Jan 172019
 


Pablo Picasso Nude female standing 1922

 

Theresa May Survives Confidence Vote, Britain Remains In Brexit Deadlock (G.)
Corbyn: No Talks With May Until No-Deal Brexit Is Off The Table (G.)
Markets Expect Brexit To Be Delayed, Bank Of England Governor Says (G.)
More Than 170 UK Business Leaders Join Call For 2nd Brexit Referendum (G.)
German Carmakers Warn Hard Brexit Would Be ‘Fatal’ (R.)
Trump ‘Inclined’ To Impose New US Auto Tariffs (R.)
Chinese Unemployment Worries Grow As Beijing Beefs Up Stimulus (CNBC)
China Injects Gargantuan 1.1 Trillion In Liquidity This Week (ZH)
Greek PM Tsipras Wins Confidence Vote After FYROM Name Crisis (R.)
DOJ Official Warned Steele Dossier Biased, Connected To Clinton (Solomon)
The New York Times Smears the President (Stockman)
Fake Washington Post Copies Announcing Trump Resignation Handed Out In DC (RT)
Plastic Pollution Of The Oceans Is Set To Treble In The Next Decade (G.)

 

 

Brexit will be delayed, quite possibly indefinitely. May’s looking for a way to achieve this while putting the blame on anyone but herself. She survived this votes only becasue of the DUP, whose votes she bought. Welcome to democracy.

Theresa May Survives Confidence Vote, Britain Remains In Brexit Deadlock (G.)

Theresa May has survived as prime minister after weathering a dramatic no-confidence vote in her government, but was left scrambling to strike a Brexit compromise that could secure the backing of parliament. In a statement in Downing Street on Wednesday night, the prime minister exhorted politicians from all parties to “put aside self-interest”, and promised to consult with MPs with “the widest possible range of views” in the coming days. It followed her announcement that she would invite Jeremy Corbyn and other party leaders for immediate talks on how to secure a Brexit deal, something she had declined to do earlier in the day, although Labour later said Corbyn would decline the invitation unless no-deal was taken off the table.

A day after overwhelmingly rejecting her Brexit deal, rebel Conservatives and Democratic Unionist party (DUP) MPs swung behind the prime minister to defeat Labour’s motion of no confidence by 325 votes to 306 – a majority of 19. In her late-night statement, the prime minister said: “I am disappointed that the leader of the Labour party has not so far chosen to take part – but our door remains open … It will not be an easy task, but MPs know they have a duty to act in the national interest, reach a consensus and get this done.”

The Scottish National party’s leader in Westminster, Ian Blackford, met May on Wednesday night, and the Liberal Democrat leader, Vince Cable, also accepted her invitation. Blackford later wrote to May, urging her to make a “gesture of faith” to show that she was serious. He said the SNP would take part in cross-party talks if she was able to confirm “that the extension of article 50, a ruling out of a no-deal Brexit and the option of a second EU referendum would form the basis of those discussions”.

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Corbyn is gambling on new elections. That, too, delays any solution.

Corbyn: No Talks With May Until No-Deal Brexit Is Off The Table (G.)

Jeremy Corbyn has said he will not hold talks with Theresa May until the prime minister agrees to remove the threat of a no-deal Brexit, ruling out any meeting with the prime minister in the immediate aftermath of the no-confidence vote. Responding to May’s offer of swift talks to break the Brexit impasse, the Labour leader told MPs that before he would entertain “positive discussions about the way forward” she had to agree to his precondition. “The government must remove clearly once and for all the catastrophe of a no-deal exit from the European Union and all the chaos that would result from that,” Corbyn said minutes after the opposition party was defeated in the confidence vote.

Minutes after the exchanges in the Commons, with Downing Street refusing to take no deal off the table, Corbyn’s spokesman said that as things stood, the Labour leader would not take up May’s offer of an evening Brexit meeting. The two sides were still in discussions, but in light of such a fundamental difference, appeared unlikely to come to an agreement to speak in the immediate future – even though only 10 weeks remain until the UK’s planned departure date. When asked directly if Corbyn was going to No10, the spokesman added: “As I understand it that is not going to take place.”

Labour is willing to support a Brexit deal if May will accept a customs union, a close relationship with the single market and enhanced protections for workers and consumers rights. However, this would represent a massive shift for the prime minister and risk splits in her own party, making it hard to see how a deal could be agreed. Corbyn’s spokesman acknowledged this, saying, “Any change in the government red lines will cause them internal splits.”

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Times headline said 2020.

Markets Expect Brexit To Be Delayed, Bank Of England Governor Says (G.)

Investors expect a delay to Britain’s exit from the EU following the crushing defeat of the prime minister’s Brexit deal, the Bank of England governor has said. Mark Carney said the reaction of financial markets in the wake of the vote showed a degree of confidence that a no-deal Brexit was unlikely on 29 March. The pound bounced back against the dollar on Tuesday night amid optimism that article 50 would be prolonged and that the prospect of a disorderly severance from Brussels had receded. “Public market commentary, consistent with our market intelligence, is that a rebound appears to reflect some expectation that the process of resolution would be extended and that the prospect of no-deal may have been diminished,” said Carney.

Speaking to MPs on the Treasury select committee on Wednesday, the governor said investors were following developments in parliament closely to detect shifts in the direction of Brexit. The reaction of EU officials and governments across the continent was also being watched closely. Carney said a “sharp rebound in sterling following the vote” was the main indicator that some investors believed Brexit could be delayed beyond the end of March.

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2nd referendum is poison. General elections not so much. But the Tories will cling to power no matter what.

More Than 170 UK Business Leaders Join Call For 2nd Brexit Referendum (G.)

More than 170 business leaders, including Terence Conran and Norman Foster, have thrown their weight behind the campaign for a second referendum on Brexit. In a step designed to indicate growing support for a “people’s vote” after Theresa May suffered the heaviest parliamentary defeat in the modern era over her Brexit plan, the letter due to be published in the Times on Thursday asks both main party leaders in Westminster to support a second referendum. Conran, the renowned designer, who was knighted in 1983, and Lord Foster, the architect behind the Gherkin skyscraper in the City of London, were among 172 signatories from the world of business urging a second referendum on the final Brexit deal.

The architect Sir David Chipperfield and the noble laureate and research scientist Paul Nurse were also among new names on the list of supporters. Several other captains of industry, including Mike Rake, the former chairman of BT, had previously backed the campaign and were also included as signatories. The figures from business, together representing more than £100bn in annual contributions to the UK economy, warned that a bad Brexit deal or Britain leaving without any deal at all could damage the economy. While admitting that many business leaders had initially backed May’s deal, even though they believed it was far from perfect, the group stated that the priority after the prime minister’s defeat in parliament was to stop a “chaotic crash-out from the EU”.

The letter said: “The only viable way to do this is by asking the people whether they still want to leave the EU. With the clock now ticking rapidly before we are due to quit, politicians must not waste any more time on fantasies. We urge the leadership of both the main parties to support a people’s vote.” Both May and the Labour frontbench under Jeremy Corbyn have so far dismissed the idea of a second referendum. The prime minister has said she will speak to senior MPs to find a compromise deal, while Corbyn is pushing for a general election.

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German economy is under severe pressure. Still, I don’t see what’s so wrong about fewer cars.

German Carmakers Warn Hard Brexit Would Be ‘Fatal’ (R.)

German carmakers on Wednesday warned of fatal consequences if Britain left the European Union without a divorce deal, predicting job losses in Britain and Europe and urging lawmakers to redouble efforts to ensure tariff-free trade can continue. Prime Minister Theresa May’s deal to leave the EU suffered an overwhelming defeat in parliament on Tuesday, leaving the country’s future in limbo and manufacturers bracing for their “worst-case scenario”, a no-deal Brexit. Britain would suffer most if it lost free trade with European markets since 80 percent of vehicles assembled in the country are exported, mostly to the European Union. But for Germany the stakes are also high.

In 2016, Britain was the largest single export market for German manufacturers, who sold 800,000 new cars there, or 20 percent of their overall global exports. Fewer cars are exported to China and U.S. because German carmakers have factories there. “The consequences of a ‘no deal’ would be fatal,” German auto industry association VDA said after the vote. “Without an orderly and practical solution for business, jobs in the car industry, particularly on the British side, are on the line.”

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Cars is not the big one, agriculture is. But Europe won’t budge on chlorinated chickens.

Trump ‘Inclined’ To Impose New US Auto Tariffs (R.)

U.S. President Donald Trump is likely to move ahead with tariffs on imported vehicles, a move that could prompt the European Union to agree a new trade deal, said Senate Finance Committee Chairman Charles Grassley on Wednesday. “I think the president’s inclined to do it,” the Republican senator told reporters. “I think Europe (is) very very concerned about those tariffs … It may be the instrument that gets Europe to negotiate.” U.S. Commerce Department recommendations into whether Trump should impose tariffs of up to 25% on imported cars and parts on national security grounds are due by mid-February. Grassley, who has had regular talks with Trump and U.S. Trade Representative Robert Lighthizer on trade issues, said he did not like new tariffs but “they are a fact of life when Trump is in the White House.”

He said they may have been an “effective tool” in getting China, Canada, Mexico and others to negotiate on trade. Iowa senator Grassley also wants the EU to agree to include agricultural issues in trade talks, although EU trade commissioner Cecilia Malmström said last week the 28-country bloc could not negotiate on agriculture. The White House has pledged not to move forward with imposing tariffs on the EU or Japan as long as it is making constructive progress in bilateral trade talks. Trump has urged the EU to drop its 10% tariff on imported vehicles. The U.S. passenger car tariff is 2.5%, while it imposes 25% tariffs on pickup trucks. Trump has repeatedly threatened to impose new auto tariffs. “Cars is the big one,” Trump said last year.

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The economy grows 6% amid widespread job losses?!

Chinese Unemployment Worries Grow As Beijing Beefs Up Stimulus (CNBC)

Beijing is working hard to stop a slowing Chinese economy from hitting its workforce. In the last several weeks authorities have made a flurry of announcements, including tax cuts, monetary policy loosening and plans to support public spending. The push comes as economic data points to sagging domestic growth and the U.S. looks set to keep up the pressure on trade. Amid that environment, worries of widespread job losses won’t help the already gloomy sentiment that’s giving consumers a second thought on spending. The overarching worry for China’s leaders is that unemployment could lead to social unrest, and deeper questioning of the Communist Party’s claim to having a handle on the best interests of the country.

Already, the economy is widely expected to slow from around 6.5% growth to just above 6%. “We think the biggest risk in the near term is rising unemployment around the Lunar New Year,” Haibin Zhu, chief China economist and head of China equity strategy, J.P. Morgan, said in a Monday report. [..] Gavekal Dragonomics’ China Consumer Analyst Ernan Cui pointed out in a Jan. 9 report that an official survey covering 374,000 large industrial firms shows total employment declined by about 2.8 million people in the 12 months through November. [..] [A UBS] survey in November found that 23% of 125 Chinese respondents in manufacturing have already laid off employees due to the negative effect of U.S.-China trade tensions. Some 34% planned to lay off employees in the next six months, and 18% had cut wages, the report said.


Job losses in Chinese manufacturing accelerated in mid-2018 after the U.S. imposed tariffs Note: Employment in large industrial enterprises, three-month moving average. December excluded for data anomalies.

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“..a panicked “spasm”..”

China Injects Gargantuan 1.1 Trillion In Liquidity This Week (ZH)

Following what Bloomberg calculated was a record net reverse repo liquidity injection on Wednesday, when the PBOC injected a whopping 560 billion yuan of liquidity into the financial system via open market operations, the Chinese central bank has done it again and in Thursday’s open market operation, it sold 250BN yuan in 7 Day repos (slightly below yesterday’s record 350BN), and 150BN in 28 Day repos, which net of maturities resulted in a whopping net 380BN yuan ($56.2BN) liquidity injection. This brings the net liquidity injection this week to a near record 1.14 Trillion yuan (Monday 20BN, Tuesday 180BN, Wednesday 560BN and Thursday 380BN) and the week is not even over yet – should tomorrow’s reverse repo be of similar magnitude, then this week will go down in history as China’s biggest liquidity injection on record.

As yesterday, today’s massive liquidity injection was aimed at “keeping reasonable and sufficient liquidity in banking system as liquidity falls relatively fast during peak season for tax payments,” according to a statement from the PBOC, although why this year should be such a significant outlier, even when factoring in the liquidity needs ahead of the Lunar new year, to prior periods was not exactly clear. There is, of course, a much simpler explanation: with Chinese economic and trade data turning from bad to worse with every passing day, Beijing’s response is increasingly one of a panicked “spasm”, as Nomura’s Charlie McElligott wrote today when he noted that with regard to the response of Chinese authorities in addressing their economic slowdown and credit crunch, “it had to get worse before it got better”—recently collapsing Chinese data has now clearly forced an escalation of easing-/stimulus-/liquidity- policies.

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He ‘won’ by one vote. And now has to win another vote on the name deal itself. Funny to see western media all say Macedonia is set to change its name. Who likes homework, after all? There is no country named Macedonia, that’s the whole point.

Greek PM Tsipras Wins Confidence Vote After FYROM Name Crisis (R.)

The Greek prime minister, Alexis Tsipras, has won a confidence vote in parliament, clearing a major hurdle for Greece’s approval of an accord to end a dispute over Macedonia’s name and averting the prospect of a snap election. Tsipras called the confidence motion after his rightwing coalition partner Panos Kammenos quit the government on Sunday in protest at the name deal signed between Athens and Skopje last year. Parliament gave Tsipras 151 votes, meeting the threshold he required in the 300-member assembly. His leftist party, Syriza, has 145 seats in parliament. Additional support was given by defectors of Kammenos’s Independent Greeks party (ANEL) and independents.

Tsipras told parliament: “I call upon you with hand on heart to give a vote of confidence to the government which gave battle, which bled, but managed to haul the country out of memorandums and surveillance,” referring to Greece’s international lenders, who kept the country on a tight leash for years. [..] Greek opponents of the agreement say Macedonia’s new name – the Republic of North Macedonia, reached after decades of dispute between Athens and Skopje – represents an attempt to appropriate Greek identity.

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There are far too many questions for this to go away. Bill Barr to the rescue.

DOJ Official Warned Steele Dossier Biased, Connected To Clinton (Solomon)

When the annals of mistakes and abuses in the FBI’s Russia investigation are finally written, Bruce Ohr almost certainly will be the No. 1 witness, according to my sources. The then-No. 4 Department of Justice (DOJ) official briefed both senior FBI and DOJ officials in summer 2016 about Christopher Steele’s Russia dossier, explicitly cautioning that the British intelligence operative’s work was opposition research connected to Hillary Clinton’s campaign and might be biased. Ohr’s briefings, in July and August 2016, included the deputy director of the FBI, a top lawyer for then-Attorney General Loretta Lynch and a Justice official who later would become the top deputy to special counsel Robert Mueller.

At the time, Ohr was the associate attorney general. Yet his warnings about political bias were pointedly omitted weeks later from the Foreign Intelligence Surveillance Act (FISA) warrant that the FBI obtained from a federal court, granting it permission to spy on whether the Trump campaign was colluding with Russia to hijack the 2016 presidential election. Ohr’s activities, chronicled in handwritten notes and congressional testimony I gleaned from sources, provide the most damning evidence to date that FBI and DOJ officials may have misled federal judges in October 2016 in their zeal to obtain the warrant targeting Trump adviser Carter Page just weeks before Election Day.

They also contradict a key argument that House Democrats have made in their formal intelligence conclusions about the Russia case. Since it was disclosed last year that Steele’s dossier formed a central piece of evidence supporting the FISA warrant, Justice and FBI officials have been vague about exactly when they learned that Steele’s work was paid for by the law firm representing the Clinton campaign and the Democratic National Committee (DNC). A redacted version of the FISA application released last year shows the FBI did not mention any connection to the DNC or Clinton.

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David guts the entire narrative. Well done.

The New York Times Smears the President (Stockman)

The Donald has been on a red hot twitter rampage, and he’s completely justified. Actually, we didn’t think the Russian Collusion Hoax could get any stupider until we saw the New York Times’ Friday evening bushwhack. The trio of authors, apparently self-tortured victims of the Trump Derangement Syndrome, actually had the gall to print a story in the once and former Gray Lady of journalistic rectitude which was nothing more than an ugly smear on the sitting President of the United States—one that would have done Joe McCarthy proud. [..] the trio —one of whom graduated from Harvard in 2015 and the other two not much older—don’t seem to even know that foreign policy is a debatable issue.

Or that the American people actually voted into office a candidate who took the other side of Imperial Washington’s unwarranted demonization of Putin and made no bones about his desire for a rapprochement with Russia. Actually, as to pursuing rapprochement, so did: • JFK, after the near catastrophe of the Cuban Missile Crisis; • Lyndon Johnson, after the Seven Days War during his meeting with Kosygin at Glassboro NJ; • Richard Nixon, with the ABM Treaty, detente and his visit with Brezhnev in Moscow; • Jimmy Carter, when he signed the SALT-II agreement; • Ronald Reagan, when he went to Moscow to virtually end the Cold War; and • Bill Clinton, when he sent a multi-billion IMF aid package to Yeltsin to help him get re-elected in 1996.

The fact is, all of the above presidential policy initiatives were heatedly debated in Washington during a period when the US and Soviet Union each had roughly 9,000 nuclear warheads pointed at the other. But that did not lead to FBI counter-intelligence investigations of politicians—to say nothing of sitting Presidents—who took the “wrong” side of these thoroughly democratic debates.

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Wonder who they’re mocking. Is it Bezos?

Fake Washington Post Copies Announcing Trump Resignation Handed Out In DC (RT)

Taking the art of fake news to new heights, a non-profit has circulated mock Washington Post issues near the White House, telling readers that President Donald Trump fled to Crimea on the back of women-led protests. Activists giving out fake copies of the Washington Post commuters were spotted near the White House on Wednesday morning. Vigilant readers immediately alerted the newspaper, which said that the copies, dated May 1, 2019, were “not Post products” and that it was “looking into this.” The fake copies include an eye-catching headline for the lead story: “UNPRESIDENTED. Ending Crisis, Trump Hastily Departs White House,” complete with a picture of a glum Trump on his way to “slip in a private car in the wee hours of the morning.”

The paper “reports” that Trump abruptly left his office at 3:15am on May 1, leaving a message on a napkin in the Oval Office that blamed “crooked Hillary,” the mysterious “Hfior,” and “the Fake News Media” for his flight. The report, meticulously mimicking the Washington Post’s source-based reporting style, cites “four White House aides” speaking on condition of anonymity, that they found the napkin two days before events took a dramatic turn. Trump’s fictional resignation and the subsequent swearing-in of Vice President Mike Pence, who instantly promises to keep as low a profile as possible, comes amidst “massive protests” staged by a grassroots movement with #MeToo as its backbone.

[..] The news of Trump’s resignation sparks a wave of celebrations across the globe, with European countries refusing to shelter him. The creators of the fake diligently stick to the Washington Post’s style, fanning the Russia collusion narrative just like their prototype by sending Trump to seek safe haven in Russia – namely, Crimea. While there has been speculation that radical liberal political activist group MoveOn or CODEPINK, a women-led grassroots NGO, might be behind the stunt since they promoted the action, later in the day, The Yes Men, a progressive non-profit group, claimed responsibility in a press release.

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UK MPs want action. I say don’t depend on politicians if you want to get things done. Britain has a target date of 2042 for phasing out avoidable plastic waste. As its volume is set to treble by 2030. That is so insane, forget about the rest too. Politics won’t solve this.

Plastic Pollution Of The Oceans Is Set To Treble In The Next Decade (G.)

A new global agreement to protect the seas should be a priority for the government to stop our seas becoming a “sewer”, according to a cross-party group of MPs. Plastic pollution is set to treble in the next decade, the environmental audit committee warned, while overfishing is denuding vital marine habitats of fish, and climate change is causing harmful warming of the oceans as well as deoxygenation and acidification. The effects of plastic pollution are particularly poorly understood, the committee found in its report, published on Thursday. It found “a lack of data on the serious long-term harm and health implications of plastic particles entering the food chain” and accused the government of treating the oceans as “out of sight, out of mind”.

One way of tackling the problem would be through a “Paris agreement for the sea”, the MPs recommended. Governments are still working on a possible new ocean protection treaty, under the UN. The MPs also called for the government to bring forward the target date of phasing out avoidable plastic waste from 2042, and urged greater action to reduce greenhouse gas emissions. Labour MP Mary Creagh, chair of the committee, said: “We have to stop treating our seas as a sewer. Plastic, chemicals and sewage are choking our oceans, polluting our water and harming every ocean species from plankton to polar bears. Supporting Indonesia and Malaysia to reduce plastic while simultaneously exporting our contaminated plastics to them shows the lack of a joined-up approach at the heart of the government’s strategy.”

[..] A UK government spokesperson said: “The UK is already a global leader in protecting our seas and oceans. We have recently proposed 41 new marine conservation zones, led calls to protect 30% of the world’s oceans by 2030, and we are going further and faster to tackle the plastic that harms marine life with our ambitious resources and waste strategy. “We know there is more to do, and we will soon publish an international ocean strategy to drive global action to conserve the world’s oceans.”

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Sep 302018
 


M. C. Escher Bond of union 1956

 

White House Directs FBI to Interview Two Kavanaugh Accusers, Not Third (WSJ)
Where Does Our Attention Belong: Kavanaugh or Yemen? (PCR)
“Dirty Money” Crackdown As Vancouver Housing Market Grinds To A Halt (ZH)
May Acts To Tackle Housing Crisis By Imposing Levy On Foreign Buyers (O.)
Brexit Costing Britain £500m A Week And Rising (O.)
Steve Bannon Thinks Michael Avenatti Has A Serious Shot In 2020 (ZH)
New WikiLeaks Release: Corruption in UAE Arms Deal Fueling War on Yemen (MPN)
Musk Out As Tesla Chair, Remains CEO in $40M SEC Settlement (AP)
How Facebook Was Hacked And Why It’s A Disaster For Internet Security (F.)
Fearing Debt Trap, Pakistan Rethinks Chinese ‘Silk Road’ Projects (R.)
FYROM Citizens Go to the Polls to Decide on Name Change (GR)
Indonesia Earthquake: Huge Surge In Death Toll (BBC)

 

 

Swetnick’s gang rape story looks far-fetched. And not one person corroborates it.

White House Directs FBI to Interview Two Kavanaugh Accusers, Not Third (WSJ)

The Federal Bureau of Investigation has been instructed by the White House to interview two of the women who have alleged sexual misconduct by Brett Kavanaugh, according to people familiar with the matter. The parameters of the FBI probe don’t include interviewing Julie Swetnick, who said this week the Supreme Court nominee attended a party decades ago where she was gang-raped, according to one of the people. The focus on the first two accusations suggests that the White House doesn’t consider Ms. Swetnick’s accusations credible, people familiar with the instructions said, a decision that drew criticism from Ms. Swetnick’s attorney, Michael Avenatti.

The Wall Street Journal has attempted to corroborate Ms. Swetnick’s account, contacting dozens of former classmates and colleagues, but couldn’t reach anyone with knowledge of her allegations. No friends have come forward to publicly support her claims. She has recorded a TV interview to be aired Sunday, the first woman making accusations against the Supreme Court nominee to do so. NBC’s “Morning Joe” on Thursday aired a clip of her interview with John Heilemann of Showtime’s “The Circus,” in which Ms. Swetnick called for an investigation into the allegations against Judge Kavanaugh.

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Paul Craig Roberts is right, but undermines himself by saying women should have more responsible sex.

Where Does Our Attention Belong: Kavanaugh or Yemen? (PCR)

There are reports that the Washington-initiated and militarily- supported Saudi Arabian war against Yemen have a starving Yemeni population eating leaves. The Saudis, with Washington’s GPS support, continue to target school busses, massacring children as an element of the terror assault against the population, trying to break Yemeni resistance by murdering children on school busses. Washington continues to supply the Saudis with the weapons to target school buses and the diplomatic support to protect the criminal Saudi regime from war crimes charges. The European cowards turn their heads. Even Russia is silent. Putin’s “partnership” with the criminal state of Saudi Arabia is more important.

Isn’t this a far greater offense, an offense that most definitely does not lack evidence, than the accusation that Kavanaugh, a nominee to the US Supreme Court attempted to rape a women 30 or 40 years ago, for which there is no evidence, only accusation, an accusation that the female defense atttorney who questioned for the Senate committee the woman claiming abuse found insufficient for an indictment.

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Signs the housing bubbles are nearing their end. This article and the next.

“Dirty Money” Crackdown As Vancouver Housing Market Grinds To A Halt (ZH)

Thanks to an influx of demand from Chinese nationals and other foreigners, Vancouver’s housing market soared in the post-crisis years, with prices more than doubling to levels that were clearly unsustainable, cementing the Pacific Northwest metropolis’ status as the most unaffordable housing market in North America. But the torrid growth ground to a halt earlier this year as home sales plummeted, along with construction of new homes and apartments. The typical single-family home in Vancouver costs more than C$1.5 million ($1.15 million) – roughly 20x the median household income. In an effort to let some air out of one of the continent’s most egregious property bubbles, British Columbia’s government has announced an unprecedented crackdown on money laundering in Vancouver’s property market in an attempt to stop a housing-market collapse from taking the city’s GDP with it.

The initiative, launched by Attorney General Daid Eby, seeks to create more transparency to expose all the “numbered corporations” (often used as fronts for foreign investors) buying property in Vancouver. The probe will also examine horse-racing and luxury car sales. Attorney General David Eby said that his office is launching an independent review into potential money laundering in real estate, horse-racing and luxury car sales. The review comes in response to recommendations from a previous review into money laundering in the province’s casinos. In addition, Finance Minister Carole James has appointed an expert panel to look directly at money laundering in the housing sector. Both probes will be done by March.

“There is good reason to believe the bulk of the cash we saw in casinos is a fraction of the cash generated through illicit activities that may be circulating in British Columbia’s economy,” Eby told reporters Thursday in the capital of Victoria. “We cannot ignore red flags that came out of the casino reviews of connections between individuals bringing bulk cash to casinos, and our real estate market.” […] “Our goal is simple, as you’ve heard: Get dirty money out of our housing market,” James said. “When the real estate market is vulnerable to illicit activity and unethical behavior, people, our communities and our economies suffer. This is something we have to tackle.”

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Foreign buyers have carried the boom for years. And now you act?

May Acts To Tackle Housing Crisis By Imposing Levy On Foreign Buyers (O.)

Foreign buyers of properties in the UK will have to pay a new levy, in a renewed attempt by Theresa May to tackle the housing crisis. With concern growing among senior Tories that the party has allowed Brexit to drown out a compelling domestic agenda, plans unveiled on Saturday night will see foreign buyers pay extra stamp duty to fund a drive to tackle rough sleeping. The announcement marks the start of the party’s conference in Birmingham, where the prime minister is desperate to avoid another row over her Brexit plans that might threaten to engulf her premiership. Ministers are also concerned that the party has been failing to respond to the radicalism of some of Labour’s economic programme, set out at its own conference in Liverpool last week.

On Sunday the prime minister will attempt to return to her vow to tackle social injustices and champion what she describes as the “British dream” – the idea that the next generation should do better than the last. Fixing the housing market is a major part of the programme. It comes as the latest Opinium poll for the Observer suggest the Conservatives take a three-point lead into their conference. Despite being carried out during the Labour conference week, which can often provide a poll bounce, the poll puts the Tories on 39% support, with Labour on 36%. According to Opinium, Labour had entered its conference with a two-point lead.

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Just the start.

Brexit Costing Britain £500m A Week And Rising (O.)

Brexit is already costing the public purse £500m a week, new research has found – a stark contrast to the £350m “dividend” promised by the Leave campaign. The Centre for European Reform’s analysis also suggests that the government’s austerity drive would be on the way to completion had Britain voted to stay in the European Union. It shows that the UK economy is already 2.5% smaller than it would have been had Remain won the referendum. Public finances have been dented by £26bn a year, more than half of the defence budget. This translates to a penalty of £500m a week, a figure that is growing. The stark finding comes as the Tory conference begins in Birmingham, with Theresa May’s premiership under severe strain.

The prime minister faces competing proposals from cabinet ministers over how she should resolve the Brexit impasse with the EU. The febrile conference coincides with explosive claims that the boss of one UK-based carmaker has been flown by private jet to meet President Emmanuel Macron, in an attempt to persuade the company to move manufacturing to France after Brexit. Carolyn Fairbairn, director general of the Confederation of British Industry, told the Observer this development was a sign of the economic damage Britain faces from the wrong Brexit deal. While some cabinet ministers are pushing for a loose, Canada-style trade deal, support is growing in May’s ministerial team and on her backbenches for a deal under which Britain would stay closely tied to the EU for a limited period.

