of people, caging them, and forcing them into trains, buses and ferries before expelling them goodness knows where.

No, Mr Mattarella vetoed the formation of a government backed by an absolute majority of lawmakers for another reason: His disapproval of the Finance Minister designate. And what was this disapproval based on? The fact that the said gentleman, while fully qualified for the job, and despite his declaration that he would abide by the EU’s eurozone rules, has in the past expressed doubts about the eurozone’s architecture and has favoured a plan of euro exit just in case it is needed. It was as if President Mattarella were to declare that reasonableness in a prospective Finance Minister constitutes grounds for his or her exclusion from the post!

Let’s face it: There is no thinking economist anywhere in the world who does not share a concern about the eurozone’s faulty architecture. And there is no prudent finance minister who does not have a plan for euro exit; indeed, I have itr on good authority that the German finance ministry, the ECB, every major bank and corporation have plans in place for the possible exit from the eurozone of Italy, even of Germany. Is Mr Mattarella telling us that only the Italian Finance Minister is not allowed to imagine having such a plan? Beyond his moral drift (as he condones Mr Salvini’s industrial-scale misanthropy while vetoing a legitimate concern about the eurozone’s capacity to let Italy breathe in its midst), President Mattarella has made a major tactical blunder.

In short, he fell right into Mr Salvini’s trap. The formation of another ‘technical’ government, under a former IMF apparatchik, is a fantastic gift to Mr Salvini. Mr Salvini is secretly salivating at the thought of another election – one that he will fight not as the misanthropic, divisive populist that he is but as the defender of democracy against the Deep Establishment. Already last night hescaled the high moral with the stirring words: “Italy is not a colony, we are not slaves of the Germans, the French, the spread or finance.”

Read more …

More than half of Italy feel utterly betrayed by their own president.

Italy President Vetoes Savona As Economy Minister, May Mean New Election (R.)

Italy’s president rejected Prime Minister-designate Giuseppe Conte’s pick for the economy ministry, a political source said on Sunday, a veto that may lead to another election this year.Conte, a little-known law professor with no political experience, took his list of ministers to President Sergio Mattarella, but the president rejected Conte’s candidate to the Economy Ministry, the 81-year-old eurosceptic economist Paolo Savona. Before Conte or Mattarella had finished their meeting, far-right League leader Matteo Salvini said that the only option now was to hold another election, probably later this year, without directly confirming the president’s veto.

“In a democracy, if we are still in democracy, there’s only one thing to do, let the Italians have their say,” Salvini said in a fiery speech to supporters in central Italy. Salvini and 5-Star leader Luigi Di Maio had met Mattarella informally on Sunday to try to find a solution. “The problem is Savona,” the coalition source said, explaining that the economist had not sufficiently softened some of his more eurosceptic positions. On Sunday, Savona tried to allay concerns about his views in his first public statement on the matter. Savona has been a vocal critic of the euro and the EU, but he has distinguished credentials, including as industry minister in the early 1990s. “I want a different Europe, stronger, but more equal,” Savona said in a statement.

Read more …

Another technocrat. That won’t go well this time around.

Italy’s President Calls In Former IMF Official Amid Political Turmoil (R.)

Italy’s president is expected to ask a former IMF official on Monday to head a stopgap government amidst political and constitutional turmoil, with early elections looking inevitable. President Sergio Mattarella has called in Carlo Cottarelli after two anti-establishment parties angrily abandoned their plans to form a coalition in the face of a veto from the head of state over their choice of economy minister. In a televised address, Mattarella said he had rejected the candidate, 81-year-old eurosceptic economist Paolo Savona, because he had threatened to pull Italy from the single currency. “The uncertainty over our position has alarmed investors and savers both in Italy and abroad,” he said, adding: “Membership of the euro is a fundamental choice. If we want to discuss it, then we should do so in a serious fashion.”

Financial markets tumbled last week on fears the coalition being discussed would unleash a spending splurge and dangerously ramp up Italy’s already huge debt, which is equivalent to more than 1.3 times the nation’s domestic output. After Mattarella’s move, the euro gained ground, adding 0.6% against the Japanese yen and ticking up against other major trading partners as well. The far-right League and anti-establishment 5-Star Movement, which had spent days drawing up a coalition pact aimed at ending a stalemate following an inconclusive March vote, responded with fury to Mattarella, accusing him of abusing his office.

5-Star leader Luigi Di Maio called on parliament to impeach the mild-mannered Mattarella, while League chief Matteo Salvini threatened mass protests unless snap elections were called. “If there’s not the OK of Berlin, Paris or Brussels, a government cannot be formed in Italy. It’s madness, and I ask the Italian people to stay close to us because I want to bring democracy back to this country,” Salvini told reporters. [..] Cottarelli would be a calming choice for the financial markets, but any technocratic administration would likely only be a short-term solution because the majority of parliamentarians have said they would not support such a government.

Read more …

Portugal is supposed to be the Prince of the PIIGS.

First Greece, Now Italy, Portugal Next? (ZH)

While most investors are focused on Italian politics – the parallel currency ‘mini-BoT’ fears and potential for a constitutional crisis – Spain is now facing its own political crisis amid calls for a no-confidence vote against Rajoy. However, ‘Spaxit’ remains a distant concern for investors as another member of the PIIGS peripheral problems is starting to signal concerns about ‘Portugone’?

And the fundamental data confirms Portugal is next in line for a debt crisis… As Statista’s Brigitte van de Pas notes, on average, European Union countries had a gross government debt of roughly 81% of GDP in 2018. This average disguises real differences between EU countries. Whereas Greece had a government debt of 177.8% in 2018, Estonia had a debt of only 8.8% – the lowest in the entire EU zone.

While, the high Greek debt is well-known, a number of other countries however also have a debt that is higher than their own GDP. The Italian debt, for example, is lower than the Greek but still significant, at over 130% of GDP. Portugal, in third place, had a debt of 122.5%. One small positive note though: all three countries had even higher debts in 2017, and the European Commission forecasted a slow, but further decrease of their government debt in 2019. Whether this holds true for Italy, with their newly-elected government of Movimento 5 Stelle and Lega remains to be seen.

Read more …

“U.S. corporate debt has risen from $40 trillion to $70 trillion since the top of the last bubble in 2007. That’s 63% in 10 years. It’s risen 135% since 2000! [..] China is the worst by far, going from $6 to $36 trillion or a 500% increase!”

Corporate Debt Soars While Credit Ratings Fall (Harry Dent)

[First], Congress’s approving a bill to roll back the Dodd-Frank Act. If this passes, smaller financial institutions will find relief from the strict rules that have applied to Wall Street banks since after the 2008 crisis. This is sheer idiocy! It will not end well. The second is the U.S. corporate debt is suffering one of its worst sell-offs since 2000. This is another disaster in the making. U.S. corporate debt has risen from $40 trillion to $70 trillion since the top of the last bubble in 2007. That’s 63% in 10 years. It’s risen 135% since 2000! Only government debt has risen faster, from $35 to $64 trillion, or 83%. China is the worst by far, going from $6 to $36 trillion or a 500% increase! Of course, many of these bonds are simply financial engineering to buy back stock to increase earnings per share.

Uber-low long-term interest rates thanks to QE have allowed companies to do this cheaply. The problem is these long-term rates have been rising since just July 2016. They’ve gone from 1.38% to 3.10%. That’s an increase of 172 basis points in the risk-free 10-year Treasury bond. That naturally reverberates up through the risk spectrum from investment grade corporate bonds to junk bonds. You see, here’s the thing…Governments have artificially pushed down bond yields for so long that companies have embraced speculation rather than productive investment (i.e. they’re not spending money on productive assets that will serve them and the economy well in the long-term). This mentality only creates financial asset bubbles that burst.

When companies buy back their own shares at historically high valuations, they’re speculating, just like an investor or hedge fund. When stocks crash ahead, shareholders will demand to know why these corporations used the money they will need to survive the crisis to speculate in their own stock… at the highest prices in history! Well, as the numbers are now showing, this corporate bond bubble is starting to burst, and of course that will ultimately hit junk bonds the worst… then stocks and real estate. But the real story here is that we’ve been in this bond bubble since 1981. And the quality of this corporate debt has been falling for nearly 40 years now. QE has only accelerated the decline. We’re now at the point where the median corporate bond rating is borderline junk…

Read more …

You don’t say…

Fed Relies On Biased Data That Makes ‘B- Economy’ Look Like ‘A+’ – Bianco (CNBC)

A veteran market researcher is out with a warning — saying the Federal Reserve is relying too heavily on economic surveys skewed by social media to mold their policies. According to Bianco Research President James Bianco, most economists mistakenly believe that leading indicators are signaling an “A+” economy that can withstand rising interest rates. “It’s more like a B- economy,” he told CNBC’s “Trading Nation” on Friday. “It’s not this screaming home run that everybody thinks it is based on the survey data.” Bianco said social media is creating the bandwagon effect among survey respondents, a psychological phenomenon characterized by people following the herd.

“The advent of social media is allowing us basically to be inundated with financial news or economic news,” he said, adding the bulk of the news about the world’s largest economy has been largely favorable. “When somebody is asked ‘what do you think about the economy,” they are not answering ‘what do you think about the economy,’ Bianco said. “They are answering ‘What have you read about the economy?'” Bianco fears the Fed will make a policy error based on respondents’ answers. “Economists like at the Fed say ‘Wow, look at that data. It’s even better than we thought. We have to raise rates even faster,'” he said, adding that the tightening could derail the bull market. “The 10-Year [yield] could very well be at 3% by the end of next year with a 3% funds rate,” Bianco said. “[That’s when] you get an inverted yield curve.”

Read more …

Nobo’s popular at home anymore. Except for Putin.

Blowing Up the Iran Deal Brings Eurasia Closer to Integration (Pieraccini)

Washington finds itself increasingly isolated in its economic and military policies. Merkel’s visit to Russia reaffirms the desire to create an alternative axis to the one between Brussels and Washington. The victory in Italy of two parties strongly opposed to new wars and the annulment of the JCPOA, and especially the sanctions against Russia, serves to form a new alliance, accentuating internal divisions within Europe. Macron, Merkel and May are all grappling with a strong crisis of popularity at home, which does not aid them in their decision-making. Exactly the same problems affect MbS, Trump, and Netanyahu in their respective countries. These leaders find themselves adopting aggressive policies in order to alleviate internal problems.

They also struggle to find a common strategy, often displaying schizophrenic behavior that belies the fact that they are meant to be on the same side of the barricades in terms of the desired world order. In direct contrast, China, Russia, Iran, and now India, are trying to respond to Western madness in a rational, moderate, and mutually beneficial way. And as a result, Europeans may perhaps begin to understand that the future lies not in piggybacking on Israel, Saudi Arabia and the United States. Trump seems to have offered the perfect occasion for European leaders to assert their sovereignty and start to move away from their traditional servility shown towards Washington.

Read more …

“This, as the saying goes, could be it.”

Sudden Chaos In Spanish Politics (Spain Report)

PSOE leader Pedro Sánchez really wants to be Prime Minister. The Socialist Party has been mostly flat in the polls for months, slowly trending down from 23% at the beginning of the year to 19% in the Metroscopia poll in El País on May 13. Articles had recently appeared wondering if Mr. Sánchez had anything relevant to say at all. His only notable intervention of late had been a meeting with Mariano Rajoy at Moncloa, the Prime Minister’s office, to agree on a joint response to the challenge posed by Quim Torra, the new separatist First Minister of Catalonia, whom Mr. Sánchez then decided to frame as “Spain’s Le Pen”, “a racist and a supremacist”.

With the publication of the Gürtel fraud case judgement on Thursday, the Socialist Party, which holds 84 out of 350 seats in Congress, has seized on an opportunity to move back into the political spotlight and oust the Popular Party from power with a motion of no confidence. Mariano Rajoy, famously unresponsive as political scandals erupt and opponents die off, wants to stay on as Prime Minister, of course, but this is a serious crisis: El País has characterised it as a “national emergency”. It is such a big mess that the PM felt he had to cancel his trip to Kiev to watch Real Madrid in the Champions League final.

He gave an unscheduled press conference on Friday afternoon, accompanied by his ministers, and accused Mr. Sánchez of wanting to destabilise Spain and wreck the country’s economic recovery. Moncloa sent out an unsigned, unofficial, unstamped “economic report” on Saturday, warning that the socialist motion of no confidence would cost €5 billion and 6,500 jobs. PP spokesman Fernando Martínez Maíllo said Mr. Sánchez would become the “Judas of Spanish politics” if he did a deal with Catalan separatists to take power. The Popular Party and Mr. Rajoy himself—also sliding inexorably downwards in the polls—sense real danger in the PSOE’s move. This, as the saying goes, could be it.

Read more …

“By early May this year, 4,409 people had reached Spain and 217 people had died in the attempt.”

Spain Struggling To Deal With Escalating Migration Crisis (G.)

Spain’s maritime rescue service has rescued hundreds of people trying to cross the Mediterranean into Europe this weekend amid growing concerns that the country is struggling to cope with the migration crisis. The service said its crews had rescued 293 people from nine boats on Saturday. On Sunday, a further 250 migrants were rescued from eight boats, three of which were in poor condition and later sank, they added. The migrants were from various countries in North and sub-Saharan Africa. On a single day in August last year, Spanish rescuers saved 593 people from 15 small paddle boats – including 35 children and a baby – after they attempted to cross the seven-mile Strait of Gibraltar.

According to statistics from the International Organisation for Migration (IOM) 21,468 migrants and refugees arrived in Spain by sea in 2017, with 224 people dying on the journey. The arrival figures showed a threefold increase on 2016, when 6,046 people reached Spain and 128 people died en route. By early May this year, 4,409 people had reached Spain and 217 people had died in the attempt. The UN refugee agency, UNHCR, has already warned that Spain is facing “another very challenging year” when it comes to helping and protecting those arriving on its shores.

Read more …

His case looks solid. But we’re talking the heart of these companies’ business models.

Google, Facebook Hit With $8.8 Billion In Lawsuits on New EU Privacy Rules (ZH)

Accusing Facebook, Google, WhatsApp, and Instagram of “intentionally” violating Europe’s strict new privacy rules that officially went into effect on Friday, Austrian lawyer and privacy activist Max Schrems filed four lawsuits against the tech companies arguing they are still “coercing users into sharing personal data” despite rolling out new policies ostensibly aimed at complying with the new regulations.

Titled the General Data Protection Regulation (GDPR), the new rules require companies to explicitly and clearly request consent from users before mining their data, and Schrems argues in his complaints – which seek fines totaling $8.8 billion – that Google, Facebook, and the Facebook-owned Instagram and WhatsApp are still utilizing “forced consent” strategies to extract users’ data when “the law requires that users be given a free choice unless a consent is strictly necessary for provision of the service,” TechCrunch explains. “It’s simple: Anything strictly necessary for a service does not need consent boxes anymore. For everything else users must have a real choice to say ‘yes’ or ‘no,'” Schrems wrote in a statement.

“Facebook has even blocked accounts of users who have not given consent. In the end users only had the choice to delete the account or hit the ‘agree’-button—that’s not a free choice.” While Facebook—which is currently embroiled in international controversy following the Cambridge Analytica scandal—insists that its new policies are in compliance with Europe’s new regulatory framework, Schrems argues that Facebook and Google aren’t even attempting to follow the new law. “They totally know that it’s going to be a violation, they don’t even try to hide it,” Schrems told the Financial Times. Schrems believes that courts can curtail companies’ ability to poke around in our private lives and wean them off their idea that, “ ‘We’re Silicon Valley, we know what’s right for everybody else.’ ”

Read more …

Strong lobby for this in Washington.

US Congressman: F-35s Could Be ‘Used Against Greece’ If Sold To Turkey (K.)

The United States should freeze the sale of the Lockheed Martin F-35 fighter jets to Turkey because they are more likely to used against Greece than against terrorists, Democratic US Congressman Brad Sherman told US Secretary of State Mike Pompeo, during a Foreign Affairs Hearing on May 23. “I hope that the administration will oppose and prevent the sale of F-35s [to Turkey]. They are not a weapon to be used against terrorists. They are a weapon to be used against Greece,” he said.

A US Senate committee passed earlier this week a defense policy bill that includes a measure to prevent Turkey from purchasing the F-35s, citing the country’s detention of US citizen Andrew Brunson and its agreement with Russia to buy its weapons systems in December. Sherman also called on the State Department not to block a House resolution on genocidal campaigns committed by the Ottoman Empire. “I hope the State Department will at least be neutral should Congress consider, as we are considering, the remembrance of the millions of Armenian, Greek, Assyrian, Chaldean and Syriac victims of the Ottoman Empire at the beginning of the last century,” he added.

Read more …

Fastest growing industry.

Huge Rise In Food Redistribution To People In Need Across UK (G.)

The UK’s largest food redistribution charity is helping to feed a record 772,000 people a week – 60% more than the previous year – with food that would otherwise be , new figures reveal. One in eight people in the UK go hungry every day – with the most needy increasingly dependent on – yet perfectly good food is wasted every day through the food production supply chain. FareShare said it was now redistributing food that otherwise would have been wasted with an annual value of £28.7m, up from £22.4m last year. “Three years ago we were helping to feed 211,000 people a week – today it’s three-quarters of a million,” said FareShare’s chief executive, Lindsay Boswell. “We reported in 2015 that we provided food across 320 towns and cities – now it’s 15,000. It’s not rocket science to see there has been a massive hike in demand for food from frontline charities.”

FareShare currently redistributes about 13,500 tonnes of surplus food every year donated by supermarkets, wholesalers and suppliers to 9,653 charities including hospices, homeless shelters, care homes and women’s refuges, but its annual target is 100,000 tonnes. Demand for surplus food has soared against a background of growing dependence on food banks and rising in the UK. FareShare says it has the capacity – and a waiting list of charities wanting help – but needs access to more food. Its solution is a government fund that would cover the costs of storage and transport. Available to any charity or producer that incurs the costs of redistributing food, it would also save charities and other beneficiaries £150m by making free food available to them. A public petition supporting this move attracted more than 16,000 signatures, which guarantees a government response.

Read more …

People will start leaving in droves sson.

In Britain, Austerity Is Changing Everything (NYT)

For a nation with a storied history of public largess, the protracted campaign of budget cutting, started in 2010 by a government led by the Conservative Party, has delivered a monumental shift in British life. A wave of austerity has yielded a country that has grown accustomed to living with less, even as many measures of social well-being — crime rates, opioid addiction, infant mortality, childhood poverty and homelessness — point to a deteriorating quality of life. When Ms. Lewis and her husband bought their home a quarter-century ago, Prescot had a comforting village feel. Now, core government relief programs are being cut and public facilities eliminated, adding pressure to public services like police and fire departments, just as they, too, grapple with diminished funding.

By 2020, reductions already set in motion will produce cuts to British social welfare programs exceeding $36 billion a year compared with a decade earlier, or more than $900 annually for every working-age person in the country, according to a report from the Center for Regional Economic and Social Research at Sheffield Hallam University. In Liverpool, the losses will reach $1,200 a year per working-age person, the study says. “The government has created destitution,” says Barry Kushner, a Labour Party councilman in Liverpool and the cabinet member for children’s services. “Austerity has had nothing to do with economics. It was about getting out from under welfare. It’s about politics abandoning vulnerable people.”

