Sep 252017
 
 September 25, 2017  Posted by at 9:19 am Finance Tagged with: , , , , , , , , ,  5 Responses »
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Pablo Picasso Portrait of the artist’s mother 1896

 

Colin Kaepernick Has Won: He Wanted A Conversation And Trump Started It (G.)
The World Can’t Stop Borrowing Dollars (BBG)
What’s Around The Corner For The Hottest Emerging Markets (BBG)
China Plans Closer Oversight of $304 Billion in State Company Funds (BBG)
China’s Yuan Is Anything But Stable as Party Congress Approaches (BBG)
US Households Are Loaded Up With Stocks (Lyons)
Merkel Lands Fourth Term, But at What Cost? (Spiegel)
Angela’s Ashes: 5 Takeaways From The German Election (Pol.)
German Vote Could Doom Merkel-Macron Deal On Europe (R.)
German FinMin Wolfgang Schaeuble May Soon Be Losing His Job (CNBC)
Luxury Properties On Greek Islands Attract Ever More Foreign Buyers (K.)
There Never Was a Real Tulip Fever (Smithsonian)

 

 

Apparently, players never stood for the anthem until 2009. Then the Defense Department started paying teams to get them out of the dressing room and onto the field when the anthem was played. A recruiting tool.

But Kaepernick is a brave man no matter what. Trump should invite him to the White House and talk.

Colin Kaepernick Has Won: He Wanted A Conversation And Trump Started It (G.)

All Colin Kaepernick ever asked was for his country to have a conversation about race. This, he warned, would not be easy. Such talks are awkward and often end in a flurry of spittle, pointed fingers and bruised feelings. But from the moment the former San Francisco 49ers quarterback first spoke about his decision to kneel or sit during the national anthem, he said was willing to give up his career to make the nation talk. In one speech on Friday night, Donald Trump gave Kaepernick exactly what he wanted. With a fiery blast at protesting NFL players that seemingly came from nowhere, the president bonded black and white football players with wealthy white owners in a way nobody could have imagined. By saying any player who didn’t stand for the anthem was a “son of a bitch” and should be fired by his team’s owner, Trump crossed a line from which no one could look away.

Come Sunday afternoon, players who wanted nothing of a racial dialogue stood before giant flags, linking arms in protest. Owners who once wished their kneeling players would just stop offending fans fired off statements in their support. Networks who have avoided showing the raised fists of dissent had no choice but show the rows of players standing strong against Trump’s rage. Whether anyone wanted it or not, Trump has forced the US to have the conversation Kaepernick has been requesting. [..] “I think this is something that can unify this country,” Kaepernick said in the summer of 2016, at his first press conference about his protest. “If we can have the real conversations that are uncomfortable for a lot of people – if we can have this conversation there’s a better understanding where both sides are coming from. (And) if we can reach common ground and can understand what everyone’s going through, we can really affect change.”

Read more …

Why the dollar’s demise is greatly exaggerated.

The World Can’t Stop Borrowing Dollars (BBG)

Companies and governments around the world can’t seem to stop borrowing U.S. dollars. This could be a problem, both for them and for the Federal Reserve. Not long ago, it seemed as though a global boom in dollar borrowing had to be reaching its limit. Encouraged by near-zero interest rates, non-U.S. borrowers had binged on trillions in new dollar-denominated debt. With the central bank aiming to increase rates and the U.S. currency rising, strains were beginning to show, as companies struggled to pay back the dollars with devalued local-currency earnings. Yet the party keeps going, perhaps thanks to the Fed’s extremely gradual pace of rate increases and a related decline in the dollar’s exchange rate. According to the Bank for International Settlements, total dollar borrowing outside the U.S. reached $10.7 trillion in the first quarter of 2017, up about 6% from a year earlier and up 83% from 2009. Here’s how that looks as a%age of non-U.S. GDP:

About a third of the debt is owed by companies and governments in emerging markets, where the relatively high volatility of earnings and exchange rates can make dollar borrowing particularly risky. Here’s the dollar-denominated debt of the countries that the BIS tracks, as a%age of their GDP:

To be sure, some of the debt might not be too burdensome if borrowers have a lot of dollar revenue from, say, oil exports (think Russia and Saudi Arabia). But to the extent that the obligations aren’t hedged, they will make the world more sensitive to the Fed’s interest-rate moves. And if future rate increases trigger belt-tightening and defaults abroad, the malaise could easily spread back to the U.S., complicating the Fed’s efforts to keep growth on track. So the world is becoming increasingly exposed to the Fed, which leaves the Fed increasingly exposed to the world.

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What’s around the corner is more debt. Dollar-denominated debt.

What’s Around The Corner For The Hottest Emerging Markets (BBG)

Nothing has been able to silence the roar of emerging markets this year, be it Kim Jong-Un’s missiles, President Donald Trump’s protectionist rhetoric or a host of domestic political ructions from Brazil to South Africa and Turkey. Instead, investors have focused on economies supported by slowing inflation, a recent recovery in commodity prices and the comfort of watching central banks conducting policy by more conventional methods than their developed-nation counterparts. The MSCI EM Currency Index and the Bloomberg Barclays index of emerging-market local-currency government bonds both reached three-year highs this month, while a gauge of developing-nation equities is close to its highest since 2011. And now that the Federal Reserve has laid out a tapering game plan likely to drive down longer-maturity U.S. Treasuries, the bulls are taking new heart, betting the rally’s just getting started.