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A three way race.

Steve Bannon Thinks Michael Avenatti Has A Serious Shot In 2020 (ZH)

Former Trump strategist Steve Bannon said on Friday that attorney Michael Avenatti could become the Democratic nominee for president in 2020. Speaking with Bill Maher about the state of the Democratic party, Bannon agreed with the HBO host that Avenatti – lawyer to porn star Stormy Daniels and Judge Brett Kavanaugh’s “gang rape” accuser – can capture the left with his bravado and plain spoken language. “The guy who’s the outsider, who like blows through the regular politician because he looks different and he’s got balls,” said Maher – to which Bannon replied: “If Bernie Sanders had an ounce of Avenatti’s fearlessness, he would have been the Democratic nominee and we would have had a much tougher time beating him.”

“Bernie doesn’t have fearlessness?” asked Maher. “Not like Avenatti,” Bannon replied. “I’ve not done any due diligence on this guy, but I tell you he’s got a fearlessness and he’s a fighter. I think he’ll go through a lot of this field if he decides to stick with it.” “I don’t happen to think a professional politician is going to be there at the end of the day. I’ve always said it’s going to be an Oprah or an Avenatti — somebody who’s more media savvy,” said Bannon. “You’re gonna have Trump on the right, a politician, maybe a Kamala Harris or somebody on the left, and I think you’ll have a Bloomberg or a Romney or somebody in the center,” Bannon concluded. “I think it will be a three-way race.”

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Assange is no longer in charge, which makes room for more releases. This is about Germany and France.

New WikiLeaks Release Exposes Corruption in UAE Arms Deal Fueling War on Yemen

The transparency organization WikiLeaks just released a new document that sheds light on the corruption behind a lucrative French-German arms deal with the United Arab Emirates (UAE), weapons that are currently being used to wage a disastrous and genocidal war against the people of Yemen. The document details a court case from the International Chamber of Commerce (ICC) International Court of Arbitration regarding a dispute over a “commission payment” made to Abbas Ibrahim Yousef Al-Yousef, an Emirati businessman, as part of a $3.6 billion arms deal between France’s state-owned weapons company Nexter Systems (then GIAT Industries SA) and the UAE.

Per the deal, which was signed in 1993 and set to conclude in 2008, the UAE purchased 388 Leclerc combat tanks, 46 armored vehicles, 2 training tanks, and spare parts, as well as ammunition. Those weapons have been an important part of the UAE and Saudi coalition’s war in Yemen since it began in 2015. The war has killed over ten thousand civilians, largely the result of the Saudi/UAE bombing campaign, which has targeted and crippled the country’s civilian infrastructure. The result of those bombings, as well as of the UAE/Saudi blockade of Yemen, has been over 17 million people near starvation – including 5.2 million children – and preventable disease epidemics that have claimed tens of thousands of additional lives.

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Big surge in share prices Monday, from whish Musk will profit?

Musk Out As Tesla Chair, Remains CEO in $40M SEC Settlement (AP)

Tesla and its CEO Elon Musk have agreed to pay a total of $40 million and make a series of concessions to settle a government lawsuit alleging Musk duped investors with misleading statements about a proposed buyout of the company. The settlement with the Securities and Exchange Commission allows Musk to remain CEO of the electric car company but requires him to relinquish his role as chairman for at least three years. Tesla must hire an independent chairman to oversee the company, something that should please a number of shareholders who have criticized Tesla’s board for being too beholden to Musk. The deal was announced Saturday, just two days after SEC filed its case seeking to oust Musk as CEO.

Musk, who has an estimated $20 billion fortune, and Tesla, a company that ended June with $2.2 billion in cash, each are paying $20 million to resolve the case, which stemmed from a tweet Musk sent on Aug. 7 indicating he had the financing in place to take Tesla private at a price of $420 per share. “A reckless tweet cost a lot of money — the $20-million tweet,” said Michelle Krebs, executive analyst at Autotrader. [..] Tesla’s stock plummeted 14 percent Friday after the SEC filed its lawsuit, erasing more than $7 billion in shareholder wealth. Many analysts predicted the shares were bound to fall even further if Musk had been forced to step down. Tesla’s stock has dropped 30 percent since Aug. 7, closing Friday at $264.77.

The steep downturn in Tesla’s market value may have influenced Musk to have an apparent change of heart and negotiate a settlement. Musk had rejected a similar settlement offer before the SEC sued Thursday, maintaining he had done nothing wrong when he posted a tweet declaring that he had secured the financing to lead a buyout of Tesla.

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Serious. Incompetent.

How Facebook Was Hacked And Why It’s A Disaster For Internet Security (F.)

Facebook dropped a bombshell on Friday when it revealed an unknown hacker had breached the site, compromising the accounts of 50 million users. The company’s security team found three bugs were used in the attacks, saying they were used in combination to successfully break into Facebook accounts. Forbes spoke with professional web app hacker and cybersecurity researcher Thomas Shadwell, who pieced together a likely hypothesis on how the mystery hacker or hackers carried out what’s believed to be the most significant ever attack to have hit the social media beast. The perpetrator’s ultimate aim was to steal what are known as “OAuth bearer tokens.” Essentially, these tokens prove the Facebook user is the rightful owner of an account and denote what they have access to.

As Shadwell describes them: “OAuth tokens are like car keys, if you’re holding them you can use them, there’s no discrimination of the holder.” And in the context of this attack, those keys unlocked not just Facebook accounts, but any site that affected users accessed with a Facebook login. That might include Instagram or news websites. To get those keys, the hackers abused a feature in Facebook called “View As.” It allows any user to see what another can access on their profile. For instance, if you’ve blocked your dad from looking at your photos, you can check it’s working by effectively impersonating your father and viewing your profile. “It looks like when Facebook built the View As feature, they did this by making it a modification of how Facebook would work if actually viewed by that other user,” said Shadwell.

“Which of course means if there’s a mistake they might end up sending the impersonated user’s credentials to the user of the ‘View As’ feature.” This is where things get a bit weirder. If a user, via View As, impersonated a friend who themselves had a friend who had a birthday, the feature would also show a box prompting them to post a “happy birthday” video. Thanks to an error made by Facebook in July 2017, the video provided the user with one of those precious tokens, Shadwell said. More specifically, the video player generated and sent the user a token, one that would log them into the Facebook mobile app as if they were the person they were impersonating via View As. From there the user (in this case a malicious hacker) would have total access over that other person’s account.

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Increasingly, the reality of the model shines through.

Fearing Debt Trap, Pakistan Rethinks Chinese ‘Silk Road’ Projects (R.)

After lengthy delays, an $8.2 billion revamp of a colonial-era rail line snaking from the Arabian Sea to the foothills of the Hindu Kush has become a test of Pakistan’s ability to rethink signature Chinese “Silk Road” projects due to debt concerns. The rail megaproject linking the coastal metropolis of Karachi to the northwestern city of Peshawar is China’s biggest Belt and Road Initiative (BRI) project in Pakistan, but Islamabad has balked at the cost and financing terms. Resistance has stiffened under the new government of populist Prime Minister Imran Khan, who has voiced alarm about rising debt levels and says the country must wean itself off foreign loans.

“We are seeing how to develop a model so the government of Pakistan wouldn’t have all the risk,” Khusro Bakhtyar, minister in Pakistan’s planning ministry, told reporters recently. The cooling of enthusiasm for China’s investments mirrors the unease of incoming governments in Sri Lanka, Malaysia and Maldives, where new administrations have come to power wary of Chinese deals struck by their predecessors. Pakistan’s new government had wanted to review all BRI contracts. Officials say there are concerns the deals were badly negotiated, too expensive or overly favored China. But to Islamabad’s frustration, Beijing is only willing to review projects that have not yet begun, three senior government officials have told Reuters.

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Pushed through by EU and US so Balkan can join NATO. Still very contested in Greece.

FYROM Citizens Go to the Polls to Decide on Name Change (GR)

FYROM citizens are going to the polls today (Sunday) to vote on the referendum on the name change to “Republic of North Macedonia”, as agreed between their government and Greece on June 17. The question of the referendum to which Macedonian voters are asked to answer is: “Are you in favor of membership in NATO and the European Union by accepting the deal between (the) Republic of Macedonia and Republic of Greece?” Opinion polls so far show that a “Yes” in the referendum is most likely, as the majority of the Former Yugoslav Republic of Macedonia citizens are in favor of NATO and EU membership.

However, the question of the Zoran Zaev government is whether the participation is satisfactory. Specifically, 50 percent plus one of registered voters are needed to cast a ballot for the referendum results to be valid. In his referendum campaign, Prime Minister Zoran Zaev stressed the NATO and EU membership prospects for the Balkan country. Meanwhile, opponents, including the country’s president, Gjorge Ivanov, have called for a boycott of the referendum, describing the Prespa agreement with Greece a “flagrant violation of sovereignty.”

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A lot of people live there.

Indonesia Earthquake: Huge Surge In Death Toll (BBC)

At least 832 people were killed in the devastating earthquake and tsunami that hit the Indonesian island of Sulawesi, the national disaster agency says. It added that the affected area was bigger than initially thought. Many people were reported trapped in the rubble of buildings that collapsed in Friday’s 7.5-magnitude earthquake, agency spokesman Sutopo Purwo Nugroho told a news conference. The quake triggered tsunami waves as high as 6m (20ft), he added. Rescuers have been digging by hand in the frantic search for survivors in the city of Palu.

“What we now desperately need is heavy machinery to clear the rubble. I have my staff on the ground, but it’s impossible just to rely on their strength alone to clear this,” Muhammad Syaugi, head of the national search-and-rescue agency, told AFP news agency. There have also been concerns about the town of Donggala, where the impact is still unclear. The Red Cross estimates that more than 1.6 million people have been affected by the earthquake and tsunami which it described as a tragedy that “could get much worse”. Indonesia’s Vice-President Jusuf Kalla said the final death toll could be in the thousands.

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Jun 172018
 


George Grosz Apocalyptic landscape 1936

 

Is Merkel’s Reign Nearing A Frustrated End? (G.)
Merkel Wants to Hold Urgent Summit With EU States on Migration Issues (Sp.)
Italy Bars Two More Refugee Ships From Ports (G.)
Spain Rescues More Than 900 Boat Migrants, Finds Four Bodies (R.)
First Migrants From Aquarius Rescue Ship Arrive At Spanish Port (Sky)
Spain Says France To Take In Aquarius Ship Migrants (AFP)
Trump Keeps His Promises On Trade (AFP)
China Tariffs On US Soybeans Could Cost Iowa Farmers Up To $624 Million (DMR)
Mattis: Putin Is Trying To “Undermine America’s Moral Authority” (CJ)
Consumers Stubbornly Cling to Cash (DQ)
May To Unveil £20 Billion A Year Boost To NHS Spending (G.)
Greece, FYROM To Sign Name Change Accord Sunday (K.)

 

 

This morning Merkel’s coalition partner, Horst Seehofer, said ‘I can not work with this woman anymore’. Looks like game could be over.

Is Merkel’s Reign Nearing A Frustrated End? (G.)

For nearly 14 years as Germany’s chancellor, Angela Merkel has defined and personified Europe’s middle ground: pragmatic, consensual, mercantilist, petit-bourgeois, above all stable. It is little wonder the leader of Mitteleuropa’s major economic power has dominated the political centre for so long. But what if Merkel falls? Can the centre hold? These are increasingly urgent questions as the once unassailable “Mutti” struggles to hold together a fractious coalition. The immediate issue, which is likely to come to a head on Monday, is a furious row over EU immigration policy. But other problems are piling up, with unpredictable consequences for Europe’s future cohesion.

Merkel’s political obituary has been written many times, but now the final draft is nearing completion. She is under fire from the hard-right, anti-immigrant Alternative für Deutschland (AfD), which stormed into the Bundestag last autumn. She has problems with the failing, unpopular Social Democrats on her left, on whom she depends for support. More seriously, though, Merkel is being challenged from within by her interior minister, Horst Seehofer, former chairman of Bavaria’s rightwing CSU, which is allied to Merkel’s Christian Democrats. In sum, Seehofer is demanding Germany no longer admit migrants who have first entered the EU via other member states – which is nearly all of them.

In Merkel’s view, such a bar would be illegal and would wreck her efforts – ongoing since the 2015 Syrian refugee crisis, when Germany accepted 1 million migrants – to create a balanced, EU-wide policy of voluntary migrant quotas. She says Seehofer should wait for this month’s EU summit to come up with a joint plan. The problem with that approach is twofold. Seehofer’s CSU, which faces a critical electoral clash with the AfD in October, complains that the EU has been trying and failing to agree this for years. Another objection, as her critics see it, is that most Germans, recalling her 2015 “open door” policy, do not trust Merkel on this issue. Polls indicate 65% back tighter border controls.

Last week’s row between France and Italy, sparked by Rome’s decision to refuse entry to a ship, the Aquarius, carrying 629 migrants rescued off Libya, showed how improbable is the prospect of agreement at the Brussels summit. Italy’s new populist leadership, in common with an emerging axis of nationalist-minded governments in Austria, Hungary and Poland, believes it has a mandate to halt the migrant flow. Meanwhile, so-called “frontline states” such as Greece, Spain and Italy accuse “destination states” such as Germany, France and the UK of failing to accept a fair share of migrants. Divisions have been exacerbated by the failure, so far, of a key Merkel-backed initiative, the multibillion-euro EU Emergency Trust Fund for Africa, to reduce migration by addressing “root causes” in places such as Nigeria, Eritrea and Somalia.

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And this is of course far too late. This summit should have been held 3 years ago. And it should be a UN summit, not some talks with Greece and Italy. Give Africa a voice. And Central America. Stop inviting xenophobia.

Merkel Wants to Hold Urgent Summit With EU States on Migration Issues (Sp.)

German Chancellor Angela Merkel wants to hold an urgent summit dedicated to the migration crisis and to discuss this issue with a group of the EU member states, local media reported. The Bild newspaper reported Saturday citing own sources in the leadership of several EU countries that Merkel would like to discuss migration-related issues with leadership of Austria, Greece, and Italy. According to the media outlet, a final decision about the date of the summit has not been made yet, however it could take place later in the month. Earlier, Italy’s Prime Minister Giuseppe Conte, called for reforms of EU asylum rules, proposing that the EU set up centers to process asylum claims in migrants’ countries of origin. France’s President Emanuel Macron also stressed the need to modify current migration rules and criticizing the European Union for not sharing the burden with Rome over the migrant crisis.

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This comes at a bad time given Merkel’s problems.

Italy Bars Two More Refugee Ships From Ports (G.)

Italy’s interior minister has sparked a new migration crisis in the Mediterranean by barring two rescue boats from bringing refugees to shore, a week after the Auarius was prevented from docking. “Two other ships with the flag of Netherlands, Lifeline and Seefuchs, have arrived off the coast of Libya, waiting for their load of human beings abandoned by the smugglers,” Matteo Salvini, the leader of the anti-immigrant party the League, wrote on his Facebook page. “These gentlemen know that Italy no longer wants to be complicit in the business of illegal immigration, and therefore will have to look for other ports [not Italian] where to go.”

Italy’s closure of its ports to the migrant rescue ship Aquarius, which was carrying 620 people, triggered warnings from aid agencies of a deadly summer at sea for people trying to cross the Mediterranean. Axel Steier, the co-founder of Mission Lifeline which operates the Lifeline ship, said his crew had rescued more than 100 migrants off Libya on Friday in an operation with a US warship, and transferred them to a Turkish merchant vessel. He said his ship was too small to make the journey from Libya to Italian ports and that he always transferred migrants to other ships, but insisted those craft should have the right to land in Italy.

“I am sure there is an obligation for Italy to take them because its closest safe harbour is Lampedusa. We hand over migrants to Europe because of the Geneva convention,” he said. Vessels chartered by an assortment of European NGOs have plied the waters off Libya for three years, rescuing migrants from leaking boats and transporting them to Sicily.

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Greece, Italy and now Spain.

Spain Rescues More Than 900 Boat Migrants, Finds Four Bodies (R.)

Spain’s coast guard rescued 933 migrants and found four dead bodies in the Mediterranean Friday and Saturday, as the country prepared for the arrival of a charity rescue ship that was denied a port by Italy and Malta. The number of people fleeing poverty and conflict by boat to Spain doubled last year and is likely to rise again in 2018, according to the EU border agency, potentially pushing migration up the national political agenda. Spanish Prime Minister Pedro Sanchez has already made migrant-friendly moves in his first two weeks in the job, offering to take in the rescue ship Aquarius with 629 people on board and pledging free healthcare to undocumented migrants. The coast guard said on Twitter it had rescued 507 people from 59 small dinghies in the Gibraltar strait, where it also found the four bodies.

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Kudos to Sanchez. But what comes next?

First Migrants From Aquarius Rescue Ship Arrive At Spanish Port (Sky)

The first boat of the Aquarius convoy carrying 630 people, who have become the focus of a pan-European disagreement over migration, has docked in Valencia. The Italian coast guard vessel Dattilo arrived in the Spanish port just before 7am local time on Sunday, and will be followed by the Aquarius and another Italian navy ship, the Orione. The migrants were rescued a week ago off the coast of Libya and have been at sea ever since after the Italian government refused to allow the vessel they were aboard to dock in Italy. Among those rescued are seven children aged under five, 32 children aged between five and 15 years, 61 young people aged from 15 to 17 and 80 women, seven of whom are pregnant.

They were rescued in several different operations last weekend after Italian coastguard vessels reported a group of small rubber dinghies off the coast of Libya. The Aquarius, a charity rescue vessel operated by French charities SOS Mediterranee and Medecins Sans Frontieres (MSF), picked up more than a hundred people in a complex night-time rescue before being asked by the Italian authorities to take on board hundreds more people they had recovered. However the Italian interior minister, Matteo Salvini, then refused to allow the Aquarius to dock at Italian ports, fulfilling an election pledge to stop the arrival of migrants from Africa. Malta also refused to allow them to dock there, arguing that the Italians had assumed responsibility for the rescue operations.

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More kudos for Sanchez. France is moving.

Spain Says France To Take In Aquarius Ship Migrants (AFP)

Madrid said Saturday it had accepted an offer from France to take in migrants from the Aquarius rescue ship, currently en route to Spain with more than 600 people on board. “The French government will work together with the Spanish government to handle the arrival of the migrants” scheduled for Sunday, Spain’s deputy prime minister Carmen Calvo said in a statement. “France will accept migrants who express the wish to go there” once they have been processed in Valencia, the statement said. The vessel is at the heart of a major migration row between European Union member states.

Chartered by a French aid group, the vessel rescued 629 migrants including many children and pregnant women off Libya’s cost last weekend. Italy’s new populist government and Malta refused to let it dock in their ports, accusing each other of failing to meet their humanitarian and EU commitments. Spain eventually stepped in and agreed to receive the refugees. France – who had angered Rome by branding it irresponsible over the vessel rejection – offered Thursday to welcome Aquarius migrants who “meet the criteria for asylum”.

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Still negotiating.

Trump Keeps His Promises On Trade (AFP)

By inflicting tariffs on the steel and aluminum of his allies, and then on tens of billions of dollars in goods from China, US President Donald Trump has quickly moved to fulfill the tough campaign pledges he made on trade. During his first year in office, Trump and his top economic aides made repeated threats and warned that preliminary investigations were launched into whether certain imports were being unjustly subsidized. But no concrete steps were taken. That all changed in March, when the “America First” president went on the offensive. “What happened for a period of time is the president was constrained by different members” of his administration, said Edward Alden, a specialist on US economic competitiveness at the Council on Foreign Relations.

“But the president has become increasingly confident in his own judgment on these issues… He is willing to do radical things he promised during his campaign and for many years before that.” In its latest move, the White House on Friday announced stiff 25 percent tariffs on Chinese imports, sparking immediate retaliation from Beijing. The move, which Trump justified as payback for the theft of American intellectual property and technology, reignited a trade spat between the world’s two largest economies, spooking markets and worrying business leaders.

It came on top of the tariffs on Chinese steel and aluminum that went into effect in late March – measures that prompted Beijing to slap punitive duties on 128 US goods, including pork, wine and certain pipes. Since June 1, steel and aluminum imports from the European Union, Canada and Mexico have been hit with tariffs of 25 percent and 10 percent, respectively. Trump has seemingly opted to go with his gut, sometimes over the protestations of his closest aides.

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Since there is no glut of soybeans globally, this looks improbable.

China Tariffs On US Soybeans Could Cost Iowa Farmers Up To $624 Million (DMR)

Perhaps Iowa farmers’ biggest fear is becoming a harsh reality: The escalating U.S.-China trade dispute erupted Friday, with each country vowing to levy 25 percent tariffs on $50 billion in goods. U.S. and Iowa agriculture is caught in the crossfire, with farmers selling $14 billion in soybeans to China last year, its top export market. Soybeans are among hundreds of U.S. products China has singled out for tariffs. The U.S. has an equally long list that includes taxing X-ray machines and other Chinese goods. Iowa farmers could lose up to $624 million, depending on how long the tariffs are in place and the speed producers can find new markets for their soybeans, said Chad Hart, an Iowa State University economist.

U.S. soybean prices have fallen about 12 percent since March, when the U.S.-China trade dispute began. “Any tariff or tax put in place will have a significant impact, not only to the U.S. soybean market but to Iowa’s, because we’re such a large producer,” Hart said Friday. Iowa is the nation’s second-largest soybean grower, producing 562 million bushels last year worth $5.2 billion. “It will slow down the market. Even with the tariffs in place, we will ship a lot of soybeans to China,” Hart said. “It just won’t be nearly the amount we did before. “It’s likely to still be our largest market even with these tariffs in place.”

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Word.

Mattis: Putin Is Trying To “Undermine America’s Moral Authority” (CJ)

At a graduation ceremony for the US Naval War College (barf), US Secretary of Defense James Mattis asserted that Russian President Vladimir Putin “aims to diminish the appeal of the western democratic model and attempts to undermine America’s moral authority,” and that “his actions are designed not to challenge our arms at this point but to undercut and compromise our belief in our ideals.” This would be the same James Mattis who’s been overseeing the war crimes committed by America’s armed forces during their illegal occupation of Syria.

This would be the same United States of America that was born of the genocide of indigenous tribes and the labor of African slaves, which slaughtered millions in Korea, Vietnam, Cambodia, Iraq, Libya and Syria for no legitimate reason, which is partnered with Ukrainian Nazis, jihadist factions in Syria and Iranian terror cultists, which supports 73 percent of the world’s dictators, which interferes constantly in the electoral processes of other countries as a matter of policy, which stages coups around the world, which has encircled the globe with military bases, whose FBI still targets black civil rights activists for persecution to this very day, which routinely enters into undeclared wars of aggression against noncompliant governments to advance plutocratic interests, which remains the only country ever to use nuclear weapons on human beings after doing so completely needlessly in Japan, and which is functionally a corporatist oligarchy with no meaningful “democratic model” in place at all.

A casual glance at facts and history makes it instantly clear that the United States has no “moral authority” of any kind whatsoever, and is arguably the hub of the most pernicious and dangerous force ever assembled in human history. But the establishment Russia narrative really is that cartoonishly ridiculous: you really do have to believe that the US government is 100 percent pure good and the Russian government is 100 percent pure evil to prevent the whole narrative from falling to pieces. If you accept the idea that the exchange is anything close to 50/50, with Russia giving back more or less what it’s getting and simply protecting its own interests from the interests of geopolitical rivals, it no longer makes any sense to view Putin as a leader who poses a unique threat to the world. If you accept the idea that the west is actually being far more aggressive and antagonistic toward Russia than Russia is being toward the west, it gets even more laughable.

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“Currency in Circulation vs. GDP is increasing on all continents..”

Consumers Stubbornly Cling to Cash (DQ)

The last month has been an unhappy time for daydreamers of a cashless nirvana. Following weeks of disruptive tech failures, payment outages, and escalating cyber fraud scams, much of it taking place in Britain, consumers have been reminded of one of the great benefits of physical cash: it is accepted just about everywhere and does not suddenly fail on you. The findings of a new study by UK-based online payments company Paysafe, partly owned by US private equity giant Blackstone, confirm that consumers on both sides of the Atlantic continue to cling to physical lucre. For its Lost in Transaction report, Paysafe surveyed over 5,000 consumers in the UK, Canada, the US, Germany, and Austria on their payment habits.

One of its main findings is that 87% of consumers used cash to make purchases in the last month, while 83% visited ATMs, and 41% are not interested in even hearing about cash alternatives. “Despite the apparent benefits of low-friction payment technologies, these findings suggest many consumers aren’t ready to lose visibility of the payment process,” says Paysafe Group Chief Marketing Officer Oscar Nieboer. “It’s clear that the benefits are not unilaterally agreed upon, with cultural and infrastructure trends at play, and it may be some time before adoption is widespread.” Although consumers continue to cling to cash, they appear to be carrying less of it: 49% overall in the survey and 55% of U.S. respondents said they carry less cash now than they did a year ago.

The average American consumer carries $42 today — that’s $8 less than in 2017. In the UK the average amount carried in 2017 was £33; that has now fallen to £21. But that does not mean that the amount of cash in circulation is dwindling. On the contrary, according to this year’s G4S cash report, the world average ratio of currency vs GDP continues to rise, reaching 9.6% in 2018. “Currency in Circulation vs. GDP is increasing on all continents, indicating a consistent, growing demand for cash across the world,” says the report. South America has by far the highest cash dependency relative to its GDP, with an average ratio of over 16%.

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First you kill it, then it needs to be revived. How much of the £20 billion goes to repairing the damage already done?

May To Unveil £20 Billion A Year Boost To NHS Spending (G.)

Taxpayers are to be asked to help fund a £20bn a year injection of extra cash into the National Health Service by 2023-24 that will pay for thousands more doctors and nurses, while cutting cancer deaths and improving mental health services, Theresa May will say today. The announcement, before the NHS’s 70th birthday next month, will represent the biggest funding boost since Gordon Brown imposed a one percentage point rise in National Insurance to pay for more NHS spending in his 2002 budget, in the face of Tory claims that Labour was slapping a “tax on ordinary families”.

Government sources said the increases, which would be paid for in part by a “Brexit dividend”, would amount to around £600m a week extra for the NHS in cash terms within six years. Health and social care secretary Jeremy Hunt said last night that the government wanted to “show the world what a cutting-edge 21st-century healthcare system can look like”. He added: “This long-term plan and historic funding boost is a fitting birthday present for our most loved institution. Like no other organisation could ever hope to be, the NHS is there for every family at the best and worst of times, from the wonder of birth to the devastation of death, living and breathing those very British values of decency, fairness and compassion.

He said the extra cash “recognises the superhuman efforts made by staff over the last few years to maintain services in the face of rapidly growing demand. But it also presents a big opportunity for the NHS to write an entirely new chapter in its history”. Details of how the public will be required to pay through tax rises, and the proportion of the funding increases they will pay for, will not be spelled out until the budget, because of ongoing arguments involving the chancellor Philip Hammond, Hunt, and No 10.

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70% of Greeks is against the deal, protests are everywhere. But he pushed it through. In Foreign Policy, someone suggested giving him a Nobal Peace Prize for it. But, but, democracy…

Greece, FYROM To Sign Name Change Accord Sunday (K.)

Greece and the Former Yugoslav Republic of Macedonia (FYROM) are set to sign a historic accord to modify the latter’s name after Greek Prime Minister Alexis Tsipras survived a no-confidence vote in Parliament Saturday. The accord is to be signed in the Prespes region, a lake district which borders Greece, FYROM and Albania, by the two countries’ foreign ministers Sunday. Tsipras and his FYROM counterpart Zoran Zaev will both attend the ceremony, along with UN mediator Matthew Nimetz and other European officials – including the European Union’s foreign policy chief Federica Mogherini and European Neighborhood Policy and Enlargement Negotiations Commissioner Johannes Hahn.

Following the ceremony, members of the two delegations will hold a working lunch in the town of Otesevo, in FYROM. Security at the event is expected to be ultra-tight. A protest against the deal will be held in the nearby village of Pisoderi. On Saturday, after more than two days of vehement debate in Parliament, Greece’s SYRIZA-led government survived a no-confidence vote brought against it by the main opposition New Democracy party, but with one less MP. The motion garnered 127 votes with 153 against. The junior coalition partner Independent Greeks (ANEL) backed the government despite its opposition to the name deal with FYROM that Tsipras announced last week, bar one MP, Dimitris Kammenos, who backed the motion. He was subsequently expelled from the party, reducing the government’s majority to 153.