Read more …

They should do that for all Americans stationed abroad today. Bring the living ones home while they’re still alive.

‘We’re Gonna Keep Riding Till We Get Everybody Back Home, From All Wars’ (AFP)

Wearing bandanas, cowboy hats or gleaming helmets, tens of thousands of bikers descended on Washington Sunday to parade in honor of US soldiers missing in action in foreign wars, a now 30-year-old tradition known as “Rolling Thunder.” “We’re gonna keep riding until we get everybody back home, from all wars,” said Jack Richardson, who at 73 crossed the country from California for the 13th time to participate in the annual Memorial Day weekend spectacular. Dressed in a leather jacket emblazoned with patches, this Vietnam War veteran had assembled with thousands of other bikers in a parking lot near the Pentagon, awaiting the start of the parade.

The route will take them into the center of official Washington, past the monuments on the National Mall and the austere black marble memorial engraved with the names of the nearly 60,000 US soldiers killed during the Vietnam War. “Still there are families waiting back home here in the United States that have not found out where their dads, their fathers, their brothers – they don’t know where they are,” said Richardson, a retired Los Angeles police officer who served two tours in Vietnam in the 1960s. “They don’t know if they’re still in Vietnam, they don’t know if they’re still alive, they don’t know if they’re dead, they don’t know if they’re captured,” he said.

According to organizers, more than 85,000 US soldiers remain unaccounted for in conflicts as far back as World War I. Most are from World War II, but 1,598 of the missing are from the war in Vietnam, a conflict still fresh in the memories of older veterans. The parade was begun in 1988 with some 2,500 motorcycles under the motto “We will never forget” to press for an accounting of the Vietnam missing. It has grown every year since into a rumbling, roaring extravaganza that organizers say attracts over a million people, including spectators. Besides the missing, the bikers also come to remember their fallen comrades.

Read more …

May 252018
 


René Magritte The therapeutist 1937

 

The Spanish government is about to fall after the Ciudadanos party decided to join PSOE (socialist) and Podemos in a non-confidence vote against PM Rajoy. Hmm, what would that mean for the Catalan politicians Rajoy is persecuting? The Spanish political crisis is inextricably linked to the Italian one, not even because they are so much alike, but because both combine to create huge financial uncertainty in the eurozone.

Sometimes it takes a little uproar to reveal the reality behind the curtain. Both countries, Italy perhaps some more than Spain, would long since have seen collapse if not for the ECB. In essence, Mario Draghi is buying up trillions in sovereign bonds to disguise the fact that the present construction of the euro makes it inevitable that the poorer south of Europe will lose against the north.

Club Med needs a mechanism to devalue their currencies from time to time to keep up. Signing up for the euro meant they lost that mechanism, and the currency itself doesn’t provide an alternative. The euro has become a cage, a prison for the poorer brethren, but if you look a bit further, it’s also a prison for Germany, which will be forced to either bail out Italy or crush it the way Greece was crushed.

Italy and Spain are much larger economies than Greece is, and therefore much larger problems. Problems that are about to become infinitely more painful then they would have been had the countries been able to devalue their currencies. If you want to define the main fault of the euro, it is that: it creates problems that would not have existed if the common currency itself didn’t. This was inevitable from the get-go. The fatal flaw was baked into the cake.

 

And if you think about it, today the need for a common currency has largely vanished anyway already. Anno 2018, people wouldn’t have to go to banks to exchange their deutschmarks or guilders or francs, they would either pay in plastic or get some local currency out of an ATM. All this could be done at automatically adjusting exchange rates without the use of all sorts of middlemen that existed when the euro was introduced.

Americans and British visiting Europe already use this exact same system. Governments can make strong deals that make it impossible for banks and credit card companies to charge more than, say, 1% or 0.5%, on exchange rate transactions. This would be good for all cross-border trade as well, it could be seamless.

Technology has eradicated the reason why the euro was introduced in the first place, and made it completely unnecessary. But the euro is here, and it is going to cause a lot more pain and mayhem. Any country that even thinks about leaving the system will be punished hard, even if that’s the by far more logical thing to do.

Europe is not ready to call for the end of the experiment. Because so much reputation and ego has been invested in it, and because the richer nations and their banks still benefit -hugely- from the problems the poorer face. The one country that got it right was Britain, when it decided to stay out of the eurozone.

But then they screwed up the next decision. And found themselves with the most incompetent ever group of ‘chosen few’ to handle the outcome. Still, anyone want to take out a bet on who’s going to be worse off when the euro whip comes down, Britain or for instance Italy or France? Not me. Close call is the best I can come up with.

 

The euro was devised and introduced, ostensibly, to solve problems. Problems with cross border trade between European nations, with exchange rates. But instead it has created a whole new set of problems that turn out to be much worse than the ones it was supposed to solve. That’s how and why M5S and the League got to form Italy’s government.

In Spain, if an election is called, and it looks that way, you will either get a left wing coalition or more of the Rajoy-style same. Left wing means problems with the EU, more of the same means domestic problems; the non-confidence vote comes on the heels of yet another corruption scandal for Rajoy’s party.

And let’s not forget that all economic numbers are being greatly embellished all over the continent. If you can claim with a straight face that the Greek economy is growing, anything goes. Same with Italy. It’s only been getting worse. And yeah, there’s a lot of corruption left in these countries, and yeah, Europe could have helped them solve that. Only, it hasn’t, that is not what Brussels focuses on.

Italy for now is the big Kahuna. The EU can’t save it if the new coalition is serious about its government program. But it also can’t NOT save it, because that would mean Italy leaving the euro. And perhaps the EU.

If Italian bonds are sufficiently downgraded by the markets, Mario Draghi’s ECB will no longer be permitted to purchase them. And access to other support programs would depend on doing the very opposite of what the M5S/League program spells out, which is to stimulate the domestic economy. Is that a bad idea? Hell no, it’s just that the eurozone rules forbid it.

 

The euro has entirely outlived its purpose, and then some. But it exists, and it will be incredibly painful to unravel. The new game for the north will be to unload as much of that pain as possible on the south.

Europe would have been much better off of it had never had the euro. But it does. The politicians and bankers will make sure they’re fine. But the people won’t be.

The euro will disappear because the reasons for it not to exist are much more pressing than for it to do. At least that bit is simple. The unwind will not be.

 

 

May 172018
 
 May 17, 2018  Posted by at 8:40 am Finance Tagged with: , , , , , , , , , , , , ,  7 Responses »


Vincent van Gogh Daubigny’s garden 1890

 

Housing ATM is Back – But It Won’t Work Any Better This Time (Mish)
Will the New Fed Get Rid of All its Mortgage-Backed Securities? (WS)
Venezuela’s State Oil Company PDVSA Faces Collapse (PaP)
Births Plunge To Record Lows In United States (AFP)
Open Letter From M5S To The Financial Times (IBDS)
Ecuador’s Ex-President Denounces Treatment of Julian Assange as “Torture” (GG)
New Zealand ‘People’s’ Budget Puts Billions More Into Health And Education (G.)
Lords Inflict 15th Defeat On Theresa May Over EU Withdrawal Bill (G.)
Western Countries Have Known Novichok Formula For Decades – German Media (RT)
31,000 Unaccompanied Minors Applied For Asylum In EU in 2017 (K.)
DR Congo Ebola Outbreak Spreads To Mbandaka City (BBC)
Mysterious Return Of Ozone-Destroying CFCs Shocks Scientists (G.)
Startling National Geographic Cover Photo Captures The Plastic Crisis (NZH)

 

 

“People are further and further in debt and need to pull out cash to pay the bills.”

Housing ATM is Back – But It Won’t Work Any Better This Time (Mish)

With mortgage rates rising, one would expect refi activity to slow. And it has: Refi Applications are at an 8-Year Low. But why is there any refi activity all at all? In September 2017 the MND mortgage rate rate was 3.85%. In June 2016, the MND rate was 3.43%.

It makes little sense to refi at 4.70% when one could have done it less than two years ago a point and a quarter lower. At these rates, refi activity should be in the low single digits. Yet, 36% of mortgage applications are refis.

Are people pulling money out of their houses to pay bills? That’s how it appears as Cash-Out Mortgage Refis are Back. What’s Going On?
• People feel wealthy again and are willing to blow it on consumption
• People pulling money out to invest in stocks or Bitcoin
• People are further and further in debt and need to pull out cash to pay the bills.

I suspect point number three is the primary reason. Regardless, releveraging is as wrong now as it was in 2007. Totally wrong.

Read more …

Dump and dump.

Will the New Fed Get Rid of All its Mortgage-Backed Securities? (WS)

Like Powell, Clarida said he “absolutely” supports the Fed’s normalization of interest rates and the balance sheet. Like Powell, he said that the normalized balance sheet should be “a lot smaller,” and that Powell’s suggestion of a range of $2.4 trillion to $2.9 trillion, down from its peak-level of $4.5 trillion, “makes sense.” Like Powell, he said stock market volatility itself – that’s downward volatility, the only volatility that matters on Wall Street – shouldn’t determine the Fed’s policy decisions. On banking regulation too he mirrored Powell. So in this sense, what he said about mortgage-backed securities on the Fed’s balance sheet is fascinating: The Fed should shed them entirely, down to zero.

Clarida explained that there are “benefits and costs” of QE, and that as more layers of QE were piled on, “the benefits of QE diminished and the costs went up.” And as vice chairman, he’d “have to take a serious look at the costs of QE.” Then he was asked about “non-Treasury instruments, like mortgage-backed securities,” for QE – that the Fed, when selecting non-Treasury securities, would be getting into something that it shouldn’t, namely “allocating credit.” “Yes, absolutely,” Clarida replied: “My preference would be for the Fed to end up with a Treasury-only portfolio.” He then added that, “as a general proposition, my preference would be to have the balance sheet as much as possible in Treasury securities.”

Shedding MBS from the balance sheet entirely and keeping them off could have a big impact. Currently, the Fed holds $1.74 trillion of MBS. That’s about 26% of all residential mortgage-backed securities outstanding. The Fed is the elephant in the MBS room.

Read more …

“..the company that 20 years ago, was the second largest in the world..”

Venezuela’s State Oil Company PDVSA Faces Collapse (PaP)

In less than a month, Venezuela’s state oil company, Petróleos de Venezuela (PDVSA), faces three lawsuits that may end up taking all of the oil giant’s international assets, leaving it bankrupt. According to the economist and opposition congressman, Ángel Alvarado, the company that 20 years ago, was the second largest in the world, is about to disappear. Alvarado says that the state has no way to pay all its outstanding debts or the legal judgments that are looming. In an ominous sign, creditors today attempted to collect USD $2.9 billion that the oil company has failed to pay in debt obligations. The bankrupt company not only must face ConocoPhillips, after having lost a lawsuit where it was ordered to pay the US oil company USD $2 billion.

PDVSA now must also respond to a wave of similar claims, as it looks for a way to pay bondholders after default, and tries to restart refineries that are about to close because of diminished production caused by abandonment and embezzlement. In short, PDVSA faces the perfect storm for falling into bankruptcy, with no credible path for solvency. According to OPEC, Venezuela is the country with the largest proven reserves of crude oil in the world with 296 billion barrels. However, paradoxically, the export of crude oil is not a profitable business for the South American country after years of neglect by the socialist government. Recently the US company ConocoPhillips decided to seize the PDVSA’s assets in the Caribbean, a dangerous precedent that could influence other plaintiffs to take similar measures.

Read more …

Joining the rest of the world.

Births Plunge To Record Lows In United States (AFP)

Births in the United States have plunged to record lows not seen in decades, marking a profound cultural shift that could have ramifications for the future economy, experts said Thursday. The overall fertility rate, which essentially shows how many babies women are having in their childbearing years, and indicates whether the population is replenishing itself, fell to 1.76 births per woman last year, down 3% from the rate of 1.82 in 2016. That marks “the lowest total fertility rate since 1978,” said the report by the National Center for Health Statistics, part of the US Centers for Disease Control and Prevention. Meanwhile, the US birth rate plunged to a 30-year low.

The 3.85 million US births in 2017 were the fewest since 1987, as American women under 40 continued to delay childbearing. About 77,000 fewer babies were born last year than in 2016 – about a 2% drop year-on-year. The latest downward trend began around the onset of the global financial crisis in 2007 and 2008, but has not abated even as US jobs rebounded and the economy has improved. “To me the biggest surprise is the continuing decline of fertility rates among young women,” said William Frey, a demographer and senior fellow of the Metropolitan Policy Program at The Brookings Institution. “About 10 years since the Great Recession we still see this declining fertility among women in their 20s and that could be problematic if it continues for another three or four years.”

Read more …

“The last 30 years in Italy have been characterized by a constant mixture of politics, the mafia and occult affairs that have literally shattered our country to the bone..”

Open Letter From M5S To The Financial Times (IBDS)

Letter to CEO John Ridding and editors of the Financial Times. Dear Sirs, I have read your article “Rome opens its gates to the modern barbarians” and, with all due respect to an important newspaper like yours, honestly I think you need to better understand what is taking place in Italy. And I suggest you get to know the 5 Star MoVement a little more closely. The last 30 years in Italy have been characterized by a constant mixture of politics, the mafia and occult affairs that have literally shattered our country to the bone, marking every possible negative record in our history. Nowadays, Italy has about 6 million people under the absolute poverty threshold and about 100,000 young people every year expatriating to try their luck elsewhere, often in your country.

All this is the result of barbarians, old barbarians about whom I have never read as many negative things in your editorials as I am reading these days against us. The 5 Star Movement was born in 2009 with a specific aim: to bring the popular will back to the centre of the political debate and the decisions of the central government. In just 9 years we have grown so much that we can now see what we have accomplished, with over 11 million people who trusted us in the last elections. We succeeded by working hard, with our heads down, studying, always struggling to defend Italian citizens. We succeeded with the youngest, most educated and most gender-balanced parliamentary group that the history of Italy has ever seen. Italians have always believed us based on the awareness that everything we have promised or written in a program, has become a reality on the first occasion we have had to make it happen.

In your article you are talking about a contract of government that is difficult to implement and economically unsustainable: what a pity you have not read this contract yet! And this is an offence to professional journalism, also. But there is one thing you are right about. The contract we are writing is challenging and it will not be easy to remedy the damage caused by political barbarians governing our country for the past 30 years. But we are doing our best to restore hope and to give Italians a brighter future. If you want to better understand how we will acccomplish this, I suggest you do not waste time publishing false news created ad-hoc by the Italian media system, get to know the 5 Star Movement and report the truth instead. Good luck!

Read more …

On the Guardian’s hit pieces yesterday.

Ecuador’s Ex-President Denounces Treatment of Julian Assange as “Torture” (GG)

Former Ecuadorian President Rafael Correa, in an exclusive interview with The Intercept on Wednesday morning, denounced his country’s current government for blocking Julian Assange from receiving visitors in its embassy in London as a form of “torture” and a violation of Ecuador’s duties to protect Assange’s safety and well-being. Correa said this took place in the context of Ecuador no longer maintaining “normal sovereign relations with the American government — just submission.” Correa also responded to a widely discussed Guardian article yesterday, which claimed that “Ecuador bankrolled a multimillion-dollar spy operation to protect and support Julian Assange in its central London embassy.”

The former president mocked the story as highly “sensationalistic,” accusing The Guardian of seeking to depict routine and modest embassy security measures as something scandalous or unusual. On March 27, Assange’s internet access at the Ecuadorian Embassy in London was cut off by Ecuadorian officials, who also installed jamming devices to prevent Assange from accessing the internet using other means of connection. Assange’s previously active Twitter account has had no activity since then, nor have any journalists been able to communicate with him. All visitors to the embassy have also been denied access to Assange, who was formally made a citizen of Ecuador earlier this year.

[..] Correa continues to believe that asylum for Assange is not only legally valid, but also obligatory. “We don’t agree with everything Assange has done or what he says,” Correa said. “And we never wanted to impede the Swedish investigation. We said all along that he would go to Sweden immediately in exchange for a promise not to extradite him to the U.S., but they would never give that. And we knew they could have questioned him in our embassy, but they refused for years to do so.” The fault for the investigation not proceeding lies, he insists, with the Swedish and British governments.

But now that Assange has asylum, Correa is adamant that the current government is bound by domestic and international law to protect his well-being and safety. Correa was scathing in his denunciation of the treatment Assange is currently receiving, viewing it as a byproduct of Moreno’s inability or unwillingness to have Ecuador act like a sovereign and independent country.

Read more …

Hopeful.

New Zealand ‘People’s’ Budget Puts Billions More Into Health And Education (G.)

The first Labour government in close to a decade has pledged to make New Zealand a kind and equitable nation where children thrive, and success is measured not only by the nation’s GDP but by better lives lived by its people. Finance minister Grant Robertson said the Labour coalition government didn’t want to “manage” issues such as child poverty and homelessness – it wanted to end them. Although the 2018 budget was focused on rebuilding vital public services – particularly the health care sector – Robertson said next year’s budget would be the first in the world to measure success by its people’s wellbeing. “We want New Zealand to be a place where everyone has a fair go, and where we show kindness and understanding to each other,” said Robertson.

“These changes are about measuring success differently. Of course a strong economy is important but we must not lose sight of why it is is important. And it is most important to allow all of us to have better lives … the government is placing the wellbeing of people at the centre of all its work. The 2018 budget had been preceded by weeks of cautious rhetoric by the government, which repeated time and again that before embarking on its ambitious social policies such as ending child poverty, tackling climate change and housing every New Zealander, it first had to invest in upgrading public services such as hospitals and schools.

Labour’s first budget was viewed as restrained and fiscally cautious, with Robertson forecasting a NZ$3bn ($2bn) surplus this year, increasing to $7bn in 2020. Prime Minister Jacinda Ardern said her government’s first budget was not focused on the election cycle, but generational improvement in New Zealanders’ lives. “Rebuild what?” said Ardern, defending her government’s budget and rounding on the opposition leader, Simon Bridges. “Well let’s start with New Zealand’s reputation shall we? We are rebuilding a government that thinks about people.” “In 15 or 20 or 30 years’ time I want my child to look back on the history books and judge me and this government favourably, rather than deciding to change their name.”

Read more …

A sad comedy.

Lords Inflict 15th Defeat On Theresa May Over EU Withdrawal Bill (G.)

Peers have inflicted a 15th defeat on the government’s key Brexit bill, underlining the acute political challenge Theresa May faces in seeking a deal that both parliament and her warring ministers can live with. The latest amendment, aimed at bolstering environmental protection after Brexit, was carried by 294 to 244 votes on Wednesday. Peers argued that enforcement measures proposed in a consultation document published last week were inadequate and that the environment had been subordinated to housing and economic growth. With her cabinet still deadlocked over customs arrangements, the prime minister must now decide when to bring the legislation back to the House of Commons and seek to undo the changes made by peers.

Martin Callanan, the Conservative leader in the Lords, said: “During the bill’s journey through the House of Lords, some changes have been made that conflict with its purpose or are designed to frustrate the entire exit process, and so we are considering the implications of those decisions.” The backbench pro-Brexit European Research Group, chaired by Jacob Rees-Mogg, wants to see the votes brought forward as soon as possible to scotch the idea that there is a majority against hard Brexit among MPs. They point to a pair of recent Commons victories, over the release of Windrush documents and a , as evidence that the government’s majority is more secure than moderate backbenchers claim.