For others, it’s getting perilously near to closing time. “We all enjoyed the party, but this may be its last leg and there maybe more volatility in the year-end,” said Peter Schottmueller, the head of asset allocation at Deka Investment GmbH in Frankfurt, who helps manage the equivalent of $7.8 billion. “The market is very myopic and very short-term focused.’’ Corporate borrowing has outstripped economic growth over the five years through 2016, according to the Bank for International Settlements. That’s raised questions about how long it can continue as central banks in developed nations prepare to pare back quantitative easing, according to Toru Nishihama, at Tokyo-based Dai-ichi Life Research.

Emerging economies expanded 4.4% in 2016, almost half of the rate of a decade ago, when the Fed was in its last year of a cycle of interest-rate increases. “There remains a gap between the growth rate of emerging economies and developed countries as well as returns from investment, and investors will continue to pour funds into emerging markets,” Dai-ichi’s Nishihama said. “However, from here, not all emerging-market investments are rosy, and investors may become more selective in which country or countries to invest.”

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“China will create a centralized financing company..” Yes, but to oversee assets, or to oversee debt, liabilities?

China Plans Closer Oversight of $304 Billion in State Company Funds (BBG)

China will create a centralized financing company to oversee some $304 billion of funds held by the country’s state-owned enterprises’ finance units, people familiar with the matter said, allowing the government closer supervision of SOEs’ borrowing and investments. The plan, approved by the State Council or Cabinet, will increase the government’s ability to supervise the non-financial central SOE finance companies’ investments, giving the entity a fuller picture of how these companies are using funds, according to the people, who asked not to be named because the plans have not been made public. Non-financial, central SOEs have their own finance units that currently offer various products and services such as deposits and loans, and the new entity could facilitate those efforts.

The plan would assist regulators by directing some 2 trillion yuan of funds held by the non-financial SOEs through the new company, meaning they could monitor the flow through only one financing company rather than dozens. Many details about the new entity were not immediately clear, such as who would control it, how much regulatory and oversight authority it would have, and how it might conduct external financing on behalf of the SOEs. The aim is to boost efficiency in the $20 trillion state sector in line with a government campaign to reduce the companies’ debt, according to the people. While the centralized finance company would have a regulatory oversight role, the SOEs would retain control over the funds, the people said.

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Not the plan.

China’s Yuan Is Anything But Stable as Party Congress Approaches (BBG)

China’s currency has swung from hot to cold in a matter of weeks, thwarting expectations that policy makers would keep the yuan stable before a crucial Communist Party Congress next month. The yuan fell 0.3% to 6.6075 per greenback at 2:29 p.m. in Shanghai, taking its decline from a Sept. 8 peak to 2.6%. That’s a sharp reversal from earlier this month, when the currency surged 1.5% in just six days. The stunning shift has propelled a gauge of 50-day price swings on the yuan to a six-month high. With China’s financial markets closed for the whole of next week due to National Day holidays, there are effectively just over two weeks of trading to go before the congress begins Oct. 18.

The turning point for the currency came when the PBOC eased a forwards trading rule that made betting against the currency more expensive – a clear signal that the surge had gone far enough. A mild recovery in the greenback thanks to a more hawkish Federal Reserve – the Bloomberg Dollar Spot Index is up 1.2% since Sept. 8. – has hastened the yuan’s decline. “Investors were too optimistic earlier, and they are now pushing the yuan lower because they figured the policy makers believed the currency was too strong,” said Eddie Cheung at Standard Chartered in Hong Kong. “There’s still room for the dollar to rise in the short term if the market becomes more confident on U.S. rate hikes. That said, the yuan could weaken further this year, though the PBOC wouldn’t allow any sharp declines.”

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Hmm, really? With so many people living paycheck to paycheck?

US Households Are Loaded Up With Stocks (Lyons)

From the Federal Reserve’s latest Z.1 Release (formerly, Flow Of Funds), we learn that in the 2nd quarter, household and nonprofit’s stock holdings amounted to 35.7% of their total financial assets. This is the highest%age since 2000. In fact, the blow-off phase from 1998 to 2000 leading up to the dotcom bubble burst was the only time in the history of the data (since 1945) that saw higher stock investment than now. You might say that everyone is in the pool. We’ve talked about this data series many times. It is certainly not a timing tool. Rather, it is what we call a “background” indicator, representative of the longer-term backdrop — and potential — of the stock market.

It also serves as an instructional lens into investor psychology. For these reasons, it is one of our favorite metrics pertaining to the stock market, as we wrote in a September 2014 post: “This is one of our favorite data series because it reveals a lot about not only investment levels but investor psychology as well. When investors have had positive recent experiences in the stock market, i.e., a bull market, they have been happy to pour money into stocks. It is consistent with all of the evidence of performance-chasing pointed out by many. Note how stock investment peaked with major tops in 1966, 1968, 1972, 2000 and 2007. Of course, investment will rise merely with the appreciation of the market; however, we also observe disproportionate jumps in investment levels near tops as well.

Note the spikes at the 1968 and 1972 tops and, most egregiously, at the 2000 top. On the flip side, when investors have bad recent experiences with stocks, it negatively effects investment flows, and in a more profound way than the positive effect. This is consistent with the scientifically proven notion we’ve discussed before that feelings of fear or loss are much stronger than those of greed or gain. Stock investment during he 1966-82 secular bear market provides a good example of this. After stock investment peaked at 31% in 1968 (by the way, after many of the indexes had topped in 1966 – investors were still buying the dip), it embarked on steady decline over the next 14 years. This, despite the fact the stock market drifted sideways during that time. By the beginning of the secular bull market in 1982, the S&P 500 was right where it was in 1968. However, household stock investment was at an all-time low of 10.9%.