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Feb 282018
 
 February 28, 2018  Posted by at 11:09 am Finance Tagged with: , , , , , , , , , , , ,  9 Responses »


Vincent van Gogh Le moulin de la galette 1886

 

Fed Chairman Powell: Market Volatility Won’t Stop More Rate Hikes (CNBC)
The Albatross Of Debt Part 4 (David Stockman)
Slowing Euro-Area Inflation Helps Draghi Push Back Exit Debate (BBG)
Banks Have The Right To ‘Do What They Want’ In Leveraged Lending: Otting (R.)
EU and China Consider Retaliation To Potential Trump Tariffs (CNBC)
People in Sweden at Risk of Losing Access to Cash Altogether (BBG)
May Is Ready to Fight With EU Over Draft Brexit Deal (BBG)
“We’ve Got To DO Something About Syria!” Uh, No You Don’t. Please Don’t. (CJ)
Protesters in FYROM Decry Proposed ‘Macedonia’ Name Compromise (AP)
World’s First Plastic-Free Aisle Opens In Netherlands Supermarket (G.)
Arctic Warming: Scientists Alarmed By ‘Crazy’ Temperature Rises (G.)

 

 

The news about Powel’s first speech is as boring as the man himself. “We’re doing so well I just gotta wear shades..”

Fed Chairman Powell: Market Volatility Won’t Stop More Rate Hikes (CNBC)

Federal Reserve Chairman Jerome Powell played down concerns about recent market volatility, arguing Tuesday that the dramatic swings do not weigh heavily on his outlook for the economy and maintaining his expectation for further gradual increases in interest rates. In Capitol Hill testimony, Powell emphasized that the job market remains robust, consumer spending is solid and wage growth is accelerating. He also highlighted gains in U.S. exports and stimulative fiscal policy as new “tailwinds” for the economy. “After easing substantially during 2017, financial conditions in the United States have reversed some of that easing,” he said in prepared remarks. “At this point, we do not see these developments as weighing heavily on the outlook for economic activity, the labor market and inflation. Indeed, the economic outlook remains strong.”

Powell’s appearance before the House Financial Services committee was his first as the powerful chairman of the world’s most influential central bank. The Fed has been aiming to boost inflation to 2%, but the recent pickup in monthly readings has spooked some investors who worry the central bank might overshoot its target. Instead, Powell’s remarks suggested the firmer data give Fed officials confidence they will actually hit a goal that has long proved elusive. He characterized inflation as “low and stable.” “Despite the recent volatility, financial conditions remain accommodative. At the same time, inflation remains below our 2% longer-run objective. In the FOMC’s view, further gradual increases in the federal funds rate will best promote attainment of both of our objectives.”

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Stockman has the best assessment of Powell. A longtime and clueless Fed puppet with no opinion of his own.

The Albatross Of Debt Part 4 (David Stockman)

Donald Trump is all about delusional and so are the casino punters. They keep buying what the robo-machines are buying, which, in turn, persist in feasting on the dip because it’s there and because it’s worked like a charm for nine years running. So doing, the punters have become downright reckless. After all, the market was already sky high last January – trading at 23X earnings on the S&P 500 and resting precariously on a record $554 billion of margin debt . Yet in order to load up on even more of these ultra risky shares, punters have since added $112 billion to their already staggering margin accounts, thereby helping to propel the S&P index to a truly ludicrous 27X by the end of January 2018.

And therein lies the true danger of the Fed’s 30-year long regime of Bubble Finance and the $67 trillion of debt it has piled upon the US economy. To wit, it has completely unmoored Wall Street from the main street economy, meaning that the speculative momentum and internals of the casino are operating in free flight: They will just keep levitating financial asset prices higher until some powerful shock triggers another meltdown of the type experienced during 2008, 2000 and 1987.

We happen to believe strongly that a bond market “yield shock” will be the crash-trigger this time around and for a self-evident reason. The central banks of the world have unleashed a credit monster – $67 trillion in the US, $40 trillion or more in China and $230 trillion on a global basis—and know they must finally stop the relentless monetization of existing debt and other assets. The leadership for that task falls to the new Fed Chairman, Jerome Powell, who is a dyed-in-the-wool Keynesian and lifetime crony capitalist bubble rider. Indeed, during the 45 meetings during which he served as a member of the Bernanke-Yellen Fed, he did not dissent a single time.

So he now owns the epic bubble generated by that madcap regime of massive money printing and drastic interest rate repression, but through his Keynesian beer goggles Powell is thoroughly clueless about the resulting giant disconnect between main street and Wall Street. Accordingly, he seems to think that there is a strong full-employment economy on main street, when it’s nothing of the kind; and a reformed, prudently regulated banking system at the center of Wall Street, when in fact it’s teeming with the fruits of relentless speculation – FANGS, leveraged ETFs, options gambling, risk parity trades, structured finance deals loaded with hidden risk and debt and countless more.`

In other words, the Fed’s new chairman avers that there is smooth sailing ahead, even suggesting to Congress today that the US economy is blessed with considerable tailwinds – including exports and fiscal policy! We will address that tommyrot below, but what’s ahead is tumult, not smooth. That’s because the disconnect between a flat-lining main street economy and Wall Street’s bubble ridden financial house of cards is blatantly unstable and unsustainable. Indeed, this fraught condition, which Powell and his Keynesian posse fail to see, will soon give rise to a thundering upheaval triggered by the Fed’s own action.

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And Draghi too just keeps claiming the economy is doing great, and it’s due to him.

Slowing Euro-Area Inflation Helps Draghi Push Back Exit Debate (BBG)

A third month of slowing inflation in the euro-area has given European Central Bank President Mario Draghi ammunition to ward off the hawks a little while longer. The rate of price growth slowed to 1.2% this month from 1.3%, dropping to its weakest since 2016. The core measure was unchanged at 1%. The figures follow a series of releases that have checked the economy’s thundering momentum at the start of 2018, which had emboldened policy makers who want a faster unwinding of the central bank’s crisis-era monetary stimulus. Draghi emphasized to European lawmakers this week that an expansionary policy is still warranted even as the economic situation is “improving constantly.”

At the same time, he’s more confident that declining unemployment will boost pay and inflation eventually, even if the rate remains below the ECB’s target of just under 2% for now. The ECB’s Governing Council meets next week and is likely to discuss a change in its policy language to pave the way for an end of quantitative easing. Executive Board member Benoit Coeure – an architect of the program who has more recently taken a hawkish turn – said last week that the ECB can afford to slow bond purchases, as long as it gives clear guidance on the path of interest rates. Bundesbank President Jens Weidmann, who has long argued in favor of unwinding stimulus, chimed in on Tuesday, saying in a Bloomberg TV interview that the ECB’s guidance on interest rates is “rather vague” and could be strengthened as the end of bond buying approaches.

The European Commission said on Tuesday euro-area economic sentiment slipped for a second month in February after touching a 17-year high in December. Data last week showed business confidence in Germany and manufacturing and services activity in the euro area all weakened more than economists forecast. Such bumps along the road of Europe’s recovery from the ravages of its debt crisis underscore why Draghi is not yet ready to pare back support for the euro area.

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You mean the ones we bailed out, right?

Banks Have The Right To ‘Do What They Want’ In Leveraged Lending: Otting (R.)

Banks have the “right” to do the leveraged lending they want as long as it does not impair their “safety and soundness,” Joseph Otting, Comptroller of the Currency, said on Tuesday. Otting was speaking to an audience at the ABS Vegas conference co-hosted by SFIG, in response to a question from the audience about whether the OCC would be more lenient with banks about leveraged lending. The Government Accounting Office, the investigative arm of the US Congress, said last October that US bank guidelines on leveraged lending are subject to Congressional review, clearing the way for them to possibly be overturned. The GAO said the guidelines, which critics said have hampered the leveraged debt market, are under the purview of the Congressional Review Act of 1996, which they would not be if the GAO had deemed them to be less formal instruments of policy.

“As long as banks have the capital, I am supportive of banks doing leveraged lending,” said Otting. That stands even if leveraged lending activities transgresses guidelines, he said. “When (the idea of the) guidance came out – it was like people were afraid to jump over the line without feeling the wrath of Khan from the regulators,” Otting said. “But you have the right to do what you want as long as it does not impair safety and soundness. It’s not our position to challenge that.” US regulators said they are open to revising restrictions on leveraged lending, offering an olive branch to a Republican-controlled Congress keen to roll back banking regulations. The response from regulators indicated a desire to avoid a protracted battle with a Congress.

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Trump the anti-globalist. That should appeal to some people.

EU and China Consider Retaliation To Potential Trump Tariffs (CNBC)

As the Trump administration considers what action to take on trade tariffs on steel and aluminum, EU and Chinese officials are considering taking aim at politically strategic products made in the U.S., such as bourbon and motorcycles. Of the options laid out by Commerce Secretary Wilbur Ross, the administration is considering the most wide-reaching penalty: slapping tariffs on all steel and aluminum imported into the U.S., not just imports from specific countries. The EU is targeting products with political punch, revisiting a list compiled during George W. Bush-era trade disputes of symbolic American brands. Potentially in the EU’s sights: items such as Harley-Davidson motorcycles, whose corporate headquarters is in House Speaker Paul Ryan’s home state of Wisconsin.

Bourbon is another target, having enjoyed a surge in exports to the EU. Senate Majority Leader Mitch McConnell’s home state of Kentucky exported $154 million worth of bourbon to the EU, up from $128 million in 2016, according to data from the International Trade Commission. Agriculture products such as cheese, orange juice, tomatoes and potatoes are also targets for retaliation. “The EU stands ready to react swiftly and appropriately in case our exports are affected by any restrictive trade measures from the U.S.,” a European Commission source tells CNBC. The counterpunch from China could land harder because of the scale of trade between the two countries and the reliance of American farmers on China as an export destination. China’s Ministry of Commerce is already investigating whether to limit imports of U.S. sorghum, a cereal grain used to feed livestock, in response to previous tariffs from the White House on solar panels and washing machines.

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NOW they find out: “Cash is important in a crisis situation…”

People in Sweden at Risk of Losing Access to Cash Altogether (BBG)

People living in the world’s most cashless society may soon lose their access to notes and coins. To avoid that extreme scenario, Swedish cash-handling provider Loomis wants authorities to force banks and retailers to continue accepting cash. The warning follows similar calls from the Swedish central bank, which is worried that the rapid disappearance of cash will ultimately lead to the disintegration of the infrastructure needed to use notes and coins and undermine its task to promote a safe and efficient payment system. “We have to have cars, vaults and all that, and in order to maintain the infrastructure we also need a base volume,” Loomis CEO Patrik Andersson said in an interview. He says Sweden’s more remotely populated areas in the north are most at risk of losing access to cash.

Such a scenario would be worrying in the event of natural disaster or a technological breakdown, with Swedes potentially unable to buy the basics needed to survive. “Cash is important in a crisis situation,” Andersson said. “Swedes don’t maybe have the insight to understand the effects of such a crisis, that it pervades the whole community.” A parliament committee reviewing the broader framework for the Riksbank plans to publish a special report this summer looking at the challenges posed by declines in cash usage. Riksbank Governor Stefan Ingves this week called for legal changes to safeguard the central bank’s governance of the payment system amid the rapid decrease in the use of cash. [..] The amount of cash in circulation in Sweden last year dropped to the lowest level since 1990 and is now more than 40% below its 2007 peak. The declines in 2016 and 2017 were the biggest on record.

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Much as you may wish this were to vanish from the news, it’ll drag on for a very long time.

May Is Ready to Fight With EU Over Draft Brexit Deal (BBG)

Prime Minister Theresa May is preparing to reject the EU’s draft Brexit deal when it’s published Wednesday, a senior official said, as her government steps up its fight with the bloc over the terms of Britain’s departure. With just three weeks left to agree on the Brexit transition phase, the EU will unveil a legal text that’s likely to infuriate euroskeptics in May’s Conservative government, piling further pressure on the premier at a critical time. According to the senior official, May will take on the EU over two of its key proposals that are unacceptable to her government. These are allowing the European Court of Justice to oversee the final deal, and arranging a separate trading regime for Northern Ireland – which, although it could avoid a “hard border” with Ireland, would impose new barriers with mainland Britain.

Almost a year in since May triggered the U.K.’s withdrawal from the 28-nation club, talks have yet to begin on what kind of trade accord will follow. Time is running out to limit the damage this ongoing uncertainty will cause to British businesses, who want a status quo transitional phase to be agreed by the end of March at the latest, to help them prepare and adapt when Britain leaves in March 2019. Yet key conflicts remain unresolved between the U.K. and the EU negotiating teams. “I maintain the evaluation that I gave you three weeks ago, which is that in light of these divergences, that we haven’t achieved the transition,” EU chief negotiator Michel Barnier said Tuesday. His remarks raise the prospect that the deal will miss its crucial end-March deadline.

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Caitlin Johnstone has it right. It’s out leadership that has turned Syria into such a mess (like Lybia, Iraq), not Assad or Putin.

“We’ve Got To DO Something About Syria!” Uh, No You Don’t. Please Don’t. (CJ)

Arguing that the western war machine is a good way to bring about peace and justice is like arguing that a bulldozer is a useful tool for brain surgery. Arguing that the western war machine is a good way to bring about peace and justice in Syria is like arguing that the gasoline which was used to start a house fire can also be used to extinguish it. The cutesy fairy tale you will hear from empire loyalists is that what started out as peaceful protests slowly morphed into a battle between the Syrian government and various terrorist factions, with the west only backing the terrorists later on in the conflict. This is false. [..] This has never been about “saving children”; this is about money, power, and resources, which are all of course ultimately the same thing as far as the empire is concerned.

Longtime US rival Russia has recently been awarded exclusive rights to oil and gas production in Syria in return for its efforts in helping its longtime ally stop the regime change, a predictable step in the fight for fossil fuel dominance in the region. Syria’s border dispute with Israel over the Golan Heights means that Israel has every reason to want to keep Syria destabilized, not only because the Golan Heights contains oil but because it provides a third of Israel’s water supply. Bashar al-Assad also launched what he called his “Five Seas Vision” in 2004, a strategy to use Syria’s supreme geographic location to become an economic superpower. Such a plan wouldn’t sit well with the US hegemon, which can only maintain its dominance by keeping other nations down.

“Once the economic space between Syria, Turkey, Iraq and Iran becomes integrated, linking the Mediterranean, the Caspian Sea, the Black Sea and the Arabian Gulf, will not only be important in the Middle East,” Assad once famously said in 2009. “When these seas are connected, we will become the inevitable intersection of the whole world in investment, transportation, and more.” It’s not hard to imagine how the imperialists would suddenly accelerate the urgency of removing Assad once he began speaking like that. Go try and find anything damning about Bashar al-Assad in the western mainstream media prior to 2009. You’ll find a bunch of positive expressions, including a nomination for honorary knighthood in 2002 by British Prime Minister Tony Blair. Interesting how he then suddenly transformed overnight into a bloodthirsty sexual sadist who gets off on gassing children to death for no reason.

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The name dispute continues. Came upon a map recently (below), which explains quite well why Greeks don’t want FYROM to call itself Macedonia: 90% of former Macedonia is in Greece.

Protesters in FYROM Decry Proposed ‘Macedonia’ Name Compromise (AP)

Several thousand protesters rallied in Skopje, the capital of the Former Yugoslav Republic of Macedonia (FYROM), late Tuesday for the government to call off talks with Greece aimed at settling a decades-long name dispute. The protesters marched peacefully from the main Orthodox cathedral in Skopje past the European Union office, chanting “Macedonia! Macedonia!” and waving national flags. Prime Minister Zoran Zaev’s 9-month-old center-left government has opened negotiations with Greece to resolve the dispute over the country’s name. Greece says the country’s name in its current form implies a territorial claim against its own region of Macedonia. Zaev has said he is willing to support a modified name. But the head of the so-called “World Macedonian Congress” group, Todor Petrov, told the protesters that changing the country’s name would be tantamount to committing treason.

“Our country has a name….To change it would mean that the Macedonian identity would be permanently lost,” he said. The rally was organized by several hard-line nationalist associations. The rally ended peacefully, but a Greek flag was burned during the march. Greeks also held a large rally in Athens earlier this month to reject a proposed compromise. Zaev has said he could accept a “geographical qualifier” in Macedonia’s name – such as “new”, “upper” or “north” – to forge a compromise, but insisted the new name must “respect the dignity” of people in both countries. Greece is also seeking changes in FYROM’s Constitution to eliminate what Athens considers tacit territorial claims. FYROM insists constitutional amendments made in 1995 already addressed Greek concerns.

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1) It’s crazy that we find this so special.

2) Shops have had plastic free aisles for many years, and in many places. Just not your supermarket.

3) That unfortunate photo makes it look as if everything is wrapped in plastic.

World’s First Plastic-Free Aisle Opens In Netherlands Supermarket (G.)

Shoppers in the Netherlands will get the chance to visit Europe’s first plastic-free supermarket aisle on Wednesday in what campaigners claim is an turning point in the war on plastic pollution. The store in Amsterdam will open its doors at 11am when shoppers will be able to choose from more than 700 plastic-free products, all available in one aisle. The move comes amid growing global concern about the damage plastic waste is having on oceans, habitats and food chains. Scientists warn plastic pollution is now so widespread it risks permanent contamination of the natural world. [..] Sian Sutherland, co-founder of A Plastic Planet, the group behind the campaign, said the opening represented “a landmark moment for the global fight against plastic pollution”.

“For decades shoppers have been sold the lie that we can’t live without plastic in food and drink. A plastic-free aisle dispels all that. Finally we can see a future where the public have a choice about whether to buy plastic or plastic-free. Right now we have no choice.” The aisle will open in the Amsterdam branch of the Dutch supermarket chain Ekoplaza. The company says it will roll out similar aisles in all of its 74 branches by the end of the year. Ekoplaza chief executive, Erik Does, has been working with the campaign for the past month and said the initiative was “an important stepping stone to a brighter future for food and drink”. “We know that our customers are sick to death of products laden in layer after layer of thick plastic packaging. Plastic-free aisles are a really innovative way of testing the compostable biomaterials that offer a more environmentally friendly alternative to plastic packaging.”

The aisle will have more than 700 plastic-free products including meat, rice, sauces, dairy, chocolate, cereals, yogurt, snacks, fresh fruit and vegetables. Campaigners say the products will not be anymore expensive than plastic-wrapped goods and will be “scalable and convenient”, using alternative biodegradable packing where necessary rather than ditching packaging altogether. They add the aisles will be a “testbed for innovative new compostable bio-materials as well as traditional materials such as glass, metal and cardboard.” Sutherland said: “There is absolutely no logic in wrapping something as fleeting as food in something as indestructible as plastic. Plastic food and drink packaging remains useful for a matter of days yet remains a destructive presence on the Earth for centuries afterwards.”

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Really? ‘Alarmed’? ‘Crazy’? They knew weeks ago the polar vortex was about to split. And still don’t know why that is. Keep it real.

Arctic Warming: Scientists Alarmed By ‘Crazy’ Temperature Rises (G.)

An alarming heatwave in the sunless winter Arctic is causing blizzards in Europe and forcing scientists to reconsider even their most pessimistic forecasts of climate change. Although it could yet prove to be a freak event, the primary concern is that global warming is eroding the polar vortex, the powerful winds that once insulated the frozen north. The north pole gets no sunlight until March, but an influx of warm air has pushed temperatures in Siberia up by as much as 35C above historical averages this month. Greenland has already experienced 61 hours above freezing in 2018 – more than three times as many hours as in any previous year. Seasoned observers have described what is happening as “crazy,” “weird,” and “simply shocking”.

“This is an anomaly among anomalies. It is far enough outside the historical range that it is worrying – it is a suggestion that there are further surprises in store as we continue to poke the angry beast that is our climate,” said Michael Mann, director of the Earth System Science Center at Pennsylvania State University. “The Arctic has always been regarded as a bellwether because of the vicious circle that amplify human-caused warming in that particular region. And it is sending out a clear warning.” Although most of the media headlines in recent days have focused on Europe’s unusually cold weather in a jolly tone, the concern is that this is not so much a reassuring return to winters as normal, but rather a displacement of what ought to be happening farther north.

At the world’s most northerly land weather station – Cape Morris Jesup at the northern tip of Greenland – recent temperatures have been, at times, warmer than London and Zurich, which are thousands of miles to the south. Although the recent peak of 6.1C on Sunday was not quite a record, but on the previous two occasions (2011 and 2017) the highs lasted just a few hours before returning closer to the historical average. Last week there were 10 days above freezing for at least part of the day at this weather station, just 440 miles from the north pole.


Snowstorm nears London Photo: NPAS

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Feb 042018
 


John William Waterhouse Hylas and the Nymphs 1896

 

A Tale Of Two Americas (Axios)
Today’s Market Is Biding Its Time Until It Becomes Normal Again (Bonner)
The Market System Is Tight In All Directions (Fas.)
Bond Market’s Debt-Ceiling Alarm Bell Is Ringing Loud and Clear (BBG)
Yellen: “I Don’t Want To Label What We’re Seeing As A Bubble” (ZH)
The Fed’s Dilemma Isn’t Going Away Under Powell (Shilling)
Theresa May Says Brexit Transition Deal Will Be Agreed In Seven Weeks (R.)
Tory Former Attorney General Says “Time is Now” To Reverse Brexit (Ind.)
Anger Over Glut Of ‘Posh Ghost Towers’ Planned For London (G.)
‘We Made The Finest Steel In The World – Now We Make Lattes’ (G.)
Illicit Foreign Casino Cash Often Goes Straight Into Vancouver Housing (VSun)
Greece On Edge For ‘Macedonia’ Protest In Athens (K.)

 

 

As I said yesterday: the divisions it causes are much bigger than the memo itself. It’s what happens in echo chambers.

A Tale Of Two Americas (Axios)

On MSNBC, Rachel Maddow was literally laughing. Over on Fox News, Sean Hannity put up his dukes. At 9 last night, Axios points out that you could just flip between the two and see an encapsulation of our two Americas – total dismissal of the memo’s import, versus the assertion that it’s “only about 15 percent of what’s coming.”

So, Rachel, how was your day? “This thing?! This was two weeks of: This memo is going to end everything. This memo, have you heard about the memo? Hashtag: Release the memo! This memo will make Donald Trump innocent. This memo will put Robert Mueller in jail. It will abolish the FBI. The Justice Department will have to rename itself the Donald J. Trump & Family Private Security Task Force.” “I mean, I can’t believe this is it.” “I don’t really believe in the whole Cable News Wars idea. I know people who work across the street at the Fox News Channel. I’ve got friends that work there. I think we’re all doing our own thing in our own way best we can.”

“But, oh my God, right? … [T]his … hyping and huffing and puffing and working their audience up into a frenzy for two solid weeks.” “And apparently, despite all of that, … they either didn’t know or they didn’t notice that this thing they have been clamoring for and hyping for two solid weeks, … it actually disproves their whole point.” “They release this memo to prove that the dossier started everything. The memo says the dossier didn’t actually start anything.”

What’s up, Sean? “[W]hen you put all this information together, here’s what it all means. The FBI misled and purposely deceived a federal court while using an unverified, completely phony opposition research bought and paid for by Hillary Clinton.” “We have never, ever in history seen anything like this, and it was spearheaded not by rank-and-file members of the FBI intelligence community and Department of Justice. No. High-ranking officials: James Comey, Andrew McCabe, Rod Rosenstein, Peter Strzok, Lisa Page, likely Loretta Lynch.”

“But here’s the bottom line: Crimes have been committed. There is no way that they did not know that the FBI was lying to a FISA court in order to spy on an opposition campaign during an election year. They have aided and abetted what is a massive constitutional violation.” “Comey, McCabe, Rosenstein and others all need to be investigated and, in many cases, prosecuted to the fullest extent of the law.” “Now, of course, Comey is running scared. He’s out of his mind right now, now that he is exposed with this memo.” “[T]he special counsel must be disbanded immediately.” “And, by the way — nobody else will say this — all charges against Paul Manafort and General Michael Flynn need to be dropped. It’s that simple.” “This scandal is only in Phase 1. … Stay tuned! Tick tock! “

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“..when something is not normal… it is just biding its time until it becomes normal again.”

Today’s Market Is Biding Its Time Until It Becomes Normal Again (Bonner)

On Planet Earth, we can find our direction by reference to the Magnetic North. For investing, we use the most reliable force in finance – the relentless return to “normal” – to get our bearings. And searching for normal, we may have stumbled upon what could be the Trade of the Century. More on that later… As economists describe it, reversion to the mean is merely a recognition of the tendency for things to stay in a range that we recognize as “normal.” Trees do not grow 1,000 feet high. People don’t run 100 mph. You don’t get something for nothing. Normal exists because things tend to follow certain familiar patterns, shapes, and routines. When people go out in the morning, they know, generally, whether to wear a winter coat or a pair of shorts.

The temperature is not 100 degrees one day and zero the next. Occasionally, of course, odd things happen. And sometimes, things change in a fundamental way. But usually, when people say “this time is different”… it’s time to bet on normal. This phenomenon – reversion to the mean – has been thoroughly tested and studied in the investment world. It seems to apply to just about everything – stocks, bonds, strategies, markets, sectors… you name it. But let’s push on. What is unusual in the chart below? What is so abnormal that the mean is likely to revert against it? You will note that global debt was only $30 trillion in 1994. Now it is $230 trillion. That $200 trillion in extra credit is probably the whirlwind that sent equities spinning up to the top right.

Those gusts blew stock and other asset prices up to heights never seen before. The Dow reached over 26,000. Houses went on the market for more than $100 million. Gold rose above $1,900. But while stocks and bonds may have the wind at their backs, it seems to blow in the economy’s face… making forward progress almost impossible. The real economy – as depicted by GDP at the bottom of the chart – has grown in a rather normal way, but at a slower and slower rate. Its steady, plodding increase gives no hint of the chaos going on above it. The real economy and the financial world are as different as the eye of a hurricane and the swirling clouds and storms around it. Another thing you notice is that until the mid-’90s… and again between 2008 and 2012… the average investor got essentially no benefit in exchange for the added risk of putting his money into equities (the chart above includes dividends). He might just as well have left his money in U.S. Treasury bonds.

[..] there is a time to be in stocks… and a time to be out of them. Without knowing the future, you can still know when something is not normal. And when something is not normal… it is just biding its time until it becomes normal again.

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Who or what can restore flexibility when everything’s maxed out to the point of bursting?

The Market System Is Tight In All Directions (Fas.)

The Four Pillars Holding Markets Up Are Strained, All At The Same Time. Viewed as a combination of intertwined components, each component is showing growing signs of pressure and seem to be running out of road for further advancing. The synchronicity of them, more than any single component taken independently, is what should draw attention, as it compounds systemic risk. Here are the four components, characterizing the basin of chaotic attraction for markets nowadays:

What happens when the system is tight in its key possible directions of expansion? That it expands no more. Stochastically, on one of the components a tipping point is reached, which jumpstarts the autolytic effect, spreading back through the vectors of the complex system, and snapping the unstable equilibrium into an alternative stable state. That is our thesis. In [a] recent interview, we discuss the impending tipping points for markets due to a synchronicity of excess valuations, excess indebtedness, excessively low cash balances and a drawback in excessive public flows. Let’s give a cursory look across the four components. Again, the list is by no means exhaustive, but rather a work-in-progress (seemingly endless) collecting of data points, following on to our previous work of ‘a long list of anomalies’

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In a country so divided it doesn’t take much to let things get out of hand.

Bond Market’s Debt-Ceiling Alarm Bell Is Ringing Loud and Clear (BBG)

In the $2 trillion Treasury-bill market, where the U.S. government turns for short-term funding, investors are showing they’re plenty nervous about the approaching deadline to raise the nation’s debt ceiling. With Treasury expected to exhaust its borrowing authority as early as the first half of March, a four-week bill sale on Tuesday will serve as the latest gauge of investor anxiety. There’s growing concern that the impasse over the debt limit will become entangled with efforts to keep the government open. Current federal funding expires Feb. 8, and the Republican-led Congress has been working on a stopgap measure to extend that into late March.

Treasury has deployed extraordinary measures to stay under the debt cap since it was reinstated in early December, but investors are wary. The new securities mature March 8, around when the Congressional Budget Office expects Treasury to run out of room. Traders are asking for higher yields to own previously issued bills maturing March 8. What’s more, an auction last week of bills due March 1 drew the weakest demand since May. “People are kind of getting skeptical of March 8 bills,” said Joseph Abate at Barclays Capital in New York. “You might argue that the March 1 bill isn’t necessarily vulnerable to payment delay because the Treasury probably has sufficient resources to meet outflows and thus might be able to last until” March 5.

Treasury has placed the drop-dead date around the end of February. But investors are leaning toward the projection from the nonpartisan CBO, which said last week that the U.S. may run the risk of default without a debt-ceiling increase in the first half of March. After the Jan. 30 auction of bills maturing March 1, the rate on those securities was higher than debt due a week later. Since then, the rate on debt expiring March 8 has climbed to 1.40%, exceeding that on bills due a week later.