Read more …

“Some NATO countries were secretly producing the chemical agent in small quantities..”

Western Countries Have Known Novichok Formula For Decades – German Media (RT)

A sample of Novichok, the nerve agent allegedly used to poison the Skripals, was obtained by German intelligence back in the 1990s, local media report. The substance has since been studied and produced by NATO countries. Western countries, including the US and the UK, have long been aware of the chemical makeup of the nerve agent known as Novichok, a group of German media outlets reported following a joint investigation. The inquiry, based on anonymous sources, gives new insights into the issue of the nerve agent said to have been used in the poisoning of former double agent Sergei Skripal and his daughter Yulia in Salisbury, UK, in March.

Western governments were able to lay their hands on the formula of what is described as “one of the deadliest chemical weapons ever developed” after the German foreign intelligence service, the BND, obtained a sample of the nerve agent from a Russian defector in the early 1990s. A Russian scientist provided German intelligence with information on the development of Novichok for some time following the collapse of the Soviet Union, the German NDR and WDR broadcasters, as well as Die Zeit and Suedeutsche Zeitung dailies, report, citing unnamed sources within the BND. At some point, the man offered to bring the Germans a sample of the chemical agent in exchange for asylum for him and his family.

A sample was eventually smuggled by the wife of the scientist and sent by the Germans to a Swedish chemical lab, according to the reports. Following the sample analysis, the Swedish experts established the formula of the substance, which they then handed over to Germany. By the order of the then German Chancellor Helmut Kohl, the BND then shared the formula with Berlin’s “closest allies,” including the intelligence services of the US and the UK. Later, the UK, the US and Germany reportedly created a special “working group” tasked with studying the substance, which also included representatives from France, Canada and the Netherlands.

“Some NATO countries were secretly producing the chemical agent in small quantities,” the four media outlets reported, adding that it was allegedly done to develop the necessary countermeasures. However, it remains unclear which particular states were involved in the Novichok production.

Read more …

Let’s make sure they are protected.

31,000 Unaccompanied Minors Applied For Asylum In EU in 2017 (K.)

Some 2,500 unaccompanied minors applied for asylum in Greece last year, around 8% of the total 31,400 child refugees who sought asylum in European Union countries in 2017. Italy received a relatively large chunk of applications for asylum – more than 10,000, or 32% of the total – followed by Germany, with 9,100 applications (29%). The United Kingdom received 2,200 applications (7%), while Austria received 1,400 (4%), Sweden 1,300 and the Netherlands 1,200. The number of child refugees seeking asylum in EU countries in 2017 almost halved compared to the previous year. In 2016 there were 63,200 applications, while there were 95,200 in 2015. However, the total number of applications in the EU last year was still double the annual average of 12,000 between 2008 and 2013.

Read more …

On the river.

DR Congo Ebola Outbreak Spreads To Mbandaka City (BBC)

The Ebola outbreak in Congo has spread from the countryside into a city, prompting fears that the disease will be increasingly difficult to control. Health Minister Oly Ilunga Kalenga confirmed a case in Mbandaka, a city of a million people about 130km (80 miles) from the area where the first cases were confirmed earlier this month. The city is a major transportation hub with routes to the capital Kinshasa. Forty-two people have now been infected and 23 people are known to have died. Ebola is a serious infectious illness that causes internal bleeding and often proves fatal. It can spread rapidly through contact with small amounts of bodily fluid and its early flu-like symptoms are not always obvious.

Senior World Health Organization (WHO) official Peter Salama said the outbreak’s shift to a major city meant there was the potential for an “explosive increase” in cases. “This is a major development in the outbreak”. “We have urban Ebola, which is a very different animal from rural Ebola. The potential for an explosive increase in cases is now there.” Mr Salama, the WHO’s Deputy Director-General of Emergency Preparedness and Response, said Mbandaka’s location on the Congo river, widely used for transportation, raised the prospect of Ebola spreading to surrounding countries such as Congo-Brazzaville and the Central African Republic as well as downstream to Kinshasa, a city of 10 million people. “This puts a whole different lens on this outbreak and gives us increased urgency to move very quickly into Mbandaka to stop this new first sign of transmission,” he said.

[..] On Wednesday more than 4,000 doses of an experimental vaccine sent by the WHO arrived in the country with another batch expected soon. The vaccine from pharmaceutical firm Merck is unlicensed but was effective in limited trials during the Ebola outbreak in West Africa. It needs to be stored at a temperature of between -60 and -80 C. Electricity supplies in Congo are unreliable.

Read more …

Curious.

Mysterious Return Of Ozone-Destroying CFCs Shocks Scientists (G.)

A sharp and mysterious rise in emissions of a key ozone-destroying chemical has been detected by scientists, despite its production being banned around the world. Unless the culprit is found and stopped, the recovery of the ozone layer, which protects life on Earth from damaging UV radiation, could be delayed by a decade. The source of the new emissions has been tracked to east Asia, but finding a more precise location requires further investigation. CFC chemicals were used in making foams for furniture and buildings, in aerosols and as refrigerants. But they were banned under the global Montreal protocol after the discovery of the ozone hole over Antarctica in the 1980s. Since 2007, there has been essentially zero reported production of CFC-11, the second most damaging of all CFCs.

The rise in CFC-11 was revealed by Stephen Montzka, at the US National Oceanic and Atmospheric Administration (NOAA) in Colorado, and colleagues who monitor chemicals in the atmosphere. “I have been doing this for 27 years and this is the most surprising thing I’ve ever seen,” he said. “I was just shocked by it.” “We are acting as detectives of the atmosphere, trying to understand what is happening and why,” Montzka said. “When things go awry, we raise a flag.” Erik Solheim, head of UN Environment, said: “If these emissions continue unabated, they have the potential to slow down the recovery of the ozone layer. It’s therefore critical that we identify the precise causes of these emissions and take the necessary action.”

Read more …

Profound.

Startling National Geographic Cover Photo Captures The Plastic Crisis (NZH)

A haunting cover image on the June issue of National Geographic is circulating online, suggesting the plastic pollution we see is just the tip of the iceberg. Such is the extent of Earth’s mind-boggling plastic problem that scientists recently found a plastic bag in the Mariana Trench — the deepest point in the ocean, sitting nearly 11 kilometres below the surface. The Nat Geo cover image was shared by the magazine’s senior photo editor Vaughn Wallace on Twitter this morning who called it “one for the ages”.

[..] The latest edition of the magazine is dedicated to Earth’s plastic consumption and is filled with striking images and infographs that show the immense scale of plastic pollution plaguing our planet. As a small part of addressing the problem, the magazine has committed to delivering its issues in paper wrappers rather than plastic wrappers moving forward. One million plastic bottles are bought every minute around the globe and most of them end up in landfill where they take a significant time to break down, or in the ocean where they kill marine life.

Read more …

May 142018
 
 May 14, 2018  Posted by at 8:56 am Finance Tagged with: , , , , , , , , , , , ,  6 Responses »


Alfred Wertheimer Elvis 1956

 

S&P 500 Should Be 1,000+ Points Lower Than Today – David Rosenberg (MW)
Why I Think the Stock Market Cannot Crash in 2018 (WS)
Italy’s Nascent Government Has Tough Economic Circles To Square (R.)
US Threatens European Companies With Sanctions After Iran Deal Pullout (G.)
May Faces Deadlock Over Brexit Customs Rules As Both Options Rubbished (Ind.)
Shoppers Desert UK High Streets (G.)
UK Metropolitan Police’s Facial Recognition Technology 98% Inaccurate (Ind.)
UK To Host Summit On Why Six Other Countries Should Join The EU (Ind.)
Xi Might Join Trump And Kim In Singapore (MS)
Prosecutors Seek Complete Media Ban On Cardinal George Pell Trial (NM)
Greek Pensions Under €1,000 Will Also Be Cut In 2019 (K.)
Greece Considers Boosting Capacity Of Refugee Centers

 

 

“..there are some serious people out there saying some very serious things about the longevity of the cycle..”

S&P 500 Should Be 1,000+ Points Lower Than Today – David Rosenberg (MW)

A reversion to the mean in U.S. stock prices could mean the market will fall by at least 20%, according to David Rosenberg of Gluskin Sheff and Associates, who gave his prediction at the Strategic Investment Conference 2018 in San Diego. Rosenberg, the chief economist and strategist at Toronto-based Gluskin Sheff, said this is one of the strangest securities-market rallies of all time. That’s because all asset classes have gone up, even ones that are inversely correlated. He thinks a breaking point is a year away, and so investors should start taking precautions now.

The beginning of this year started off great for investors. The S&P 500 Index hit record highs at around 2,750 points, and stocks had their best January since 1987. As if that was not enough, Rosenberg pointed out, many Wall Street strategists raised their target to 3,000. The media extrapolating record returns only added to the rise in investors’ unreasonable expectations. However, increasingly more hedge fund managers and billionaire investors who timed the previous crashes are backing out.

One of them is Sam Zell, a billionaire real estate investor, whom Rosenberg says is a “hero” of his. Zell predicted the 2008 financial crisis, eight months early. But, essentially, he was right. Today, his view is that valuations are at record highs. Then we have Howard Marks, a billionaire American investor who is the co-founder and co-chairman of Oaktree Capital Management. He seconds Zell’s view that valuations are unreasonably high and says the easy money has been made. “And I don’t always try to seek out corroborating evidence. But there are some serious people out there saying some very serious things about the longevity of the cycle,” said Rosenberg.

According to Rosenberg’s calculations, the S&P 500 should be at least 1,000 points lower than it is today based on economic growth. In spite of this, equity valuations sit at record highs. Another historically accurate indicator that predicts the end of bull cycles is household net worth’s share of personal disposable income. As you can see in the chart below, the last two peaks in this ratio almost perfectly coincided with the dot-com crash and the 2008 financial crisis.

Read more …

There is no market.

Why I Think the Stock Market Cannot Crash in 2018 (WS)

The 85% of S&P 500 companies that have reported earnings so far disclosed they’d bought back $158 billion of their own shares in Q1, according to the Wall Street Journal. The quarterly record of $164 billion was set in Q1 2016. If the current rate applies to all S&P 500 companies, they repurchased over $180 billion of their own shares in Q1, thus setting a new record. At this trend, including a couple of slower quarters, S&P 500 companies are likely to buy back between $650 billion and $700 billion of their owns shares in 2018. This would handily beat the prior annual record of $572 billion in 2007.

Here are the top buyback spenders in Q1: Apple: $22.8 billion, Amgen: $10.7 billion, Bank of America: $4.9 billion, JPMorgan Chase: $4.7 billion, Oracle: $4 billion, Microsoft: $3.8 billion, Phillips 66: $3.5 billion, Wells Fargo: $3.34 billion, Boeing: $3 billion, Citigroup: $2.9 billion. Buybacks pump up share prices in several ways. One is the pandemic hype and media razzmatazz around the announcements which cause investors and algos to pile into those shares and create buying pressure. Since May 1, when Apple announced mega-buybacks of $100 billion in the future, its shares have surged 11%. The magic words.

Other companies with big share buyback programs have also fared well: Microsoft shares are up 14% year-to-date. And if buybacks don’t push up shares, at least they keep them from falling: Amgen shares are flat year-to-date. Shares of the 20 biggest buyback spenders in Q1 are up over 5% on average year-to-date, according to the Wall Street Journal, though the S&P 500 has edged up only 2%.

Read more …

Basic income AND a parallel currency. How can this fit inside the eurozone?

Italy’s Nascent Government Has Tough Economic Circles To Square (R.)

The Italian coalition taking shape 10 weeks after March’s inconclusive election has made economic promises that seem incompatible with Europe’s fiscal rules and will be hard, if not impossible, to keep. These include slashing taxes for companies and individuals, boosting welfare provision, cancelling a scheduled increase in sales tax and dismantling a 2011 pension reform which sharply raised the retirement age.The marriage being sealed between the anti-establishment 5-Star Movement and the far-right League was seen as an unlikely and worrying prospect by most analysts before the March 4 election ended in a hung parliament.

The pre-election adversaries have spent the last few days trying to fuse their very different programs into a “contract” of mutually acceptable policy commitments. What they have in common is that they are extremely expensive. On the face of it their plans, which they say may also include a form of parallel currency, could push the budget deficit far above targets agreed with the EU, setting up a clash with the European Commission and Italy’s partners. “We will need to renegotiate EU agreements to stop Italy suffocating,” League leader Matteo Salvini said on Saturday after a day of talks with his 5-Star counterpart Luigi Di Maio.

5-Star’s flagship policy of a universal income for the poor has been costed at around 17 billion euros ($20 billion) per year. The League’s hallmark scheme, a flat tax rate of 15 percent for companies and individuals, is estimated to reduce tax revenues by 80 billion euros per year. Scrapping the unpopular pension reform would cost 15 billion euros, another 12.5 billion is needed to head off the planned hike in sales tax, and the parties are also considering printing a new, special-purpose currency to pay off state debts to firms. “If implemented, it would be the biggest shake-up of the Italian economic system in modern times,” said Wolfgang Munchau, head of the London-based Eurointelligence think-tank.

[..] olfango Piccoli, co-president of Teneo Intelligence, said taking on Brussels would be popular with Italian voters, and the new government had little to fear from a European Commission which “is very weak and on its way out”. The Commission, with just a year of its term remaining, “can’t really do much other than put Italy’s finances under greater scrutiny, and markets don’t care about that”, he said.

Read more …

Bolton.

US Threatens European Companies With Sanctions After Iran Deal Pullout (G.)

Donald Trump is prepared to impose sanctions on European companies that do business in Iran following his withdrawal of the US from the international nuclear deal, his administration reiterated on Sunday. Trump’s most senior foreign policy aides signalled that the US would continue pressuring allies to follow Washington in backing out of the pact, which gave Tehran relief from sanctions in exchange for halting its nuclear programme. John Bolton, Trump’s national security adviser, predicted that “the Europeans will see that it’s in their interests to come along with us” rather than continue with the 2015 deal, under which major European corporations have signed billions of dollars of contracts in Iran.

Asked on CNN’s State of the Union whether that meant the Trump administration would impose sanctions against those firms, Bolton said: “It’s possible. It depends on the conduct of other governments.” US sanctions on Iran reimposed following Trump’s withdrawal not only block American firms from doing business in the country, but also bar foreign firms that do business there from accessing the entire US banking and financial system. Mike Pompeo, Trump’s secretary of state, said on Sunday wealth created in Iran under the terms of the nuclear deal “drove Iranian malign activity” in the region. He declined to rule out sanctions against European firms. “The sanctions regime that is in place now is very clear on what the requirements are,” Pompeo said on Fox News Sunday.

Read more …

Britain better get rid of her.

May Faces Deadlock Over Brexit Customs Rules As Both Options Rubbished (Ind.)

Theresa May faces deadlock over the key controversy of customs rules after Brexit, after senior politicians rubbished both of the options being studied by her warring cabinet. Michael Gove – picked by the prime minister to examine her preferred “customs partnership” model – warned there were “significant question marks over the deliverability of it”. Meanwhile, the Irish deputy prime minister insisted Dublin would block a Brexit withdrawal agreement if she pursued an alternative technology-based solution, saying: “It won’t work.” The warnings left Ms May with few apparent options to resolve the impasse, with a deadline set by the EU just six weeks away.

Two working groups of key ministers have been set up to study both the customs partnership – under which the UK would collect tariffs on behalf the EU – and the tech-based “max-fac” proposal. Mr Gove, the environment secretary, speaking on the BBC’s The Andrew Marr Show, declined to back Boris Johnson’s description of the partnership model as “crazy”. But he said: “Boris pointed out that because it’s novel, because no model like this exists, there have to be significant question marks over the deliverability of it on time.” Crucially, Mr Gove also suggested the proposal would break Ms May’s key promise – stated again today – to ‘take back control” of borders and laws.

“What the customs partnership requires the British government to do is in effect to act as the tax collector and very possibly the effective deliverer of regulation for the European Union,” he claimed. A proposal to seek EU agreement to keep the UK in the single market and customs union past the end of 2020, while a solution is found, was also stamped on by Mr Gove. “I don’t believe in an extension,” he said – arguing it was “critical to meet that deadline” of ending the post-Brexit transition period after 21 months.

Read more …

Slowly, people are starting to get very afraid of Brexit.

Shoppers Desert UK High Streets (G.)

Shoppers are deserting the high street in greater numbers than during the depths of the recession in 2009, creating a brutal climate that is putting thousands more retail jobs at risk. The coming days will be crucial to the future of a handful of household names, including Mothercare and Carpetright, which are trying to persuade investors to make vital cash injections so they can jettison unwanted stores. There is also the spectre of job losses at Poundworld, the struggling discount chain, which is being cut adrift by its American owners. Dwindling shopper numbers tally with weak spending figures for April, which show Britons slashed spending on gadgets, furniture and even nights out.

Consumer spending dropped 2% last month, according to Visa’s consumer spending index, which has recorded declines in 11 of the past 12 months. “With inflation beginning to fall and wages growing faster than expected in recent months, it would have been easy to assume we might be over the worst of the consumer squeeze,” Mark Antipof, the chief commercial officer at Visa, said. “Yet there has been no corresponding improvement in spending. It is clear that consumers remain in belt-tightening mode.” High street visits declined 3.3% in April, according to the BRC-Springboard monthly tracker, which also highlighted nearly one in 10 town centre shops are lying empty.

The drop in footfall came on the back of a disastrous performance in March, when shopper numbers declined by 6%. Taken together there has been an unprecedented 4.8% drop over the two months – a bigger decline than was recorded in the same months of 2009 when the UK was mired in recession. “Not since the depths of recession in 2009 has footfall over March and April declined to such a degree, and even then the drop was less severe at -3.8%,” said the Springboard analyst Diane Wehrle. “Much could be made of the adverse impact on April’s footfall of Easter shifting to March but even looking at March and April together still demonstrates that footfall has plummeted.”

Read more …

Priceless.

UK Metropolitan Police’s Facial Recognition Technology 98% Inaccurate (Ind.)

Facial recognition software used by the UK’s biggest police force has returned false positives in more than 98 per cent of alerts generated, The Independent can reveal, with the country’s biometrics regulator calling it “not yet fit for use”. The Metropolitan Police’s system has produced 104 alerts of which only two were later confirmed to be positive matches, a freedom of information request showed. In its response the force said it did not consider the inaccurate matches “false positives” because alerts were checked a second time after they occurred. Facial recognition technology scans people in a video feed and compares their images to pictures stored in a reference library or watch list. It has been used at large events like the Notting Hill Carnival and a Six Nations Rugby match.

The system used by another force, South Wales Police, has returned more than 2,400 false positives in 15 deployments since June 2017. The vast majority of those came during that month’s Uefa Champion’s League final in Cardiff, and overall only 234 alerts – fewer than 10 per cent – were correct matches. Both forces are trialling the software. The UK’s biometrics commissioner, Professor Paul Wiles, told The Independent that legislation to govern the technology was “urgently needed”. He said: “I have told both police forces that I consider such trials are only acceptable to fill gaps in knowledge and if the results of the trials are published and externally peer-reviewed. We ought to wait for the final report, but I am not surprised to hear that accuracy rates so far have been low as clearly the technology is not yet fit for use.

Read more …

Irony is dead.

UK To Host Summit On Why Six Other Countries Should Join The EU (Ind.)