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She won but lost. What happens here is the future of Europe is decided by German voters alone. That is the core of the European problem.

Merkel Lands Fourth Term, But at What Cost? (Spiegel)

Angela Merkel’s election result four years ago was, to be sure, extraordinary. It was clear from the surveys that her conservatives wouldn’t be able to repeat it. But a fall like this? Merkel’s Christian Democratic Union (CDU) and its Bavarian sister party Christian Social Union (CSU) saw their joint result fall by more than eight%age points – their worst showing since 1949. During her first appearance after the election at her party’s headquarters, the chancellor said she had, in fact, hoped for a somewhat better result. Those gathered at the headquarters dutifully chanted, “Angie, Angie.” Then things grew quiet again. Nobody waved the German flag. It was a far cry from 2013, when CDU politicians broke out into a spontaneous karaoke session after the results were announced. This time, the prominent members of Merkel’s party who had gathered behind her on the stage seemed sobered by the tepid showing.

Merkel can keep her job as chancellor, the “strategic goal” has been achieved, as Merkel refers to it. But it comes at a high price. Voters have severely punished the parties of the current governing coalition, with Merkel’s conservatives losing dozens of seats in parliament. The right-wing populist Alternative for Germany (AfD) will now enter parliament with a strong, double-digit result. And it will be extremely difficult for Merkel to build a government coalition that will be stable for the next four years. There won’t just be a sprinkling of renegades representing the AfD in parliament. The right-wing populists will be the third-largest party in the Bundestag and they have announced their intention to “chase down” the chancellor as one of the party’s two leading candidates expressed it on Sunday.

The election campaign already gave a taste of what might be coming, with AfD supporters loudly venting their hatred and anger at events held by Merkel’s CDU. Merkel, who isn’t known for being the world’s best public speaker, will now be confronted by them on a daily basis. And the conservatives will also have to ask themselves what share of the responsibility they carry for the AfD’s success. What can they do to win back disappointed voters? More than a million voters are believed to have flocked from the CDU and the CSU to the AfD. And most of them say that it was the chancellor’s refugee policies that led them to vote for the right-wing competition. It’s little wonder, then, that Merkel has identified the enduring regulation of refugee flows and domestic security as the key topics for the coming years.

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I went for the headline. But good insights too.

Angela’s Ashes: 5 Takeaways From The German Election (Pol.)

1. Merkel’s twilight has begun SPD leader Martin Schulz told Merkel on live television she was the election’s “biggest loser.” A bit harsh perhaps (especially coming from a candidate who just recorded his party’s worst-ever result), but there’s some truth to it. Instead of addressing tough questions such as migration head-on, Merkel ran a vague, feel-good campaign, promising a “Germany in which we live well and happily,” while offering few specifics about how she wanted to get there.

2. Germany’s consensus-driven political model is shattered The next parliament will include seven parties (eight, if you count the CSU, the Bavarian sister party to Merkel’s CDU), representing a much more diverse cross-section of the country’s body politic than its predecessor. Sparks will fly. The inclusion of the far right in parliament will make German politics louder and nastier. AfD leader Jörg Meuthen made it clear Sunday that confrontation and “provocation” were central to the party’s strategy. If other European countries where populists have a strong foothold are any indication, that no-holds-barred spirit will infect the political mainstream, creating a decidedly more raucous political climate.

3. Forget about meaningful eurozone reforms Merkel’s conservatives were skeptical of French President Emmanuel Macron’s reform proposals even before Sunday. A grand coalition represented the French president’s best chance for realizing his vision. With that option now off the table, a weakened Merkel is unlikely to be able win over the Free Democrats and skeptics in her own party, even if she wanted to. France and Germany may agree to establish some form of budget and an oversight position for the eurozone with the title of finance minister, but neither will have the scope the French, not to mention many economists, had been hoping for.

4. Berlin will play hardball with Europe on refugees German patience over Europe’s lack of solidarity on the refugee front was already wearing thin. After Sunday’s result, look for outright confrontation with countries like Poland and Hungary. In the view of many Christian Democrats, the AfD would have never gotten this far if other European countries had taken in their fair share of refugees instead of letting Germany bear the burden. It’s payback time.

5. This isn’t Weimar For all the breathless historical comparisons, it’s worth taking a deep breath and remembering Germany is a stable democracy. The vast majority of Germans didn’t vote for the AfD and most of those who did, did so in protest. The coming years won’t be pretty, but Germany’s democratic foundations are robust enough to withstand the populist onslaught.

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Not could, will. Already has.

German Vote Could Doom Merkel-Macron Deal On Europe (R.)

Weakened by the worst result for her party since 1949 and facing a more fractious political landscape at home, Germany’s Angela Merkel could be forced to rein in plans to re-shape Europe together with France’s Emmanuel Macron. Merkel’s conservatives garnered more support than any other party in the German election on Sunday, projections showed, ensuring that she will return for a fourth term as chancellor. But her party appeared on track for its poorest performance since the first German election after World War Two and its only path to power may be through an unwieldy, untested three-way coalition with the ecologist Greens and liberal Free Democrats (FDP), fierce critics of Macron’s ideas for Europe.