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In a country where 70% of people live paycheck to paycheck, the best the central bank president can muster is “they should diversify their investments..” And people are praising her for doing such a good job.

Yellen: “I Don’t Want To Label What We’re Seeing As A Bubble” (ZH)

While her term ended – for all practical purposes – with the conclusion of this week’s January FOMC meeting, former Fed Chairwoman Janet Yellen’s last official day at the helm of the world’s most important central bank was marked by an explosion of volatility in the Dow, with the blue chips recording their worst single-day selloff since the collapse of Lehman brothers. And even though it’s tempting to suspect Friday’s selloff might foreshadow what’s to come during the Powell era, Yellen admitted during an interview with PBS Newshour that she was disappointed to not be reappointed for a second term by President Trump – and that, if she had her druthers, she would’ve opted to stay. “I would have liked to serve an additional term and I did make that clear, so I will say I was disappointed not to be reappointed,” Yellen said Friday. “I think things are looking very strong.”

Despite the volatility of the past week and the first nascent signs of wage growth in years – which should worry a central bank whose primary responsibility is to put a floor under plunging markets – Yellen says she expects interest rate hikes to proceed as planned. “The Federal Reserve has been on a path of gradual rate increases and if conditions continue as they have been, that process is likely to continue,” she said. “And as it happens we would expect long rates to move up.” Unlike fellow former Fed chairman Alan Greenspan – who this week declared that both stocks and bond valuations are in bubble territory – Yellen was careful not to use such strident language. “I don’t want to label what we’re seeing as a bubble.”

“But I would say that asset valuations are generally elevated…for the stock market, the ratio of price to earnings…is near the high end of its historical range. If we look at for example commercial real estate and other assets, we’re seeing high valuations.” But should Americans be worried about the markets? “They should be careful and I would say diversified in their investments. What we look at is the likely resilience of the economy and the financial system… In that regard, we have a banking system that is much stronger and better capitalized and better able to withstand a shock than prior to the financial crisis.” Stlll, Yellen is refusing to rule out another selloff. “Asset valuations could change I’m not predicting that that would happen and I wouldn’t rule that out,” she said.

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Powelll will be cleaning up Bernanke and Yellen’s shit.

The Fed’s Dilemma Isn’t Going Away Under Powell (Shilling)

[..] the Fed is confronted with a serious dilemma: Inflation and wage increases continue to undershoot its expectations at the same time the central bank confronts forces pressuring it toward credit tightening. The new chairman, Jerome Powell, who isn’t a trained economist, may change the central bank’s tone, but his soon-to-be predecessor Janet Yellen and the other academic economists who have dominated monetary policy, believe fervently in the theoretical Phillips Curve. It posits that a declining unemployment rate should spur inflation, despite evidence to the contrary. Rather than increase as the unemployment rate declined since the recession, the rate of inflation has largely stayed the same.

Nevertheless, the Fed wants to tighten credit slowly due to chronic low inflation and memories of the May 2013 “taper tantrum,” when a mere mention by then-Chairman Ben Bernanke of reducing the Fed’s rate of asset purchases sent financial markets into tailspins as interest rates leaped. Another reason for the Fed to tighten is to keep commercial banks from lending out the more than $2 trillion in excess reserves the Fed has given them through quantitative easing. These are simply an asset of the banks and a liability on the Fed balance sheet with little financial or economic consequences. But as economic growth picks up as a result of the tax cuts followed by likely massive fiscal stimulus, creditworthy borrowers will want to borrow, banks will be happy to lend, and these excess reserves could turn into tons of money that would threaten major inflation.

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Fat chance.

Theresa May Says Brexit Transition Deal Will Be Agreed In Seven Weeks (R.)

British Prime Minister Theresa May said on Friday that a Brexit transition period will be agreed with the European Union in seven weeks as she tries to ease concerns that a deal may take longer to reach. The EU has offered Britain a status quo transition until the end of 2020 after Brexit. Both sides are aiming to reach a transition agreement by the end of March that will form part of the final withdrawal treaty to be agreed later this year. But there is disagreement inside May’s Conservative Party over some details such as the status of EU citizens during the transition and the scope of European Court of Justice jurisdiction. Many businesses and banks are concerned a battle over the terms of a transition could delay or even sink an agreement just months before Britain exits the EU on March 29, 2019.

“In seven weeks time, we will have an agreement with the European Union, that is the timetable they have said on an implementation period,” May told the BBC in an interview in China. “What the British people voted for is for us to take back control of our money, our borders and our laws and that’s exactly what we are going to do,” May said of Brexit. The EU and Britain hope to hammer out a deal on Britain’s exit and the outline of a trade package by October 2018. But some EU officials have begun to voice concern that a plan to have the leaders endorse negotiating guidelines for a new phase of talks to begin in April on a future trade agreement may be in danger of slipping if May does not spell out what Britain’s demands are for that trade pact.

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Britain is as divided as the US is.

Tory Former Attorney General Says “Time is Now” To Reverse Brexit (Ind.)

Dominic Grieve has warned the public it is running out of time to change its mind on Brexit, saying the next few months are “decision time”.The former Attorney General told The Independent it would soon be too late to reverse the decision to leave the EU, and urged people to make their minds up in the next six months.“The six months we have between now and the autumn are so important,” he said. “It is going to be decision time. And decision time in the sense of what happens in the next six months being a final decision.“If people do want to change their mind, and they could if they wanted to, the time is now. It cannot be after 29 March 2019, and frankly it cannot be after the end of the autumn of this year.”

While he did not endorse calls for a second EU referendum, Mr Grieve said it was important to give people the chance to change their minds on Brexit. “I’m not calling for a second referendum,” he said. “But we should not exclude the possibility that people’s opinion may change. And to start from an opinion on an issue that was expressed 18 months ago, where people are bound to have had their opinion influenced since, we must be very careful to listen about what it is they want.”He continued: “It the most extraordinary conundrum. We have an instruction from the electorate, by a small but significant majority, to do something that many of us [in Parliament] think is going to be very hard to achieve without serious damage to the wellbeing of every citizen in this country. It is an ethical conundrum and it is a practical conundrum.”

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And here is why the country is so divided.

Anger Over Glut Of ‘Posh Ghost Towers’ Planned For London (G.)

London councils have granted property developers planning permission to build more than 26,000 luxury flats priced at more than £1m each, despite fears that there are already too many half-empty “posh ghost towers” in the capital. Builders are currently constructing towers containing 7,749 homes priced between £1m and £10m, and have planning rights to build another 18,712 high-end apartments and townhouses, the Observer can reveal. Politicians and housing campaigners said the figures show councils are prioritising the needs of the super-rich over those of hardworking young Londoners. The boom in developments of luxury flats, which often include private cinemas, gyms, swimming pools and concierge facilities, comes as the capital faces a growing crisis in the availability of affordable housing, with nurses, police officers and other essential workers struggling to get on to the housing ladder.

Research shows that a fifth of aspiring first-time buyers have moved in with their parents to save money, and a quarter of them will need to stay there for at least five years to amass enough for a deposit. The proportion of English first-time buyers who rely on help from families and friends for their deposit has increased from 22% in 1996 to 29% in 2016, according to the government’s English Housing Survey. Anne Baxendale of Shelter said: “The UK is in the grip of a housing crisis and nowhere is this more apparent than in the capital – and these luxury developments are certainly not the types of homes most Londoners need. The government must close loopholes which make it easy for developers to build high-priced homes that are way out of reach of ordinary families, rather than the affordable ones most people actually need and can afford.”

David Lammy, the Labour MP for Tottenham, said the figures “reveal a travesty being played against the working class and young Londoners”. “The public keep being told we are building more affordable housing, and people can see cranes up all over London,” he said. “But this shows that councils are prioritising the fancies of overseas millionaires and billionaires before the needs of hardworking young Londoners.” Just 6,423 affordable homes were built in London during the 2016-2017 financial year (the latest figures available), a 5% decline on the previous year and a big drop from the 19,622 built in 2014-15.

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Plus, of course, Britain suffers from what brought Trump to power. Where globalization goes to die.

‘We Made The Finest Steel In The World – Now We Make Lattes’ (G.)

Wearing a T-shirt with the slogan “Fighting for the community” underneath an image of Redcar’s mothballed steelworks, Frankie Wales is preparing to take a training session at the town’s boxing club. Young men are sparring in the rings; others are hitting punchbags. “Nothing gets you fit like boxing,” says one, exhausted from the ring. Wales, who set up the club 20 years ago and funds it on a shoestring with various small grants, is proud to be doing his bit for Redcar’s young people. He is a livewire in a community struggling to get off the floor after a series of near knockout blows. The local steelworks ceased production in 2015 with the loss of 3,000 jobs. Someone, he insists, has to help them. “It is incredibly sad,” he says. “Not long ago they would go and work in the steelworks after school.

Men round here made the finest steel in the world. Now they are making lattes and sandwiches on zero-hours contracts. We have lots of entrepreneurial kids, but the only entrepreneurial activity going on around here is selling fags and drugs.” Few young people care what those who are supposed to run their country – politicians and civic and business leaders – say any more because they feel so let down. “We have lost the steel industry, lost the local shipbuilding, lost the coal. What’s the point? There is nothing left,” says Wales. “We just have to make the best of what we have got and get on with it ourselves.” Like many communities in England’s north-east, the people of this North Yorkshire town, which bears the scars of industrial decline, and has a youth unemployment rate more than double the national average, made their unhappiness known in June 2016.

They fought back. In Redcar, there was a hefty 66% vote for Brexit, similar to that in areas further north up the coast, from Teesside to Tyneside. “We have to get our country back to where it needs to be,” says Geoff Holding, a caretaker at a government office in the town who voted Leave and whose brother lost his job at the steelworks. He wants an end to cheap imports of foreign goods, like the Chinese steel that did for the local plant. There is a still a thriving chemicals sector in Redcar, but not enough manufacturing. “We need to bring things back in-house, get industry back on its own feet, make things ourselves.”

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“Staggering volumes of dirty cash, including hundreds of thousands of dollars worth of $20-dollar bills stuffed in hockey bags..”

Illicit Foreign Casino Cash Often Goes Straight Into Vancouver Housing (VSun)

It’s almost hard to believe the dismaying stories that Postmedia investigative reporter Sam Cooper has been producing about the laundering of hundreds of millions of dollars of East Asian cash through Metro Vancouver casinos and the funnelling of much of it into the city’s pricey real estate. Yet Cooper continues to clearly map out, using impeccable high-level sources, the trans-national connections between Chinese drug traffickers, B.C. casinos and the city’s housing market. He has been so effective that NDP Attorney General David Eby ended years of B.C. Liberal inaction on casino fraud to launch an investigation by money-laundering specialist Peter German. Global intelligence agents have come to call the Asian-Pacific network of corruption, drugs, tax avoidance and real estate that Cooper is exposing “The Vancouver Model.”

Metro’s casinos have become infamous for the way B.C.’s former Liberal government allowed them to be exploited to help make possibly billions of dollars in “dirty” money appear “clean” – particularly by injecting it into residential housing and condo development. Cooper says his sources “took a lot of risks” to unveil how high-stakes Chinese gamblers, called “whales,” have been funnelling illicit cash into gambling chips, especially at Richmond’s River Rock Casino. Using freedom-of-information law, Cooper obtained reports in which an official with the B.C. Lottery Commission noted that 97 of its 100 top rollers were East Asian. Cooper also dug up reports suggesting one out of four of China’s major 100 alleged financial fugitives were living in Canada, with many of them believed to be in B.C.

One Metro Vancouver gambler was accused Lai Changxing, alleged mastermind of a billion-dollar drug-smuggling operation in China, who owned property in Richmond. An audit of 800 “VIP” gamblers at River Rock Casino found their most common profession was “real estate.” Almost half their $53 million worth of transactions in one year were flagged as “suspicious.” The second and third most common professions among the biggest gamblers were “business owner” and “construction.” Many high-stakes gamblers at River Rock also declared themselves as “housewife” or “student” – with one youth forking over $819,000 in cash to buy casino chips. Investigators believe housewives and offspring are often used as fake “nominees” to hide the true source of wealth in money-laundering and real-estate schemes. Staggering volumes of dirty cash, including hundreds of thousands of dollars worth of $20-dollar bills stuffed in hockey bags, have been flowing through Metro casinos and then been shifted into real-estate.

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A major and undoubtedly heated protest today. Topic: A former Yugoslav province wants to call itself Macedonia. But there already is a Greek province called macedonia. So Greece has refused to accept that name for a foreign country, and has for years halted access for that country to international organizations. The legacy of Alexander the Great plays a big role too. There are negotiations ongoing, but 70% of Greeks want no referral to Macedonia in the country’s eventual name. So no New Macedonia etc. Just call it the Republic of Skopje.

Greece On Edge For ‘Macedonia’ Protest In Athens (K.)

With United Nations-mediated negotiations aimed at resolving a dispute between Greece and the Former Yugoslav Republic of Macedonia (FYROM) over the latter’s name at a sensitive juncture, the government is bracing for Sunday’s Athens rally protesting the use of the term “Macedonia” in a solution amid signs that the turnout will be significant. Around 1,500 buses have been chartered to bring demonstrators from the provinces to the capital where the rally is to begin at Syntagma Square at 2 p.m. Most conservative New Democracy MPs are expected to attend. ND leader Kyriakos Mitsotakis said the party respects both those who do choose to attend and those who do not.

“We respect all choices,” he said. Former conservative premier Antonis Samaras endorsed the demo, saying Sunday will be “a great day for the country.” The main speaker will be veteran Greek composer Mikis Theodorakis, who is to address the crowd in person rather than sending a video message as originally planned. Speeches will also be delivered by three clerics representing the Church of Greece, which has backed the rally following initial reservations by Archbishop Ieronymos. The Greek Police plans to erect barriers to keep demonstrators at Syntagma apart from anarchists who are to stage their own counter-rally, starting at noon outside Athens University.

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 August 23, 2015  Posted by at 9:54 am Finance Tagged with: , , , , , , , ,  1 Response »


Harris&Ewing Ninth Street N.W., Washington, DC 1915

China Syndrome: How The Slowdown Could Spread To The Brics And Beyond (Observer)
There May Be No Sudden Fallout From China’s Crash – But Give It Time (Das)
IMF Official Says ‘Premature’ To Speak Of Chinese Crisis (Reuters)
The Last Great Bubble May Finally Be Starting To Pop (MarketWatch)
Foreign “Smart Money” Plows into US Housing Bubble 2 (WolfStreet)
Greek Election Heralds Fresh Bailout Battle (Dimitri Sotiropoulos)
Syriza Rebels Clash With Government As Parties Prepare Candidate Lists (Kath.)
Yanis Varoufakis Brands Alexis Tsipras The ‘New De Gaulle’ (Guardian)
Greek House Speaker Ups Attacks On PM, President (Kath.)
Varoufakis: If I’m Convicted Of High Treason, It Would Be Interesting (Observer)
Jeremy Corbyn Wins Economists’ Backing For Anti-Austerity Policies (Guardian)
Migrants Cross Unhindered Into Macedonia; Trains, Busses Await (Reuters)
Refugees Tear Through Police Lines At Macedonian Border (Reuters)
Italian Navy Rescues 3,000 Migrants In Mediterranean
Greek President Wants EU Summit On Refugee Crisis (Kath.)

Not could, but will.

China Syndrome: How The Slowdown Could Spread To The Brics And Beyond (Observer)

Tumbling share prices. A sell-off in commodity markets. Capital flight from some of the world’s riskier countries. Hints of a looming currency war. Financial markets ended last week in panic mode as fears emerged that the world was about to enter the next phase of the crisis that began eight years ago in August 2007. Back then, the problems began in the developed world – in American and European banks – and spread to the rest of the world. The bigger emerging markets – China and India most notably – recovered quickly and acted as the locomotive for global growth while the west was struggling. There was talk of how the future would be dominated by the five Brics countries – Brazil, Russia, India, China and South Africa – and by 11 more emerging market economies, including Turkey, Indonesia, Mexico and Nigeria.

That has happened. Emerging market countries are dominating the news – but for all the wrong reasons. And because, after years of rapid growth, they now account for a bigger slice of the global economy, a crisis would have more serious ramifications than in the past. Emerging markets have a habit of causing trouble. For a quarter of a century after the Latin American debt crisis erupted in Mexico in 1982, the story was of a storm moving from the periphery of the global economy towards its core, the advanced nations that make up the G7. Mexico ran into fresh problems in 1994, there was an Asian debt crisis in 1997, and a Russian default in 1998 before the dotcom bubble burst in 2001. That proved to be a dress rehearsal for the near meltdown of the global financial system in 2007-08.

Now the focus is back squarely on emerging markets. The problem is a relatively simple one. In the post-Great Recession world, the tendency has been for all countries to try to export their way out of trouble. But this model works only if the exports can find a home, as they did when China was growing at double-digit rates. But in the past 18 months, the Chinese economy has slowed, causing problems for two distinct groups of emerging-market economies – the east Asian countries that sell components and finished goods to their big neighbour, and countries that supply China with the fuel and raw materials to keep its industrial machine going.

China’s slowdown has led to a slump in the price of oil and industrial metals. In theory, this should have no net effect on the global economy because lower incomes for commodity-producing countries should be offset by the boost to countries that import commodities. It hasn’t quite worked out that way. Consumers in Europe, Japan and North America have not used the windfall from cheaper energy to go on a spending spree. Meanwhile, emerging market economies are hurting badly. With the western economies one new recession away from deflation, China is making its exports cheaper by devaluing its currency just as oil producers are flooding the world with crude in a bid to balance their budgets.

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I simply think everything’s worse than what’s reported.

There May Be No Sudden Fallout From China’s Crash – But Give It Time (Das)

In the aftermath of share falls in the Chinese stock market, there is increased focus on the wider effects. China’s problems are unlikely to have any immediate impact on other equity markets directly, due to its limited integration with international markets and the fact that these markets did not see a sharp parallel rise. The effects on China’s economic activity are the primary concern. These, in turn, may flow through into the global economy, affecting growth, trade, commodity prices, inflation and capital flows. The impact on the real economy has been muted to date. The paper profits of inflated share prices did not have a major effect on consumption. It is incorrect to assume, however, that the fall will have no effects.

Chinese households may increase already high saving rates, reducing consumption and slowing growth. The output of the finance industry contributed about 16% of GDP in the first quarter of 2015. It accounted for 1.3 percentage points of China’s 7% growth in the same period, compared with a contribution of about 0.7 points to the 7.4% growth in 2014. The financial impact may be greater. Given that a significant part of the rise in stock prices was driven by borrowings to purchase shares, the recent falls will reduce the value of collateral. To the extent that investors cannot meet margin calls, lenders may suffer losses. Also affected will be many large shareholders and state-owned enterprises, whose holdings are pledged as collateral for loans. The falls increase the risk of default.

The level of leverage may account for the difficulty in initially arresting the pace of the market falls. The consensus view is that such loans are modest relative to the size of the banks (around 1.5% of total banking assets) and the economy, implying the risk of a major financial crisis is limited. But there are reasons for caution. First, the amounts involved may be much larger than expected. The amount of official margin debt extended by securities companies of $250-300bn may be only a fraction of the real level of stock-secured debt. Once vehicles like umbrella trusts, private lending arrangements and the rest are included, the amount may be 50-100% higher.

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Sure, take your time boys. A forecast for 6.8% growth looks silly though.

IMF Official Says ‘Premature’ To Speak Of Chinese Crisis (Reuters)

China’s economic slowdown and a sharp fall in its stock market herald not a crisis but a “necessary” adjustment for the world’s second biggest economy, a senior IMF official said on Saturday. Fresh evidence of easing growth in China hammered global stock markets on Friday, driving Wall Street to its steepest one-day drop in nearly four years. “Monetary policies have been very expansive in recent years and an adjustment is necessary,” said Carlo Cottarelli, an IMF executive director representing countries such as Italy and Greece on its board. “It’s totally premature to speak of a crisis in China,” he told a press conference.

He reiterated an IMF forecast for a 6.8% expansion in the Chinese economy this year, below the 7.4% growth achieved in 2014. “China’s real economy is slowing but it’s perfectly natural that this should happen … What happened in recent days is a shock on financial markets which is natural,” he added. China’s stock markets have fallen more than 30% since mid-year. Following a slew of poor economic data, Beijing devalued the yuan in a surprise move last week. Cottarelli said the IMF would discuss in coming months with Chinese authorities their decision to weaken the currency.

China is eager for the yuan to join the IMF’s Special Drawing Rights basket of currencies. But the fund is considering extending the current SDR basket by nine months until September 30, 2016. Turning to Greece, which is heading to an early election in September, Cottarelli said the IMF would decide in two or three months whether to join the latest international rescue efforts. The IMF deems Greece’s debt unsustainable and has called for debt relief as a condition to participate in a third bailout. “The debt sustainability assessment will take place after the launch of the program (agreed with creditors) in two or three months. The IMF will then be able to evaluate whether to intervene,” he said.

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Faith in central banks.

The Last Great Bubble May Finally Be Starting To Pop (MarketWatch)

Forget for a moment the “panic” that is happening in U.S. stocks. Forget about the panic in China. Forget about the panic in Apple. As I argued several weeks back and have written about continuously since, the odds simply have been favoring a summer stock-market correction given the behavior of key inter-market relationships outlined in our award-winning papers (click here to download). Something far more important and spectacular may be underway which likely will only be realized and appreciated after the damage is done. The illusion of stock-market stability is fading, and the Last Great Bubble — faith in central banks — may be starting to pop.

Just as everyone is talking about the Fed raising rates in September and “lift off” finally occurring, the global growth and inflation story is dramatically reversing. It turns out quantitative easing did absolutely nothing for the economy, and it turns out that Europe’s own version of QE simply isn’t working to boost reflation hope. For too long, market participants have been sucked into the idea that the S&P 500 is the money market (as I said on CNBC here). Lower for longer has now become an excuse for too long to buy U.S. markets and believe that risk does not exist when central banks “have our backs.”

The narrative may be on the verge of a significant change. At some point, we have to stop endlessly debating the question of “when” the Fed will raise rates. Instead, we must begin to question what is so wrong with the environment that has resulted in them not having raised rates yet. Unquestionably there are long-term structural forces at play which have been disinflationary, but the bigger issue is that the U.S. stock market turned from a discounting mechanism of the future to yet another failed vehicle for stimulus under the guise of the “wealth effect.”

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A tad disappointing that Wolf doesn’t link the US bubble to those in Oz, NZ, Canada, which occur for the exact same reasons. It’s a global Anglo development.

Foreign “Smart Money” Plows into US Housing Bubble 2 (WolfStreet)

Wealthy, very nervous foreigners yanking their money out of their countries while they still can and pouring it into US residential real estate, paying cash, and driving up home prices – that’s the meme. But it’s more than a meme as political and economic risks in key countries surge. And home prices are being driven up. The median price of all types of homes in July, as the National Association of Realtors (NAR) sees it, jumped 5.6% from a year ago to $234,000, now 1.7% above the totally crazy June 2006 peak of the prior bubble that blew up in such splendid manner. But you can’t even buy a toolshed for that in trophy cities like San Francisco, where the median house price has reached $1.3 million. And the role of foreign buyers?

[N]ever have so many Chinese quietly moved so much money out of the country at such a fast pace. Nowhere is that Sino capital flight more prevalent than into the US residential real estate market, where billions are rapidly pouring into the American Dream. From New York to Los Angeles, China’s nouveau riche are going on a housing shopping spree.

So begins RealtyTrac’s current Housing News Report. “For economic and political reasons, Chinese investors want to protect their wealth by diversifying their assets by buying US real estate,” William Yu, an economist at UCLA Anderson Forecast, told RealtyTrac. “The best place for China’s smart money to invest is the United States.” In the 12-month period ending March 2015, buyers from China have for the first time ever surpassed Canadians as the top foreign buyers, plowing $28.6 billion into US homes, at an average price of $831,800, according to the NAR. In dollar terms, Chinese buyers accounted for 27.5% of the $104 billion that foreign buyers spent on US homes. It spawned a whole industry of specialized Chinese-American brokers.

Political and economic instability in China along with the anti-corruption drive have been growing concerns for wealthy Chinese, Yu said. “China’s real estate market has peaked already. Their housing bubble has popped.” So they’re hedging their bets to protect their wealth. And more than their wealth…. “China’s economic elites have one foot out the door, and they are ready to flee en masse if the system really begins to crumble,” explained David Shambaugh at George Washington University. China has capital controls in place to prevent this sort of thing for the average guy. But Yu said there are ways for well-connected Chinese to transfer money to the US, particularly those with business relationships in Hong Kong or Taiwan.

But in the overall and immense US housing market, foreign buying isn’t exactly huge. According to NAR, foreign buyers acquired 209,000 homes over the 12-month period, or 4% of existing home sales. But foreign buyers go for the expensive stuff, and in dollar terms, their purchases amounted to 8% of existing home sales. In most states, offshore money accounts for only 3% or less of total homes sales. But in four states it’s significant: Florida (21%), California (16%), Texas (8%), and Arizona (5%). And in some trophy cities in these states, the percentages are huge.

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A bit overblown. The -seeming- instability is part of the democratic process.

Greek Election Heralds Fresh Bailout Battle (Dimitri Sotiropoulos)

Greek political instability has reached alarming levels, with the emergence of a new left-wing party in parliament defying Syriza. A new coalition government of national unity was needed, in order to start implementing the promised bailout reforms. But the call for snap elections by Prime Minister Alexis Tsipras, and then the launch of Popular Unity – a breakaway anti-austerity party led by former energy minister Panagiotis Lafazanis – have fuelled disunity. All reforms will be put on hold for about six weeks. Greece faces a key sequence of events during that time. First, in line with the constitution, the main opposition parties will get a chance to form a new coalition government. The second-strongest party – centre-right New Democracy – is expected to fail.

Then Popular Unity, launched on Friday and already the third-strongest party, will get its chance next week. Popular Unity will fail too, but Mr Lafazanis could wish for no better way to promote his party on the political scene. Second, fresh elections will be held next month in a heated atmosphere. There is the now familiar division between supporters and opponents of the bailout. But on top of that, a new division will grow between Syriza voters still loyal to Mr Tsipras and Syriza voters who will shift their allegiance to Popular Unity. Popular Unity will be entitled to ample space in the Greek media, during the election campaign, to argue that it, not Syriza, is the true anti-austerity party. It will pose as flag-bearer of the anti-austerity movement that swept Syriza to power after mass protests in 2010-2014.

So Popular Unity will try to draw on the pool of disaffected Syriza voters and other Eurosceptic voters on the left. They oppose the additional public sector cuts, sweeping privatisation and restructuring of pensions, required under the bailout. Most likely, the new party will get considerable support from the many voters – 62% of the total – who said “No” to the third bailout, in the 5 July referendum. Soon after that “No” vote Mr Tsipras performed a u-turn, accepting the austerity demands of Greece’s creditors as the price for keeping Greece in the euro. So now Greece is committed to the €86bn bailout from its eurozone partners – the country’s third in five years.

If the elections have no clear winner and Mr Tsipras – until recently leading in opinion polls – cannot form a clear majority government, complicated negotiations will follow. It could be a protracted period, during which potential coalition allies of Syriza jockey for position. So Mr Tsipras’s resignation – in order to call snap elections – has triggered a process of disintegration in Syriza. He may have saved Syriza from a damaging internecine fight between supporters and opponents of the new bailout. But he has also diminished the chances for a quick economic recovery. Economic instability has been compounded by political instability.

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Jockeying for position. Kathimerini is hardly the best source for comments on this.

Syriza Rebels Clash With Government As Parties Prepare Candidate Lists (Kath.)

The row between and the rebels that broke away to form their own group on Friday intensified over the weekend as Greece’s parties prepare their candidate lists for the upcoming snap elections. The new leftist party, Popular Unity, comprising 25 breakaway MPs from SYRIZA, took the opportunity to lash out at the government over the weekend. In a statement, the party said the government’s claim to have negotiated with the country’s lenders was a “euphemism” as it led to the country’s third bailout. The party also accused Tsipras’s aides of “confusing the dictatorship of the memorandum with the democratic operation of institutions.” That comment was a reaction to an earlier statement issued by Tsipras’s press office, accusing Parliament Speaker Zoe Constantopoulou of “acting like a dictator” and saying that she was “a wrong choice.”

SYRIZA is expected to start whittling down its list of election candidates this week. The fact that the Popular Unity rebels defected before this process has begun is likely to make Tsipras’s task easier. In January he attempted to maintain the balances between his party’s factions, which is something he no longer needs to do. Also, party sources told Kathimerini that the defections also provide Tsipras with the opportunity to invite candidates of other political persuasions to join the SYRIZA ticket. The party leadership is hoping that a meeting of the SYRIZA central committee this week will lead to an inclusive message being sent out by the leftists as they seek to draw up their lists for the snap elections.