The British government will host a summit encouraging six European countries to join the EU for the sake of their “security, stability and prosperity”, months before it is due to sign its own Brexit withdrawal deal with Brussels. London will in July play host to Western Balkans governments including Serbia and Albania, as well as existing EU member states, to discuss reforms to pave the way to future EU enlargement. The summit is part of the so-called Berlin Process – a series of meetings aimed at supporting the region towards joining the bloc and described by the European parliament’s research arm as “bringing a new perspective and impetus to the enlargement process”.

Critics said the UK government must have “a sense of humour” for hosting a conference on EU enlargement and extolling the benefits of accession as Britain itself headed towards the exit door. The leaders of EU candidate countries Albania, Montenegro, Macedonia, and Serbia will attend, as well as those of Bosnia and Herzegovina, and Kosovo – two states who have both expressed an interest in joining the bloc but have not yet been accepted as candidates. They will be joined by representatives of the governments of EU countries with an interest in the region such as Austria, Croatia, France, Germany, Italy, Poland, Slovenia and Bulgaria.

Read more …

Makes sense.

Xi Might Join Trump And Kim In Singapore (MS)

The prospect of China’s president Xi Jinping coming to Singapore on June 12, 2018 to meet with United States President Donald Trump and North Korea leader Kim Jong-un has been raised. This is according to mainstream media reports in Singapore on May 11, which re-reported a Japanese newspaper, Mainichi Shimbun, that cited American diplomatic sources. In the Friday report, Mainichi Shimbun quoted a senior international negotiator with the National Security Council saying that “there is a possibility” the leader of a third country may take part. It is understood that this leader is Xi. The suggestion that the three leaders will descend upon Singapore at the same time is not without merit.

On Tuesday, May 8, Trump spoke to Xi about Kim’s recent visit to China. The Chinese president and North Korean leader met Monday and Tuesday, May 7 and 8, in China again in a second meeting. This meeting followed Kim’s first visit to Beijing in March. However, as of Friday morning, there were no news reports on North Korean media outlets of the date and venue of Kim’s meeting with Trump, Japanese broadcaster NHK reported. Previously, Kim and South Korean president Moon Jae-in issued a joint declaration to say that both sides aim to realise complete denuclearisation for a nuclear-free Korean Peninsula, at the historic inter-Korea summit on April 27. They also agreed to pursue three-way talks involving the two Koreas and the US, or four-way talks involving the two Koreas, the US and China.

Read more …

People no longer have a right to know?

Prosecutors Seek Complete Media Ban On Cardinal George Pell Trial (NM)


On Friday, the Victorian Department of Public Prosecutions lodged an application with the Country Court of Victoria for a ‘super injunction’ against media coverage of the trial of Cardinal George Pell, who is accused of a number of historical sexual offences. Cardinal Pell – the Vatican’s treasurer and the third highest ranked Catholic in the world – was committed to stand trial a fortnight ago. The orders being sought by the DPP, which will be decided on Wednesday morning in the County Court in Melbourne before Chief Judge Peter Kidd, are:

(1) Publication is prohibited of any report of the whole or any part of these proceedings and any information derived from this proceeding and any court documents associated with this proceeding. (2) The prohibition on publication applies within all States and Territories of Australia and on any website or other electronic or broadcast format accessible within Australia. (3) For the purpose of this order, ‘publication’ has the meaning attributed to it by s3 of the Open Courts Act, that is to say, it means the dissemination or provision of access to the public by any means including, publication in a book, newspaper, magazine or other written publication, or broadcast by radio or television; or public exhibition; or broadcast or electronic communication. (4) The order will expire upon a jury verdict in respect of the charges on the final indictment, or by further order of the court.

Ordinarily, an injunction against media reporting of a trial prevents outlets from reporting the details of the trial. But they can report the existence of the injunction and explain to readers why they’re not reporting the matter. The order that the DPP is seeking in the Pell matter is so broad that it will operate as a super injunction. The suppression order would be ‘any part of’ the proceedings, meaning the trial could not be reported, nor could media report the fact they’re not allowed to report. If Wednesday’s application for a super injunction is successful, this story will have to be removed from publication. [..] Cardinal Pell, aged 76, is the most senior Catholic charged with sexual offences anywhere in the world. Cardinal Pell has strongly denied the allegations levelled against him.

Read more …

We’re on a road to nowhere..

Greek Pensions Under €1,000 Will Also Be Cut In 2019 (K.)

The planned pension cuts for people who have already retired and which will be implemented as of January 2019 will also affect pensions under 1,000 euros, Deputy Minister for Social Security Tasos Petropoulos admitted on Sunday. “In October we will see the exact cuts in pensions […] and will improve them,” he told broadcaster Skai. “We have seven months ahead.” Petropoulos said the 18 percent cut in pensions includes benefits, and estimated that about 25-30 percent of pensioners will be affected by the new reductions. He also pledged to pay all pending main pensions by August, “except in some particular cases.”

Read more …

Now Turkish citizens fleeing Erdogan are added.

Greece Considers Boosting Capacity Of Refugee Centers

The Migration Policy Ministry is reportedly considering increasing the capacity of existing refugee and migrant centers on the mainland as a first step in managing a recent spike in arrivals from neighboring Turkey, in a plan ministry sources say the European Union agrees with. “Practically, this means tents will be set up between the containers, exacerbating the already difficult situation for the residents,” a nongovernmental organization official said. Increasing capacity also means that the current logistics involved in running the camps will have to be adjusted. For example, if daily food costs are €3.50 per person per day (according to the specifications cited in official announcements), an additional 16,478 additional refugees will mean an extra €57,673 per day.

According to official data, 6,632 refugees crossed into Greece in April alone and 16,478 people in the first five months of the year, of whom 9,375 arrived on the islands and 7,103 from the Evros border in northeastern Greece. The government is also hoping to reduce arrivals and overcrowding on the islands by investing in diplomacy with Turkey and speeding up the asylum process through a bill which is being discussed in Parliament. At the same time, the reactions of residents on the islands that have borne the brunt of migration, even if they do not reflect the views of the entire population, show their patience is wearing thin. Authorities have also recorded increased arrivals of Turkish nationals from Evros. About 30 Turks have been arriving on a daily basis since Turkish President Recep Tayyip Erdogan called elections for next month, versus zero arrivals previously.

Read more …

May 132018
 
 May 13, 2018  Posted by at 9:18 am Finance Tagged with: , , , , , , , , , ,  8 Responses »


Pablo Picasso Le repos 1932
This painting has a story. It’s very funny. Read below.

 

Bill Gross’s Wife Paints Fake Picasso, Swaps It With Real Thing In Divorce (NYP)
Fed To Deliver ‘Punch In The Face’ Markets Aren’t Prepared For – Boockvar (CNBC)
Who’s Most Afraid of a Latin American Debt Crisis? (DQ)
Can We Blame The Bankers? (Pettifor)
UK’s 17-Year Wage Squeeze The Worst In Two Hundred Years (Tily)
EU Set To Push For 6-Month Extension To Brexit Transition Period (Ind.)
The Hard Border Is Too Hard A Question (G.)
Half A Million ‘Hidden’ Young People In UK Left Without State Help (Ind.)
UK Campaigners Slam £1 Million Incentive To Store Nuclear Waste (G.)
Italy Could Blow Up Europe As We Know It (Pol.eu)
Italy’s Radical M5S And League On Verge Of Forming Government (G.)
EU’s Mogherini: Iran Nuclear Deal Will Hold (Pol.eu)
Damage To North Korea’s Nuclear Test Site Is Worse Than Anyone Thought (Ind.)
Bad Bitches From Mars (Jim Kunstler)

 

 

Bill Gross’s wife. About the Picasso above.

Bill Gross’s Wife Paints Fake Picasso, Swaps It With Real Thing In Divorce (NYP)

A woman locked in a contentious divorce with her bond-trader husband took a Picasso off his wall and replaced it with a forgery she made herself. Sue Gross didn’t wait until she and Wall Street titan Bill Gross had finalized their split, swapping out a 1932 Pablo Picasso painting entitled “Le Repos” hanging in their bedroom with her own rendering. The original is expected to fetch as much as $35 million at Sotheby’s Monday evening. The painting, which depicts Picasso lover Marie-Thérèse Walter, had belonged to them jointly. But a coin flip in August 2017 amid the couple’s divorce proceedings awarded Sue full custody of Picasso’s depiction of his sleeping mistress, which the couple had owned since 2006.

After the flip, Bill Gross tried to make arrangements for the piece to be transferred from his Laguna Beach, Calif., house to his ex-wife, sources told The Post. But the ex-Mrs. Gross said that was unnecessary; she already had taken the real thing. The couple’s art collection had been appraised by Sotheby’s in January 2017 amid the divorce proceedings, but Bill learned only later the Picasso was appraised in a different location than Laguna Beach. Bill was shocked Sue already had the piece, a source said, adding that Bill said, She stole the damn thing. In November testimony, the ex-wife readily admitted to swiping the Picasso, citing an e-mail Bill sent to her where he instructed her to “take all the furniture and art that you’d like”.

“And so I did,” she said. But it wasn’t quite that simple, as testimony revealed the ex-wife’s prowess for both painting and artful deception. “Well, you didn’t take it and leave an empty spot on the wall, though, did you?” lawyers for Bill Gross asked. “No,” Sue responded. “You replaced it with a fake?” the lawyer asked. “Well, it was a painting I painted,” Sue responded. “A replication of the Picasso?” the lawyer asked. “A replication, yes,” Sue answered. “And it had the Picasso signature and everything, didn’t it?” the lawyer asked. “Not exactly . . .” she said. “Whose signature was it? Sue Gross?” the lawyer asked.

“I don’t remember how I signed it. Bill will remember because I painted it at home years ago,” she said. “Did you tell him that you took the Picasso?” the lawyer asked. “No. We didn’t speak for a year and a half,” she answered just before the line of questioning turned to a 7-foot, 300-pound rabbit sculpture she also admitted taking.

Read more …

“..it’s very rare that the Fed engineers soft landings, and I’m not a believer that they’re going to do it again this time.”

Fed To Deliver ‘Punch In The Face’ Markets Aren’t Prepared For – Boockvar (CNBC)

Markets already know the Federal Reserve will deliver more rate hikes this year. They’re just not prepared for how much it will hurt, according to Peter Boockvar, chief investment officer of Bleakley Advisory Group. “The Fed is trying to ease the effect of their rate hike cycle by being very transparent,” Boockvar told CNBC’s “Futures Now” this week. It is “trying to convince us that quantitative tightening is like watching paint dry.” Fed chair Jerome Powell is carrying on Janet Yellen’s legacy of full transparency by prepping the markets as best as he can for inevitable monetary tightening. The Fed’s message of ‘steady-as-she-goes’ rate increases has calmed Wall Street into thinking this will mostly be a smooth path higher.

Boockvar expects tighter monetary policy will have a far greater impact than the Fed is telegraphing, and the market is anticipating. “Regardless of how they tell us, regardless of how they do it, there’s still a rise in the cost of capital, there’s still a drain of liquidity,” he said. He used a colorful analogy for the shock the markets will be dealt, even with the Fed’s fair warning. “If I gave you a month’s notice that I’m going to punch you in the face, when I punch you in the face, it’s still going to feel the same, it’s still going to hurt,” he said. Even worse, it’s more like two blows: While the Fed hikes interest rates, it’s also shrinking its balance sheet, Boockvar points out. “The biggest risk to the market is that they’re really tightening twice through the reduction of the size of their balance sheet,” said Boockvar.

[..] “At the same time, they’ll likely raise two more times this year, so the rise in interest rates to me is very noteworthy,” said Boockvar. “In a very over-levered, credit-dependent economy, that is my main concern because it’s very rare that the Fed engineers soft landings, and I’m not a believer that they’re going to do it again this time.”

Read more …

Spain.

Who’s Most Afraid of a Latin American Debt Crisis? (DQ)

Economic history appears to be rhyming once again in Latin America. Perennial credit-basket-case Argentina was one of the first countries to suffer a major currency crisis this century. Now, its government has asked the IMF for a brand-new bailout. But if this classic last-gasp fix was meant to calm the markets, it isn’t working. Previous Latin American debt crises have taught us two things: • The direct impact on the general populace, already suffering from sky-high poverty rates, is devastating; • Once the first domino falls, contagion can spread like wildfire. The debt crisis of the early 1980s, which spread to virtually all corners of the region, famously paved the way to Latin America’s “lost decade.”

Mexico’s Tequila Crisis of 1994-5 at one point became so serious that it almost brought down some of Wall Street’s biggest banks. At the moment, as long as the US dollar and US yields continue to rise, emerging market jitters can be expected to grow. As British financial correspondent Neal Kimberley notes, markets often behave like predators, running down what they perceive as the weakest prey first — a role being filled, with usual aplomb, by Argentina. Emerging market weakness is by now a generalized trend. The jitters could soon spread to Latin America’s two largest economies, Brazil and Mexico, which between them account for close to 60% of Latin America’s GDP. Both of the countries face general elections in the next two months.

[..] But it’s not just countries that are at risk of contagion; so, too, are global companies with a big stake in the affected markets. Few companies are more exposed to Latin America than large Spanish ones. Some were already burnt in Argentina’s last crisis and default. But in the aftermath of Spain’s real estate collapse, opportunities at home dried up to such an extent that access to Latin America’s fast-growing economies became a godsend. But it could soon become a curse.

Read more …

What makes austerity dangerous.

Can We Blame The Bankers? (Pettifor)

At a Rethinking Economics conference in Oslo last month I pointed out that western politicians and economists are repeating policy errors of the 1930s. The pattern of a global financial crash, followed by austerity in Europe and the UK, led in those years to the rise of populism, authoritarianism and ultimately fascism. The scale of economic and political failures and missteps led in turn to a catastrophic world war. Today that pattern – of a global financial crash, austerity and a rise in political populism and authoritarianism – is evident in both Europe and the US. And talk of war has risen to the top of the US political agenda. Why have we not learnt lessons from the past?

The “fount and matrix” (to quote Karl Polanyi) of the international financial system prior to its collapse in 1929, was the self-regulating market. The gold standard was the policy by which the private finance sector, backed by economists, central bankers and policy-makers, sought to extend the domestic market system to the international sphere – beyond the reach of regulatory democracy. In the event, the 1929 stock market crash put an end to the delusional aspirations of Haute Finance: namely that financiers could detach their activities from democratic, accountable political oversight. (Polanyi, The Great Transformation 1944).

Between 1929 and 1931 the losses from the US stock market crash were estimated at $50bn. It was the worst economic failure in the history of the international economy. Within three years of the crash millions of Americans were unemployed, and farmers were caught between rising debts and deflating commodity prices. In Germany between 1930 and 1932, Heinrich Brüning, the Chancellor, with the tacit support of Social Democrats, imposed a savage austerity programme that led to high levels of unemployment and cuts in welfare programmes. This in turn led to the demise of social democracy, the rise of fascism and ultimately a global war.

Read more …

Again, austerity. Theresa May trumps Napoleon.

UK’s 17-Year Wage Squeeze The Worst In Two Hundred Years (Tily)

A decade on from the financial crisis, real wages today are still worth £24 a week less than they were in 2008. By the time they’re forecast to return to their pre-crash level in 2025, real wages will have been in decline for 17 years – the longest period since the beginning of the nineteenth century. The TUC compared the current wage squeeze (including the forecast) with every major earnings crisis over the past two centuries. We found that the only slump longer than the one we’re experiencing today was the 24 years between 1798 and 1822, a period when Europe was ravaged by the Napoleonic Wars and their aftermath. In fact, real wages even recovered faster during the Great Depression (10 years) and after the Second World War (7 years), as the chart below shows:


Year zero is the pre-crisis peak. Outcomes in subsequent years are measured as an index relative to that point. The real wage index returns to 100 when the crisis is over.

The current crisis not only dwarfs all others during the last century; it is the biggest since the period between 1798, when Nelson destroyed the French Fleet at the Battle of the Nile, and 1822, when the economy finally began to recover from the devastation of the Napoleonic Wars:

Read more …

What’s the difference?

EU Set To Push For 6-Month Extension To Brexit Transition Period (Ind.)

The EU is to push for an optional six-month extension to the Brexit transition period to be built in to the UK’s withdrawal agreement, The Independent understands. European Commission officials will seek the extension to give the EU added flexibility, but it comes as key figures in the UK also look to extend the transition to give time to implement new customs arrangements. Next week a crunch meeting will see Theresa May’s top ministers try to agree what kind of customs relations to seek in negotiations, with both of her proposed options potentially needing more time than the current transition allows. The Independent has been told by two sources in Brussels that the EU wants the six-month extension to protect its own interests, as Brexit negotiations come to their most critical phase.

One said: “Of course they are aware of the sensitivity around the issue in London, but it is about giving the commission more leeway if needed, at the end of the transition to get things in place.” A second official in Brussels said it would be normal for the commission to seek the added time, simply as a safety precaution given the uncertainty surrounding the British position. The commission is expected to try to put the optional six-month extension into the withdrawal agreement late on in the negotiations process, in order to maximise the chance of it being accepted. According to the current withdrawal agreement text, the transition period is set to last around 18 months from the end of March 2019 until December 2020 – to give time for both sides to get their houses in order before new legal and trade systems come into play.

Read more …

They have no clue how to solve this. This whole Brexit preparation thing is just a waste of time.

The Hard Border Is Too Hard A Question (G.)

[..] it would be satisfying to rewind and show that the reason many now believe Britain must stay connected to the EU for five years or so relates to complex customs rules and how they cannot be reconciled with open borders. Parliament only took notice when MPs on the Brexit select committee damned the government’s dithering. The committee’s message was that keeping the Irish border open and at the same time installing border controls with the EU couldn’t work. Ever since their report last December, the border contradiction has travelled through Whitehall like a virus, forcing civil servants to drop what they are doing in a desperate bid to find a cure. As one senior civil servant put it, officials are too busy finding a way to put the right export stamp on a sheep’s backside to think about anything else.

So far, no cure has been found and the situation is looking desperate. Foreign companies have virtually switched off the stream of investment into the UK. By the end of last year, OECD figures show foreign direct investment down by half on the average seen from 2012 to 2015 and by 90% on the bumper inflow of funds seen in 2016. [..] Even the most confident Brexiters have noticed the economy flagging under the weight of the customs union uncertainty. It’s such a quandary that last week Tory MPs were openly considering adding another three years to the transition deal just to give the brightest minds in the civil service enough time to sort it out. That would take the UK’s membership of the customs union to 2023.

They recognise that any attempt to stay inside an economic zone with the EU – whether that be the “Norway option”, under the banner of the European Economic Area, or the “Swiss option”, which involves negotiating upwards of 100 separate trade agreements – comes with a demand for free movement of labour. That, as we know, is an unacceptable outcome for Leave voters.

Read more …

Throwing away much of a generation. Just like in Greece.

Half A Million ‘Hidden’ Young People In UK Left Without State Help (Ind.)

Almost half a million young people are at risk of “a life of unemployment and poverty” after being left without any state help to survive and find work, ministers have been warned. The alarm has been raised over a staggering number of “hidden jobless” who have “fallen off the government radar”, despite promises of intensive support to achieve their potential. The new research has found that 480,000 16- to 24-year-olds are missing out on both benefits and advice – no less than 60 per cent of the official total of young jobless. Strikingly, many of them have good job prospects, boasting impressive GCSE qualifications and having continued with their education beyond 16.