Over the next four years, Merkel will also have to cope with a more confrontational opposition force in the Alternative for Germany (AfD), a eurosceptic, anti-immigration party that rode a wave of public anger after her decision to open Germany’s borders to hundreds of thousands of migrants in 2015.[..] This will be a new world for Merkel, who has grown accustomed to cozy coalitions and toothless Bundestag opposition during her 12 years in power. “In my mind, reform of the euro zone is the single most important foreign policy issue that the new government has in front of it,” said Thomas Kleine-Brockhoff, who runs the Berlin office of the German Marshall Fund. But he predicted a so-called “Jamaica” coalition between Merkel’s conservatives, the FDP and the Greens – whose combined party colors of black, yellow and green are like those the Jamaican national flag – would struggle to deliver.

Read more …

Party in the streets of Athens.

German FinMin Wolfgang Schaeuble May Soon Be Losing His Job (CNBC)

In the aftermath of the German election, there could be one important casualty for markets. Wolfgang Schaeuble, the German Finance minister, could soon lose his influence on Germany and the euro zone if coalition talks remove him from his key ministry. Schaeuble became the face of austerity and had a determinant role in bailout programs across the euro zone, namely Greece, and is often described as Chancellor Angela Merkel’s co-chancellor, given his importance to the German government. However, given the tough political horse-trading that lies ahead, Merkel might not manage to keep her close ally. “Coalition building will be extremely difficult,” Carsten Brzeski, chief economist at ING, told CNBC Monday via email.

“If Schauble would really no longer be Finance minister it would be a watershed for the entire euro zone. An exit of one of the main characters of the entire euro zone crisis clearly marks the end of a historical chapter,” he said. Merkel’s center-right CDU and its Bavarian sister-party the CSU won 33% of the vote, provisional votes showed, down from 41.5% in the previous election. The pro-business FDP party, which placed fourth with 10.7% of the votes, has said it is open for coalition talks with Merkel’s CDU. The Greens are set to join coalition talks too, which could ultimately form Germany’s first four-party government in decades. In German politics, it’s usually the case that the largest party chooses the chancellor, and the second largest group picks the next post.

As such, the FDP could opt for the Finance Ministry and put an end to Schaeuble’s eight-year reign. The future for Schaeuble is “the question” from a market perspective, Carsten Nickel, managing director at Teneo Intelligence, told CNBC Monday. “In the end, I think there is probably very little alternative to Schaeuble, right now, at least in terms of individual politicians. There’s nobody who really comes to mind as the key person who would challenge him for that role. I wouldn’t be surprised if he stays on in the end,” he said. f Germany were to lose Schaeuble as Finance minister, the current momentum for further euro zone integration could also be damaged.

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The firesale continues unabated. Prices were cut in half over the last decade, even in the high end. Greeks won’t own anything in their own country anymore.

Luxury Properties On Greek Islands Attract Ever More Foreign Buyers (K.)

The rise of tourism and the popularity of certain destinations such as Myconos and Santorini have sent demand for and purchases of luxury holidays homes soaring. The first half of the year saw a 63.5% annual increase in the inflow of capital for property buys in Greece, following a 45.3% rise in the entire 2016 year-on-year to reach 270 million euros. Another factor boosting investments in holiday homes grow is the considerable decline in prices – averaging at 50% – compared to the period before the financial crisis, around 2008. The drop mainly took place from 2009 to 2013, as this section of the property market has become stable since then with some growth signs mainly regarding properties that have unique features and are regarded as emblematic.

Several foreigner buyers are scrambling to complete their acquisitions within the year, sensing that the window of opportunity may shut in the coming months, as there already are cases of owners who are raising their asking prices in view of the spike in demand. Franceska Kalamara, the head of the Franceska Properties estate agency that is active in the Myconos market, tells Kathimerini that “the buyers from abroad are interested in sizable and luxurious properties, from 400 square meters upward, and at very favorable locations, as close to the sea as possible. These are mostly individuals from Egypt, Lebanon and Israel, but also from the US, while there has recently been particular activity by Cypriot buyers.”

Among the recent well-known buyers of luxurious homes on Greek islands are Israeli entrepreneur Teddy Sagi (owner of Camden Market in London) who bought a series of properties on Myconos, according to estate agency sources, and Egyptian businessman Naguib Sawiris, buyer of two villas on the same island costing a total of some 11 million euros. It should be noted that the actual volume of the funds invested in the Greek holiday home market is far greater than reported by the Bank of Greece, as the majority of sellers ask buyers to deposit the money in bank accounts abroad. This trend has grown considerably since the imposition of capital controls two years ago.

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But we like the story! Don’t take our modern mythology away.

There Never Was a Real Tulip Fever (Smithsonian)

According to popular legend, the tulip craze took hold of all levels of Dutch society in the 1630s. “The rage among the Dutch to possess them was so great that the ordinary industry of the country was neglected, and the population, even to its lowest dregs, embarked in the tulip trade,” wrote Scottish journalist Charles Mackay in his popular 1841 work Extraordinary Popular Delusions and the Madness of Crowds. According to this narrative, everyone from the wealthiest merchants to the poorest chimney sweeps jumped into the tulip fray, buying bulbs at high prices and selling them for even more. Companies formed just to deal with the tulip trade, which reached a fever pitch in late 1636. But by February 1637, the bottom fell out of the market.

More and more people defaulted on their agreement to buy the tulips at the prices they’d promised, and the traders who had already made their payments were left in debt or bankrupted. At least that’s what has always been claimed. In fact, “There weren’t that many people involved and the economic repercussions were pretty minor,” Goldgar says. “I couldn’t find anybody that went bankrupt. If there had been really a wholesale destruction of the economy as the myth suggests, that would’ve been a much harder thing to face.” That’s not to say that everything about the story is wrong; merchants really did engage in a frantic tulip trade, and they paid incredibly high prices for some bulbs. And when a number of buyers announced they couldn’t pay the high price previously agreed upon, the market did fall apart and cause a small crisis—but only because it undermined social expectations.