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“..a split in the party that our people, the courageous voters who voted No, did not deserve..” Well, I think it was inevitable.

Yanis Varoufakis Brands Alexis Tsipras The ‘New De Gaulle’ (Guardian)

Greece’s pre-election campaign has turned ugly before it has even officially commenced, with senior figures – including the former finance minister Yanis Varoufakis – rounding on the prime minister, Alexis Tsipras, for his governance of the crisis-plagued country. Breaking the wary truce since his surprise resignation the day after Greeks voted to reject austerity in a referendum last month, Varoufakis has lashed out at the leftwing leader’s policy choices, saying in an interview in the New Review that Tsipras had decided “to surrender” to the punitive demands of international creditors keeping Athens afloat. Instead of remaining faithful to the anti-austerity platform on which his radical left Syriza party had been elected, the young prime minister had allowed his ego to get the better of him and made a conscious decision to become the “new De Gaulle, or Mitterrand more likely”.

In the wake of Tsipras’s unexpected move on Thursday to call early elections, Varoufakis said: “Tsipras made a decision on that night of the referendum not only to surrender to the troika but also to implement the terms of surrender on the basis that it is better that a progressive government implement terms of surrender that it despises than leave it to the local stooges of the troika, who would implement the same terms of surrender with enthusiasm.” As a result, Syriza once the hope of Europe’s anti-austerity movement, had not only betrayed the cause but mutated into the very thing it had set out not to be. “This mutation I have already witnessed. Those in our party/government who underwent it, then turned against those who refused to mutate, the result being a split in the party that our people, the courageous voters who voted No, did not deserve,” he wrote.

The criticism is the closest Varoufakis has come to distancing himself from the man he did much to mentor in the nearly six months that he oversaw often fraught negotiations with the eurozone and the IMF. Tsipras’s rash decision to resign and call elections – the third poll to be held in Greece this year – the MP argued, amounted to a concerted effort by the leader to purge the party of dissent. “For it is clear,” he continued, “that once you start implementing policies it becomes untenable to say constantly: ‘I am passing law X through parliament even though I think it is toxic.’ At some point either you resign or you remove the cognitive dissonance by beginning to believe that law X ain’t that bad; perhaps it is what the doctor ordered.”

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Don’t think Zoë and Alexis are best friends anymore.

Greek House Speaker Ups Attacks On PM, President (Kath.)

A brewing row between Parliament Speaker Zoe Constantopoulou and the government peaked over the weekend as the former redoubled her verbal attacks against both Prime Minister Alexis Tsipras and President Prokopis Pavlopoulos, prompting a terse reaction from the offices of both. A day after expressing strong objections to the procedure followed by Pavlopoulos in handing exploratory mandates to the conservative opposition following Tsipras’s resignation, Constantopoulou struck again on Saturday, accusing Tsipras and the president of treating Greece’s institutions as “their fiefdom and property.” Constantopoulou hit out at Tsipras for calling elections “on the sly,” claiming that only Greece’s creditors had been briefed about the plan.

She also slammed Pavlopoulos for not informing her before launching the process of issuing exploratory mandates to party leaders. The Constitution dictates that the president informs the parliamentary speaker on the composition of the House before issuing exploratory mandates, she said. Pavlopoulos did not respond publicly to Constantopoulou on Saturday but his office issued a terse statement. “As of yesterday, the presidency is no longer paying attention to Mrs Constantopoulou,” it said. On Friday, sources in Pavlopoulos’s office had countered accusations of an “institutional faux pas” by declaring that the president had “honored the Constitution to the letter.”

Later on Saturday, Tsipras’s office also issued a curt note, indicating that the premier regretted appointing Constantopoulou to Parliament’s top role. “The parliamentary speaker is acting like a dictator,” it said. “She thinks she’s at the institutional center of democracy when she’s just a wrong choice.”

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Long and interesting.

Varoufakis: If I’m Convicted Of High Treason, It Would Be Interesting (Observer)

As we finish lunch, we talk about his future plans. He’s dismissive of the criminal investigation against him, which he says doesn’t bother him in the slightest. “I think it’s going to fizzle out. However if I’m prosecuted and convicted of high treason, it would be interesting. For what? Saying no to an agreement that the troika itself considers to be unsustainable? Or indeed for having tried to come up with a defensive plan against threats they were making? In a sense, I would very much like it if it came to it because I would be able to expose them for what they are.” As for the idea that he hacked into private tax accounts, he says there’s nothing secret about tax files. “Let’s say I know your tax file number, so what? They would have to come up with a charge that I tried to create reserve accounts for people to put money into them. OK? Guilty.”

He says he’s not going to return to academia for the time being – although if and when he does, you can imagine that he’ll be in a great deal more demand than he was when plying his trade, largely uncelebrated, in Athens, Sydney and Austin. “I’m a member of parliament, let me remind you, and my commitment to my voters was that I’m not going to abandon them, come what may,” he says, sounding for the first time in our conversation like a politician rather than a theoretician. Can he envisage returning to government? “Yes,” he says, straight away. Would he like to? “Depends on the government,” interjects Stratou.

He gives her a look, as if she’s said too much, and then tells me that serving in a government is like becoming head of an academic department: it’s something the appropriate person should only do reluctantly. I don’t believe this. I think Varoufakis is the sort of political animal who, having tasted power, will not be content to return to the sidelines. He has economic theories that he’s determined to prove will work in practice. It’s that determination, of course, that his critics say was his undoing, but it’s also what made him stand out in a grey and uniform world of political conformity.

[..] A couple of weeks later, Tsipras makes his surprise move and resigns in preparation for a new election and, he hopes, a new mandate. He and Varoufakis have maintained a wary truce, occasionally offering implied or mildly explicit criticisms but on the whole steering clear of an outright conflict. But the election manoeuvre seemed to break the bond of loyalty and mutual constraint. In an email to me two days ago, Varoufakis wrote: “Tsipras made a decision on that night, of the referendum, not only to surrender to the troika but also to implement the terms of surrender on the basis that it is better that a progressive government implement terms of surrender that it despises than leave it to the local stooges of the troika who would implement the same terms of surrender with enthusiasm.”

For Varoufakis it would have been better to “retreat to opposition” than go along with the terms because they will force the party to “mutate” into the very thing it set out not to be. “For it is clear,” he continued, “that once you start implementing policies it becomes untenable to say constantly, ‘I am passing Law X through parliament even though I think it is toxic.’ At some point either you resign or you remove the cognitive dissonance by beginning to believe that Law X ain’t that bad; perhaps it is what the doctor ordered.’ This mutation I have already witnessed. Those in our party/government who underwent it, then turned against those who refused to mutate, the result being a split in the party that our people, the courageous voters who voted NO, did not deserve.”

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Far as I can see, Corbyn’s PQE is far from perfect, but it’s hardly ‘extreme left”. Corbyn would de very wise to consult Steve Keen, one of the signees, on his Modern Debt Jubilee.

Jeremy Corbyn Wins Economists’ Backing For Anti-Austerity Policies (Guardian)

More than 40 leading economists, including a former adviser to the Bank of England, have made public their support for Jeremy Corbyn’s policies, dismissing claims that they are extreme, in a major boost to the leftwinger’s campaign to be leader. The intervention comes as the Corbyn campaign reveals that a Labour government led by the MP for Islington North would reserve the right to renationalise Royal Bank of Scotland and other public assets, “with either no compensation or with any undervaluation deducted from any compensation for renationalisation” if they are sold at a knockdown price over the next five years.

The leftwinger’s economic policies – dubbed Corbynomics – have come under sustained attack in recent days, including by members of his own party, with Andy Burnham warning his party in an interview with this paper not to forget the lessons of the general election about the importance of economic credibility. But with just under three weeks until Ed Miliband’s replacement is announced, Corbyn’s credibility receives a welcome endorsement as 41 economists make public a letter defending his positions. In the letter to which David Blanchflower, a former member of the Bank of England’s monetary policy committee is a signatory, the economists write: “The accusation is widely made that Jeremy Corbyn and his supporters have moved to the extreme left on economic policy. But this is not supported by the candidate’s statements or policies. His opposition to austerity is actually mainstream economics, even backed by the conservative IMF. He aims to boost growth and prosperity.”

Corbyn remains the frontrunner to be Labour leader, but as his policies, and the risks he poses to the unity of the Labour party, have come under scrutiny, rivals believe he is losing momentum. Burnham’s campaign shared data with the Observer that suggested some of those who had previously committed to voting for Corbyn were now recognising the dangers and either opting for the shadow health secretary or describing themselves as “don’t knows”. But writing in the Observer, Corbyn defended his platform and said the government’s “free market dogma” had to be fought and vowed that a Labour government under his leadership would re-empower the state. The chancellor, George Osborne, intends to sell off £31bn of public assets in 2015-16.

Corbyn writes: “Parliament can feel like living in a time warp at the best of times, but this government is not just replaying 2010, but taking us back to 1979: ideologically committed to rolling back the state, attacking workers’ rights and trade union protection, selling off public assets, and extending the sell off to social housing. “This agenda militates against everything the Chancellor says he wants to achieve. If you want to revive manufacturing and rebalance the economy, you need a strategic state leading the way.”

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What is this, a wordgame? They’re still “Hundreds of migrants [..], but many of them refugees from the Syrian war and other conflicts in the Middle East..”

Migrants Cross Unhindered Into Macedonia; Trains, Busses Await (Reuters)

Hundreds of migrants crossed unhindered from Greece into Macedonia on Sunday after overwhelmed security forces appeared to abandon a bid to stem their flow through the Balkans to western Europe following days of chaos and confrontation. Riot police remained, but did little to slow the passage of a steady stream of migrants, many of them refugees from the Syrian war and other conflicts in the Middle East, a Reuters reporter at the scene said. Macedonia had declared a state of emergency on Thursday and sealed its southern frontier to migrants pouring in at a rate of 2,000 per day en route to Serbia then Hungary and the Europe Union’s borderless Schengen zone.

That led to desperate scenes at the border, as men, women and children slept under open skies with little access to food or water. Saying they would ration access, riot police used tear gas and stun grenades to drive back crowds, but were overwhelmed on Saturday by several thousand who tore through police lines or ran through nearby empty fields. The state eventually laid on extra trains, and buses arrived from across the country to take the migrants swiftly north to Serbia and the next step of a long journey from the Middle East, Africa and Asia.

“I watched the news on TV and I was astonished,” said Abdullah Bilal, 41, from the devastated Syrian city of Aleppo. “I thought I would face the same when I arrive here. But it was very peaceful. The Macedonian police told us ‘Welcome to Macedonia; trains and buses are waiting for you.'” Mohannad Albayati, 35, from Damascus, traveling with his wife, two children and three brothers, said: “I passed one step but it is a long road to my destination. With Allah’s help I will go to Germany.”

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Wait a minute! Reuters starts calling them refugees!

Refugees Tear Through Police Lines At Macedonian Border (Reuters)

Thousands of migrants stormed across Macedonia’s border on Saturday, overwhelming security forces who threw stun grenades and lashed out with batons before apparently abandoning a bid to stem their flow through the Balkans to western Europe. Some had spent days in the open with little or no food or water after Macedonia on Thursday declared a state of emergency and sealed its borders to migrants, many of them refugees from war in Syria and other conflicts in the Middle East. But by nightfall on Saturday, thousands had crossed the frontier, milling around the border town of Gevgelija where busses had converged from all over the country and trains left in quick succession to take them north to the next leg of their journey through Serbia.

There was no official word from the government, but the level of organisation suggested authorities had opted to move the migrants on as quickly as possibly, having tried and failed to keep them out with razor wire, teargas and stun grenades. “The government is organising additional trains. I don’t know who is organising the busses,” said Alexandra Krause, a senior protection officer with the United Nations refugee agency, UNHCR. No-man’s land, where men, women and children had slept in squalor under open skies appeared largely empty, though more people are certain make their way from Greece.

“In this Europe, animals are sleeping in beds and we sleep in the rain,” said 23-year-old Syrian woman Fatima Hamido on entering Macedonia. “I was freezing for four days in the rain, with nothing to eat.” Thirty-two-year-old Saeed from Syria said of the blocked border: “We know this was not Macedonia and the Macedonian police. This was the European Union. Please tell Brussels we are coming, no matter what.”

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And now we’re back to ‘migrants’?!

Italian Navy Rescues 3,000 Migrants In Mediterranean

The Italian navy rescued 3,000 migrants aboard more than a dozen boats in the Mediterranean on Saturday after receiving requests for help from 22 vessels, the coast guard said. Operations are continuing and it is still unclear where the people will be taken, a spokesman said. Europe is struggling to cope with record influx of refugees as migrants flee war in Middle Eastern countries such as Syria. The Mediterranean has become the world’s most deadly crossing point for migrants. More than 2,300 people have died this year in attempts to reach Europe by boat, according to the International Organisation for Migration. On Saturday, thousands of rain-soaked migrants stormed across Macedonia’s border as police lobbed stun grenades and beat them with batons, seeking to enforce a decree to stem their flow through the Balkans to western Europe.

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Far too late.

Greek President Wants EU Summit On Refugee Crisis (Kath.)

President Prokopis Pavlopoulos has proposed that a EU leaders’ summit be called to discuss a mounting migrant and refugee crisis and called for a closer cooperation with the United Nations. In comments during a meeting on Saturday with Health Minister Panayiotis Kouroublis, Pavlopoulos said a burgeoning migration crisis “is not only a security issue but also a humanitarian concern.” The scale of the problem means it must be tackled jointly, the president said. “There must be a common European policy,” he said, noting that this was “an obligation of the EU and its institutions.” He called for an EU leaders’ summit to be called without delay and with the involvement of the UN refugee agency. Kouroublis, for his part, said the migration crisis “threatens to drown us as a country and we must exhaust all efforts at the European level so that they realize this is not just a Greek issue.”

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Aug 222015
 
 August 22, 2015  Posted by at 9:22 am Finance Tagged with: , , , , , , , ,  10 Responses »


Harris&Ewing Motorcycle postman, Washington, DC 1912

Dow Plunges 531 Points In Global Selloff, Largest Weekly Drop Since 2008 (WSJ)
Stocks Post Worst Week In Years On China Fears (Reuters)
Record Capital Flight From China As Industrial Slump Drags On (AEP)
Chanos on China: “Whatever You Might Think, It’s Worse” (CNBC)
Chinese Market Mirroring 1929 Crash: Analyst (CNBC)
Fed Suffers Interest-Rate ‘Impotency’ as China Withers Markets (The Street)
Tsipras Hits Back After SYRIZA Rebels Form Own Group (Kathimerini)
Lafazanis Declares New Party’s Goals To Cancel Bailout, Write Down Debt (Kath.)
In a Twist, Europe May Find Itself Relying on Success of Alexis Tsipras (NY Times)
Germans Begin The Looting Of Greece (MarketWatch)
After the Bailout: The Spoils of Greece Are Bound for Germany (Sputnik)
German Wage Repression: Getting to the Roots of the Eurozone Crisis (Miller)
Debt Is Good (Paul Krugman)
The Drought Is Sinking California (Bloomberg)
Macedonia Migrants: Hundreds Rush Border (BBC)
Are Jellyfish Going To Take Over The Oceans? (Guardian)

A big one. But not THE big one.

Dow Plunges 531 Points In Global Selloff, Largest Weekly Drop Since 2008 (WSJ)

Stocks plummeted on global-growth fears for a second straight day Friday in a plunge that dragged the Dow industrials into correction territory. The global market rout pummeled stocks and commodities as fresh evidence emerged that China’s economy is slowing, spooking investors. The Dow industrials lost 530.94 points, or 3.1%, to close at 16459.75, putting it in correction territory, as defined by a 10% decline from a recent high. The S&P 500 dropped 64.84 points, or 3.2%, to close at 1970.89. The Nasdaq Composite fell 3.5%, or 171.45 points, to 4706.04. The Dow’s more than 1,000-point drop this week was the largest weekly drop since the week ended Oct. 10, 2008. U.S. oil prices also briefly dropped below $40 a barrel on Friday, a level not seen since the financial crisis.

Signs of a sharp slowdown in the world’s second-largest economy have unnerved investors since Beijing surprised markets last week by devaluing its currency. Shares in the U.S., Asia and Europe have tumbled, along with commodity prices as investors fretted about waning Chinese demand just as supplies are surging. The market turmoil has some traders exercising caution. “You have a situation that’s tough to play,” said Christopher Cady, a New York-based trader. He said he closed out bets toward the end of the week that U.S. stocks would fall. “Nimble…is the new black.” The pan-European Stoxx Europe 600 ended the session 3.3% lower, closing out its biggest week of losses since August 2011. The index has now lost nearly 13% since its April peak, entering correction territory.

Earlier, the Shanghai Composite Index tumbled 4.3%, hitting its lowest level since March, despite Beijing’s efforts to prop up the market in recent weeks. In Japan, the Nikkei fell 3% to a six-week low. An early gauge of China’s factory activity fell to a six-and-a-half year low in August, heaping further pressure on stocks and commodities after Thursday’s global selloff. “Now we’ve had some harder evidence that China is slowing relatively fast, people have chosen to get out,” said Kiran Ganesh at UBS Wealth Management.

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“You have across-the-board competitive currency devaluations that will invoke the deflationary monster here in the U.S.”

Stocks Post Worst Week In Years On China Fears (Reuters)

World stock markets tumbled on Friday and U.S. oil prices dove briefly below $40 a barrel sparked by fresh evidence of slowing growth in China, sending investors scurrying to the safety of bonds and gold. Stocks on Wall Street and in Europe fell more than 3% in a global rout spurred by a more than 4% fall in Shanghai stocks. Thomas Lee at Fundstrat Global Advisors in New York, said it was hard to say what was behind the sell-off in stocks but a market bottom may be close at hand. “There’s no shortage of things people can cite, from the movement in currencies, to the weakness in commodities and fears about China,” Lee said. “But at the end of the day if people are trying to take down risk, then it’s going to make sense for them to sell their exposure in equities as well.”

Crude posted its longest weekly losing streak in nearly 30 years and emerging market stocks, bonds and currencies all fell, with slowing Chinese growth withering demand for commodities from developing countries. China’s manufacturing sector shrank at its fastest rate in more than six years in August, according to a survey from private data vendor Caixin/Markit. World markets had already been on edge after China’s surprise devaluation of the yuan last week and a more than 30% fall in its stock markets since mid-year. The U.S. dollar fell too, dropping to a two-month low against the euro, as the Chinese data and falling commodity prices eroded expectations the Federal Reserve will raise U.S. interest rates next month.

“The Fed is in an extremely awkward situation right now,” said Robbert van Batenburg at Societe Generale. “You have across-the-board competitive currency devaluations that will invoke the deflationary monster here in the U.S.” The Dow industrials, Nasdaq and major European stock indices have now fallen more than 10% from their peak earlier this year. The pan-regional FTSEurofirst fell 3.4% to 1,427.13, its worst day since November 2011, as traders shrugged off upbeat euro zone manufacturing and services data in a third straight day of selling. MSCI’s emerging markets index was at its weakest in four years, off 2.16%, while the firm’s all-country world stock index fell 2.7%. The Dow Jones industrial average fell 530.94 points, or 3.12%, to 16,459.75. The S&P 500 slid 64.84 points, or 3.19%, to 1,970.89 and the Nasdaq Composite lost 171.45 points, or 3.52%, to 4,706.04.

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Well, that’s definitely one I got right, when I said after the first devaluation move that capital flight could well out-do any positive effects Beijing was hoping for. I’m thinking Peking Duck. Meanwhile, Ambrose is jubilant about China one day, and morose the next.

Record Capital Flight From China As Industrial Slump Drags On (AEP)

Capital outflows from China have surged to $190bn over the last seven weeks, forcing the authorities to intervene on an unprecedented scale to defend the Chinese currency. The exodus of funds is draining liquidity from interbank markets and has pushed up overnight Shibor rates by 30 basis points in the last ten trading days, a sign of market stress. Yang Zhao from Nomura said $90bn left the country in July. The pace has accelerated since the central bank (PBOC) shocked the markets by ditching its currency peg to the US dollar. Capital flight for the first three weeks of August is already close to $100bn, despite draconian use of anti-terrorism and money-laundering laws to curb illicit flows. Mr Zhao said the PBOC had intervened “very aggressively” to stabilise the currency and prevent the devaluation getting out of hand, but this automatically tightens monetary policy.

The central bank will almost certainly have to cut the reserve requirement ratio (RRR) for banks to offset the loss of liquidity, with some analysts expecting action as soon as this weekend. The PBOC’s latest report calls for “monetary easing”, dropping the usual caveat that measures should be targeted. It is a sign that Beijing is preparing blanket stimulus, despite worries that this could lead to a repeat of the credit excesses that have haunted China since the post-Lehman boom. The PBOC has already injected $160bn into the China Development Bank for projects. Hopes that China is at last shaking off a recession in the first half of the year – caused by a combined monetary and fiscal crunch – have once again been dashed by grim manufacturing data.

The Caixin PMI survey slumped to 47.1, far below the boom-bust line of 50 and the lowest since March 2009. New export orders slid further to 46.0 while inventories are rising, a nasty cocktail. Caixin Insight said the bad figures reflect the tail-end of a downturn that has largely run its course as stimulus kicks in. “The economy could be in the process of bottoming out and may start to rebound within the next few months,” it said. The ructions in China come at a moment when markets are already bracing for the first interest rate rise by the US Federal Reserve in eight years, a move that threatens to tighten the noose further on over-stretched emerging markets (EM) and the commodity nexus. Danske Bank said the latest rout is worse than the “taper tantrum” in 2013 when the Fed first hinted at tightening, and is quickly turning into a “perfect storm” as the Turkish lira, Brazilian real, Malaysian ringgit, and Russian rouble all go into free-fall.

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“In fact, like many of us, sometimes they don’t have a clue.”

Chanos on China: “Whatever You Might Think, It’s Worse” (CNBC)

Lingering concerns about China have helped drive stock selling, but investors may still underestimate how much the world’s second-largest economy has slowed, short seller Jim Chanos said Friday. “It’s worse than you think. Whatever you might think, it’s worse,” he said. Chanos appeared on CNBC’s “Fast Money: Halftime Report” on Friday amid the fourth straight day of losses for major U.S. averages. The Dow Jones industrial average, S&P 500 and Nasdaq were setting up for their worst weeks since 2011. He did not classify the drop as a correction or a bear market. But he noted that the yearslong runup in U.S. stocks shows “we’ve gotten a little complacent.” China’s slowdown, among other macroeconomic concerns, has spooked global investors.

Beijing’s handling of a stock market spike, “panic responses” from investors and recent currency devaluation has “given investors pause,” Chanos added. “People are beginning to realize the Chinese government is not omnipotent and omniscient,” he said. “In fact, like many of us, sometimes they don’t have a clue.” He added that investors should forget about the performance of the Shanghai composite, but instead focus on how declining GDP growth and the Chinese consumer could affect American companies with exposure to the country. Concerns about demand in China, one of the world’s largest energy consumers, has added pressure to already sagging commodities. Crude oil fell again on Friday, with West Texas Intermediate breaking below $40 per barrel for the first time since 2009.

A slowdown in consumption has fueled additional concern about what many observers have already called an oversupplied market. “Now that demand is flagging a little bit, the oversupply situation has just swamped the real demand,” he noted. Chanos is “betting against a number of the big guys” in the energy sector, he added. He dislikes Shell and Chevron, in particular.

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“In 1929, the market declined 50.6%. So that was a warning that there was something more serious in the market breakdown.”

Chinese Market Mirroring 1929 Crash: Analyst (CNBC)

Chinese stocks are set to fall another 9% in the next four or five days and are in danger of replicating the hefty losses seen in the U.S. exchanges in the Wall Street crash of 1929, an analyst has told CNBC. Thomas DeMark, founder and CEO of DeMark Analytics, told CNBC Friday that the current turmoil on the Shanghai Composite index is already on course to echo the crash of 1987 and 2001, but could still fall even lower. “That’s what could happen,” DeMark said, detailing the technical analysis that his company use to predict stock market declines. “In 1929, the market declined 50.6%. So that was a warning that there was something more serious in the market breakdown.”

DeMark added that his company turned bearish on China on June 12, just as the market reached a top and has – more or less – correctly predicted the downturn of 38% that has occurred since. He now sees the blue-chip index – which closed 4.3% lower Friday at 3,509.98 points – dropping to 3,282 points, or even 3,200 points. At this juncture, his technical models state there could be a 40% rally, which would mirror similar moves in 1987 and 2001. However, he added that a further fall was still possible which would echo world stock markets in the time of the Great Depression. “We can’t determine that right now. We think there’s going to be great rally, meaningful rally off the 3200 (points), or even worse case 3282, and we’ll see a retracement of 40% of the decline. And at that time we can reassess what the outlook is,” he said.

DeMark spoke of a “preordained” move in the Chinese stock markets. Authorities in Beijing have curbed short selling and several publicly listed firms have been able to suspend the trading of their shares over the last few weeks. Economists have highlighted that the Chinese officials might be trying to force a bottom in the Chinese markets or “shake out” foreign investors from speculating on its indexes. This sort of “interference” creates a vacuum in the market, according to DeMark, who said it adds to a growing sense of pessimism. DeMark is no stranger of making bold market predictions. In early 2014, he told CNBC that U.S. stocks had reached an “inflection point” that resembled the period prior to the 1929 stock-market crash. He did stress that certain caveats and preconditions would need to be met before “turning all-out bearish” but the market turmoil in U.S. stocks failed to materialize.

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“The “end of excess liquidity and the end of excess profits has caused an end of excess returns in 2015..”

Fed Suffers Interest-Rate ‘Impotency’ as China Withers Markets (The Street)

Years of holding interest rates near zero have left the Federal Reserve suffering from “central bank policy impotence,” a Bank of America report says, and there’s no pill to provide a quick fix. Pushing interest rates up now, even though the benefits of low rates are fizzling, risks spooking the markets just when they’re getting hammered by China’s slump. The S&P 500 plummeted 3.2% for the day and has fallen 7.5% since its May high, near the 10% decline which would constitute a correction. The Dow Jones Industrial Average dropped 3.1% or 539 points. The “end of excess liquidity and the end of excess profits has caused an end of excess returns in 2015,” Michael Hartnett of the bank’s Merrill Lynch Global Research unit wrote in the report this week.

“The summer mood of investors appears to have darkened considerably as the declines in commodities and emerging markets have induced widespread losses in equities in recent weeks.” Worldwide, stocks have dropped 2.6% in the past month, he noted. The excess returns Hartnett’s team acknowledged were largely due to the Fed’s policy of keeping interest rates near zero for the past seven years. Unfortunately, the effectiveness of that policy has waned in what Bank of America characterized as “central bank policy impotence.” Year-to-date returns across asset classes have been underwhelming compared with those in the market run-up from 2009 to 2014, Hartnett’s team noted. By his measure, the total return on stocks so far this year has been 2.3%, while bonds decreased 2.5%.

Still, Bank of America advises that tactical traders – those who take short to medium-term positions in their trades – may want to add some riskier, potentially higher-yielding, assets to their portfolio. The recommendation comes with two big caveats, however: China devaluation and, of course, Fed policy. Last week, China devalued its currency by 2%. While the amount is small, it can pose significant consequences to U.S. manufacturing and export businesses. Bank of America already sees U.S. inventories outpacing sales, which could lead to a supply glut. If the demand for U.S. goods overseas is further decreased by the comparably higher cost relative to Chinese goods, profits could take a hit.

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It’ll be interesting elections. If Greec, in its predicament, did not have these heated discussions, it wouldn’t be a functioning democracy.

Tsipras Hits Back After SYRIZA Rebels Form Own Group (Kathimerini)

Prime Minister Alexis Tsipras chaired a meeting of SYRIZA’s political secretariat on Friday to discuss strategy ahead of snap elections as former Energy Minister Panayiotis Lafazanis announced his new breakaway party, Popular Unity, which is to campaign on an anti-austerity platform. The party, comprising Lafazanis and another 24 SYRIZA hardliners, will aim to cancel Greece’s bailouts and write down the country’s debt, Lafazanis told a press conference in Parliament. The goals are virtually the same as those championed by Tsipras ahead of the January elections that brought SYRIZA to power. But Lafazanis, who has lobbied for Greece to return to the drachma, also indicated that his party would “follow the course of exiting the euro” if necessary, insisting that any exit would be “orderly.”