But they refuse to go to job centres because they are “unhelpful” or they “fear being treated badly” – due to the threat of sanctions – while others lack the necessary documents. A senior MP has now demanded answers from ministers, while campaigners are urging the government to let them plug the gap where the state is failing young people. Frank Field, the chairman of the Commons Work and Pensions Committee, told The Independent: “It seems as though a small army of unemployed young people have fallen through the gaps in the safety net without any official data recording whether they are destitute. “If we are to prevent them from being consigned to a life of unemployment and poverty, a first move must involve gathering accurate data on which young people are without either a job or an income, so they can then receive appropriate support.”

Read more …

One word: Yucca.

UK Campaigners Slam £1 Million Incentive To Store Nuclear Waste (G.)

MPs from both major parties have attacked the government’s latest incentive to entice communities into volunteering to host Britain’s first deep underground store for nuclear waste as “completely inadequate”. Ministers have offered up to £1m per community for areas that constructively engage in offering to take part in the scheme, and a further sum of up to £2.5m where deep borehole investigations take place. The aim is to find a permanent underground geological disposal facility (GDF) that could store for thousands of years the waste from Britain’s nuclear energy and bomb-making programmes. The scheme could involve building stores under the seabed to house highly radioactive material. It is predicted that the UK is likely to have produced 4.9m tonnes of nuclear waste by 2125.

But critics say the inducements offered by the government – part of the consultations it launched this year – to ensure local cooperation are “simply not good enough”, and point to the example of France, which has a similar amount of nuclear waste. It offers around €30m (£26.5m) a year as local support for districts neighbouring the site at Bure, in north-east France, and has also offered €60m in community projects. [..] The government is seeking to dispose of the UK’s nuclear waste underground because current storage facilities are both ineffective and expensive to maintain. A GDF would involve sealing the waste in rock for as long as it remains a hazard. The plan was also criticised by the Conservative MP Zac Goldsmith, who said the UK should stop making nuclear waste and stop building new reactors.

“We are still pouring untold billions of taxpayer money into propping up an industry that the free market would have killed off years ago,” he said. “In return, we will be compounding the catastrophe of a nuclear waste build-up, which we are no closer to solving than we were when the industry was born.” Nina Schrank, energy campaigner at Greenpeace UK, added: “The lack of seriousness with which the UK government treats nuclear legacy issues makes it predictable that their quest for a suitable site has been so unsuccessful that they are looking again at the Irish Sea, which Sellafield turned into one of the most radioactively contaminated seas in the world.”

Read more …

“..we all know what usually happens when the EU goes on the ballot (see France and Netherlands in 2005, Ireland in 2008, Britain in 2016, pick your year in Denmark)”

Italy Could Blow Up Europe As We Know It (Pol.eu)

As Italy’s leading vote-getters work through the weekend to hammer out a coalition deal — about time, some might add, two months after the election — the EU and Brussels establishments are in a state of heightened anxiety. A government of the 5Stars (anti-establishment, in media shorthand) and the League (far right, ditto) together, or somehow alone, is unprecedented. Never before in any of the six original EU countries, much less one of its leading powers, have parties deeply skeptical toward the EU grabbed the reins of power. If that happens, the consequences for Italy and the EU could be felt for months and years to come. But the appetizer has been served. A surprise election outcome that sidelined Italy’s more traditional left and right parties and catapulted this odd couple into the limelight is disrupting European politics in unexpected ways.

[..] an Italian euro-exit is hardly off the table either. Beppe Grillo, the 5Stars’ founder, last week revived the idea of forcing a referendum on Italy’s membership in the single currency. It is, after all, in the party’s DNA — and we all know what usually happens when the EU goes on the ballot (see France and Netherlands in 2005, Ireland in 2008, Britain in 2016, pick your year in Denmark). Italy’s high debt, low growth and terrible demographics make it an unhappy fit in a eurozone dominated by northern economic powerhouses. If anything, the speculation about the intentions of any government with the 5Stars in it hardly helps boost investor confidence in Italy.

[..] The success of these two parties brings home the changed mood among Italians. That’s especially true for the young. In a 2017 poll, just over half of people under 45 said they would vote to leave the EU if Italy holds a referendum on EU membership (while 68 percent of respondents over 45 supported staying in the bloc). Young adults in Italy have memories only of economic stagnation and crisis. While domestic politics and finance can be blamed for much of that, the heavy hand of the EU is often present in the tale of woe.

Read more …

Just yesterday, Berlusconi got permission to run again. So maybe no new government yet?

Italy’s Radical M5S And League On Verge Of Forming Government (G.)

When Italians went to the polls in early March, the message was loud and clear: it was time for the parties that had dominated politics since the early 1990s to vacate the stage. Over 50% of voters backed two outsider parties, the anti-establishment Five Star Movement (M5S) and the far-right League. Over two months later, the pair are on the verge of forming a coalition government that could break decisively with the centrist policies that went before. Matteo Salvini, leader of the League (formerly the Northern League), and his M5S counterpart, Luigi di Maio, have been thrashing out a deal that could be revealed as soon as Sunday. “The Italian people want this government,” said Mattia Diletti, a professor at Sapienza University in Rome.

“They want to see something new, and I think Sergio Mattarella [Italy’s president] understands this.” Salvini and Di Maio, an odd couple who have spent most of the past two months hurling insults at each other, are working to put together a policy document and are expected to update Mattarella on Sunday. Di Maio has said that “considerable steps forward” have been made on a policy programme, with agreement on issues such as tougher laws on immigration, reform of pensions, a flat tax and a universal basic income. But it is unclear who Italy’s next prime minister will be. The names mooted in the Italian press include the League’s deputy leader, Giancarlo Giorgetti; Giampiero Massolo, chairman of shipbuilder Fincantieri and ex-chief of the secret service, and Elisabetta Belloni, the foreign ministry’s secretary general.

In any event, the candidate is likely to be someone who will heed Mattarella’s thinly disguised warning to the coalition on Thursday against retreating from Europe. M5S has softened its stance on the EU, saying it would like to open discussions on “some treaties” rather than pull Italy out, while Salvini has said he wants to “defend Italy” within the bloc.

Read more …

Hmmm…doubtful at best: .. the secret of change — and we need change — is to put all energies not in destroying the old, but rather in building the new.

So change, but decided by the same people…

EU’s Mogherini: Iran Nuclear Deal Will Hold (Pol.eu)

The Iran nuclear deal can survive without the United States’ support, Federica Mogherini, the EU’s foreign policy chief, said Friday. Speaking at a State of the Union conference, Mogherini said she has received assurances from Iranian President Hassan Rouhani that the country would stand by the agreement, despite U.S. President Donald Trump’s decision to withdraw and reimpose sanctions on Iran earlier this week. “We are determined to keep this deal in place,” Mogherini said, adding that only Iran has the power to unilaterally wreck the deal.

The Italian diplomat will meet with the foreign ministers of Germany, France and the United Kingdom — the three European powers that brokered the nuclear deal along with the EU, U.S., China and Russia — in Brussels Tuesday to discuss the future of the agreement. The European diplomats will also meet with Iranian Foreign Minister Mohammad Javad Zarif. Europeans are seeking to demonstrate that they can still deliver most of the economic benefits Tehran was promised in exchange for giving up its nuclear weapons program and allowing a robust system of international inspections, as well as persuade European companies active in Iran not to abandon their deals out of fear of being penalized by the U.S.

In her speech, Mogherini took several shots at Trump, though she did not mention the U.S. president by name, saying: “It seems that screaming, shouting, insulting and bullying, systematically destroying and dismantling everything that is already in place, is the mood of our times. While the secret of change — and we need change — is to put all energies not in destroying the old, but rather in building the new. “This impulse to destroy is not leading us anywhere good,” she added. “It is not solving any of our problems.”

Read more …

And he’s going to make closing it into a wonderful ceremony. Everyone’s welcome.

Damage To North Korea’s Nuclear Test Site Is Worse Than Anyone Thought (Ind.)

The damage to North Korea’s nuclear test site after its latest missile firing is believed to be worse than previously thought, it has been reported. Space-based radar showed that after the initial impact of the blast, which took place in September 2017, a large part of the underground Punggye-ri test site caved in. Chinese scientists had previously said that due to a partial collapse of a mountain near the test region that part of the site was no longer useable. The new research, from a study published in Science magazine, confirms this is likely to be the case. Sylvain Barbot, one of the authors of the study, said: “This means that a very large domain has collapsed around the test site, not merely a tunnel or two.”

Read more …

I made that title up.

Bad Bitches From Mars (Jim Kunstler)

I sense that with Schneiderman we’ve reached the zenith in this comic phase of American cultural collapse. The same week, Vanity Fair Magazine ran this item about the pop star Rihanna: Rihanna’s lingerie collection will drop on Friday [today], and there’s one very special addition that is making people lose their minds: her line, Savage x Fenty, will feature handcuffs. [Fenty is Ms. Rihanna’s surname.] Just days after she reimagined the Pope at the Met Gala, Rihanna is reminding us that this is still her week. She told Vogue that it was only natural that Fenty Beauty, which launched last fall, feature a lingerie line for women who want to express agency over their own looks and bodies…. ‘Women should be wearing lingerie for their damn selves,’ Rihanna [told Vogue]. I want people to wear Savage x Fenty and think, I’m a bad bitch.’”

[..] The Martian in me sees America turning into something like a Fellini movie, a panorama of fabulous excess and sinister fantasy, with the more malign forces of commerce propelling the garbage barge to ever darker extremes at the edge of a flat earth. On one part of the edge stands President Trump, all greatness and little goodness; and on the other edge stand characters like Eric Schneiderman and Harvey Weinstein, deposed champions of social justice — now cultural blood-brothers in the Sexual Predators Hall of Infamy. Mr. Schneiderman was all set to drag Mr. Weinstein, figuratively speaking, over several miles of broken glass and old Gillette blue blades in the state courts, and now it looks like the former NY AG himself may submit to a death of a thousand cuts by civil litigation, or maybe even a trip to one of his old criminal courtrooms, if the ever-vengeful Governor Andrew Cuomo has his wicked way.

If America were an X-rated billiard parlor, I’d think it had run the table on political sex stories, with nothing but the eight-ball of doom left on the table, and a wrathful deity — the Pope’s boss, shall we say — standing there chalking up his cue stick. When he sinks that last shot, a new game will get underway. I believe it will have to do with financial markets and currencies, and a lot more will hang on the outcome. The break itself should be a doozy — all those colored balls banging into each other and dropping into oblivion.

Read more …

 


For your Sunday calm: Philip Glass paints both the river flowing by, and the traffic of New York City, all at the same time. For him, in the end, it’s the same thing.

 

 

Mar 052018
 
 March 5, 2018  Posted by at 11:04 am Finance Tagged with: , , , , , , , , , , , ,  6 Responses »


Astor Theater, Times Square NYC 1945

 

Monetary Policy In The Grip Of A Pincer Movement (BIS)
The Arithmetic of Risk (John Hussman)
BOJ’s Kuroda Joins Queue of Central Banks Looking Toward Exit (BBG)
Trump’s Trade War Is For The Forgotten People (Eric Peters)
Italy Faces Political Gridlock After 5-Star Surges (R.)
China Sets 2018 GDP Target at About 6.5%, Turns Fiscal Screws (BBG)
Tax the Wealth of Older Britons to Help the Young, Report Argues (BBG)
Eliminate The Deficit? Eliminate Economic Hope, More Like (McDuff)
15,000 New Manchester Homes And Not A Single One ‘Affordable’ (G.)
The Tyranny of Algorithms (G.)
US Embassy In Turkey Closed Due To Security Threat (R.)
Erdogan Advisor Says Ankara Ready To ‘Strike’ In Eastern Med (K.)
Australia: Global Deforestation Hotspot (G.)
Europe Tree Loss Pushes Beetles To The Brink (BBC)

 

 

Financial cycles appear to have grown in amplitude and length. Next move could be really wild.

Monetary Policy In The Grip Of A Pincer Movement (BIS)

The emergence of disruptive financial cycles and the limited sensitivity of inflation to domestic slack may at first sight seem to be unrelated. In fact, there may be a common thread: the behaviour of monetary policy. Consider each in turn. The first major development is that, since around the early 1980s, financial cycles appear to have grown in amplitude and length. There is no unique definition of the financial cycle. A useful one refers to the self-reinforcing processes between funding conditions, asset prices and risk-taking that generate expansions followed by contractions. These processes operate at different frequencies. But if one is especially interested in those that cause major macroeconomic costs and banking crises, probably the most parsimonious description is in terms of credit and property prices.

Graph 1 illustrates the phenomenon for the United States using some simple statistical filters, although the picture would not be that different for many other countries or using other techniques (eg peak-trough analysis). The graph shows that the amplitude and length of the fluctuations has been increasing, that the length of the financial cycle is considerably longer than that of the traditional business cycle (blue versus red line) and that banking crises, or serious banking strains, tend to occur close to the peak of financial cycle. Another key feature of financial cycles is that the bust phase tends to generate deeper recessions. Indeed, if the bust coincides with a banking crisis, it causes very long-lasting damage to the economy.

There is evidence of permanent output losses, so that output may regain its pre-crisis long-term growth trend while evolving along a lower path. There is also evidence that recoveries are slower and more protracted. And in some cases, growth itself may also be seriously damaged for a long time. Some recent work with colleagues sheds further light on some of the possible mechanisms at work. Drawing on a sample of over 40 countries spanning over 40 years, we find that credit booms misallocate resources towards lower-productivity growth sectors, notably construction, and that the impact of the misallocations that occur during the boom is twice as large in the wake of a subsequent banking crisis.

Read more …

“.. I continue to expect the S&P 500 to lose about two-thirds of its value over the completion of the current market cycle…”

The Arithmetic of Risk (John Hussman)

At present, I view the market as a “broken parabola” – much the same as we observed for the Nikkei in 1990, the Nasdaq in 2000, or for those wishing a more recent example, Bitcoin since January. Two features of the initial break from speculative bubbles are worth noting. First, the collapse of major bubbles is often preceded by the collapse of smaller bubbles representing “fringe” speculations. Those early wipeouts are canaries in the coalmine. In July 2007, two Bear Stearns hedge funds heavily invested in sub-prime loans suddenly became nearly worthless. Yet that was nearly three months before the S&P 500 peaked in October, followed by a collapse that would take it down by more than 55%.

Observing the sudden collapses of fringe bubbles today, including inverse volatility funds and Bitcoin, my impression is that we’re actually seeing the early signs of risk-aversion and selectivity among investors. The speculation in Bitcoin, despite issues of scalability and breathtaking inefficiency, was striking enough. But the willingness of investors to short market volatility even at 9% was mathematically disturbing. See, volatility is measured by the “standard deviation” of returns, which describes the spread of a bell curve, and can never become negative. Moreover, standard deviation is annualized by multiplying by the square root of time. An annual volatility of 9% implies a daily volatilty of about 0.6%, which is like saying that a 2% market decline should occur in fewer than 1 in 2000 trading sessions, when in fact they’ve historically occurred about 1 in 50.

The spectacle of investors eagerly shorting a volatility index (VIX) of 9, in expectation that it would go lower, wasn’t just a sideshow in some esoteric security. It was the sign of a market that had come to believe that stock prices could do nothing but advance, and could be expected to do so in an uncorrected diagonal line. I continue to expect the S&P 500 to lose about two-thirds of its value over the completion of the current market cycle. With market internals now unfavorable, following the most offensive “overvalued, overbought, overbullish” combination of market conditions on record, our market outlook has shifted to hard-negative. Rather than forecasting how long present conditions may persist, I believe it’s enough to align ourselves with prevailing market conditions, and shift our outlook as those conditions shift.


Annotation in blue by Mish

Read more …

Perhaps this is truly a coordinated effort. The BIS could be doing the coordination.

BOJ’s Kuroda Joins Queue of Central Banks Looking Toward Exit (BBG)

The end of the easy money era which spanned the global economy for the last decade came into even sharper focus as the Bank of Japan gave fresh insight into when it might slow its stimulus program. Governor Haruhiko Kuroda’s remarks on Friday that the central bank will start thinking about how to complete its unprecedented easing around the fiscal year starting April 2019 was the clearest signal yet that a conclusion might be in sight to emergency support for the Japanese economy. While Kuroda’s statement in response to questions from lawmakers was in some ways stating the obvious – the BOJ forecasts inflation to reach its 2% target in fiscal 2019 – the significance is that he’s put down a marker in public that he can be held to.

“It’s notable how over the past few weeks Kuroda has been forced into talking more specifically about the exit,” said Izumi Devalier, head of Japan economics at BofAML. “A year and a half ago he would have shut down the discussion altogether with the blanket ‘it’s too early to talk about it’ statement.” That means the last of the big central banks is finally thinking out loud about policy normalization or how to begin the process of unwinding years of asset purchases and ultra-low interest rates that were used to stoke growth after the 2008 financial crisis sparked the worst global recession in decades. The Fed, Bank of Canada and Bank of England have already raised interest rates and may do so again soon, while the ECB is debating how soon to end its own bond-buying. China’s central bank is sticking to what it describes as neutral policy settings and is ratcheting up money market rates to cool the pace of borrowing.

Read more …

Peters is never boring.

Trump’s Trade War Is For The Forgotten People (Eric Peters)

“The import restrictions announced by the US President are likely to cause damage not only outside the US, but also to the US economy itself, including to its manufacturing and construction sectors, which are major users of aluminum and steel,” warned the IMF, their army of nerds in full sweat. Panic. Just 200k Americans work in steel, aluminum and iron. 5.5mm of our 154mm workers are employed by businesses that use steel. “How could the Americans make such an idiotic mistake?” howled the nerds. But of course, they entirely miss the point. “If the EU wants to further increase their already massive tariffs and barriers on US companies doing business there, we will simply apply a Tax on their Cars which freely pour into the US. They make it impossible for our cars (and more) to sell there. Big trade imbalance!” tweeted Trump.

The US currently imposes a 2.5% tariff on EU auto imports. The EU imposes a 10% tariff on US auto imports. Germany exports $25bln of autos to America annually. “US auto prices will rise,” warned the Washington Post. But of course, they entirely miss the point. “Trade wars are good, easy to win,” tweeted Trump, knowing the statement would trigger every nerd with a college degree. Some worried about their jobs. But not terribly. Because their unemployment rate is just 2%, their labor force participation is 74%. They’re as well off as they’ve ever been. Particularly when set against those who never went to college, 5% of whom are unemployed, and 50% don’t even participate in the labor force. They’ve given up. These trade policies are for these forgotten people. To hell with the consequences. That’s the point.

Read more …

More for forgotten people. Beppe got them where he wanted; largest party by a huge margin. Merkel and Macron’s “More Europe” plans can be shelved. But first, expect more tricks to keep the old guard in power.

Italy Faces Political Gridlock After 5-Star Surges (R.)

Italy faces a prolonged period of political instability after voters delivered a hung parliament on Sunday, spurning traditional parties and flocking to anti-establishment and far-right groups in record numbers. With votes counted from more than 75% of polling stations, it looked almost certain that none of the three main factions would be able to govern alone and there was little prospect of a return to mainstream government, creating a dilemma for the EU. A rightist alliance including former prime minister Silvio Berlusconi’s Forza Italia (Go Italy!) held the biggest bloc of votes. In a bitter personal defeat that appeared unlikely last week, the billionaire media magnate’s party looked almost certain to be overtaken by its ally, the far-right League, which campaigned on a fiercely anti-migrant ticket.