“In this case it was very difficult to deal with the fact that almost all of your relationships are based on trust, and people said, ‘I don’t care that I said I’m going to buy this thing, I don’t want it anymore and I’m not going to pay for it.’ There was really no mechanism to make people pay because the courts were unwilling to get involved,” Goldgar says. But the trade didn’t affect all levels of society, and it didn’t cause the collapse of industry in Amsterdam and elsewhere. As Garber, the economist, writes, “While the lack of data precludes a solid conclusion, the results of the study indicate that the bulb speculation was not obvious madness.” [..] All the outlandish stories of economic ruin, of an innocent sailor thrown in prison for eating a tulip bulb, of chimney sweeps wading into the market in hopes of striking it rich—those come from propaganda pamphlets published by Dutch Calvinists worried that the tulip-propelled consumerism boom would lead to societal decay.

Read more …

Sep 132017
 
 September 13, 2017  Posted by at 7:09 pm Finance Tagged with: , , , , , , , , , ,  2 Responses »
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Eugene Delacroix Greece expiring on the Ruins of Missolonghi 1826

 

European Commission president Jean-Claude Juncker, famous for his imbibition capacity and uttering -not necessarily in that order- the legendary words “when it becomes serious, you have to lie”, presented his State of the Union today. Which is of pretty much limited interest because, as Yanis Varoufakis’ book ‘Adults in the Room’ once again confirmed, Juncker is nothing but ventriloquist Angela Merkel’s sock puppet.

But of course he had lofty words galore, about how great Europe is doing, and how that provides a window for more Europe, in multiple dimensions. Juncker envisions a European Minister of Finance (Dutch PM Rutte immediately scorned the idea), and he wants to enlarge the EU by inviting more countries in, like Albania, Montenegro and Serbia (but not Turkey!).

Juncker had negative things to say about Britain and Brexit, about Poland, Prague and Hungary who don’t want to obey the decree about letting in migrants and refugees, and obviously about Donald Trump: Brussels apparently wants ‘to make our planet great again’.

What the likes of Jean-Claude don’t seem to be willing to contemplate, let alone understand or acknowledge, is that the EU is a union of sovereign countries. The meaning of ‘sovereignty’ fully escapes much of the pro-EU crowd. And if they keep that up, it will break the union into pieces.

The European Court of Justice has ruled that Poland, the Czech Republic and Hungary must accept their migrant ‘quota’, as decided in Brussels, and that, too, constitutes an infringement on these countries’ sovereignty. And don’t forget, sovereignty is not something that can be divided into separate parts, some of which can be upheld while others are discarded. A country is either sovereign or it is not.

The single euro currency is already shirking awfully close to violating sovereignty, if not passing over an invisible line, and a European Finance Minister would certainly constitute such a violation. At some point, the politicians in all these countries will have to tell their voters that they’re about to surrender -more of- their sovereignty and become citizens of Merkel Land. But they don’t want to do that, because as soon as people would realize this, the pitchforks would come out and the union would be history.

The EU will be able to muddle on for a while longer, but Europe is not at all doing great economically (however, to maintain the illusion ECB head Draghi buys €60 billion a month in ‘assets’), and when the next crisis comes people will demand their sovereignty back. It really is that simple. And what will the negotiations look like to make that happen? 27 times Brexit?

 

The real Europe is not the one Juncker paints a portrait of. The real Europe is Greece. That’s where you can see the economic reality as well as the political one. Greece has no sovereignty left to speak of, despite the fact that it is guaranteed it in EU law. Europe’s political reality is about raw power. About the rich waterboarding the poor, to the point that they are turned from sovereign citizens of their countries into lost souls in debt prisons.

This week, another chapter has been added to the dismal annals of the Greek adventures in the European Union. It’s like the Odyssee, I kid you not. Like the previous chapters, this one will not solve the Greek crisis, or even alleviate it, but instead it will deepen it further, and not a little bit. This chapter concerns the forced auctioning of -real estate- properties.

Not to Greeks, 90% of whom can’t afford to buy anything at all, let alone property, but to foreigners, often institutional investors. At the same time, bad loans, including mortgage loans, will be offloaded for pennies on the dollar to that same class of ‘investors’. Once the Troika is done with this chapter, Greece will have seen capital destruction the likes of which the world has seldom if ever witnessed.

People in the country have a hard time understanding the impact:

Greece Property Auctions Certain To Drive Market Prices Even Lower

Ilias Ziogas, head of property consultancy company NAI Hellas and one of the founding members of the Chartered Surveyors Association, said that the property market is certain to suffer further as a result of the auctions: “The impact on prices will be clearly negative, not because the price of a property will be far lower at the auction than a nearby property, but because it will diminish demand for the neighboring property.”

[..]Giorgos Litsas, head of the GLP Values chartered surveyor company, which cooperates with PQH [..] told Kathimerini that the only way is down for market rates. “I believe that unless there is an unlikely coordination among the parties involved – i.e. the state (tax authorities, social security funds etc.), the banks and the clearing firms – in order to prevent too many properties coming onto the market at the same time, rates will go down by at least 10%.”