Lafazanis, whose party is now the third largest in Parliament and as such has the right to seek to form a government, said Popular Unity would seek alliances with all “progressive” parties except those that have backed austerity. Lafazanis is to take over the exploratory mandate on Monday from New Democracy leader Vangelis Meimarakis, who assumed it yesterday. Tsipras meanwhile convened his political secretariat. Before discussing pre-election strategy, the three members of the secretariat who are now aligned with Lafazanis resigned. They blamed Tsipras and SYRIZA’s leadership for the breakup of the party. Tsipras also took a jab at the SYRIZA rebels. “It is not revolutionary to choose to escape from reality or create a virtual reality,” he was quoted as saying. “It is revolutionary to open roads where there aren’t any.”

As for SYRIZA, he said it “has a chance to develop a new relationship with the society that supports it and to acquire a clear ideological and political identity of a contemporary, radical left, purged of reactionary remnants and self-delusion.” The party’s central committee is expected to meet in the week. It remains unclear when the elections will take place. The proposal was for September 20 but if the procedures involving the exploratory mandates are delayed, that date could be put back to September 27. Parliament Speaker Zoe Constantopoulou, another SYRIZA rebel who has used her power to delay and obstruct proceedings in the House, raised objections yesterday to the procedure followed by President Prokopis Pavlopoulos in handing a mandate to Meimarakis.

She accused Pavlopoulos of an “institutional faux pas,” saying that she had not been informed in advance as, she said, the Constitution dictates. Sources in the president’s office retorted that he had “honored the Constitution to the letter.” The intervention was not expected to delay the process though the outlook for Constantopoulou’s relationship with SYRIZA remained unclear. The response from Greece’s creditors to looming elections appeared relatively upbeat, with several officials indicating that they had been expecting the move and saying the polls could help Tsipras broaden his majority and boost implementation of the new bailout program.

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“The ‘no’ of the referendum will not be an ‘orphan’ in these elections..”

Lafazanis Declares New Party’s Goals To Cancel Bailout, Write Down Debt (Kath.)

Addressing his new breakaway party Popular Unity, Panayiotis Lafazanis on Friday declared that the new movement would offer a “realistic, alternative to the memorandum,” and said its key goals would be to cancel the memorandums and write down Greece’s debt, adding that any euro exit would be “orderly.” “We will become a major and decisive political force,” he said, adding that the grouping of 25 MPs “will try to express the spirit and substance of the 62% who voted no to austerity,” referring to last month’s referendum on austerity measures proposed by Greece’s creditors.

“The ‘no’ of the referendum will not be an ‘orphan’ in these elections,” Lafazanis told MPs and reporters in Parliament. He said the decision by Prime Minister Alexis Tsipras to call snap elections in the summer “does not portend good things” and suggested that the premier had tried to catch Greeks off guard. “If it is necessary for us to cancel the memorandum, we will follow the course of exiting the euro,” Lafazanis said, adding that any exit would be “orderly.”

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Not sure they would get what they want. Don’t think Tsipras is done yet.

In a Twist, Europe May Find Itself Relying on Success of Alexis Tsipras (NY Times)

Europe spent months trying to crush Alexis Tsipras. But now that Greece’s leftist prime minister has called a snap election and is seeking a mandate for the tough new bailout program he negotiated with his country’s creditors, Europe, oddly enough, may find itself invested in his success. Greece never fails to surprise, and Mr. Tsipras’s turbulent eight-month tenure has proved he is rarely predictable. But the man many European leaders once regarded as a populist wrecking ball is now presenting himself as a figure who can deliver pragmatism and stability — and carry out the sort of austerity program he once inveighed angrily against.

“I’m sure that he has talked to European leaders, and they are O.K. with what he is doing now,” said Harry Papasotiriou, a professor at Panteion University in Athens, adding that Mr. Tsipras was staking his political life on a bailout deal that includes the kind of taxes and pension cuts he once opposed. “He’s taking ownership of it.” The latest twist by Mr. Tsipras was met with cautious optimism on Friday by some European commentators even as his surprise move again tossed Greece into political turmoil. On Friday, a faction of hard-line leftists split from Mr. Tsipras’s Syriza party and formed a new party, vowing to resist austerity and possibly even lead Greece out of the eurozone.

At the same time, analysts cautioned that the new election, and the continuing political maneuverings in Athens, could further complicate and slow implementation of the 86 billion euro bailout program, worth about $98 billion at Friday’s exchange rate, signed by Mr. Tsipras in July. An initial progress review by creditors, scheduled for October, may be delayed, which would delay discussions between Greece and its lenders over possible restructuring of the country’s crippling sovereign debt. Some economists also warned that the uncertainty surrounding the elections, including the possibility that the proposed Sept. 20 election could be pushed back, could revive the sort of public anxiety that earlier this year destabilized the broader economy and spurred a run on Greek banks. “That element I find to be much more risky,” said Marcel Fratzscher, president of the German Institute of Economic Research in Berlin. “It creates much more uncertainty.”

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“..the plundering that has now begun unmasks the whole euro charade for what it really is — a war of conquest by money rather than by arms.”

Germans Begin The Looting Of Greece (MarketWatch)

To the victor goes the spoils. The ink was not yet dry on the new European bailout accord for Greece before German companies started their plundering of Greek assets. Per provisions of the “agreement” imposed on Greece, the Athens government awarded the German company that runs the Frankfurt Airport, Fraport, a concession to operate 14 regional airports, mostly on the islands like Mykonos and Santorini favored by tourists, for up to 50 years in the first privatization of government-owned assets demanded by the creditors. The airport deal had been agreed upon last year by the previous Greek government and then suspended by Prime Minister Alexis Tsipras’s newly elected government this year as part of his pledge to prevent the fire sale of valuable public assets at bargain-basement prices.

The airport deal gives Fraport the right to run the facilities as its own for €1.2 billion over the 50 years and an annual rent of €23 million. The German company is also pledging to invest significantly in upgrades for the airports. Under the terms of the new bailout accord, which provides 86 billion euros of new debt to a government already vastly overindebted, the country must sequester €50 billion worth of public assets to sell off at distressed prices to mostly foreign bidders — with German companies first in line. In the end, Tsipras had no choice but to buckle under to the creditors’ demands if he wanted to fulfill his other pledge of keeping the country in the euro. But the plundering that has now begun unmasks the whole euro charade for what it really is — a war of conquest by money rather than by arms.

Privatization is a standard feature of the neoliberal policy mix seeking smaller government, less state intervention and more free-market competition. (Privatization, of course, leads just as often to crony capitalism, while some services, such as electricity and trains, are arguably more efficient as government-owned monopolies.) But privatization in the context of the bailout accord is tantamount to expropriation, like forcing a bankrupt to sell the family silver in order to pay off debts. After piling more and more unsustainable debt onto the Greek government in two previous bailouts — most of which went back to banks in France and Germany — the victorious Northern European governments are now inviting their companies to partake in the spoils.

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“..workers will be sacked and their conditions made worse, while the elite of Europe profits.”

After the Bailout: The Spoils of Greece Are Bound for Germany (Sputnik)

The ‘Asset Development Plan’ for Greece is out and it’s all go for the privatization of the country. Hellenic sea ports, air ports, motorways, petroleum companies, water and gas supply, real estate, holiday resorts – it’s all for sale. Debt laden Greece has been forced to sell the family silver in an all too familiar tale with ancient history repeating itself. The Hellenic Public Asset Development Fund has been published by German Green MEP Sven Giegold who said the Greek people “hardly know” what will be sold off and that they have “the right” to know. The selling of Greek assets to raise €50 billion was demanded by Greece’s creditors, the Troika. The document reveals that 66% of a gas distribution and processing firm will be sold to Azerbaijan; 35% of Greece’s first oil refinery firm will be sold off along with 17% of its electricity distributor and 65% of gas distributor Depa.

All rail and bus services will go under the hammer — along with the Greek telephone and postal service. Even before the bailout deal was completed and the money arrived safely in the Greek banks, the Germans had won their bid to take over 14 Greek airports for the next 40 years, paying $1.36 billion (€1.23bn) for the privilege. Of the $56 billion (€50bn) needed in asset stripping and bank shares, only $8.69 billion (€7.7bn) has been agreed so far. Nick Dearden, economic expert and campaigner, says it makes “no sense to sell off valuable assets in the middle of Europe’s worst depression in 70 years.” Writing in Global Justice Now, Dearden says: “The vast majority of the funds raised will go back to the creditors in debt repayments, and to the recapitalization of Greek banks.

“From German airport operators and phone companies to French railways — who are getting their hands on Greece’s economy. Not to mention the European investment banks and legal firms who are making a fast buck along the way. “The self-interest of European governments in forcing these policies on Greece leaves a particularly unpleasant flavour…workers will be sacked and their conditions made worse, while the elite of Europe profits.” Dearden continues to offer a scathing attack on the asset stripping of Greece. “Privatization in the context of the bailout accord is tantamount to expropriation, like forcing a bankrupt to sell the family silver in order to pay off debts…the victorious Northern European governments are now inviting their companies to partake in the spoils.”

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Interesting take.

German Wage Repression: Getting to the Roots of the Eurozone Crisis (Miller)

Beggar Thy Neighborhood

Germany’s transformation into an export powerhouse came at the expense of the southern eurozone economies. Despite posting productivity gains that were equal or almost equal to Germany’s, Greece, Portugal, Spain, and Italy saw their labor costs per unit of output—and in turn prices rise— considerably faster than Germany’s. Wage growth in these countries exceeded productivity growth, and the resulting higher unit labor costs pushed prices up by more than the eurozone’s low 2% annual inflation target (though by only a small margin). The widening gap in unit labor costs gave Germany a tremendous competitive advantage and left the southern eurozone economies at a tremendous disadvantage.

Germany amassed its ever-larger current account surplus, while the southern eurozone economies were saddled with worsening deficits. Later in the decade, the Greek, Portuguese, and Spanish current account deficits approached or even reached alarming double-digit levels, relative to the sizes of their economies. In this way, German wage repression is an essential component of the euro crisis. Heiner Flassbeck, the German economist and longtime critic of wage repression, and Costas Lapavistas, the Greek economist best known for his work on financialization, put it best in their recent book Against the Troika: Crisis and Austerity in the Eurozone: “Germany has operated a policy of ‘beggar-thy-neighbor’ but only after ‘beggaring its own people’ by essentially freezing wages. This is the secret of German success during the last fifteen years.”

While Germany’s huge exports across Europe and elsewhere created German jobs and lowered the country’s unemployment rate, the German economy never grew robustly. Wage repression subsidized exports, but it sapped domestic spending. And, held back by this chronic lack of domestic demand, Germany’s economic growth was far from impressive, before or after the Great Recession. From 2002 to 2008, the German economy grew more slowly than the eurozone average, and over the last five years has failed to match even the sluggish growth rates posted by the U.S. economic recovery.

With low wage growth, consumption stagnated. German corporations hoarded their profits and private investment relative to GDP fell almost continuously from 2000 on. The same was true for German public investment, held back by the eurozone budgetary constraints. At the same time, Germany spread instability. Germany’s reliance on foreign demand for its exports drained spending from elsewhere in the eurozone and slowed growth in those countries. That, in turn, made it less likely that German banks and elites would recover their loans and investments in southern Europe.

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Infrastructure.

Debt Is Good (Paul Krugman)

Rand Paul said something funny the other day. No, really — although of course it wasn’t intentional. On his Twitter account he decried the irresponsibility of American fiscal policy, declaring, “The last time the United States was debt free was 1835.” Wags quickly noted that the U.S. economy has, on the whole, done pretty well these past 180 years, suggesting that having the government owe the private sector money might not be all that bad a thing. The British government, by the way, has been in debt for more than three centuries, an era spanning the Industrial Revolution, victory over Napoleon, and more. But is the point simply that public debt isn’t as bad as legend has it? Or can government debt actually be a good thing?

Believe it or not, many economists argue that the economy needs a sufficient amount of public debt out there to function well. And how much is sufficient? Maybe more than we currently have. That is, there’s a reasonable argument to be made that part of what ails the world economy right now is that governments aren’t deep enough in debt. I know that may sound crazy. After all, we’ve spent much of the past five or six years in a state of fiscal panic, with all the Very Serious People declaring that we must slash deficits and reduce debt now now now or we’ll turn into Greece, Greece I tell you.

But the power of the deficit scolds was always a triumph of ideology over evidence, and a growing number of genuinely serious people — most recently Narayana Kocherlakota, the departing president of the Minneapolis Fed — are making the case that we need more, not less, government debt. Why? One answer is that issuing debt is a way to pay for useful things, and we should do more of that when the price is right. The United States suffers from obvious deficiencies in roads, rails, water systems and more; meanwhile, the federal government can borrow at historically low interest rates. So this is a very good time to be borrowing and investing in the future, and a very bad time for what has actually happened: an unprecedented decline in public construction spending adjusted for population growth and inflation.

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“..more than a foot in just eight months..”

The Drought Is Sinking California (Bloomberg)

Land in California’s central valley agricultural region sank more than a foot in just eight months in some places as residents and farmers pump more and more groundwater amid a record drought. The ground near Corcoran, 173 miles (278 kilometers) north of Los Angeles, dropped about 1.6 inches every 30 days. One area in the Sacramento Valley was descending about half-an-inch per month, faster than previous measurements, according to a report released Wednesday by the Department of Water Resources. NASA completed the study by comparing satellite images of Earth’s surface over time.

“Groundwater levels are reaching record lows — up to 100 feet lower than previous records,” Mark Cowin, the department’s director, said in a statement. “As extensive groundwater pumping continues, the land is sinking more rapidly and this puts nearby infrastructure at greater risk of costly damage.” Areas along the California Aqueduct — a system of canals and tunnels that ships water from the north to the south — sank as much as 12.5 inches, with eight inches of that occurring in just four months of 2014, researchers found.

The warnings come as a four-year, record-setting drought squeezed California’s $43 billion agriculture industry and led to mandatory, statewide water restrictions for the first time. The sinking could damage aqueducts, bridges, roads and dams, NASA said. As it occurs over time, sinking land has already destroyed thousands of public and private groundwater well casings in central California, the agency found. A state law enacted in September requires local governments to form agencies to regulate pumping to better manage groundwater supplies.

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Countries must leave EU to deal with this.

Macedonia Migrants: Hundreds Rush Border (BBC)

Hundreds of migrants have rushed at Macedonian border forces in an attempt to enter the country from Greece. The security forces beat back the migrants with truncheons and riot shields. A number of people were injured. On Thursday, Macedonia declared a state of emergency to cope with migrants – many from the Middle East – who are trying to reach northern EU states. The UN urged both Greece and Macedonia to tackle a “deteriorating situation”. Some 44,000 people have reportedly travelled through Macedonia in the past two months, meeting little border resistance, but razor wire has now been rolled across the frontier to prevent people from entering. Medecins Sans Frontieres said it had treated 10 people with wounds from stun grenades fired by Macedonian troops, near the Greek border village of Edomeni.

Amnesty International deputy Europe director Gauri van Gulik said: “Macedonian authorities are responding as if they were dealing with rioters rather than refugees who have fled conflict and persecution.” Macedonian Foreign Minister Nikola Poposki told the BBC that his government had been forced to act because the numbers trying to enter Macedonia had recently soared to more than 3,000 a day. He said a small country such as his could not cope with such an influx. Police have issued temporary transit documents to 181 migrants in the past 24 hours. Spokesman Ivo Kotevski told Reuters: “We are allowing entry to a number that matches our capacity to transport them or to give them appropriate medical care and treatment.”

The BBC’s James Reynolds, who was at the scene, says that later on Friday he saw some families being allowed to cross – they smiled with relief as they walked to a train station so they could head north to Serbia, Hungary and the rest of Europe. The UN refugee agency, the UNHCR, on Friday expressed concern for “thousands of vulnerable refugees and migrants, especially women and children, now massed on the Greek side of the border amid deteriorating conditions”. It urged Macedonia to “establish an orderly and protection-sensitive management of its borders” while appealing to Greece to “enhance registration and reception arrangements” on its side of the border. The UNHCR also said it had been assured by Macedonia the border “will not be closed in the future”, but did not elaborate.

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Back to the future.

Are Jellyfish Going To Take Over The Oceans? (Guardian)

Another British summer, another set of fear-mongering headlines about swarms of “deadly” jellyfish set to ruin your holiday. But news that jellyfish numbers may be rising carries implications far beyond the interrupted pastimes of the sunburnt masses. Like a karmic device come to punish our planetary transgressions, jellyfish thrive on the chaos humans create. Overfishing wipes out their competitors and predators; warmer water from climate change encourages the spread of some jellies; pollution from fertilisers causes the ocean to lose its oxygen, a deprivation to which jellyfish are uniquely tolerant; coastal developments provide convenient, safe habitat for their polyps to hide. In addition, the great mixing of species transported across the world in the ballasts of ships opens up new, vulnerable ecosystems to these super-adaptors.

“They’ve got this unique life cycle where they can tolerate harsh conditions and then rapidly thrive when conditions are favourable. So when a stressor like climate change or overfishing opens up a niche for them they can really take advantage of that and rapidly proliferate,” said Lucas Brotz, a researcher at the University of British Columbia. Not all species of jelly benefit, rather there tends to be a reduction in the diversity of species and vast, homogenous masses emerge. “They can make millions and millions of copies of themselves and clone asexually. That’s when you get these massive blooms. I think that’s the secret to the success of jellyfish, the reason they’ve been around for hundreds of millions of years.”[..]

The links between human activity and local jellyfish blooms are strong. In the Black Sea, invasive comb jellies dumped from the ballast of tankers have spawned deliriously and destroyed the region’s fishing industry. In the Sea of Japan, fertiliser run-off has left an oxygen-depleted sea where little other than jellies can thrive. But aside from these regional observations, Mark Gibbons, a zoologist at the University of the Western Cape, said the evidence to support a global trend was still patchy. “Whether there is strong evidence of a global increase in jellyfish populations [now] is difficult to answer. Certainly in some coastal systems there have been increases but in others there have not – or at least the background data with which to measure change are absent or scant, so it is hard to say,” he said.

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Aug 212015
 


Lewis Wickes Hine Newsies in St. Louis, N. Broadway and De Soto 1910

Greek PM Alexis Tsipras Steps Down To Trigger New Elections (Guardian)
Syriza Rebels Break Away To Form New Party ‘Leiki Anotita’ -Popular Unity- (BBC)
The Colony Of Italy (M5S Lower House)
Asia Stocks Tumble as China PMI Hits Six-Year Low; Shanghai -4.27% (Bloomberg)
Global Stocks In ‘Panic Mode’ As China Factory Slump Drags On Markets (Guardian)
Commodity Rout Erases $2 Trillion From Stock Values (Bloomberg)
Stock Market Correction: Is This A New Global Financial Crisis? (Guardian)
The Asian Century Hits a Speed Bump (Bloomberg)
China Wants Great Power, Not Great Responsibility (Pesek)
Can Kickers United – Why It’s Getting Downright Hazardous Out There (Stockman)
The Baby Boom Will Never Retire (MyBudget360)
Draghi’s Post-Holiday Inbox Stuffed With Trouble (Bloomberg)
How Long Can Saudi Arabia Hold Out Against Cheap Oil? (Bloomberg)
UK New Home Builds Fall 14% In Three Months Despite Election Pledge (PA)
Brazil’s Unemployment Rate Hits Five-Year High in July (WSJ)
World Breaks New Heat Records In July (AFP)
The Unique Ecology Of Human Predators (Phys Org)
Macedonia Police Use Tear Gas Against Migrants (BBC)

Democracy in progress.

Greek PM Alexis Tsipras Steps Down To Trigger New Elections (Guardian)

Seven months after he was elected on a promise to overturn austerity, the Greek prime minister, Alexis Tsipras, has announced that he is stepping down to pave the way for snap elections next month. As the debt-crippled country received the first tranche of a punishing new €86bn bailout, Tsipras said on Thursday he felt “a moral obligation to place this deal in front of the people, to allow them to judge … both what I have achieved, and my mistakes”. The 41-year-old Greek leader is still popular with voters for having at least tried to stand up to the country’s creditors, and his leftwing Syriza party is likely to be returned to power in the imminent general election, which government officials told Greek media was most likely to take place on 20 September.

The prime minister insisted in an address on public television that he was proud of his time in office and had got “a good deal for the country”, despite bringing it “close to the edge”. He added that he was “shortly going to submit my resignation, and the resignation of my government, to the president”. The prime minister will be replaced for the duration of the short campaign by the president of Greece’s supreme court, Vassiliki Thanou-Christophilou – a vocal bailout opponent – as head of a caretaker government. Tsipras won parliamentary backing for the tough bailout programme last week by a comfortable margin, but suffered a major rebellion among members of his ruling Syriza party, nearly one-third of whose 149 MPs either voted against the deal or abstained.

The revolt by hardliners, angry at what they view as a betrayal of the party’s anti-austerity pledges, left Tsipras short of the 120 votes he would need – two-fifths of the 300-seat assembly – to survive a censure motion, leading to speculation that he would call an early confidence vote. He has now decided to skip that step, opting instead to go straight to the country in an attempt to silence the rebels and shore up public support for the three-year bailout programme, which entails a radical overhaul of the Greek economy and major reforms of health, welfare, pensions and taxation.

Government sources had long suggested that an announcement on early elections was on the cards as soon as Athens had got the first instalment of the new package – Greece’s third in five years – and completed a critical €3.4bn debt repayment to the European Central Bank, due on Thursday. Some analysts had speculated that the prime minister might wait until early October, by which time Greece’s creditors would have carried out their first review of the country’s reform progress and perhaps come to a decision about debt relief – a potential vote-winner for the prime minister.

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Is Tsipras wise enough to use this to his full advantage?

Syriza Rebels Break Away To Form New Party ‘Leiki Anotita’ -Popular Unity- (BBC)

Rebels from Greece’s main party, left-wing Syriza, are to break away and form a new party, Greek media reports say. Prime minister and Syriza leader Alexis Tsipras stood down on Thursday, paving the way for new elections. The move came after he lost the support of many of his own MPs in a vote on the country’s new bailout with European creditors earlier this month. Greek media reports say 25 rebel Syriza MPs will join the new party, called Leiki Anotita (Popular Unity). The party will be led by former energy minister Panagiotis Lafazanis, who was strongly opposed to the bailout deal, reports say. A list of MPs joining the party published by the Ta Nea newspaper showed that the parliamentary speaker Zoe Konstantopulou and former finance minister Yanis Varoufakis were not among its members. Both had opposed a new bailout deal, with Ms Konstantopulou highly critical of her former ally Mr Tsipras.

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From Beppe Grillo’s parliamentarians. Dead on. “The 5 Star MoVement wants to show Europe what it means to have people in government who are free to make decisions.”

The Colony Of Italy (M5S Lower House)

“From Crete to Santorini, from Mykonos to Thessaloniki – it’s official: 14 of the Greek airports making the most money, will be handed over to Germany until 2055. Before now, things were conquered with wars. Now it’s done with the Euro. In Italy, companies called Lamborghini, Ducati, Italcementi and other giants have been in German hands for more than a year. Parmalat, Galbani, Eridania, Bulgari, Gucci, Buitoni, Sanpellegrino, Perugina, and Motta have landed up in French hands. Between 2008 and 2013, 437 of the most famous Italian brands have ended up in foreign hands. They’ve converted us into an outlet, where they come “shopping” from all over the world and the government doesn’t even notice. Recently, English and South Africans have bought Peroni beer and Gancia sparkling wine.

And that’s not considering Ansaldo that’s gone to the Japanese, Terna and Pirelli to the Chinese, and the Valentino brand to the Arabs. And how much longer before the Colosseum gets purchased? Greece was first strangled by the conditions to get their budget balanced for the Euro, those same constraints that Germany and France allowed themselves not to respect on so many occasions. Now that the country is totally dependent on the transfer of funds from the European Central Bank and the International Monetary Fund, they are being obliged to give up the family jewels in exchange for a bit of small change. In these new wars of conquest, Germany and France are acting like their masters.

In Greece, they are buying up the services that make the most money: last year Greece had a record number of 23 million tourists and it’s obvious that the airports are a gold-mine. This is why they want them. And in exchange the banks can open their doors. In Italy, on the other hand, they have bought up the “Made in Italy” companies, with a quasi-military strategy. First, the governments led by the PD, Forza Italia and Lega, strangled them by increasing taxes, because “it’s what Europe asked us to do”. Then, that same “Europe” (in actual fact the Franco-German alliance) bought them up from owners who found their backs to the wall. A bit like what happens in war-time when cities are razed to the ground and then the reconstruction business starts.

Europe needs to experience once more the joy of having sovereign states, states that don’t accept being bought out while saying “thank you”. If you want to give us the possibility of governing, our idea of Italy is clear: we want to bring back home many of the excellent companies that are Made in Italy. We could do this by using the Italian Strategic Fund of the Cassa Depositi e Prestiti that will be able to buy them. By buying back these “family jewels” we are creating an opportunity to relaunch top quality employment in Italy. Profits from “Made in Italy” will stay in Italy and will make Italy rich. We must also have discussions about thie “Euro” that cannot be a weapon used to colonise other States. The 5 Star MoVement wants to show Europe what it means to have people in government who are free to make decisions.”

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Getting serious.

Asia Stocks Tumble as China PMI Hits Six-Year Low; Shanghai -4.27% (Bloomberg)

Asian stocks tumbled with U.S. index futures, oil and emerging currencies as a gauge of Chinese manufacturing plunged to the lowest since 2009, underscoring the weakness in global demand. Gold and the yen extended gains. Benchmark gauges in Hong Kong, Taiwan and Indonesia headed for bear markets, dragging down the MSCI Asia Pacific Index by 2.4% at 2:34 p.m. in Tokyo. Standard & Poor’s 500 Index futures dropped 0.5% after the gauge fell the most in 18 months. Gold is set for its biggest weekly advance since January as the selloff in emerging markets spreads. U.S. oil headed for an eighth straight weekly slide, its longest streak since 1986. “We’ve been expecting a correction and it looks like we’re getting one,” said Mark Lister at Craigs Investment Partners.

“The S&P had held up, now it’s back in negative territory. The whole world’s looking a little bit sad. China still looks really worrying on a number of fronts.” China’s decision to devalue its currency amid slowing growth and the prospect of higher U.S. interest rates has spurred a wave of selling across emerging markets and commodities. The first read on Chinese economic activity in August added to concern that the slowdown in global growth is deepening, boosting the appeal of haven assets such as gold, the yen and sovereign bonds. The MSCI Asia Pacific Index is heading for its biggest weekly loss since 2011. Japan’s Topix index slid the most since July 8 on Friday and the Kospi gauge in Seoul set for its worst week since May 2012. The MSCI All-Country World Index has lost 3.1% this week.

Hong Kong’s Hang Seng Index dropped 2.3%, taking declines since an April high beyond 20%. Taiwan’s benchmark gauge dropped 2.7% to finish in a bear market and the Jakarta Composite Index slid 2.1%. The Shanghai Composite Index slumped 3%, taking the week’s loss beyond 10%. The gauge briefly erased all its gains since the government began efforts to prop up the market in July. About $2.2 trillion was wiped from the value of global stocks in the first four days of the week. The S&P 500 slipped out of the 70-point trading range it has been stuck in since March, falling below 2,040 to as low as 2,035.73 on Thursday. It closed below its 200-day moving average for the first time since July 9.

The Federal Reserve will decide whether to raise interest rates for the first time since 2006 on Sept. 18. Bets on liftoff taking place next month have been wound back since the last meeting as oil slumped, China cut the value of its currency and the Fed’s own minutes showed concern among policymakers about the pace of inflation. The decision is “only four weeks away and the world’s looking pretty vulnerable,” said Stephen Halmarick at Colonial First State Investment. “If they delay you might see some support coming through to U.S. markets because then the dollar probably comes down a bit from where it is now and some of those pressure points may be relieved, at least in the short term.”

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Everyone’s sinking now.

Global Stocks In ‘Panic Mode’ As China Factory Slump Drags On Markets (Guardian)

Stock markets across Asia-Pacific went into “panic mode” on Friday after more signs of a weakening Chinese economy compounded overnight losses on Wall Street and European bourses. China’s factory sector shrank at its fastest pace in more than six years in August as domestic and export demand dwindled, a private survey showed, adding to worries that the world’s second-largest economy may be slowing sharply and sending financial markets into a tailspin. China’s surprise devaluation of the yuan and heavy selling in its stock markets in recent weeks have sparked fears that it could be at risk of a hard landing which would hammer world growth. Markets in countries whose economic fortunes are closely linked to China’s growth tumbled.

Japan’s Nikkei average dropped more than 2% to six-week lows on Friday while the Kopsi index in South Korea fell 2.25%. Shares in Australia are having their worst month since the global financial crisis hit in October 2008. On Friday afternoon the benchmark ASX200 was down 2.2% at 5,173 points and is down 8.8% so far in August, according to broker Commsec. The Australian dollar was also hammered, falling 0.5% to as low as US72.85c. The Aussie, which is seen as a proxy for the Chinese economy, has fallen about 1% in the past week. The Hang Seng stock index in Hong Kong was down 2.32% while the Shanghai Composite index was 3% lower.