But the anti-establishment 5-Star Movement saw its support soar to become Italy’s largest single party by far, and one of its senior officials said on Monday that forming a coalition without it would be impossible. The League’s economics chief on Monday raised the possibility of an alliance with 5-Star. Any government based on that combination would be euro-skeptic, likely to challenge EU budget restrictions and be little interested in further European integration. The full result is not due until later on Monday and, with the centre-right coalition on course for 37% of the vote and 5-Star for 31%, swift new elections to try to break the deadlock are another plausible scenario.

Despite overseeing a modest economic recovery, the ruling centre-left coalition trailed a distant third on 22%, hit by widespread anger over persistent poverty, high unemployment and an influx of more than 600,000 migrants over the past four years.

Read more …

Plus huge cuts to steel production. China is hurting.

China Sets 2018 GDP Target at About 6.5%, Turns Fiscal Screws (BBG)

China stepped up its push to curb financial risk, cutting its budget deficit target for the first time since 2012 and setting a growth goal of around 6.5% that omitted last year’s aim for a faster pace if possible. The deficit target – released Monday as Premier Li Keqiang delivered his annual report to the National People’s Congress in Beijing – was lowered to 2.6% of GDP from 3% in the past two years. The 6.5% goal is consistent with President Xi Jinping’s promise to deliver a “moderately prosperous” society by 2020. Policy makers dropped a target for M2 money supply growth, saying it’s expected to expand at similar pace to last year. Authorities reiterated prior language saying prudent monetary policy will remain neutral this year and that they’ll ensure liquidity at a reasonable and stable level.

Xi has ratcheted up his drive to curb debt risk, pollution and poverty at a time when the world’s second-largest economy is on a long-term growth slowdown. His efforts to rein in spending contrast with an historic expansion of U.S. borrowing under Donald Trump during a period of economic expansion. The 2018 targets “suggest slower growth and a fiscal drag,” said Callum Henderson, a managing director for Asia-Pacific at Eurasia Group in Singapore. “This makes sense for China in the context of the new focus on financial de-risking, poverty alleviation and environmental clean-up, but is less good news at the margin for those economies that have high export exposure to China.”

Read more …

Is it too late to close the gap in a peaceful manner?

Tax the Wealth of Older Britons to Help the Young, Report Argues (BBG)

Britain should impose higher wealth taxes on the older generation to ease the growing burden on young people, according to the Resolution Foundation. In a speech Monday, Executive Chair David Willetts will warn that welfare spending is set to rise by the equivalent today of 60 billion pounds ($83 billion) by 2040 as aging “baby boomers” drive up the cost of health care. “The time has come when we Boomers are going to have reach into our own pockets,” he will say. “The alternative could be an extra 15 pence on the basic rate of tax, paid largely by our kids. Is that kind of tax really the legacy we – a generation who own half the nation’s wealth – want to bequeath our children and grandchildren?”

Willetts, a former minister in the ruling Conservative Party, will make the case for reform of council tax – a property-based levy that helps fund local services – and of inheritance tax. Failure to act could fuel a sense of grievance among young people who are already struggling to match to the living standards enjoyed by older generations, he will say.

Read more …

“..deficits aren’t only not bad, they’re necessary…”

Eliminate The Deficit? Eliminate Economic Hope, More Like (McDuff)

Congratulations, everyone! We did it! The deficit has been eliminated! George Osborne, the architect of austerity, emerged from one of his non-jobs as the editor of the London Evening Standard to tell us all it was a “remarkable national effort” on Twitter, as if he’d ever broken a sweat over it. David Cameron, who will go down as arguably the worst prime minister in history thanks to the gigantic power move of doing a Brexit and running away, simply added: “It was the right thing to do” – safe in the knowledge that he was now out of the line of fire from tough questions.

That will all be cold comfort to the thousands of homeless people struggling to cope with sub-zero temperatures, or those having to choose between keeping the heating on, or risk going into rent arrears and losing their home entirely; to public sector workers in the NHS or local government, trying to keep the wheels from falling off as they deliver vital services in the face of budget cuts; and to disabled and unemployed people, bearing the brunt of the government’s spending cuts and facing harassment from the authorities. Forget all that. We’ve eliminated the deficit, and all we had to do was attack the poor and vulnerable with a relentless fury, create a new generation of young people for whom the concept of pensions or even steady wages is a fantasy, and undermine public services to such a grotesque extent that it will take years to rebuild what we’ve lost. Hooray!

[..] As Richard Murphy of Tax Research UK points out: “A growing economy requires general price increases, or inflation. Except under unusual circumstances, a general increase in prices requires an increasing money supply. A fiscal deficit is the only way in which money can be injected into an economy continuously. It follows that governments must run a near perpetual deficit or face the risk of creating a liquidity crisis due to a shortage in the money supply, which would then create a risk of deflation.” In other words, deficits aren’t only not bad, they’re necessary. Without them we get deflation, an over-indebted household sector, and an explosion in inequality.

The government is not like your household. It does not “run out of money,” because its job is to match the quantity of money to the desired economic activity. Its “debts” are not like your debts – they’re your savings and your pension funds. Osborne’s “remarkable national effort” was always and only to ensure that the government sector took more money out of the economy than it put into it. His great legacy is that we’re now at the stage where for every pound the government spends in day-to-day services, it taxes, and therefore destroys, more than a pound somewhere else. And we put people on the streets to freeze to achieve it. Go us.

Read more …

Thatcher-inflicted pain continues.

15,000 New Manchester Homes And Not A Single One ‘Affordable’ (G.)

Some of the UK’s biggest cities are allowing developers to plan huge new residential developments containing little or no affordable housing. In Manchester, none of the 14,667 homes in big developments granted planning permission in the last two years are set to be “affordable”, planning documents show – in direct contravention of its own rules, and leading to worries that London’s affordable housing crisis is spreading. In Sheffield – where house prices grew faster last year than in any other UK city, according to property portal Zoopla – just 97 homes out of 6,943 (1.4%) approved by planners in 2016 and 2017 met the government’s affordable definition. That says homes must either be offered for social rent (often known as council housing), or rented at no more than 80% of the local market rate.

In Nottingham, where the council aims for 20% of new housing to be affordable, just 3.8% of units given the green light by council planners meet the definition, Guardian research found. In Manchester, named by Deloitte earlier this month as one of Europe’s fastest growing cities and where property now sells three times as quickly as in London, planners have routinely waved through huge new developments – some containing swimming pools, tennis courts and more than 1,000 flats. Not one of the swanky apartments meets the national definition of “affordable” – leading critics to accuse the council of social cleansing. Others worry the city could become like London, where people on average salaries can no longer afford to live anywhere central.

Read more …

Aka the terror of social media.

The Tyranny of Algorithms (G.)

For the past couple of years a big story about the future of China has been the focus of both fascination and horror. It is all about what the authorities in Beijing call “social credit”, and the kind of surveillance that is now within governments’ grasp. The official rhetoric is poetic. According to the documents, what is being developed will “allow the trustworthy to roam everywhere under heaven while making it hard for the discredited to take a single step”. As China moves into the newly solidified President Xi Jinping era, the basic plan is intended to be in place by 2020. Some of it will apply to businesses and officials, so as to address corruption and tackle such high-profile issues as poor food hygiene.

But other elements will be focused on ordinary individuals, so that transgressions such as dodging transport fares and not caring sufficiently for your parents will mean penalties, while living the life of a good citizen will bring benefits and opportunities. Online behaviour will inevitably be a big part of what is monitored, and algorithms will be key to everything, though there remain doubts about whether something so ambitious will ever come to full fruition. One of the scheme’s basic aims is to use a vast amount of data to create individual ratings, which will decide people’s access – or lack of it – to everything from travel to jobs. The Chinese notion of credit – or xinyong – has a cultural meaning that relates to moral ideas of honesty and trust.

There are up to 30 local social credit pilots run by local authorities, in huge cities such as Shanghai and Hangzhou and much smaller towns. Meanwhile, eight ostensibly private companies have been trialling a different set of rating systems, which seem to chime with the government’s controlling objectives. The most high-profile system is Sesame Credit – created by Ant Financial, an offshoot of the Chinese online retail giant Alibaba. Superficially, it reflects the western definition of credit, and looks like a version of the credit scores used all over the world, invented to belatedly allow Chinese consumers the pleasures of buying things on tick, and manage the transition to an economy in which huge numbers of people pay via smartphones. But its reach runs wider.

Read more …

What does Washington have to say?

US Embassy In Turkey Closed Due To Security Threat (R.)

The U.S. embassy in Turkey’s capital Ankara will be closed to the public on Monday due to a security threat and only emergency services will be provided, it said in a statement on Sunday. The embassy advised U.S. citizens in Turkey to avoid large crowds and the embassy building and to be aware of their own security when visiting popular tourist sites and crowded places. It did not specify what the security threat was that prompted the closure. Additional security measures were taken after intelligence from U.S. sources suggested there might be an attack targeting the U.S. embassy or places U.S. citizens were staying, the Ankara governor’s office said in a statement. Visa interviews and other routine services would be canceled on Monday, the embassy said, adding that it would make an announcement when it was ready to reopen.

Read more …

Same guy said if Greeks set foot on -their own- Imia islets, it will basically mean war.

Erdogan Advisor Says Ankara Ready To ‘Strike’ In Eastern Med (K.)

A close advisor of Turkish President Recep Tayyip Erdogan has warned of a “strike” in the eastern Mediterranean if any attempt to explore or drill for hydrocarbons goes ahead without Ankara’s approval. Yigit Bulut, who is known for his incendiary remarks, was quoted by the Cyprus News Agency as telling Turkish state broadcaster TRT that Erdogan is prepared to call a “strike” at any “attempt at provocation.” “Have no doubt about it,” he said. Ankara has vowed to prevent any exploration for oil or gas around Cyprus and last month was accused to threatening to use force against a drillship chartered by Italy’s Eni to explore Block 3 of Cyprus’s exclusive economic zone.

Read more …

3 million hectares to be lost over 15 years.

Australia: Global Deforestation Hotspot (G.)

Australia is in the midst of a full-blown land-clearing crisis. Projections suggest that in the two decades to 2030, 3m hectares of untouched forest will have been bulldozed in eastern Australia. The crisis is driven primarily by a booming livestock industry but is ushered in by governments that fail to introduce restrictions and refuse to apply existing restrictions. And more than just trees are at stake. Australia has a rich biodiversity, with nearly 8% of all Earth’s plant and animal species finding a home on the continent. About 85% of the country’s plants, 84% of its mammals and 45% of its birds are found nowhere else. But land clearing is putting that at risk. About three-quarters of Australia’s 1,640 plants and animals listed by the government as threatened have habitat loss listed as one of their main threats.

Much of the land clearing in Queensland – which accounts for the majority in Australia – drives pollution into rivers that drain on to the Great Barrier Reef, adding to the pressures on it. And of course land clearing is exacerbating climate change. In 1990, before short-lived land-clearing controls came into place, a quarter of Australia’s total greenhouse gas emissions were caused by deforestation. Emissions from land clearing dropped after 2010 but are rising sharply again. “It has gotten so bad that WWF International put it on the list of global deforestation fronts, the only one in the developed world on that list,” says Martin Taylor, the protected areas and conservation science manager at WWF Australia. In Queensland, where there is both the most clearing and the best data on clearing, trees are being bulldozed at a phenomenal rate.

Read more …

And more deforestation. Sometimes you wonder what will be left of Europe in 100 years. Or 50.

Europe Tree Loss Pushes Beetles To The Brink (BBC)

The loss of trees across Europe is pushing beetles to the brink of extinction, according to a new report. The International Union for the Conservation of Nature assessed the status of 700 European beetles that live in old and hollowed wood. Almost a fifth (18%) are at risk of extinction due to the decline of ancient trees, the European Red List of Saproxylic Beetles report found. This puts them among the most threatened insect groups in Europe. Saproxylic beetles play a role in natural processes, such as decomposition and the recycling of nutrients. They also provide an important food source for birds and mammals and some are involved in pollination.

“Some beetle species require old trees that need hundreds of years to grow, so conservation efforts need to focus on long-term strategies to protect old trees across different landscapes in Europe, to ensure that the vital ecosystem services provided by these beetles continue,” said Jane Smart, director of the IUCN Global Species Programme. Logging, tree loss and wood harvesting all contribute to the loss of habitat for the beetles, said the IUCN. Other major threats include urbanisation and tourism development, and an increase in wildfires in the Mediterranean region. Conservation efforts need to focus on long-term strategies to protect old trees and deadwood across forests, pastureland, orchards and urban areas, the report recommended.

Read more …

Sep 052017
 
 September 5, 2017  Posted by at 7:43 am Finance Tagged with: , , , , , , , , , ,  1 Response »


Irma

 

The Supernova Nature Of Asset Bubbles (CHS)
Bitcoin Tumbles as PBOC Declares Initial Coin Offerings Illegal (BBG)
China ICO Crackdown May Just Be The Start (R.)
Caribbean, Florida Brace For Hurricane Irma (BBC)
Landlords Demand Rent On Flooded Houston Homes (G.)
Germany Must Pay Poland Up To $1 Trillion In Reparations – Minister (Ind.)
Populist Hopeful Shunned by Italian Elite on Shores of Lake Como (BBG)
China May Be The Real Target Of North Korea’s Pressure (AFP)
Nuclear-Armed Nations Brought The North Korea Crisis On Themselves (G.)
New Kind Of Black Hole Found At The Centre Of The Milky Way (RT)
Established Story That Humans Came From Africa May Be Wrong (Ind.)

 

 

It takes ever more effort to keep a bubble inflated.

The Supernova Nature Of Asset Bubbles (CHS)

The trouble with inflating asset bubbles is that you have to keep inflating them or they pop. Unfortunately for the bubble-blowing central banks, asset bubbles are a double-bind: you cannot inflate assets forever. At some unpredictable point, the risk and moral hazard that are part and parcel of all asset bubbles trigger an avalanche of selling that pops the bubble. This is another facet of The Fed’s Double-Bind: if you stop pumping asset bubbles, they pop as participants realize the music has stopped, and if you keep pumping them, they expand to super-nova criticality and implode.

There are several dynamics at play in this double-bind.

1. The process of inflating a bubble (for example, the current bubbles in stocks and real estate) requires pushing investors and speculators alike into risky asset classes. This puts the market at increasing risk as everyone is pushed to one side of the boat.

2. Those on the other side of the boat (i.e. shorts) are slowly but surely eradicated as the pumping keeps inflating the bubble. When the bubble finally bursts, there are no shorts left to cover, i.e. buy stocks at lower prices to reap their profits.

3. As the bubble continues to expand, the money available to enter the market and keep prices rising declines. The very success of the pumping process strips the markets of new sources of new money, leading to a point where normal selling exceeds new-money buying and the bubble collapses.

4. Money pumping by central banks and governments follows a curve of diminishing return. One analogy is insulin insensitivity: as the systemic distortions build, markets become increasingly insensitive to money pumping. Authorities respond to this intrinsic process of increasing insensitivity by pumping even more money into the system. But as with insulin insensitivity, at some point the system loses all sensitivity to money pumping: no matter how much money central authorities inject, the markets refuse to go higher. At this point, the stick-slip nature of bubbles manifests and modest selling triggers a collapse as participants all rush for the exits. Buyers have vanished and there is no longer a bid at any price.

5. Having pumped the assets higher with ever-greater injections of speculative risk and pumping, central banks and states have exhausted their ability to re-inflate assets as they collapse.

Systems cannot be controlled once risk and moral hazard have been raised to levels where instability is an intrinsic feature of the system. Those who actually believe the Fed can keep asset bubbles inflated at a permanently high plateau will discover their error in dramatic fashion, as the bigger the bubble, the more violent the implosion. This is the super-nova nature of asset bubbles: if you try to deflate the bubble slowly, it implodes, but if you keep inflating the bubble it eventually implodes from its internal extremes.

Read more …

China needs its foreign reserves. The last thing it needs is a way for money to leave the country that it has no control over. Other countries have no choice but to follow suit.

Bitcoin Tumbles as PBOC Declares Initial Coin Offerings Illegal (BBG)

Bitcoin tumbled the most since July after China’s central bank said initial coin offerings are illegal and asked all related fundraising activity to be halted immediately, issuing the strongest regulatory challenge so far to the burgeoning market for digital token sales. The People’s Bank of China said on its website Monday that it had completed investigations into ICOs, and will strictly punish offerings in the future while penalizing legal violations in ones already completed. The regulator said that those who have already raised money must provide refunds, though it didn’t specify how the money would be paid back to investors. It also said digital token financing and trading platforms are prohibited from doing conversions of coins with fiat currencies. Digital tokens can’t be used as currency on the market and banks are forbidden from offering services to initial coin offerings.

“This is somewhat in step with, maybe not to the same extent, what we’re starting to see in other jurisdictions – the short story is we all know regulations are coming,” said Jehan Chu at Kenetic Capital in Hong Kong, which invests in and advises on token sales. “China, due to its size and as one of the most speculative IPO markets, needed to take a firmer action.” Bitcoin tumbled as much as 11.4%, the most since July, to $4,326.75. The ethereum cryptocurrency was down more than 16% Monday, according to data from Coindesk. ICOs are digital token sales that have seen unchecked growth over the past year, raising $1.6 billion. They have been deemed a threat to China’s financial market stability as authorities struggle to tame financing channels that sprawl beyond the traditional banking system. Widely seen as a way to sidestep venture capital funds and investment banks, they have also increasingly captured the attention of central banks that see in the fledgling trend a threat to their reign.

Read more …

The Chinese know how corrupt their countrymen are.

China ICO Crackdown May Just Be The Start (R.)

China is poised to further tighten rules on virtual currencies after regulators on Monday banned virtual coin fundraising schemes, Chinese financial news outlet Yicai reported, citing sources. China banned and deemed illegal the practice of raising funds through launches of token-based digital currencies, targeting so-called initial coin offerings (ICO) in a market that has exploded since the start of the year. Yicai’s report late Monday cited a source close to decision-makers as saying the announcement on the ban was just the start of further follow-up regulations of virtual currencies. In total, $2.32 billion has been raised through ICOs globally, with $2.16 billion of that being raised since the start of 2017, according to cryptocurrency analysis website Cryptocompare.

Bitcoin rival ethereum, which token-issuers usually ask to be paid in and which has seen dramatic growth this year, fell sharply on the news. It was down almost 20% on Monday at $283, according to trade publication Coindesk. Bitcoin was also down 8%, while the total value of all cryptocurrencies was down around 10% after China’s ban was announced, according to industry website Coinmarketcap.com.

Read more …

Wonder what reporting will look like if islands are destroyed but US mainland is not.

Caribbean, Florida Brace For Hurricane Irma (BBC)

Hurricane Irma has been upgraded to a powerful category four storm as warnings have been issued for several Caribbean islands. The hurricane had sustained winds of up to 220km/h (140mph) and was likely to strengthen in the next 48 hours, the US National Hurricane Center (NHC) said. Irma was projected to hit the Leeward Islands, causing storm surges, life-threatening winds and torrential rain. The US state of Florida has declared a state of emergency. It comes as residents in Texas and Louisiana are reeling from the effects of Hurricane Harvey, which struck as a category four storm, causing heavy rain and destroying thousands of homes. However the NHC warned that it was too early to forecast Irma’s exact path or effects on the continental US. Irma was set to reach the Leeward Islands, east of Puerto Rico, by late Tuesday or early Wednesday (local time), the centre added.