He noted that “we estimate the stock of unsold properties of all types comes to 270,000-280,000, in a market with no more than 15,000 transactions per year. Therefore the rise in supply will send prices tumbling.” Yiannis Xylas, founder of Geoaxis surveyors, added, “I fear the auctions will create an oversupply of properties without the corresponding demand, which translates into an immediate drop in rates that may be rapid if one adds the portfolios of bad loans secured on properties that will be sold to foreign funds at a fraction of their price.”

A 10% drop? Excuse me? Even in the center of Athens, rental prices for apartments that are not yet absorbed by Airbnb have plummeted. With so many people making just a few hundred euro a month that is inevitable. You can rent a decent place for €200 a month, and if you keep looking I’m sure you can find one for €100. An 80% drop?! But property prices would only go down by 10% in a market that has 20 times more unsold properties than it sells in a year?

The Troika creditors found they had to deal with attempts to prevent the wholesale fire sale of Greek properties. They now think they’ve found the solution. First, they will force the government to lower official valuations concerning the so-called “primary residence protection”, which protected homes valued at below €300,000 from foreclosure. Second, they will bypass the associations of notaries who refused to cooperate in ‘physical’ auctions, as well as protesters, by doing the fire sale electronically:

E-Auctions Of Foreclosed Property For First Time This Month In Greece

Environment and Energy Minister Giorgos Stathakis confirmed the development in statements to a local television station, announcing the relevant justice ministry is ready to begin electronic auctions in the middle of next week.At the same time, Stathakis noted that a law protecting a debtor’s primary residence from creditors will be expanded until the end of 2018. According to reports, the e-auctions will take place every Wednesday, Thursday and Friday over a four-hour period, i.e. from 10 a.m. to 2 p.m. or 2 p.m. to 6 p.m. Some 5,000 foreclosed commercial properties will be up for sale by the end of the year, which translates into 1,250 properties per month, on average.

Currently, the primary residence protection against foreclosure extends to properties valued (by the State tax bureau) at under €300,000, a very high threshold that shields the “lion’s share” of mortgaged residential real estate in the country, if judged by current commercial property values in Greece. Creditors and local lenders have called for a decrease in the protection threshold, a prospect that is very likely.

The development is also expected to generate another round of acrimonious political skirmishing, given that both leftist SYRIZA, and its junior coalition partner, the rightist-populist Independent Greeks party, rode to power in January 2015 on a election campaign platform that included an almost universal protection of residential property from bank foreclosures and auctions.

Associations representing notaries – professionals who in Greece are law school graduates specializing in drawing up contracts and maintaining registries of deeds, property transactions, wills etc. – had also blocked old-style auctions from taking place in district courts by ordering their members not to take part. The e-auction process aims to bypass this opposition, as well as disruptions and occupations of courtrooms by anti-austerity protesters.

The claim is that Greek banks must be made healthy again by removing bad loans from their books. The question is if selling both properties and bad loans to foreign institutional investors for pennies on the buck is a healthy way to achieve that. But yeah, if 50% of your outstanding loans are bad, you have a problem. Still, at the same time, the problem with that is that many if not most of those loans have turned sour because of the neverending carrousel of austerity measures unleashed upon the country. It’s a proverbial chicken and egg issue.

If Brussels were serious about Greek sovereignty, it would make sure that Greek homes were to remain in Greek hands. You can’t be sovereign if foreigners own most of your real estate. By bleeding the country dry, and forcing the sale of Greek property to Germans, Americans, Russians and Arabs, the Troika infringes upon Greek sovereignty in ways that will scare the heebees out of other EU nations.

It’s not for nothing that the entire Italian opposition is talking about a parallel currency next to the euro. That is about sovereignty.

5,000 Greek Properties Under the Electronic Auction System by End of 2017

Auctions of foreclosed properties to settle bad debts are seen as key to returning Greek banks to health by helping reduce the burden of non-performing loans. These currently stand at roughly €110 billion, or 50% of the banks’ total loans. Under pressure from its lenders, in the summer of 2016 the Greek government passed measures allowing the sale of delinquent mortgages and small business loans to international funds, a move seen by many as yet another betrayal by the SYRIZA-led government.

Greek banks won’t return to health, they’ll simply shrink the same way the people do who can’t afford to rent a home or eat decent food. Austerity kills entire societies, including banks. If Mario Draghi would decide tomorrow morning to include Greece in his €60 billion a month QE bond-buying program, and Greece could use that money to stop squeezing pensions and wages, and no longer raise taxes and unemployment, both the people AND the banks could return to health. It would take a number of years, but still.

 


Attica! Attica!

 

Whatever you call what happens to Greece, and what’s been happening for nearly 10 years now, whether you call it fiscal waterboarding or Shock Doctrine, it is definitely not something that has a place in a union of sovereign nations bound together in mutual respect and dignity. And that will ensure the demise of that union.

 

Another aspect of the fire sale is the valuation of the properties austerity has caused to crumble (so many buildings in Athens are empty and falling apart, it’s deeply tragic, at times it feels like the entire city is dying). The press calls it a hard task, but that doesn’t quite cover it.

It’s not just about mortgages, many Greeks simply give up their properties because they can’t afford the taxes on them. People that inherit property refuse to accept their inheritance, even if it’s been in their families for generations, and it’s where they grew up. In that sense, it may be good to lower valuations to more realistic levels. But tax revenues will plunge along with the valuations, and the government is already stretched silly. Add a new tax, then?