Commodities also suffered. US crude hit fresh six and a half year lows near $40 a barrel as it headed for its eighth straight weekly decline, the longest weekly losing streak since 1986. Brent crude for October delivery was down 29c at $46.33. “Global markets are in panic mode as the full scale of China’s slowdown becomes clearer,” said Angus Nicholson at IG Markets in Sydney. The long-awaited interest rate rise by the US federal reserve, pencilled in for as early as September by many analysts, was now looking much less likely, Nicholson added. “The potential for further devaluations in the Chinese yuan not only make a US rate hike in September unlikely, but increasingly even put a December rate hike at risk.”

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Deflation in action.

Commodity Rout Erases $2 Trillion From Stock Values (Bloomberg)

The value that commodity producers have lost in the past year almost equals India’s entire economy. Slumping prices for raw materials have wiped out $2.05 trillion from the shares of mining and oil companies since the middle of last year, data compiled by Bloomberg show. That compares with India’s $2.07 trillion gross domestic product. Prices plunged after years of overinvestment led to a supply glut at the same time that economic growth is slowing in China, the biggest consumer of commodities. The Bloomberg Commodity Index of 22 raw materials dropped Wednesday to its lowest since 2002, paced this year by declines in nickel, sugar, and crude oil.

Oil companies have reduced spending by $180 billion this year while maintaining dividends, according to Rystad Energy, an Oslo-based energy consultant. As a prolonged decline lowers revenue, it may be harder for the industry to avoid slashing payments. “The energy is the worst, the materials, industrials have been a disaster,” says Donald Selkin at National Securities Corp. in New York. “The problem is their ability to pay dividends. That’s the question, as far as the valuation is concerned.” Another blow has come from a stronger dollar. Currencies of commodity producers in such countries as Canada and Russia are slumping, lowering production costs. That’s helped boost Russian oil supply to a post-Soviet high this year, adding to the global glut.

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Is this a question?

Stock Market Correction: Is This A New Global Financial Crisis? (Guardian)

The jitters in the City have nothing to do with the state of the UK economy and nothing to do with the speculation that Greece might eventually be forced out of the single currency. They have everything to do with concerns that the next global financial crisis has begun in emerging markets. As ever, the riposte to this suggestion is “it’s different this time”, with good reason considered the four most dangerous words in financial markets. Panglossian investors can always think up a hundred reasons why it’s different this time, up to the moment when reality smacks them in the face.

The optimists argue that China is adroitly easing its way to slower but more sustainable growth, that the fall in commodity prices has been caused by over-supply rather than a shortage of demand, and that the rest of the world has had plenty of opportunity to prepare itself for an increase in interest rates from the Federal Reserve later this year. The pessimists would say that China’s hard landing is being disguised by dodgy official figures, that oil and metals prices are falling because demand is faltering and that the $1tn of capital that has flowed out of emerging markets in the past year is evidence of a sharp drop in investor confidence.

As Russell Jones and Bimal Dharmasena of Llewellyn Consulting note: “The export-led model has run its course. In many ways, it sowed the seeds of its own destruction, the emphasis on exchange rate competitiveness and foreign exchange reserve accumulation morphing into undue monetary laxity, excessive credit growth, asset price inflation, income inequalities, and malign financial imbalances similar to those built up in the advanced economies pre-2007.” Many emerging market countries assumed that high commodity prices would last for ever. They spent up to their income, and then some. They now have a twin deficit problem: they are running budget and current account deficits. Capital flowed into emerging markets when zero interest rates in the west set off a search for higher yield in markets that were seen as a bit riskier but still safe. Now those markets are seen as not nearly so safe as they were and a lot riskier than the west.

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“Beijing will have to choose between propping up the equity market and defending the currency from further downside pressure: “They will not be able to do both.”

The Asian Century Hits a Speed Bump (Bloomberg)

Trade slowing, currencies weakening, stocks falling, economic growth waning and political wobbles emerging. 2015 is proving a bumpy year in what’s meant to be the Asian century. The confluence of stresses – from China’s slowdown, the fallout from the yuan’s devaluation, doubts over Abenomics, disappointment with Modi and Jokowi, and deepening vulnerabilities among smaller economies – comes as the Federal Reserve contemplates raising interest rates for the first time in almost a decade. Weakening currencies can help boost export competitiveness, but also raise the cost of servicing U.S. dollar debt. And when devaluations start spreading, there are fears of a new currency war.

Bank of America Merrill Lynch economists say they’re concerned about the competitive impact on the rest of Asia from a weaker yuan, as China’s market share of exports to the U.S. and the EU was growing even before the devaluation. Demand for Asian-made goods was already stumbling amid uneven recoveries in the U.S. and Europe before the yuan devaluation. Now, “northeast Asia will likely face greater competitive pressures from China’s devaluation given stronger trade linkages and overlapping exports,” BofA economists say. Asian stocks have reflected the worsening outlook. China has seen the wildest ride, with a first-half surge reversing course since June. While China’s FX hoard is the envy of the world, even it isn’t bottomless. Analysts at BMI Research say Beijing will have to choose between propping up the equity market and defending the currency from further downside pressure: “They will not be able to do both.”

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Re: Nicole’s eroding Trust Horizon: “China is facing an “erosion in trust in government (stock bubble, Tianjin blast, etc.)” both at home and abroad.”

By the way, Brussels wants the same as Beijing: no responsibility.

China Wants Great Power, Not Great Responsibility (Pesek)

Forty-three years after Richard Nixon made his famous visit to China, that country has seemingly decided to take a page from the former U.S. president’s Treasury Department. As China lowers the value of the yuan, the country’s economic policy makers are mimicking the blasé attitude of Nixon-era Treasury chief John Connally, who dismissed international complaints about U.S. monetary policy with a curt remark: “It’s our currency, but it’s your problem.” To be fair, Japan has acted with similar self-interest since late 2012, when its 35% devaluation began. But that raises a prickly question: What options do Asia’s smaller economies have when the region’s two biggest seem intent on passing their own vulnerabilities onto everyone else?

China will be watching closely for the region’s response, for economic as well as political reasons. Beijing’s designs for regional leadership have always depended on winning the loyalty of its neighbors in order to reduce America’s financial, diplomatic and military role in Asia. Vietnam has already initiated a devaluation of its own, lowering the value of the dong by 1% on Wednesday in order to keep pace with China. Less clear are the potential responses of South Korea, Indonesia or the Philippines. China claims it’s just doing what the IMF asked in moving to a more market-determined exchange rate. But markets have taken so badly to China’s 3% devaluation because no one really believes President Xi Jinping’s government when it says bigger drops aren’t coming.

Take yesterday’s Bloomberg News report that China’s wealthiest investors have been the quickest to bail out of plunging stocks. China would surely deny Communist Party cronies are getting tipoffs on when it’s best to sell, but investors would be forgiven if they felt skeptical. The government’s obsessive efforts to censor deadly explosions at a toxic-material warehouse in Tianjin have only fed suspicions that Xi’s team is obfuscating on economic matters, too. As Patrick Chovanec of Silvercrest Asset Management told me in a Twitter exchange, China is facing an “erosion in trust in government (stock bubble, Tianjin blast, etc.)” both at home and abroad.

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Another strong outing by Stockman

Can Kickers United – Why It’s Getting Downright Hazardous Out There (Stockman)

It’s getting downright hazardous out there, and not just because the robo-machines were slamming the “sell” key today. The real danger comes from the loose assemblage of official institutions which claim to be running the world. They might better be referred to as “can kickers united.” It is now blindingly obvious that they have lapsed into empty ritualism, contrivance and double-talk in the face of a global economy and financial system that is becoming more unstable and incendiary by the day. Who in their right mind would pile $95 billion of new debt on the busted remnants of Greece? Likewise, how can Japan possibly consider enacting still another round of fiscal stimulus, as did Prime Minister Abe’s chief advisor recently, when it already has one quadrillion yen of debt?

And what geniuses are trying to fix the bankrupt finances of China’s local governments by swapping trillions of crushing bank loans for equivalent mountains of new municipal bonds? But it is on the home front where kicking the can has been taken to an egregious extreme. By what rational calculus can it be said, as the Fed did in its meeting minutes today, that 80 months of free money has not quite yet done the job? And that is exactly what these mountebanks had to say:

“The Committee concluded that, although it had seen further progress, the economic conditions warranting an increase in the target range for the federal funds rate had not yet been met. Members generally agreed that additional information on the outlook would be necessary before deciding to implement an increase in the target range.”

Say again! We are now 74 months into a so-called “recovery” cycle that is well longer than the post-war average, yet the Fed is still manning the emergency fire hoses.

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Full liquidation.

The Baby Boom Will Never Retire (MyBudget360)

Some of you might remember the glossy highly produced advertisements back in the early 1980s when Wall Street decided it was time to turn American retirement plans into casinos. The slow and agonizing death of the pension plan was supposed to be replaced by the beautiful and wonderful world of the 401(k) plan. Save for 30 years and in the end, you will be a millionaire just like your friends on Wall Street that sincerely care about your financial future. Of course since then, we have found out about junk bond scandals, mutual fund fees that make loan sharks look conservative, and of course the financial shenanigans of giving people toxic mortgages that were essentially ticking time bombs of destruction. This was the industry that was put in charge of helping you plan for your future. We are now a generation out from those slick ads and the results have been disastrous for most Americans.

A recent analysis found that half of US households 55 and older have no money stashed away for retirement. Planning for retirement takes time. Saving money is a slow process. There was a time when simply stashing money into CDs and savings bonds was enough to have a nice nest egg if you were diligent enough. Yet for the last decade, most banks are paying close to 0% on their savings accounts thanks to the Fed’s low rate policy to juice the markets. Since the true inflation rate is much higher, you are essentially letting your money rot away. So the only other option is for people to invest in the stock market or try to leverage into real estate. The stock market is largely an arena for the wealthy. Half of Americans own no stocks at all. Now after a generation, we are finding out that most people did not follow in the footsteps of those glossy over produced retirement ads.

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Much of it is of his own making.

Draghi’s Post-Holiday Inbox Stuffed With Trouble (Bloomberg)

The euro area’s monetary-policy makers aren’t getting to slumber through the dog days of August. Even with talks over Greece’s third bailout wrapped up, European Central Bank officials are having their repose disturbed by developments that could jolt their plan to revive the region’s economy. In coming weeks, they’ll have to deal with a world in which China has devalued its currency, oil has slumped to almost $40 a barrel, and investors in emerging markets are walking wounded. The ECB’s Governing Council meets in Frankfurt on Sept. 3, sandwiched between the U.S. Federal Reserve’s annual policy pow-wow in Jackson Hole, Wyoming, and a gathering of Group of 20 finance ministers and central bankers in Ankara.

As the Fed considers raising its interest rates as soon as next month, ECB President Mario Draghi and his colleagues could find themselves discussing policy action of a very different kind. “The pressure for the ECB to bring forward the discussion about an extension or expansion of its quantitative-easing program beyond summer 2016 has increased significantly,” said Ruben Segura-Cayuela at BofAML. “Deflationary pressures coming from China, emerging markets and the decline of commodities’ prices are making it harder for the ECB to hit its inflation target.” In assessing whether they’ll reach that goal – inflation of just under 2%, compared with 0.2% in July – the ECB is watchful of how investors hedge against prices in the future. Since the end of July, the outlook has worsened.

So-called five-year, five-year forward inflation swaps show that market-based consumer-price expectations slid to about 1.6% this month, almost as low as when QE started in March. The drop in the price of oil, down by a third since June, and cheaper imports into Europe as Asian currencies follow the yuan lower, may compound the problem. Adding to the uncertainty, the Greek government plans to hold an election on Sept. 20, just before the first review of its new bailout program. Stubbornly low inflation in the euro area – as in the U.S. and the U.K. – increases the risk that broad-based price decreases, or deflation, could creep in. It also drags on economic growth, which slowed to a sluggish 0.3% in the 19-nation bloc last quarter. This month’s inflation figures will be published on Aug. 31.

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When will internal trouble start?

How Long Can Saudi Arabia Hold Out Against Cheap Oil? (Bloomberg)

The oil price was near its lowest in more than a decade, cash reserves were being depleted, emerging markets were in turmoil and Saudi Arabia was beginning to panic. “It was a very scary moment,” said Khalid Alsweilem, former head of investment at the Saudi Arabian Monetary Agency, the country’s central bank. “And luckily at that point, oil prices started going up. Not by design, by good luck.” That was 1998, and now Saudi Arabia’s fortunes threaten to turn again. This time, luck might not be enough as the government tries to protect the wealth of a nation whose economy has swelled by five times since then. The bastion of conservative Sunni Islam also is paying for an expanding role in regional conflicts in the face of a resurgent Iran and Islamic State extremists who have bombed Saudi mosques.

Economists are predicting a budget deficit of as much as 20% of GDP and the IMF forecasts a first Saudi current-account deficit in more than a decade. Reserves at the central bank tumbled 10% from a year ago, or by more than $70 billion. As a result, bets on the devaluation of the riyal are surging. The Tadawul All Share Index lost 18% in the past three months and dragged stocks down across the Gulf region. The benchmark’s moving averages made a so-called death cross on Aug. 18, a sign to some investors that more losses are ahead. The Saudis have “played a waiting game,” Robert Burgess at Deutsche Bank said. “The budget for next year is going to be a very important milestone that the markets are going to be focusing on quite intently.”

With oil prices down by more than half over the past 12 months to below $50, Saudi Arabia faces many of the same financial problems it did in 1998. The difference is the sheer cost of maintaining the state as an employment machine and guarantor of the riches that Saudis have become accustomed to since the last squeeze. Subsidized gasoline costs 16 cents per liter and while there’s the religious levy called zakat, there is no personal income tax in the nation of 30 million people. “The Saudi government can’t continue to be the employer of first resort, it can’t continue to drive economic growth through the big infrastructure projects and it can’t keep lavishing on subsidies and social spending,” said Farouk Soussa at Citigroup.

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Can’t keep the Ponzi going without new ‘candidates’.

UK New Home Builds Fall 14% In Three Months Despite Election Pledge (PA)

The number of new homes being started in England fell at its steepest rate for three years in the last quarter, official figures show. The 14% drop in housing starts to 33,280 in the period from April to June is the biggest decline since the first three months of 2012, according to seasonally adjusted government data. Starts are 6% lower year on year. It means the pace of new housebuilding is 32% below the peak level in 2007, but remains nearly double the trough it reached during the financial crisis in 2009. The fall comes after a 29% rise in the first quarter of this year, the biggest increase on records going back to 2006. For the year to June 2015, there was a total of 136,320 starts, down 1% on the year before, according to the figures from the Department for Communities and Local Government.

Housing completions for the quarter were 4% up on the previous period at 35,640, and 22% up year on year. But they remain 26% below their 2007 peak. In the year to June, completions totalled 131,060, a 15% increase on the previous 12-month period. The housing charity Shelter said this was only half the 250,000 needed to deal with the country’s housing shortage. Its chief executive, Campbell Robb, said: “Once again, these figures show that we’re not building anywhere near the number of homes needed each year, leaving millions of ordinary, hardworking people priced out. “And worryingly, despite claims by the government that progress is being made to solve our chronic housing shortage, the number of new homes started has actually decreased.”

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This will get much, much worse.

Brazil’s Unemployment Rate Hits Five-Year High in July (WSJ)

Brazil’s unemployment rate surged to a five-year high last month and came in far above forecasts as the country’s troubled economy likely took a turn for the worse. The jobless rate in six major metropolitan areas jumped to 7.5% in July from 6.9% in June, the Brazilian Institute of Geography and Statistics, or IBGE, said Thursday. Economists polled by the local Agência Estado newswire had forecast a median unemployment rate of 7%. The swift deterioration in Brazil’s job market comes as the nation’s economy is expected to suffer its deepest recession in more than two decades this year, with economists calling for a contraction of more than 2%. Most now expect the decline to continue, albeit at a more moderate pace, through 2016.

Rising unemployment could ramp up the pressure on Brazil’s embattled president, Dilma Rousseff, whose approval ratings have plunged to a record-low 8% just 10 months after she was elected to a second term. Ms. Rousseff’s popularity has been weighed down by the bad economy, rising inflation, and a massive corruption scandal surrounding state-run energy firm Petróleo Brasileiro SA, where she served as chairwoman from 2003 to 2010.

Ms. Rousseff’s administration is struggling to push fiscal austerity measures through an unruly Congress in hopes of clamping down on the government’s swelling budget deficit. At stake is Brazil’s investment-grade credit rating which, if lost, would trigger higher borrowing costs and huge outflows of foreign money from foreign investment funds. Antigovernment lawmakers—and thousands of protesters who took to the streets on Sunday—are even calling for Ms. Rousseff’s impeachment, though legal experts say there appears to be little justification for such a move.

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Past point of no return.

World Breaks New Heat Records In July (AFP)

The world broke new heat records in July, marking the hottest month in history and the warmest first seven months of the year since modern record-keeping began in 1880, US authorities said Thursday. The findings by the National Oceanic and Atmospheric Administration showed a troubling trend, as the planet continues to warm due to the burning of fossil fuels, and scientists expect the scorching temperatures to get worse. “The world is warming. It is continuing to warm. That is being shown time and time again in our data,” said Jake Crouch, physical scientist at NOAA’s National Centers for Environmental Information. “Now that we are fairly certain that 2015 will be the warmest year on record, it is time to start looking at what are the impacts of that? What does that mean for people on the ground?” he told reporters.

The month’s average temperature across land and sea surfaces worldwide was 61.86 Fahrenheit (16.61 Celsius), marking the hottest July ever. The previous record for July was set in 1998. “This was also the all-time highest monthly temperature in the 1880-2015 record,” said NOAA in its monthly climate report. “The first seven months of the year (January-July) were also all-time record warm for the globe,” NOAA said. When scientists looked at temperatures for the year-to-date, they found land and ocean surfaces were 1.53 F (0.85 C) above the 20th century average. “This was the highest for January-July in the 1880-2015 record, surpassing the previous record set in 2010 by 0.16 F (0.09 C).”

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The most deadly and most tragic species.

The Unique Ecology Of Human Predators (Phys Org)

Want to see what science now calls the world’s “super predator”? Look in the mirror. Research published today in the journal Science by a team led by Dr. Chris Darimont, the Hakai-Raincoast professor of geography at the University of Victoria, reveals new insight behind widespread wildlife extinctions, shrinking fish sizes and disruptions to global food chains. “These are extreme outcomes that non-human predators seldom impose,” Darimont’s team writes in the article titled “The Unique Ecology of Human Predators.” “Our wickedly efficient killing technology, global economic systems and resource management that prioritize short-term benefits to humanity have given rise to the human super predator,” says Darimont, also science director for the Raincoast Conservation Foundation.

“Our impacts are as extreme as our behaviour and the planet bears the burden of our predatory dominance.” The team’s global analysis indicates that humans typically exploit adult fish populations at 14 times the rate of marine predators. Humans hunt and kill large land carnivores such as bears, wolves and lions at nine times the rate that these predatory animals kill each other in the wild. Humanity also departs fundamentally from predation in nature by targeting adult quarry. “Whereas predators primarily target the juveniles or ‘reproductive interest’ of populations, humans draw down the ‘reproductive capital’ by exploiting adult prey,” says co-author Dr. Tom Reimchen, biology professor at UVic. Reimchen originally formulated these ideas during long-term research on freshwater fish and their predators at a remote lake on Haida Gwaii, an archipelago on the northern coast of British Columbia.

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This is going to break Brussels.

Macedonia Police Use Tear Gas Against Migrants (BBC)

Macedonia is a key route for migrants trying to reach prosperous northern EU countries (archive picture) Macedonian police have fired tear gas to disperse thousands of migrants trying to enter from Greece. It comes a day after Macedonia declared a state of emergency in two border regions to cope with an influx of migrants, many from the Middle East. Large numbers spent the night stuck on Macedonia’s southern frontier, and tried to charge police in the morning. The Balkan nation has become a major transit point for migrants trying to reach northern EU members. Some 44,000 people have reportedly travelled through Macedonia in the past two months, many of whom are escaping the conflict in Syria.

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Aug 202015
 
 August 20, 2015  Posted by at 9:37 am Finance Tagged with: , , , , , , , ,  1 Response »


NPC “Largest electric locomotive and Congressman John C. Schafer” 1924

China Stocks Slump Again Despite Government Support (Reuters)
China Strengthens Yuan By Most In 2 Months; Massive Liquidity Injection (ZH)
China Central Bank Injects Most Funds Since February (Bloomberg)
Is This The Great Crash Of China? (Steve Keen)
China’s August Scare Is A False Alarm As Fiscal Crunch Fades (AEP)
Should We Be Afraid Of China’s ‘Value Chain’? (CNBC)
Eurozone: The Case Against ‘Cash For Reform’ (Martin Sandbu)
Greece’s First Privatization Deal Since Third Bailout Hits Snag (Bloomberg)
Fresh Doubts Raised Over Privatization Of 14 Greek Airports (Xinhua)
Stiglitz: “Deep-Seatedly Wrong” Economic Thinking Is Killing Greece (Parramore)
Dutch Lambast Greece For Creating ‘Complete Chaos’ (Telegraph)
European Bailout Fund To Disburse First Greek Tranche On Thursday (Reuters)
The Fisherman’s Lament – A Way of Life Drowned by Greece’s Crisis (WSJ)
Get Used To Cheap Oil, Derivatives Markets Say (Reuters)
As Canada’s Oil Debt Soars to Record, an Industry Shakeout Looms (Bloomberg)
Cheap Oil’s Making It Tough for Ethanol to Pay the Bills (Bloomberg)
Banks Have Treated Our Housing Market Like A Ponzi Scheme (David)
Rebels In Ukraine’s Donetsk Plan Referendum On Joining Russia (Xinhua)
China’s Building a Huge Canal in Nicaragua, But We Couldn’t Find It (Bloomberg)
British Police Head To Calais To Stymie Migrant Smuggling Activity (Guardian)
Refugee Chaos in Macedonia: ‘Life-Threatening for Women and Children’ (Spiegel)

Shanghai closed down another 3.42%. Capital is taking the Concorde out of the country.

China Stocks Slump Again Despite Signs Of Government Support (Reuters)

China stocks tumbled again in late trading on Thursday, underscoring fragile investor confidence in the market as worries about the world’s second largest economy persist. Trading volumes were thin, suggesting many investors stayed on the sidelines. Shares were marginally lower in the morning, as statements by a slew of companies that the government had invested in them boosted some counters. But in mid-afternoon, prices began to drop. The CSI300 index of the largest listed companies in Shanghai and Shenzhen fell 3.2%, to 3,761.45, while the Shanghai Composite Index lost 3.4%, to 3,664.29 points.

The SSEC is now down about 7% since China devalued the yuan by nearly 2% on Aug. 11. On Wednesday, the indexes had reversed sharp losses to end higher, as roughly 30 Chinese listed companies, many small caps, disclosed holdings by government-backed investors in an apparent attempt to sooth market panic following the previous session’s 6% tumble. “Even as the government has the will to put a floor under the market, whether it has the ability to do so is in doubt,” said Hou Yingmin, analyst at AJ Securities, citing adversities including an anaemic economy, capital outflows and ugly technical patterns. “Without fresh money inflows, any rebound is not sustainable.”

Most sectors fell, with transport and real estate shares leading the decline. Analysts have said further yuan depreciation would trigger fresh capital outflows, putting pressure on the property market. But investors nevertheless bet on companies with investments from state-backed investor Central Huijin, and state margin lender China Securities Finance Corp (CSFC), which was tasked with propping up share prices during crisis.

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Not looking good for Beijing.

China Strengthens Yuan By Most In 2 Months; Massive Liquidity Injection (ZH)

The PBOC set the Yuan fix 0.08% stronger – the biggest ‘strengthening in 2 months, which is interesting because following The IMF’s confirmation of a delay to Yuan inclusion in the SDR basket to Oct 2016 (pending a year-end decision and asking for more flexibility), Offshore Yuan forwards notably devalued (shifting 350pips higher to 6.65, the highest/weakest Yuan in a week) pricing a 20 handle (or 3%) devaluation by August 2016. Overnight saw another CNY110bn liquidity injection rescue from The PPT in the afternoon session (saving SHCOMP from a close below the 200DMA) and tonight we see promise to recap Ag Bank along with another CNY 120bn reverse repo injection. Shanghai margin debt declined for a 2nd day in a row and Chinese stocks look set to open weaker.

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“Authorities have to walk a thin line between boosting exports and satisfying the IMF’s requirements for the yuan to obtain reserve status, while at the same time ensuring financial stability.”

China Central Bank Injects Most Funds Since February (Bloomberg)

China’s central bank injected the most funds in open-market operations since February as intervention to prop up the yuan strained the supply of cash and drove a key money-market rate to a four-month high. The People’s Bank of China pumped a net 150 billion yuan ($23 billion) into the financial system this week, data compiled by Bloomberg show. That’s the most since before the Chinese New Year holiday, when seasonal demand for cash spikes. The authorities are providing another 170 billion yuan through loans and an auction of deposits. The injections come after China surprised investors by devaluing the yuan last week and shifting to a more market-oriented exchange rate. Under the new system, PBOC intervention has partly replaced the daily reference rate’s role in guiding currency moves.

Yuan purchases risk driving borrowing costs higher at a time of slowing economic growth unless the monetary authority releases additional cash. “Front-end rates have been edging up, likely resulting from tighter liquidity conditions amid intervention,” said Frances Cheung at Societe Generale in Hong Kong. “The PBOC needs to step up its open-market operations to offset the liquidity withdrawal on the foreign-exchange side.” Authorities have to walk a thin line between boosting exports and satisfying the IMF’s requirements for the yuan to obtain reserve status, while at the same time ensuring financial stability. The overnight repurchase rate, a gauge of liquidity in the banking system, rose three basis points to 1.80% as of 1 p.m. in Shanghai, according to a weighted average from the National Interbank Funding Center. That’s the highest since April 23 and reflects increased demand for cash.

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“..it is more heavily indebted than America was when its crisis began—even relying on official statistics which undoubtedly understate the real situation..”

Is This The Great Crash Of China? (Steve Keen)

Banks in the West effectively ignore what the government wants: in the West, the political class is effectively subservient to the financial class. But in China, despite its economic transformation, the political class remains dominant: any Chinese entity that ignores a government directive does so at its peril. Things are not as they were in the 1980s, when every answer to every question that I and my group of touring Australian journalists asked began with “We followed the directives of the Central Committee of the Communist Party of China”.

But it’s still not good for your health to flout Central Committee policy. So the Chinese banking system and its satellites lent like crazy to any company and many individuals, and one of the biggest credit bubbles in history—possibly the biggest ever—took off. In 2010, the increase in private debt in China was equivalent to 35% of GDP. That dwarfs the rate of growth of credit in both Japan and the USA prior to their crises: Japan topped out at just over 25% per year, and the USA reached a “mere” 15% of GDP per year.

As I have argued for a decade now, crises begin when the rate of growth of credit slows down in heavily indebted countries. China was not heavily indebted in 2008, which is why it could take the credit growth path out of the Global Financial Crisis. But now it is more heavily indebted than America was when its crisis began—even relying on official statistics which undoubtedly understate the real situation—and the momentum of debt may well carry it past the peak level reached by Japan after its Bubble Economy collapsed in the early 1990s.

So China is having its first fully-fledged capitalist crisis. To date its response to it has been to try to sustain the unsustainable: to transfer the bubble from housing to the stockmarket, and to keep the stockmarket rising like some production target for wheat from the bad old days before the fall of the Gang of Four. It can’t be done. At some point, the Chinese government is going to have to make the transition from generating a credit bubble to trying to contain its aftermath.

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Ambrose is the odd one out.

China’s August Scare Is A False Alarm As Fiscal Crunch Fades (AEP)

The situation in China is desperate but not serious, to borrow an old Viennese saying. Countries with a tight exchange controls and state banking systems may come to grief in the long-run, but they do not face the sort of financial collapse seen in the US and Europe in 1931 or 2008. China’s central bank (PBOC) has already warned that it will deploy the coercive might of the Communist regime to stop anybody smuggling money abroad under false pretexts, invoking laws covering “money laundering and terrorist financing.” It said violators will be “severely punished”. They will be sent to the proverbial asbestos mines of Sichuan. This is the sort of liberalisation that Xi Jinping does best. Given the sanctions and given that China has a trade surplus of $600bn or 6pc of GDP – and is therefore accumulating foreign exchange at blistering pace, ceteris paribus – there is no chance whatsoever that reserve losses will spin out of control.