The storm was moving at a speed of 20km/h (13mph). It may cause rainfall of up to 25cm (10in) in some northern areas and raise water levels by up to 3m (9ft) above normal levels, the NHC said. Puerto Rico also declared a state of emergency and activated the National Guard. Governor Ricardo Rossello announced the opening of emergency shelters able to house up to 62,000 people, and schools would be closed on Tuesday. Long queues of people formed in shops, with residents stocking water, food, batteries, generators and other supplies. Hurricane warnings have been issued for the islands of Antigua and Barbuda, Anguilla, Montserrat, St Kitts and Nevis, St Martin, Sint Maarten, St Barthelemy, Saba, St Eustatius, Puerto Rico, British Virgin Islands and US Virgin Islands. It means that hurricane conditions are expected in the next 36 hours.

Read more …

Absurdity.

Landlords Demand Rent On Flooded Houston Homes (G.)

An acute housing crisis is starting to grip thousands of other families in south-east Texas as the floodwaters ebb away, with a death toll put at 60 on Monday. More than 180,000 houses in the Houston area have been badly damaged, with only a fraction of occupants owning any flood insurance. And under Texas law, rent must still be paid on damaged dwellings, unless they are deemed completely uninhabitable. A spokeswoman for the city of Houston’s housing department said city officials “are aware these problems exist” but said that state law deals with the situation. She said the city was still assessing the total number of people in need of housing assistance. Under the Texas property code, if a rental premises is “totally unusable” due to an external disaster then either the landlord or tenant can terminate the lease through written notice.

But if the property is “partially unusable” because of a disaster, a tenant may only get a reduction in rent determined by a county or district court. “There are a lot of property owners who aren’t conscious of what has gone on; they are being rude and kicking people out,” said Isela Bezada, an unemployed woman who lived with 10 family members in a Houston house until her landlord took her to court to evict her after the hurricane hit. Bezada, like Fuentes, has had almost every area of her life touched by the flood. Her relatives, who work in home renovations, have little opportunity to bring in money until the full gutting of sodden houses – piles of torn up carpet, broken chairs and children’s toys have become a common adornment to the front of Houston homes – and she worries about other family members stranded in Port Arthur by a flooded highway.

Read more …

Greece first.

Germany Must Pay Poland Up To $1 Trillion In Reparations – Minister (Ind.)

Germany should consider paying Poland as much as $1 trillion in World War II reparations, according to the Polish foreign minister. Poland’s foreign minister Witold Waszczykowski told local radio station RMF that “serious talks” were needed with Germany to “find a way to deal with the fact that German-Polish relations are overshadowed by the German aggression of 1939 and unresolved post-war issues.” He said Poland’s material losses were about $1 trillion, or higher. Polish defense minister Antoni Macierewicz also accused European critics of trying to “erase” the fate of the Poles at German hands during the war “from the historical memory of Europe”.

The country’s right-wing government has dismissed a 1953 resolution by Poland’s former communist government which dropped any claim to reparations from Germany, and are instead claiming that Germany is “shirking” its moral responsibility. Critics of the government say they are talking about reparations to divert attention from their nationalistic agenda. Around six million Polish citizens, including about three million Jews, were killed during the war and much of Warsaw was destroyed. Mr Waszczykowski did not say when Poland would make public its formal position on repatriations.

Read more …

Just keep saying populist often enough. He’s right about the euro: “a currency tailor-made for the German economy.”

Populist Hopeful Shunned by Italian Elite on Shores of Lake Como (BBG)

Populist would-be premier Luigi Di Maio had an awkward introduction to the Italian elite. The Five Star Movement’s most likely candidate for next year’s election was ignored by Italy’s business and financial establishment when he arrived at an exclusive networking event by Lake Como on Sunday. Di Maio, 31, was reduced to posing for photographers, while a passing banking executive muttered that he hoped the populist might learn something from his visit. His group, which wants a referendum on Italy’s euro membership, is virtually tied in opinion polls with the Democratic party of ex-premier Matteo Renzi, and with a possible center-right alliance including the Forza Italia party of Silvio Berlusconi. Di Maio sought to reassure.

Those opinion polls – as well as the possibility of a hung parliament – are prompting fears of political instability and financial turbulence with elections due by late May, even as the third-biggest economy in the euro area recovers from its worst recession since World War II. “We don’t want a populist, extremist or anti-European Italy,” he told the Ambrosetti Forum in Cernobbio, in a bid to win round his skeptical audience. The euro referendum plan is simply “a last resort,” he added, to force reforms of the European Union and “a currency tailor-made for the German economy.”

The proposals of Five Star, co-founded by ex-comic Beppe Grillo, also include a monthly €780 “citizen’s income” for the poor and the jobless, purging private lenders from control of the Bank of Italy, and tougher penalties for managers of bankrupt banks. “We want to stay in the EU and discuss some of the rules which are suffocating and damaging our economy,” Di Maio said. “And the money we’re giving the EU budget every year must be one of the themes to put forward to the other countries.” Many of those ideas were anathema to those debating world affairs at the luxury Villa D’Este hotel – a five-star institution with which the assembled ruling class was altogether more comfortable.

Read more …

Xi has to polish his image before the Congress in October. He can’t let this continue.

China May Be The Real Target Of North Korea’s Pressure (AFP)

North Korea’s escalating nuclear provocations are putting putative ally China in an increasing bind, and may be part of a strategy to twist Beijing’s arm into orchestrating direct talks between Pyongyang and Washington, analysts said. The North’s Kim dynasty has repeatedly used nuclear brinkmanship over the years in a push to be taken seriously by the United States but traditionally avoided causing major embarrassment to China, its sole major ally and economic lifeline. But leader Kim Jong-Un’s detonation Sunday of what he called a hydrogen bomb marked the second time this year that the 33-year-old family scion upstaged Chinese President Xi Jinping just as he was hosting a carefully choreographed international gathering.

Communist propaganda deifies Xi as an infallible father figure, but Kim’s actions are puncturing the facade and exposing the Chinese leader’s impotence toward the nuclear crisis on his doorstep. “North Korea’s repeated nuclear and missile tests have put China in a more and more difficult position,” said Shi Yinhong, Director of the Center for American Studies at Renmin University in Beijing. Shi said Kim – who has never met Xi – had become “more and more hostile towards China” after Beijing signed on to tougher new international sanctions against Pyongyang. That has apparently made Kim more willing to bring pressure on Xi, said Jean-Pierre Cabestan, a political science professor at Hong Kong Baptist University. Kim may be using Xi “like a cue ball in billiards,” Cabestan said, “in order to get negotiations with the United States.” “But he has to be careful not to infuriate Xi as China is his only lifeline.”

Pyongyang’s sixth nuclear test, by far its most powerful to date, came just as leaders of the five BRICS emerging economies – Brazil, Russia, India, China, and South Africa – gathered for a summit. The meeting in the southeastern city of Xiamen was intended to be the typical China-hosted event — micromanaged to the smallest detail to portray Xi at home as a wise and benevolent world leader. But Kim stole the spotlight, just as he did in May when the North conducted a missile test that embarrassed Xi as he hosted a large international summit on trade.

Read more …

Valid points.

Nuclear-Armed Nations Brought The North Korea Crisis On Themselves (G.)

North Korea’s defiant pursuit of nuclear weapons capabilities, dramatised by last weekend’s powerful underground test and a recent long-range ballistic missile launch over Japan, has been almost universally condemned as posing a grave, unilateral threat to international peace and security. The growing North Korean menace also reflects the chronic failure of multilateral counter-proliferation efforts and, in particular, the longstanding refusal of acknowledged nuclear-armed states such as the US and Britain to honour a legal commitment to reduce and eventually eliminate their arsenals. In other words, the past and present leaders of the US, Russia, China, France and the UK, whose governments signed but have not fulfilled the terms of the 1970 nuclear non-proliferation treaty (NPT), have to some degree brought the North Korea crisis on themselves.

Kim Jong-un’s recklessness and bad faith is a product of their own. The NPT, signed by 191 countries, is probably the most successful arms control treaty ever. When conceived in 1968, at the height of the cold war, the mass proliferation of nuclear weapons was considered a real possibility. Since its inception and prior to North Korea, only India, Pakistan and Israel are known to have joined the nuclear “club” in almost half a century. To work fully, the NPT relies on keeping a crucial bargain: non-nuclear-armed states agree never to acquire the weapons, while nuclear-armed states agree to share the benefits of peaceful nuclear technology and pursue nuclear disarmament with the ultimate aim of eliminating them. This, in effect, was the guarantee offered to vulnerable, insecure outlier states such as North Korea. The guarantee was a dud, however, and the bargain has never been truly honoured.

Rather than reducing their nuclear arsenals, the US, Russia and China have modernised and expanded them. Britain has eliminated some of its capability, but it is nevertheless renewing and updating Trident. France clings fiercely to its “force de frappe”. Altogether, the main nuclear-weapon states have an estimated 22,000 nuclear bombs. A report by the non-governmental British-American Security Information Council in May said nuclear security was getting worse. “The need for nuclear disarmament through multilateral diplomacy is greater now than it has been at any stage since the end of the cold war. Trust and confidence in the existing nuclear non-proliferation regime is fraying, tensions are high, goals are misaligned and dialogue is irregular,” the report said.

Read more …

It’s only 100,000 suns. The biggest one is 4,000 times larger.

New Kind Of Black Hole Found At The Centre Of The Milky Way (RT)

A new kind of black hole has been found at the centre of the Milky Way – a find that may help explain the evolution of the phenomena. In research conducted by Japanese astronomers using the ALMA Observatory in northern Chile, a black hole 100,000 times the size of our sun was found within a molecular gas cloud. Its relatively small size means that it is the first to be identified as an intermediate-mass black hole (IMBH). Professor Tomoharu Oka of Japan’s Keio University believes that black holes with masses greater than a million solar masses are at the centre of all galaxies and are essential to their growth. The origins of supermassive black hole, however, remain a mystery. “One possible scenario is IMBHs – which are formed by the runaway coalescence of stars in young compact star clusters – merge at the centre of a galaxy to form a supermassive black hole,” said Prof Oka.

Using the ALMA telescope, the team observed the cloud more than 195 light years from the centre of the Milky Way. In findings published in the journal Nature Astronomy, Prof Oka then used computer simulations to show the high speed motion of the gas cloud, which the team concluded was a sign that it is surrounding a black hole. “Based on the careful analysis of gas kinematics, we concluded a compact object with a mass of about 100,000 solar masses is lurking in this cloud,” Prof Oka added. The IMBH is the second-largest black hole discovered in the Milky Way next to Sagittarius A*, which is 400 million times the size of our sun. According to theories, the Milky Way should be home to about 100 million smaller black holes, but only 60 have been found.

Read more …

“.. the absence of evidence for later humans could suggest that the journey “may not have ended well..”

Established Story That Humans Came From Africa May Be Wrong (Ind.)

The belief that humans came out of Africa millions of years ago is widely believed. But it might be about to be entirely re-written, according to the authors of a new study. They claim to have found a footprint in Crete that could change the narrative of early human evolution, suggesting that our ancestors were in modern Europe far earlier than we ever thought. The accepted story of the human lineage has been largely set since researchers found fossils of our early ancestors in South and East Africa, in the middle of the 20th century. Later discoveries appeared to suggest that those that followed remained isolated in Africa for millions of years before finally moving out and into Europe and Asia. But the new discovery of a footprint that appears to have belonged to a human that trod down in Crete 5.7 million years ago challenges that story.

Humans may have left and been exploring other continents including Europe far earlier than we knew. “This discovery challenges the established narrative of early human evolution head-on and is likely to generate a lot of debate,” said Professor Per Ahlberg, who was an author on the study. “Whether the human origins research community will accept fossil footprints as conclusive evidence of the presence of hominins in the Miocene of Crete remains to be seen.” The study looked at the characteristics of the footprint, in particular examining its toes. It found that the footprint didn’t have claws, walked on two feet and had inner toes that went out further than its outer ones. All of that led them to conclude that the foot appeared to belong to our early human ancestors, who could have been walking around Europe at an early time than we ever knew.

They also make clear that the owner of the footprint and their species could have developed the same traits separately from those in Africa. At the time the footprint was made, the Sahara Desert didn’t exist and lush, savannah-like environments went all the way from North Africa to the eastern Mediterranean, and Crete hadn’t yet detached from the Greek mainland. All of that makes it easier to see how those early hominins made their way to the island. But the journey might not run into problems. Mark Maslin from University College London told The Times that while the discovery supports the idea that our ancestors used their new found bipedalism to walk into modern Europe, the absence of evidence for later humans could suggest that the journey “may not have ended well”.

Read more …

Apr 072017
 


Fred Stein Times Square at Night 1947

 

Eyewitness Says Syrian Military Anticipated US Raid (ABC)
The Biggest Stock Bubble In US History (IRD)
The Unavoidable Pension Crisis (Roberts)
Americans Are Taking Out The Largest Mortgages On Record (MW)
Global Debt Explodes At ‘Eye-Watering’ Pace To Hit £170 Trillion (Tel.)
Wall Street Doubts Trump Wants to Split Up Biggest US Banks (BBG)
Fed’s Asset Shift To Pose New Test Of Economy’s Recovery, Resilience (R.)
M5S Plans To ‘Revolutionize Democracy’ With Online Voting, E-petitions (LI)
Arms Sales Becoming France’s New El Dorado, But At What Cost? (F24)
Guns Are The True Cause Of Hunger And Famine (G.)
Greece’s Dark Age: How Austerity Turned Off The Lights (R.)
On Dimitris Christoulas: ‘He Is A Part Of History Now’ (AlJ)

 

 

“I think Secretary of Defense [General] James Mattis gave the president a list of options, this being the smallest…”

Eyewitness Says Syrian Military Anticipated US Raid (ABC)

Syrian military officials appeared to anticipate Thursday’s night raid on Syria’s Shayrat airbase, evacuating personnel and moving equipment ahead of the strike, according to an eyewitness to the strike. Dozens of Tomahawk missiles struck the airbase near Homs damaging runways, towers and traffic control buildings, a local resident and human rights activist living near the airbase told ABC News via an interpreter. U.S. officals believe the plane that dropped chemical weapons on civilians in Idlib Province on Tuesday, which according to the Syrian Observatory for Human Rights killed 86 people, took off from the Shayrat airbase. The attack lasted approximately 35 minutes and its impact was felt across the city, shaking houses and sending those inside them fleeing from their windows. Both of the airport’s major runways were struck by missiles, and some of its 40 fortified bunkers were also damaged.

Local residents say the Russian military had used the airbase in early 2016 but have since withdrawn their officers, so the base is now mainly operated by Syrian and Iranian military officers. There is also a hotel near the airport where Iranian officers have been staying, though it was not clear whether it was damaged. The eyewitness believes human casualties, at least within the civilian population, were minimal, as there was no traffic heading toward the local hospital. [..] Former National Security Adviser and ABC News contributor Richard Clarke said this attack, one of the quickest displays of force by a new president in recent history, is largely “symbolic.”

Following a 2013 chemical weapons attack that killed more than 1400 people outside of Damascus which a U.S. government intelligence assessment concluded likely used a nerve agent, the Obama administration threatened retaliation but ultimately called off planned airstrikes after Assad agreed to turn over the majority of his chemical weapons arsenal to an international watchdog group. Trump has attempted to blame Obama’s “weakness” for the worsening violence in Syria. “This attack on one air base seems more symbolic,” Clarke said. “I think Secretary of Defense [General] James Mattis gave the president a list of options, this being the smallest. It was a targeted attack not designed to overwhelm the Syrian military … I think the president was trying to differentiate himself from his predecessor.”

Read more …

“Tesla has never made money and never will make money. Next to Amazon, it’s the biggest Ponzi scheme in U.S. history.”

The Biggest Stock Bubble In US History (IRD)

Please note, many will argue that the p/e ratio on the S&P 500 was higher in 1999 than it is now. However, there’s two problems with the comparison. First, when there is no “e,” price does not matter. Many of the tech stocks in the SPX in 1999 did not have any earnings and never had a chance to produce earnings because many of them went out of business. However – and I’ve been saying this for quite some time and I’m finally seeing a few others make the same assertion – if you adjust the current earnings of the companies in SPX using the GAAP accounting standards in force in 1999, the current earnings in aggregate would likely be cut at least in half. And thus, the current p/e ratio expressed in 1999 earnings terms likely would be at least as high as the p/e ratio in 1999, if not higher. (Changes to GAAP have made it easier for companies to create non-cash earnings, reclassify and capitalize expenses, stretch out depreciation and pension funding costs, etc).

We talk about the tech bubble that fomented in the late 1990’s that resulted in an 85% (roughly) decline on the NASDAQ. Currently the five highest valued stocks by market cap are tech stocks: AAPL, GOOG, MSFT, AMZN and FB. Combined, these five stocks make-up nearly 10% of the total value of the entire stock market. Money from the public poured into ETFs at record pace in February. The majority of it into S&P 500 ETFs which then have to put that money proportionately by market value into each of the S&P 500 stocks. Thus when cash pours into SPX funds like this, a large rise in the the top five stocks by market cap listed above becomes a self-fulfilling prophecy. The price rise in these stocks has nothing remotely to do with fundamentals. Take Microsoft, for example (MSFT). Last Friday the pom-poms were waving on Fox Business because MSFT hit an all-time high.

This is in spite of the fact that MSFT’s revenues dropped 8.8% from 2015 to 2016 and its gross margin plunged 13.2%. So much for fundamentals. In addition to the onslaught of retail cash moving blindly into stocks, margin debt on the NYSE hit an all-time high in February. Both the cash flow and margin debt statistics are flashing a big red warning signal, as this only occurs when the public becomes blind to risk and and bet that stocks can only go up. As I’ve said before, this is by far the most dangerous stock market in my professional lifetime (32 years, not including my high years spent reading my father’s Wall Street Journal everyday and playing penny stocks).

Perhaps the loudest bell ringing and signaling a top is the market’s valuation of Tesla. On Monday the market cap of Tesla ($49 billion) surpassed Ford’s market cap ($45 billion) despite the fact that Tesla delivered 79 thousand cars in 2016 while Ford delivered 2.6 million. “Electric Jeff” (as a good friend of mine calls Elon Musk, in reference to Jeff Bezos) was on Twitter Monday taunting short sellers. At best his behavior can be called “gauche.” Musk, similar to Bezos, is a masterful stock operator. Jordan Belfort (the “Wolf of Wall Street”) was a small-time dime store thief compared to Musk and Bezos. Tesla has never made money and never will make money. Next to Amazon, it’s the biggest Ponzi scheme in U.S. history. Without the massive tax credits given to the first 200,000 buyers of Tesla vehicles, the Company would likely be out of business by now.

Read more …

And to think even without demographics pensions look screwed too, just from financial engineering and insane debt levels.