Greece Property Value Review A Hard Task

The government is facing a daunting task in adjusting the so-called objective values (the property rates used for tax purposes) to market levels by the end of the year, as its bailout agreement dictates. The huge slump in transactions and the forced sales of properties due to their owners’ debts do not lead to any safe conclusions for the values per area. One in four sales are conducted with prices that lag the objective value by 60-70%, and the prices of 2008 by 70-80%. The Finance Ministry must overcome all the obstacles to bring to Parliament all the necessary adjustments and regulations.

Moreover, once the objective values are brought in line with market rates, the government will have to maintain the same amount of revenues from the Single Property Tax (ENFIA) either by raising the tax’s rates or by introducing a new tax in the form of the old Large Property Tax.

Furthermore, once the objective values are reduced by 40-50% to match the going prices, banks may see problems with their capital adequacy, as lenders will incur losses by having to revise the collateral they get. Mortgage loans in Greece amount to €59.44 billion, of which 42%, or €25.4 billion are nonperforming.

Yeah, there’s the health of the banks again. And the government. And the people. A wholesale fire sale is the worst possible thing that could happen at this point in time. Greece needs help, stimulus, hope, not more austerity and fire sales. Juncker and his Berlin ventriloquist have this all upside down and backwards, squared. The one thing the EU cannot afford itself to do, is the one thing it engages in.

They may as well pack in the whole thing today, and go home. Actually, that would be by far the best option, because more of this will inevitably lead to the very thing Europe prides itself in preventing for the past 70 years: battle, struggle, war, fighting in the streets, and worse. If the EU cannot show it exists for the good and benefit of its people, it no longer has a reason to exist.

Saving the banks in the richer countries by waterboarding an entire other country is not just the worst thing they could have thought of, it’s entirely unnecessary too. The EU and ECB could easily have saved Greece from 90% of what it has gone through, and will go through going forward, at virtually no cost at all. But yes, German, French, Dutch banks would likely have had to cut the bonuses of their bankers, and their vulture funds couldn’t have snapped up the real estate quite that cheaply.

Summarized: the EU is a disgrace, morally, politically, economically. I know that French President Macron on the one side, and Yanis Varoufakis’ DiEM25 movement on the other, talk about reforming the EU. But the EU is the mob, and you don’t reform the mob. You dismantle their organization and then you lock them up.

 

 

Sep 042017
 
 September 4, 2017  Posted by at 3:34 pm Finance Tagged with: , , , , , , , , ,  2 Responses »
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Detail of a fresco from the House of the Tragic Poet, Pompeii, 2nd century BC

 

About a month ago, I finished reading former Greek finance minister Yanis Varoufakis’ book “Adults in the Room”, subtitled “My Battle With Europe’s Deep Establishment”, and published by The Bodley Head. I started writing about it right away, but noticed I was writing more about my personal ideas and experiences related to Greece than about the book. So I let it rest a bit.

I read the book in, of all places, Athens, sitting outside various old-style cafés. That got me a lot of reactions from Greeks seeing the cover of the book, most of them negative, somewhat to my surprise. Many Greeks apparently do not like Varoufakis. Of course I asked all the time why that is. “He’s arrogant” was/is a frequent one.

That’s not very helpful, I find, since first of all, it’s a purely subjective judgment, and second, I’m convinced their views come to a large extent from Greek media coverage, not only during Yanis’ term as finance minister from January to July 2015, but also in the years leading up to it. And Greek media are all controlled by ‘oligarchs’ et al, who certainly do not like either Yanis or the Syriza party he represented as minister.

The irony is that Varoufakis received more -individual- votes in the January 2015 election that brought Syriza to power than any other party member. And in the July 5 referendum 61.3% of Greeks voted against -yet- another bailout, very much in line with what Varoufakis had proposed. So there was a time when he was popular.

One guy said: ”he should be in jail”. When I asked why, the response was something like “they should all be in jail”, meaning politicians. Which is a bit curious, because whatever Varoufakis may be, a politician he is not. And the Greeks know that. They are very disappointed, and often depressed, by what has happened to them, of course they are. But why they would think Yanis is responsible for that is much less clear. Other then: “they’re all responsible”.

The best line in my opinion came from someone who said he thought Varoufakis was wrong for getting involved with Greek politics in the first place, a pit -as is the EU- replete with slithering venomous snakes. That I understand. That he should never have become minister since it could only have ended badly because of the corruption and backstabbing at all levels. I’m guessing Yanis himself has thought that too at times.

But at the same time, I remain convinced, as I’m sure he does, that he genuinely did it to help his people -who were already in terrible shape in late 2014 when he decided to run, and are much worse off now. And that’s not all. He would never have done it if he hadn’t had a plan to make things better. He did. If anything, that’s the key to his story.

And if his one-time friend, PM Tsipras, had not been paralyzed with fear at the last moment, that plan might well have worked. Yanis is an economist, and a game theorist at that. And though he has always insisted game theory was not the basis of what he did as minister, and rightly so because it’s not a game, there’s one aspect of what happened that comes straight from that field.

That is, before he agreed to run for finance minister, as he writes in the book, he tells Tsipras and his closest Syriza confidants that because Greece is very weak vs the Troika, they are not in any position to bluff. Meaning, if they are going to follow ‘the plan’, they must follow it to the end, in other words, they must be willing to walk away from the Troika, from the EU.

Not because they want to, but because the rules of the game demand it. When you’re weak, you cannot afford to blink. Yanis based his plan on letting the other side blink first, as he felt they would have to if only Greece did not. That’s what the whole thing was based on. And then, after -or rather, even before- winning the NO referendum, Tsipras blinked.