Jens Nordvig from Nomura says China has $3.65 trillion reserves to cover foreign currency debts of $1.135 trillion, a ratio of 322pc. This a far cry from the East Asia Crisis in 1997-1998 when the ratio was 59pc in Malaysia, 33pc in Thailand, 27pc in Indonesia, and 22pc in Korea. All these countries had current account deficits. China most emphatically does not. “We think the authorities will remain in control of the situation. This may mean that the worst shock effect is behind us, although ultimately the economic data will provide the final verdict,” he said. On cue, the economy is already coming back to life after hitting a brick wall over the winter. Credit growth jumped to a 31-month high in July. The monetary base has grown at a 20pc rate over the last three months, implying an economic spike later this year.

It is worth remembering what has just happened in China. The country is recovering from a ferocious monetary and fiscal shock. The authorities refused to react as falling inflation caused one-year lending rates to ratchet up to 5pc in real terms from zero in late 2011. This was deliberate, of course. Premier Li Keqiang intended to break the back of the property bubble and wean the country off its $26 trillion credit dependency. But pricking bubbles is no easy task. The authorities overshot. The crunch came just as fiscal policy went awry. Budget spending contracted in the first quarter. This was certainly not intended. While details remain murky, it appears that banks refused to roll over short-term loans used by local governments to finance a raft of existing projects.

They feared that these loans were no longer covered by a state guarantee under new rules. “It caused huge disruption,” said Capital Economics. At the same time, the regions saw a sudden-stop in lending for new projects as well. Local governments were prohibited from fresh bank borrowing in January. Under the so-called “debt swap” plan there was supposed to be a seamless transition from loans to bond issuance, but the bond market was not up and running until May. This is why China crashed into a recession in the first half of the year. Wisely or not – depending on your economic religion – the Communist Party has now reverted to stimulus as usual. The local governments issued almost $200bn of bonds over the two months of July and August. Beijing coyly describes its fiscal spending as “proactive”. Turbo-charged would be another way of putting it.

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I’m not.

Should We Be Afraid Of China’s ‘Value Chain’? (CNBC)

The devaluation of the yuan may have a tougher impact on global companies than previously imagined, as China’s drive to produce and consume higher-quality goods intensifies. The shockwaves of the People’s Bank of China’s devaluation of its currency are still resonating around the world’s markets, but in the medium to long-term, it’s manufacturers who may hurt the most. Western companies from Apple to Burberry will face a tough time finding out whether they can rely on their cachet in China even when their goods becoming more expensive. China’s wealth has grown by leaps and bounds since the gradual opening up of its economy began in the 1980s.

Its per capita GDP in 2014 was $12,608.87, when adjusted for purchasing power, more than double what it had been just a decade before. The Chinese leadership’s current five-year economic plan (2011 to 2015) is specifically aimed at moving the economy’s fast-paced growth away from the low-cost manufacturing it had become famous for, towards consumption. Tactics included greater investment in research and development, higher-end manufacturing, and services targeted at the country’s burgeoning middle class.

In May, the Made in China 2025 plan has been billed by Premier Li Keqiang as an attempt to “redouble our efforts to upgrade China from a manufacturer of quantity to one of quality.” He pledged in May to “seek innovation-driven development, apply smart technology, strengthen foundations, pursue green development” – all of which is aimed at avoiding the “middle income trap”, where a country gets stuck at a certain level of economic development. Worryingly for those countries which have done well out of exporting to China in recent years, the plan includes sourcing 70% of key components within China’s borders by 2025.

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“Euro area policymakers have lived on one myth after another..”

Eurozone: The Case Against ‘Cash For Reform’ (Martin Sandbu)

“Euro area policymakers have lived on one myth after another,” says Ashoka Mody, a former deputy director at the International Monetary Fund. “A process of groupthink coalesces around these myths: ‘We know it’s not going to work but we need to make it work and we need to seem supportive’ — and before you know it they start to believe it. And because there is no democratic accountability, they are free to make one error after another in terms of economic and political logic.” The eurozone establishment has largely internalised the idea that “cash for reform” is necessary to keep the euro together.

The most direct challenge to it, from Greece’s Syriza party, was defeated when other countries — most notoriously Germany — made clear they would rather force Greece out of the euro than consider alternatives to offering refinancing in return for control over fiscal and reform policies. The idea that “there is no alternative” also motivates the efforts to “complete” Europe’s economic and monetary union. These efforts at deeper integration, epitomised most recently in the so-called “Five Presidents’ Report” — written by the heads of the most influential eurozone and EU institutions — proceed from the notion that the euro was flawed at birth and needs significant repairs to function properly. [..]

This article examines four widely-held preconceptions about Europe’s single currency. First, that the euro eroded the export competitiveness of the weaker countries. Second, that the resulting debt made official bailouts necessary. Third, that a monetary union can work only in the presence of a “fiscal union” — large budget transfers between countries to insure against downturns. And fourth, that the weaker countries must undergo deep structural reforms to be able to stay in the euro.
Each of these claims has had an outsize influence on policy. The research reported below shows that they should not be taken for granted.

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Fraport is rumored not to have paid its Greek VAT in many years.

Greece’s First Privatization Deal Since Third Bailout Hits Snag (Bloomberg)

Greece’s first privatization agreement since the country’s third bailout hit a snag just one day after the government announced the deal’s approval. A government council overseeing state asset sales said on Tuesday that Fraport AG and a unit of Greece’s Copelouzos Group had won a 40-year concession to operate 14 regional airports for €1.2 billion. Fraport commented afterward that the decision was “not tantamount to the conclusion of a contract but rather offers a basis for the resumption of negotiations.” The Greek government said Wednesday that it had approved the contract based on previous agreements, and that any effort to seek a renegotiation “wouldn’t be limited to the issues raised by the company.”

Fraport is “working toward a positive outcome,” said Joerg Machacek, a company spokesman. The airport deal is meant to be the first in a series of privatizations that Prime Minister Alexis Tsipras agreed to undertake in return for the third bailout package worth as much as €86 billion. The most pressing matter is obtaining funding to avoid a default Thursday when Greece must pay €3.2 billion to the ECB. Under the current proposal, Fraport would invest €1.4 billion to upgrade the airports by the end of the concession. The German company would also pay an annual lease of €22.9 million for the airports, which include the holiday islands of Mykonos and Santorini.

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It’s simply a bad bad deal. Strike it.

Fresh Doubts Raised Over Privatization Of 14 Greek Airports (Xinhua)

Fresh doubts were raised on Wednesday after the government finalized a €1.23 billion deal with the German consortium Fraport-Slentel on Tuesday to privatize 14 regional airports in Greece. The sale of the airports’ operation rights for 40 years was the first privatization to be concluded under the third bailout that was ratified by the Greek parliament on Friday. It was also the first privatization to be carried out since the left-led government coalition assumed power after the general elections in January. The announcement sparked mixed reactions in Greece. Some members of opposition parties welcomed the deal as a step towards boosting development. At the same time, they criticized the government for wasting precious time by delaying decisions for months.

Meanwhile, the ruling SYRIZA party’s hardliners denounced the “sell off” in a statement. Left Platform accused the government of “handing a great gift to the German government in return for the new catastrophic bailout.” The president of the Federation of Greek Civil Aviation Workers (OSYPA), Vassilis Alevizopoulos, warned of strike actions and lawsuits in Greek and European courts to “safeguard Greek public interests,” speaking to local VIMA radio station on Wednesday. Critics argued that the funds the German consortium would invest in the upgrade of the airports under the contract were insufficient and the cost will undoubtedly be transferred to travelers. In this climate of prolonged economic and political uncertainty in Greece, the German investors would most likely seek “more guarantees” from the government, Kathimerini reported.

However, Greek government sources stressed that if the consortium should wish to renegotiate the contract, there would be an in-depth dialogue on all issues. The agreement on the concession of the 14 airports that included the airports of Thessaloniki in northern Greece, and airports on islands such as Corfu and Mykonos, was initially scheduled to close in late 2014, but was frozen in the pre-election period. SYRIZA, which initially opposed the entire privatization program since the beginning of Greek bailouts in 2010, had previously said that the terms of the tender would be reviewed. But according to Tuesday’s official announcement, no amendments were made on the finalization of the privatization. [..]Greek ministers argued that privatizations would take place under changed conditions in comparison to the past “to benefit Greek economy and people.”

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“..the MoU is really a “surrender document” that eclipses the country’s economic sovereignty and ensures that Greece’s depression — already deeper than America’s Great Depression — will get worse.”

Stiglitz: “Deep-Seatedly Wrong” Economic Thinking Is Killing Greece (Parramore)

Bad economic ideas inflict untold human suffering. When they come cloaked in a fog of Orwellian obfuscation, their poison and effects can spread with little hindrance. The public is misled. Power plays are hidden from view. In Greece, where suicide rates have risen sharply in the wake of austerity measures, people lose hope. Joseph Stiglitz, who has been following the Greek crisis closely and is recently returned from Athens, sets himself to the task of cutting through the fog. His plain English and fearless use of moral language to expose the ugliness behind economic and political abstractions lend clarity to a situation that is not just bringing a nation to its knees, but threatening to destroy the European project and bring on a future of conflict and hardship.

In discussing Greece’s Third Memorandum of Understanding (MoU) and its draconian terms, Stiglitz observes that the MoU is really a “surrender document” that eclipses the country’s economic sovereignty and ensures that Greece’s depression — already deeper than America’s Great Depression — will get worse. An economy that is seeing youth unemployment reaching up to 60% is likely to lose another 5% in GDP. That is over and beyond the 25% plunge in GDP the country has been hit with since the imposition of austerity measures. Socially conservative Germans, Stiglitz warns, are doubling down on the discredited notion that austerity policies help economies recover in times of crisis.

In reality, the insistence on keeping wages down, stripping away bargaining power from workers, forcing small business owners to pay taxes a year in advance, and cutting pensions will only hamper demand and lead to a deepening spiral of debt. (Stiglitz emphasizes that hardly any of the money loaned to Greece has actually gone to help the Greeks themselves, but rather private-sector creditors – namely German and French banks). Reflecting on a recent panel at Columbia University with Finance Minister Wolfgang Schäuble followed by a dinner, Stiglitz said, “My heart goes out to Greece, even more so after meeting Schäuble.”

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The Dutch are clueless. They blame SYRIZA for what’s ailing Greece. For Pete’s sake, get a life.

Dutch Lambast Greece For Creating ‘Complete Chaos’ (Telegraph)

German MPs voted to back a third bail-out for Greece on Wednesday as Dutch prime minister Mark Rutte fought back a no confidence vote over his decision to support the €86bn rescue plan. After a three-hour debate, Berlin’s Bundestag approved a new rescue package for Greece with a majority of 454 votes to 113. Eighteen MPs also abstained, marking Angela Merkel’s biggest insurrection during her decade in office. Of her ruling CDU/CSU parliamentarians, 63 MPs voting against the package, more than the 60 coalition MPs who voted “no” in an initial vote in July. But the approval was enough to secure the disbursement of €13bn from the European Stability Mechanism (ESM) – the eurozone’s bail-out fund.

However, less than €1bn will go directly to the Greek government and €3.2bn will be used to immediately pay back a maturing bond held by the ECB on Thursday. It is the first injection of rescue cash to the Greek economy since August 2014 after eight months of ill-tempered talks and political crisis in the eurozone. EU policymakers hailed the agreement on Wednesday evening. Pierre Moscovici, the euro’s economics chief, said the deal would mark a “new chapter based on reforms, fairness and shared trust” between Greece and its creditors. Ratification from the German parliament was crucial in securing the deal. Wolfgang Schaeuble, Germany’s finance minister, told lawmakers that a deal was in the “interest of Europe”, but admitted that backing for a third bail-out deal was “not easy” and there was “no guarantee of success”.

“If Greece stands by its obligations and the programme is completely and resolutely implemented, then the Greek economy can grow again,” he said. “The opportunity is there. Whether it will be used, only the Greeks can decide.” Dutch finance minister Jeroen Dijsselbloem, who is also president of the Eurogroup, said reaching an accord was difficult. “Greece has seen decades of bad policies and six months of complete chaos,” he told his parliament. The Dutch backlash was led by right-wing politician Geert Wilders, who has called for the Netherlands to withdraw from the European Union. “Today we are here to prevent Dutch PM Rutte from indulging in his favorite hobby: sending money to Greece, this time €5bn,” Mr Wilders told the Dutch parliament on Wednesday.

Mr Wilders said Mr Rutte had reneged on a pledge in September 2012 that “enough is enough” and that Greece would get no more financial help from the country. “He’s the Pinocchio of the low countries. This is betrayal,” said Mr Wilders. “We need this money to support health care and the elderly. This government hates the elderly.” Mr Rutte said he took “responsibility” for his comments, but defended the government’s decision to back a bail-out, claiming that “no-one could have foreseen” in 2012 how the situation in Greece would evolve. “The new Greek government has caused great damage,” he said.

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Crucial for Greece: bank recapitalization. The rest is circle jerk only.

European Bailout Fund To Disburse First Greek Tranche On Thursday (Reuters)

The European Stability Mechanism will disburse the first tranche of funds from Greece’s bailout loan on Thursday, the Greek finance ministry said after the ESM board approved a rescue of up to €86 billion on Wednesday. Athens will receive €13 billion on Thursday morning, the ministry said, of which about €12 billion will be used to pay down debt, including an earlier bridge loan and money owed to the ECB. “Nearly one billion euros will be made available to the Greek state, a sum that can be used to pay arrears,” the finance ministry said in a statement.

The new bailout package of up to €86 billion for 32.5 years includes up to €25 billion to recapitalize Greek banks, of which 10 billion will be immediately available, according to the ministry. Athens needed the funds in time to make a €3.2 billion debt payment to the ECB on Thursday. The initial €13 billion tranche will be paid in cash, while the €10 billion euros for the recapitalization of banks will be sent to a segregated account in the form of ESM notes.

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“..economic pain was designed into the Greek rescue. Unable to devalue Greece’s currency, the bailouts’ architects—other eurozone countries and the IMF—tried to push down prices and wages in a process called “internal devaluation.”

The Fisherman’s Lament – A Way of Life Drowned by Greece’s Crisis (WSJ)

Dimitris Stathakis, 75 years old and wearing no shoes, is at work on the aft deck of the North Aegean, a fishing boat docked in the Greek port of Nea Michaniona. The boat’s 14-man crew is prepping for a night at sea. Bags of ice are tossed aboard. Someone brings a delivery of white Styrofoam boxes. It is baking hot. Mr. Stathakis has his shirt on his head to keep the sun off. He is mending nets with flicks of a plastic shuttle and assessing the state of a profession he took up in his teens. “This is the end,” he says. “This is the worst. There is no life anymore.” The fisherman’s lament is as old as the seas. And Greeks have earned a living from fish for eons. It is the country’s second-largest agricultural export, behind fruit and nuts but ahead of olive oil and cheese.

Six years of economic crisis, however, have left this way of life in a shambles. A collapse in household buying power has demolished demand for fish, and with it fishermen’s income. Aquaculture companies, once a shining star in the marine economy, are drowning in debts. Fish processors are struggling with high costs for finance and relentless price pressure among strapped shoppers. Few think the woes will end soon. The Greek government has signed up to a new bailout, with more years of belt-tightening ahead. The first notches came last month, in laws rushed through parliament at the behest of Greece’s creditors: Fishermen face higher pension contributions, while fish processors face new, higher taxes on processed food.

Meantime, Greek banks are only dribbling out cash to customers—further strangling already weak demand. Sales at North Aegean Sea Canneries SA, one of Greece’s largest fish processors, dropped 20% at the beginning of the crisis. The company is facing a long recovery. Nikolaos Tzikas, an owner, says he had hoped to crawl back to 2011 levels this year. “Now,” he says, “I don’t know.” The travails of Greece’s fish industry show how years of crisis and bailouts have left the country’s economy in worse shape than before—and why the next episode may well meet the same fate. In a way, economic pain was designed into the Greek rescue. Unable to devalue Greece’s currency, the bailouts’ architects—other eurozone countries and the IMF—tried to push down prices and wages in a process called “internal devaluation.”

The hope was that lower costs would make Greek industries nimbler and more competitive, juicing a sustained economic recovery. Instead, the loss of income has killed consumption. People are too poor to buy stuff and the banks too weak to give them credit, and the effects ripple up the economic chain. “Internal devaluation did not do any good for the Greek fishing, aquaculture and processing sector,” says Lamprakis Avdelas, a fishing expert at a government-affiliated institute in Athens.

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“..the price of oil in five years’ time has collapsed in recent months.”

Get Used To Cheap Oil, Derivatives Markets Say (Reuters)

Oil prices will stay low for years to come, derivatives markets say, keeping a lid on inflation and helping boost global growth. Oil has more than halved in value over the last year, thanks to huge oversupply, and many oil companies, particularly in the United States, say they may soon have to rein in production, tightening supply, unless the market recovers. That has led many analysts to predict that oil – on average around 5% of companies’ costs – will see price rises later this year or in 2016, pushing up inflation. But oil derivatives tell another story. Contracts for delivery of crude oil in the future on the big commodities markets such as the New York Mercantile Exchange and the InterContinental Exchange show the price of oil in five years’ time has collapsed in recent months.

U.S. crude now costs around $42 a barrel for delivery next month, and only about $20 more for delivery in 2020. Prices of oil for future delivery are usually much more stable than volatile near-term prices, holding their value even when the spot market crashes. But the recent oil-price rout looks different. Prices for all futures months for years to come, also known as the futures price “curve”, have come down sharply. “The curve is saying prices will stay low for some time,” said Amrita Sen, oil analyst at consultancy Energy Aspects.

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All that’ll be left is the lethal tailings ponds.

As Canada’s Oil Debt Soars to Record, an Industry Shakeout Looms (Bloomberg)

Canadian energy companies’ debt loads are the heaviest in at least a decade, boosting concern that some won’t survive the collapse in crude prices. Trican Well Service, Canada’s largest fracking service provider, said last week it may be unable to continue because it’s in danger of breaching the terms of its debt. It’s the latest firm to see crude’s descent to a six-year low sap the cash flow needed to meet financial obligations. Oil’s plunge has pushed a measure of the average debt burden among Canadian energy firms to the highest since at least 2002, and another measure of their ability to make interest payments to the third-lowest level in a decade, according to data compiled by Bloomberg.

Facing some of the highest production costs in the world and carrying more debt than U.S. peers, the Canadian industry has become ripe for acquisitions. “Your ability to be an ongoing entity is certainly decreased,” said Jason Parker, head of fixed-income research at Bank of Montreal. “You’ll see larger, more financially affluent entities coming in and picking away at those properties.” Energy companies in the Standard & Poor’s/TSX Composite Index had an average of 3.1 times more debt than earnings as of their latest quarterly report, the highest ratio in Bloomberg data going back to the middle of 2002. That measure, a gauge of a firm’s ability to repay its obligations where a higher number indicates greater difficulty, has surged this year amid the global oil glut that’s depressed prices and earnings.

Another ratio, measuring how much greater earnings are than interest expenses, plummeted to the third least in a decade at the end of last year, suggesting there’s less money to service the borrowings. The heavy crude that many Canadian firms pump sells at almost the widest discount in a year relative to the U.S. benchmark. At $24.22 per barrel on Wednesday, the price is below the cost of production for many companies. For James Jung, who rates the debt of Canadian oil companies at DBRS Ltd. in Toronto, that divides the country’s industry into winners and losers, with those who have stronger balance sheets and lots of cash in a position to take advantage as more peers struggle with debt.

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That’s one Ponzi industry I wouldn’t mind seeing killed off.

Cheap Oil’s Making It Tough for Ethanol to Pay the Bills (Bloomberg)

Cheap crude oil may make it hard for ethanol companies to pay their bills on time. The lowest oil prices in six years are hitting biofuel producers two ways: They’re making ethanol less attractive as a blend for gasoline, and emboldening the arguments of petroleum backers who say the U.S. law mandating consumption of the fuel alternative is obsolete, Standard & Poor’s Ratings said in a report Wednesday. “The most noteworthy trend in the energy industry during the past year has been the precipitous decline in commodity prices, and chief among these has been plummeting oil prices,” Michael Ferguson, a credit analyst at S&P, wrote. “The lower oil prices may present a difficult rationale for blending ethanol.”

Crude oil has fallen 57% in the past year to $40.80 a barrel on the New York Mercantile Exchange, the lowest since March 2009. Gasoline has plunged 42% and ethanol has dropped 31%. Regulatory support has also waned. In May, the Environmental Protection Agency proposed reducing the amount of ethanol required to be mixed with gasoline from statutory levels set in 2007, citing changing driving habits and fuel use since then. That’s not reason enough to abandon the policy, according to Growth Energy, a Washington-based trade group. “Cheap gas and cheap oil is never a certainty, and often it is the exception,” Tom Buis, chief executive officer of the lobby, said in an e-mailed statement.

The Renewable Fuels Association, also a Washington-based trade group, said the S&P report “is really out of step with the realities of the market place today.” Low-priced crude oil lowers gasoline costs and makes ethanol less attractive for blending beyond government mandates. An additive, ethanol is used to boost gasoline supply and lower prices. “Consumers are saying, ‘I’ve already got cheap gas, why do I need this ethanol?’” Ferguson, the report’s author, said in a telephone interview Wednesday.

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Australia.

Banks Have Treated Our Housing Market Like A Ponzi Scheme (David)

Australia’s big four banks are among the largest and most profitable financial institutions in the world. Despite this, it is mathematically impossible that these banks, primarily focused on domestic retail operations, could be as big and profitable as they currently are without one of the following taking place: either each of these banks, in their individual capacity, has solved (at the same time, in the same country, and as a first in the history of banking) the ultimate recipe for infinitely profiting from an exponentially-growing stock of private debt; or they are all engaged in activity which is incredibly risky. Looking at the balance sheets of these four banking leviathans they have clearly taken on abnormal sums of risk to invest in a single, all-in, one-way bet on the housing market.

As my colleague Philip Soos and I told the House of Representatives’ economics committee inquiry into home ownership last week, the evidence suggests that on the back of irrational exuberance, Australia is experiencing what can only be described as a classic debt-financed speculative housing bubble with every metric that evidenced the bubble in the US and Ireland present within our economic system today. Between 2002 and 2015, the mortgage books of National Australia Bank, ANZ, Commonwealth Bank and Westpac grew by 388%, 435%, 475% and 554% respectively. Put another way, the big four’s mortgage books escalated from a combined $242bn to a whopping $1.13tn, surging at such a consistent rate it would make Bernie Madoff proud.

What the Australian banking system has developed is an uninterrupted growth model which shares a similar risk profile as a Ponzi or pyramid scheme by lending ever-larger sums of debt to homebuyers and property investors year after year. If this growth model is interrupted, however, and banks cannot expand their mortgage books further, housing price inflation halts and will then plunge.

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Only choice left that will stop the shelling.

Rebels In Ukraine’s Donetsk Plan Referendum On Joining Russia (Xinhua)

Leaders of the self-proclaimed “Donetsk People’s Republic” are planning to hold a referendum on seceding from Ukraine and joining Russia, the Donetsk-based Ostrov news agency reported Wednesday. The referendum is scheduled to be held in two to four weeks after the Oct. 18 local elections, said the news agency. The ballot papers for the referendum designed in the colors of the Russian flag have already been printed, it said. Neither the rebel leadership nor the Ukrainian authorities have commented on the report yet.

In July, leaders of pro-independence insurgents in Donetsk region said they would hold local elections on Oct. 18 without Kiev’s supervision as they believed that the Ukrainian government has not fulfilled its obligations under the Minsk peace agreement. Last week, violence in eastern Ukraine has sharply escalated after several weeks of relative calmness. On Sunday night, at least 11 people, including nine civilians, were reportedly killed in Donetsk region, marking the worst casualties in the conflict since early June.

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Hilarious.

China’s Building a Huge Canal in Nicaragua, But We Couldn’t Find It (Bloomberg)

Deep on the southeastern side of Lake Nicaragua, along a bumpy dirt road that climbs gently through lush-green forest, sits the tiny town of El Tule. It is quintessential rural Central America: Chickens roam outside tin-roofed homes while pigs stand tied to trees, awaiting slaughter; the sound of drunk locals singing along to ranchera music greeted visitors on a recent rain-soaked afternoon. The village, if you listen to Nicaraguan officials, is a key point in what will be the biggest infrastructure project the region has ever seen, the construction of a $50 billion canal slated to run 170 miles from the country’s east to west coast. Awarded two years ago by President Daniel Ortega to an obscure Chinese businessman named Wang Jing, the concession calls for El Tule to be ripped up, erased essentially, in order to make way for the canal right before it plunges into the lake and then meets the Pacific Ocean a few miles later.

The idea is that the waterway will attract many of the larger vessels that the Panama Canal — located just 300 miles to the southeast — has historically struggled to accomodate. A construction deadline of 2020 has been set. Yet a four-day tour through El Tule and surrounding areas slated for crucial initial development only seemed to corroborate the belief, harbored by many analysts inside and outside Nicaragua, that this project isn’t going to get done. The townspeople haven’t seen any signs of canal workers in months. And the work that was done was marginal. A handful of Chinese engineers were spotted late last year making field notations on the east side of the lake; early this year, a dirt road was expanded and light posts were upgraded at a spot on the west side where a port is to be built.

Juharling Mendoza, a 32-year-old local entrepreneur, is so convinced that the project won’t proceed that he’s constructing a two-story house with three guest rooms and an attached convenience store just outside of El Tule. He says bluntly: “There isn’t going to be a canal.”

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These people are completely nuts. Sending dogs on refugees says it all.

British Police Head To Calais To Stymie Migrant Smuggling Activity (Guardian)

British police will be deployed to Calais to target people-smuggling gangs as part of a new agreement aimed at alleviating the ongoing migrant crisis at the French port. In the first visit to Calais by a UK government minister since the crisis escalated at the start of the summer, home secretary Theresa May will travel to the town on Thursday to confirm a joint declaration with Bernard Cazeneuve, the French minister of the interior. Their deal will see officers from the UK based in a new command and control centre in Calais alongside their French counterparts and Border Force personnel. The work of the police contingent will be led by two senior commanders – one from the UK and one from France. They will report regularly to May and Cazeneuve on the extent of immigration-related criminal activity on both sides of the Channel.

Officials said the move was aimed at disrupting organised criminals, who attempt to smuggle migrants illegally into northern France and across the Channel into Britain, by ensuring intelligence and enforcement work is more collaborative. Britain and France will also work jointly to ensure networks are dismantled and prosecutions are pursued, sources said. Fresh measures included in the new agreement include: • The deployment of extra French policing units and additional freight search teams, including detection dogs • The investment of UK resources including fencing, CCTV, flood lighting and infrared detection technology to secure the Eurotunnel railhead • The tightening of security within the tunnel itself, with Eurotunnel helping to increase the number of guards protecting the site • The creation of a new “integrated control room” covering the railheads at Coquelles • A security audit to be carried out by specialist French and British police teams to underpin the design of the improvements.

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The moral bankruptcy of Europe.

Refugee Chaos in Macedonia: ‘Life-Threatening for Women and Children’ (Spiegel)

A dangerous bottleneck has formed in the Macedonian border town of Gevgelija, an important hub for refugees traveling to Western Europe. Those trying to reach the trains here face extreme heat, dangerous crowds and police bullying. It’s Monday, earlier this week, and what can be seen unfolding along the route to Macedonia is no less than mass migration, with around 200 people making their way along the Balkans route to Western Europe on this day alone. They have come here from Aleppo, Homs, Kobani, Tartus, Hama and Damascus. Indeed, much of Syria’s population appears to be fleeing at the moment, as they attempt to make their way to safety. The group walks along the railway tracks that lead from the Greek village of Idomeni to the town of Gevgelija in Macedonia.

“Good luck, Kobani!” a family from Damascus calls out as they pass by a group of Syrian Kurds. “Good luck, Damascus,” they respond. But they don’t make it very far. They soon encounter five Macedonian police officers waiting along the tracks on the dusty, trampled earth. They order the people to wait without telling them why or for how long. The Syrians take off their backpacks and set them on the ground. Women and children look for a place in the shade. Over the next five hours, the waiting group swells to around 400 people. Not all are Syrians. A few Iraqis have also made it here. Some are now claiming to be Syrian, which would give them greater chances of success with their asylum applications and expedited procedures. A Syrian man points to eight young men and women from Africa.

“Everyone here is from Syria now, even those people over there,” he says, grinning. The people here all have at least one thing in common: They arrived in Europe during recent days via one of the Greek islands located near the Turkish coast – Kos, Lesbos or Chios. Each day, around 1,000 to 1,500 people arrive on the islands, a greater number than ever seen before. Most want to continue on to Western Europe as quickly as possible. The massive surge of refugees has created a dangerous bottleneck on the main route through the Balkans.

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