The Unavoidable Pension Crisis (Roberts)

There is a really big crisis coming. Think about it this way. After 8 years and a 230% stock market advance the pension funds of Dallas, Chicago, and Houston are in severe trouble. But it isn’t just these municipalities that are in trouble, but also most of the public and private pensions that still operate in the country today. Currently, many pension funds, like the one in Houston, are scrambling to slightly lower return rates, issue debt, raise taxes or increase contribution limits to fill some of the gaping holes of underfunded liabilities in their plans. The hope is such measures combined with an ongoing bull market, and increased participant contributions, will heal the plans in the future. This is not likely to be the case. This problem is not something born of the last “financial crisis,” but rather the culmination of 20-plus years of financial mismanagement.

An April 2016 Moody’s analysis pegged the total 75-year unfunded liability for all state and local pension plans at $3.5 trillion. That’s the amount not covered by current fund assets, future expected contributions, and investment returns at assumed rates ranging from 3.7% to 4.1%. Another calculation from the American Enterprise Institute comes up with $5.2 trillion, presuming that long-term bond yields average 2.6%. With employee contribution requirements extremely low, averaging about 15% of payroll, the need to stretch for higher rates of return have put pensions in a precarious position and increases the underfunded status of pensions. With pension funds already wrestling with largely underfunded liabilities, the shifting demographics are further complicating funding problems.

One of the primary problems continues to be the decline in the ratio of workers per retiree as retirees are living longer (increasing the relative number of retirees), and lower birth rates (decreasing the relative number of workers.) However, this “support ratio” is not only declining in the U.S. but also in much of the developed world. This is due to two demographic factors: increased life expectancy coupled with a fixed retirement age, and a decrease in the fertility rate. In 1950, there were 7.2 people aged 20–64 for every person of 65 or over in the OECD countries. By 1980, the support ratio dropped to 5.1 and by 2010 it was 4.1. It is projected to reach just 2.1 by 2050. The table below shows support ratios for selected countries in 1970, 2010, and projected for 2050:

Read more …

Happy days!

Americans Are Taking Out The Largest Mortgages On Record (MW)

For the past few years, the housing market has been unbalanced. Strong demand and lean supply keep pushing prices higher and higher. On Wednesday, a fresh piece of data confirmed that trend. The Mortgage Bankers Association’s weekly purchase loan data showed that the average size of a home loan was the largest in the history of its survey, which goes back to 1990. Higher prices have a few different effects on the market. Buyers have to make tradeoffs on the kinds of homes they can afford, or may be shut out of ownership altogether. They may also adjust their borrowing. Larger mortgage sizes may reflect not just more expensive properties, but also more leveraged ones.

The 20% down payment is a relic: the median down payment in 2016 was 10%. For first-time buyers, it was 6%. First-timers and other buyers of less-expensive homes are more leveraged now than they were at the height of the housing bubble a decade ago. Home loan sizes aren’t the only things that have changed in the years since MBA started its survey. Back at the start of the survey, the median mortgage size was only about 3.3 times the median annual income. It’s now over five times as big – though buyers get bigger homes and lower interest rates.

Read more …

Over $70 trillion since 2008.

Global Debt Explodes At ‘Eye-Watering’ Pace To Hit £170 Trillion (Tel.)

Global debt has climbed at an “eye-watering” pace over the past decade, soaring to a fresh high of £170 trillion last year, according to the Institute of International Finance (IIF). The IIF said total debt levels, including household, government and corporate debt, climbed by more than $70 trillion over the last 10 years to a record high of $215 trillion (£173 trillion) in 2016 – or the equivalent of 325pc of GDP. It said emerging markets posed “a growing source of concern” to financial stability and the global economy as debt burdens in these countries climb at a rapid pace. The IIF data showed the increase was partly driven by a “spectacular rise” in emerging markets, where total debt stood at $55 trillion at the end of 2016, or 215pc of total emerging market GDP.

Debt has risen from $16 trillion in 2006 and $7.4 trillion in 1996. The body, which represents the world’s top financial institutions, said a wave of maturing debt this year presented a “growing refinancing risk”. It estimates that more than $1.1 trillion of emerging market bonds and loans will mature this year, with dollar-denominated debt accounting for a fifth of all redemptions. It said China faced around $40bn of dollar-denominated redemptions this year, while Russia faced redemptions of $20bn. International bodies including the IMF and OECD have warned that rising interest rates in the US could bring an end to an emerging market corporate debt binge as companies in these countries see their debt servicing costs rise in local currency terms. “While risks associated with currency mismatches may not be as acute as during past emerging market debt crises, the overall emerging market debt burden – particularly as global interest rates head higher – is a growing source of concern,” the IIF said in a note.

Read more …

Goldman is not a consumer bank. They might actually profit from this.

Wall Street Doubts Trump Wants to Split Up Biggest US Banks (BBG)

President Donald Trump and his advisers have vowed to bring back a Depression-era law that would cleave the biggest U.S. lenders in half by separating commercial and investment banking operations. Wall Street doesn’t expect that to happen. After chief economic adviser Gary Cohn reiterated the administration’s stance toward the Glass-Steagall Act in a private meeting with lawmakers on Wednesday, analysts said they viewed any radical regulatory changes as unlikely. Shares of Bank of America and JPMorgan Chase, which would be most affected by the rule, rose Thursday after Bloomberg first reported on Cohn’s comments. Reinstating Glass-Steagall, which was created after the banking crises of the 1930s and repealed in 1999, would require a rewriting of U.S. banking rules. The Dodd-Frank Act took more than a year of work by Congress.

The Trump administration hasn’t put forward a detailed plan and the revisions proposed by House Republicans don’t involve the return of Glass-Steagall. “Anything resembling Glass-Steagall is so far from happening that it’s hard to envision,” said Ian Katz, an analyst at Capital Alpha. “It simply isn’t a priority issue in Congress.” The Republicans who control the House and the Senate want to loosen banking regulations, not make them stricter, Katz wrote. The Republican Party made restoring Glass-Steagall part of its platform, and Trump sometimes criticized the big banks during the campaign, saying “I’m not going to let Wall Street get away with murder.” Since taking office, he’s appointed Cohn and several other former Goldman Sachs bankers to top posts, and said that he’ll look to JPMorgan CEO Jamie Dimon for advice about regulatory reform.

Treasury Secretary Steven Mnuchin said during his confirmation hearing that he opposes the old Glass-Steagall, but supports a “21st Century” version. He didn’t elaborate on what he meant. “If you’ve listened to all the rhetoric on regulation, we’ve no real guidance on where we are going,” said Christopher Wheeler, an Atlantic Equities analyst in London. “The uncertainty is immense and what you have to believe is that things will continue as they are.” The regulation might not mean that commercial and investment banks have to be separated, Cowen Group analyst Jaret Seiberg wrote in a report. Instead, the government could require that broker-dealers be subsidiaries of holding companies, rather than banks, he said. That would mean that the brokerage arm would have to be separately funded. “Cohn was the most likely obstacle within the Trump White House,” Seiberg wrote. “With him supporting Glass-Steagall’s restoration, there is no one in the inner circle left to fight it.”

Read more …

More uncharted territory. We tend to forget, but for 10 years now they’re grasping in the dark. They have no idea what they do, all they have to go on are outdated textbooks that were flawed to begin with. Time to audit the Fed and then close it.

Fed’s Asset Shift To Pose New Test Of Economy’s Recovery, Resilience (R.)

The Federal Reserve’s coming decision to reduce its massive asset holdings will set off a complex dance with global investors and the U.S. Treasury as it tries to put a final end to policies used to fight the 2007 financial crisis without upending the economy along the way. It is a feat with no clear precedent, according to analysts and officials involved in the process: a central bank trying to squeeze trillions of dollars out of markets it has supported for a decade, and in the process likely pushing up the cost of home buying, corporate finance and an array of other activities. Though final decisions have not been made, the Fed may shift policy as soon as the end of this year, and over 2018 begin pulling anywhere from $20 billion to $60 billion a month out of bond markets, according to a review of current Fed asset holdings.

For several years during the crisis, the Fed added to its holdings of U.S. Treasury bonds and securities backed by home mortgages to the tune of $85 billion a month before the program was slowed. The purchases were an emergency measure made necessary because the Fed’s short-term interest rate – its primary tool to encourage people and businesses to spend and invest – had already been cut to zero. With the economy still in freefall, the asset purchases added to demand for financial securities, and are thought to have held down long-term interest rates in general, a boost to the home-building and other industries in particular. The central bank is already raising its short-term interest rate and has managed a series of increases without slowing the economy. When it starts to scale back the size of its $4.5 trillion stockpile of Treasury bonds and mortgage-backed securities – essentially reversing the purchases it made during the crisis – it will pose a stiff new test of the economy’s resilience.

Read more …

This was always the plan. Use technology to strengthen democracy.

M5S Plans To ‘Revolutionize Democracy’ With Online Voting, E-petitions (LI)

Italy’s anti-establishment Five Star Movement party plans to introduce online voting and public referendums to increase “democracy and transparency” in the country’s capital. Five Star councillors presented the draft resolution at Rome’s city hall on Monday, where it will be debated. They claimed the proposed ideas would take the city “from Mafia Capitale [the ongoing corruption scandal which has seen dozens of Rome politicians and businessmen put on trial] to direct democracy and transparency in five years”. The ideas suggested included online consultations and participatory budgeting. The latter process would give citizens more say in how Rome money is spent, and has already been introduced by Five Star-led local authorities in some areas, including Mira and Ragusa.

In a blog post, leader Beppe Grillo said that within a year, a Five Star government would introduce public petitions which can be created online and sent directly to the Italian parliament for discussion – a system which already exists in the UK, for example. “It should be the citizens and the local community who govern cities through the Internet, using collective intelligence,” said Grillo. “The web is revolutionizing the relationship between citizens and institutions making direct democracy feasible, as applied in ancient Greece.” Angelo Sturni, one of the councillors behind the proposal, said: “We also want to experiment with electronic voting in referendums, using the American model.” Discontent over widespread corruption in Rome, as revealed in the Mafia Capitale trial, was one of the main factors in Five Star candidate Virginia Raggi’s victory in mayoral elections last June.

Read more …

UK, France, Germany, Holland, Belgium: merchants of death. Government sponsored murder.

Arms Sales Becoming France’s New El Dorado, But At What Cost? (F24)

When Qatar agreed to buy 24 French Rafale fighter jets in a €6.3 billion contract at the end of April, it represented yet another major success for France’s arms industry, coming hot on the heels of further multi-billion euro sales of Rafales to Egypt and India. The deals have been hailed by Hollande and his government. According to France’s Minister of Defence Jean-Yves Le Drian, in comments made to the Journal du Dimanche newspaper Sunday, the Qatar contract brought the value of the country’s arms exports to more than €15 billion this year so far. That sum is already more than the €8.06 billion for the whole of 2014, which itself was the highest level seen since 2009 – suggesting a continued upward trajectory for the French arms trade and one that is providing a much-needed salve to the country’s economic woes.

But some of these deals have raised more than a few eyebrows, with anti-arms trade campaigners critical of France’s willingness to sell weapons to countries with less than stellar human rights records. These concerns are only set to rise when Hollande heads first to Doha on Monday and then Saudi Arabia’s capital of Riyadh the day after, where furthering the recent success of the French arms industry is likely to be one of his top priorities. Saudi Arabia has already proved a lucrative trading partner for French arms manufacturers, most recently in a deal signed in November that saw the kingdom buy $3 billion-worth (€2.7 billion) of French weapons and military equipment to supply the Lebanese army. The oil-rich country is currently on something of an arms spending spree. Last year, the Saudis surpassed India to become the world’s biggest arms importer, upping its spending by 54% to €5.8 billion, according to a report by industry analyst IHS.

France, thanks to some adept diplomatic manoeuvering in recent years, is well placed to take advantage of the Saudi cash cow. Paris has been an increasingly close ally of Riyadh ever since it was among the most vocal in backing military intervention against Syria’s President Bashar al-Assad, a key ally of Shiite Iran – one of Sunni Saudi Arabia’s main regional rivals. “You’re seeing political fractures across the region, and at the same time you’ve got oil, which allows countries to arm themselves, protect themselves and impose their will as to how they think the region should develop,” Ben Moores, author of the IHS report, told AP in March. France, of course, is not alone in striking lucrative arms deals in the region. The US remains the biggest arms exporter to the Middle East, with $8.4 billion (€7.5 billion) worth of weapon sales in 2014, while the UK and Germany are also major players.

Read more …

And this is what the merchants of death leave behind.

Guns Are The True Cause Of Hunger And Famine (G.)

Last year, the World Bank revised its position on conflict – upgrading it from being one of many drivers of suffering and poverty, to being the main driver. In Somalia, despite some political progress the conflict has put more than half the population in need of assistance, with 363,000 children suffering acute malnutrition. In north-east Nigeria, conflict with Boko Haram has left 1.8m people still displaced, farmers unable to grow crops, and 4.8 million people need food. In Yemen, an escalation in conflict since 2015 has worsened a situation already made dire by weak rule of law and governance. Now more than 14 million people need food aid. Only if we understand conflict can we understand hunger. South Sudan is another example. I worked there for two years following the signing of the comprehensive peace agreement in 2005.

Right now a place called Koch, where Mercy Corps works, is in what the famine early warning systems network calls a “level 4 emergency phase”. This means that people will start to die of hunger in a matter of months if they don’t receive enough aid. Until recent years, Koch was a thriving community with fertile land. It has been destroyed in armed clashes since conflict broke out in South Sudan in December 2013. Families have had to move time and time again and disease is rampant due to the lack of clean water. As one father of five told our team in Koch: “My house was burnt, everything was looted and I do not know how to rebuild my life.” Across the places where we work and where people are facing starvation, the pattern is the similar.

Hunger is not some freak environmental event; it is human-made, the result of a deadly mix of conflict, marginalisation and weak governance. Yet watching some of the news and the crisis appeals, one could be forgiven for thinking that what we need is another Live Aid song and airdrops of food. Red Nose Day has been criticised for portraying Africa as a place where “nothing ever grows”. A recent social media campaign to send a plane filled with food to Somalia gathered support: a noble gesture, but not a long-term solution. Mercy Corps’ own emergency response is not the long-term answer either.

Read more …

It’s easy to label something ‘theft’, but for Greeks it’s either go illegal or sit in the dark, freeze etc. Still can’t believe this is the European Union.

Greece’s Dark Age: How Austerity Turned Off The Lights (R.)

Kostas Argyros’s unpaid electricity bills are piling up, among a mountain of debt owed to Greece’s biggest power utility. His family owe €850 to the Public Power Corporation (PPC), a tiny fraction of the state-controlled firm’s 2.6 billion euros ($2.8 billion) in unpaid bills. Argyros picks up only occasional work as an odd-job man. “When you only work once a week, what will you pay first?” said the 35-year-old, who lives in a tiny apartment in an Athens suburb with his unemployed wife and four small children. The Argyros family are emblematic of deepening poverty in Greece following seven years of austerity demanded by the country’s international creditors. They burn wood to heat their home in winter, food is cooked on a small gas stove, and hot water is scarce.

The only evening light is the blue glare of a TV screen, for fear of racking up more debt. Five-watt lightbulbs provide a dim glow and Argyros worries about the effect on their eyesight. More than 40% of Greeks are behind on their utility bills, higher than anywhere else in Europe. People in poor neighborhoods are also increasingly turning to energy fraud, meaning that the problem for PPC is much higher than the mountain of unpaid bills suggests. Power theft is costing PPC around €500-600 million a year in lost income, an industry official said, requesting anonymity because he was not authorized to divulge the numbers. Public disclosures by the Hellenic Electricity Distribution Network Operator HEDNO, which checks meters, show that verified cases of theft climbed to 10,600 last year, up from 8,880 in 2013 and 4,470 in 2012.

Authorities believe theft is far higher than the cases verified by HEDNO, another official said, declining to be named. Households in the country are equipped with analog meters, which are easy to hack. One of the most common tricks is using magnets, which slow down the rotating coils to show less consumption than the real amount, a HEDNO official said. Some websites even offer consumers tips and tricks on power fraud. For households who have had their electricity cut off, a group of activists calling themselves the “I Won’t Pay” movement have taken it upon themselves to reconnect the supply. The group says it has done hundreds this year. PPC, which has a 90% share of the retail market and 60% of the wholesale market, is supposed to reduce this dominance to less than 50% by 2020 under Greece’s third, 86 billion euro bailout deal.

Read more …

It’s time to make this personal. Against Schäuble and Dijsselbloem, Merkel and Rutte and Hollande. They are killing people. There’s nothing innocent about that. Making it personal is the only thing that’ll work. Bring it to their doorstep. Literally to their doorstep.

On Dimitris Christoulas: ‘He Is A Part Of History Now’ (AlJ)

On the morning of April 4, 2012, a gunshot sounded amid the city’s hustle and bustle. As passers-by rushed to work through Syntagma Square in central Athens, Dimitris Christoulas had taken his life with a shotgun a few metres from the Greek parliament. The 77-year-old pensioner, a former pharmacist, had left a note in his pocket. “The occupation government literally annihilated my ability to survive,” he wrote. “I depended on my decent pension, which I alone and without the support of the state, paid for 35 years.” His only daughter, Emmy Christoula, had known nothing about his plans. But, speaking as the fifth anniversary of his death approached, she confidently described her father’s public suicide as a political act. Her father woke up in the morning, got dressed, and wrote two identical notes – putting one in his pocket and leaving the other on his kitchen table for his daughter to read.

He took the subway to the square, site of the country’s most important protests for more than a century. When Dimitris arrived at Syntagma, he texted his daughter – “It’s the end, Emmy,” he wrote – and switched off his phone. Greek morning television talk shows broke the news of Christoulas’s suicide a few minutes after it happened. Hundreds soon gathered to pay their respects. Flowers, letters and notes of resistance were left by the tree where he chose to take his life. Spaniards wrote songs of his resistance. Irish poets wrote odes to him. His funeral turned into a rally against the austerity measures imposed on Greece, when the country’s debt payments became too onerous to pay amid the worldwide recession. The country’s creditors called for harsh spending cuts and steep tax increases so that Athens could make the payments. Protests and riots became a staple of life in Athens in the years that followed.

Five years on from Christoulas’ suicide, the crisis has only grown deeper. Greece’s debt is 175% of its GDP. Greek officials have cut retirees’ pensions 17 times to around half of their value before the recession, according to the Greek Association of Pensioners. Budget cuts have also been implemented in education, health, and welfare services. Lenders must improve most government decisions. Unemployment stands at more than 23%. A fourth bailout agreement is expected soon. According to the Greek Statistical Service, suicides have increased by 68% since 2008, the first year Greek economic growth stagnated. “I’m of a certain age and don’t have the power of dynamically reacting,” wrote Christoulas in his suicide note. “I can’t find another solution to a dignified end, as soon I’d have to start scavenging through the garbage to find my own food.”

Christoulas’ suicide became a symbol of the devastating effects of austerity on the Greek people. Until then, the majority of the stories published in the international media on the issue were about lazy Greeks who deserved their comeuppance for living off debt for so many years. “[My father] taught me that you shouldn’t just follow history, you should write it,” said Emmy, adding that she has accepted her father’s decision but still aches from his absence. Emmy describes her father as a wiry and lean man who had long participated in public life. Her first childhood memories include sitting on his shoulders at pro-democracy rallies against Greece’s military government in the 1970s. The police brutality didn’t deter father and daughter from participating.

Read more …