And yes, you can blame Varoufakis for that: for not making sure that would not happen. For putting trust where none was warranted. But the alternative would have been to stay in Texas and see his country perish. He was asked to join, he had a plan he believed in, what was he supposed to do?

 

“[The book] reads like a train”, says a Dutch review of Adults in the Room. And it does. Yanis proves a talented writer in the ‘genre’, which is not his by trade -so to speak-, of a day-to-day description of a series of events, conversations, confrontations with Greek, European and global political elites -with the occasional economist thrown in here and there-. The fact that he recorded many of the conversations on his iPhone, and undoubtedly made notes of many things as they happened, makes it a very compelling read. It’s obvious he’s not making it up, that he wrote down what actually happened -much of it word for word-. Seen through his eyes, of course.

As much as it reads like a train though, it also reads like a trainwreck. The portraits Yanis paints of many of the individuals he encounters, as well as of the institutions they represent, are often as painful as they are damning. Still, that is not what he sets out to do, as many of those who find their names in the book will undoubtedly claim. They are simply the portraits that emerge as events unfold.

In the world of power politics, this should not be a great surprise. But the picture of the dynamics that ‘control’ the European Union and it representatives, as well as the Troika institutions, the IMF, ECB, Eurogroup and European Commission, becomes, as we read along, more and more that of one familiar to us through the Godfather and the Sopranos. For many of the ‘players’ that appear on the scene, a comparison to ‘made men’ in the mafia is hard to avoid. Only, without a proper code of honor. A conversation Yanis describes in the introduction of the book makes this ‘analogy’ even more striking. He’s talking to Larry Summers, former US Treasury Secretary, who talks about insiders and outsiders.

“I had a choice. I could be an insider or I could be an outsider. Outsiders can say whatever they want. But people on the inside don’t listen to them. Insiders, however, get lots of access and a chance to push their ideas. People – powerful people – listen to what they have to say. But insiders also understand one unbreakable rule: They don’t criticize other insiders.”

That’s obvious stuff. Except that this quote is from another book, US Senator Elizabeth Warren’s “A Fighting Chance”, and it’s almost verbatim the same as the one in Yanis’ book. It’s just politics. In the same way that Vito Corleone says: “it’s not personal, Sonny, it’s strictly business”. And Larry Summers is a consiglieri who spreads the gospel. Like it was once spread to him.

How do you become an insider, a made man? By committing to ‘the cause’, the family, through performing acts, initiation rituals. In the mob, that act is mostly murder, in the EU it’s something else, like obliterating the Greek economy. Or, in the case of European Council president Donald Tusk or First Vice-President of the European Commission Frans Timmermans, incessantly badmouthing Vladimir Putin. That gets you in. We know this because neither Tusk nor Timmermans had any other outstanding achievements to their names before they landed their top jobs.

So that gets you in. But into what, exactly? That’s a very opaque issue, and Varoufakis’ book doesn’t shine much light on it. Which is not a criticism, that’s not what he set out to do. Still, when he writes that in many occasions, as he tries to talk to for instance the assembled Eurogroup (all EU finance ministers plus -often- ECB head Mario Draghi and IMF head Christine Lagarde) about actual policies and plans, he “might as well have been singing the Swedish national anthem”, the opaqueness is the only thing that does ‘shine’.

A question that occurred to me, repeatedly, was how many of the people he tries to discuss issues with, actually understand what he’s talking about. For instance, once you delve into the specifics of debt swaps, what the benefits of one sort of bond are over others, you need a specific kind of knowledge, something an experienced investment banker or economist would have.

Schäuble’s a lawyer. Dijsselbloem’s an ‘agricultural economist’, whatever that may be. If you want to prevent any discussion on issues, what better than to put people in place who are -by education, by intelligence- simply not able to discuss them?

 

Not even Yanis, in my view, condemns Merkel and Schäuble and Dijsselbloem and a whole host of other characters in Brussels, Athens and beyond, strongly enough. Because the mob truly resides in Brussels -and Athens is truly corrupt. And Berlin. No matter how many times you may hear, or say, that something is simply politics, or it’s simply business, and nothing personal, it is very much personal and we should never accept it as normal human behavior.

That is the most damning issue Varoufakis brings up, but he doesn’t do that strong enough. When he seals a deal with China’s ambassador to Greece for Beijing to invest in Greece’s ports and railways, Angela Merkel calls the Chinese to tell them to back off; Germany’s not done with Greece yet. When current French President Emmanuel Macron, who was Economy Minister in 2015, sought to help Greece, Merkel called then-President Hollande to order him to get Macron ‘off the case’.

The European Union is undemocratic in myriad ways. What Varoufakis lays bare in his book, and then fails to utterly condemn, is that it is also undemocratic in the ‘ultimate’ way. That is, no country has anything to say except Germany. The EU’s largest member country decides everything. Not that Berlin sweats the small stuff, mind you, others are allowed to keep the illusion of democracy alive there.

But as soon as big decisions are made, finance, defense, there is one voice only that counts. That is the final nail in Europe’s coffin, even if it remains hidden very well. But spell that out loud and clear to the French people, or the Italians, that they have nothing at all to say about their own country and their own laws anymore, that the Germans decide FOR them, and what do you think they will say?

The very concept of a sovereign country, and the Union officially has 27 of them left, has turned into a joke inside the EU. Plus, Merkel and Macron and Brussels are calling for more Europe. Go to a supreme court in any EU country and tell them their own governments have lost all power over money and economics, and what do you think their constitutions will say? Care to define sovereignty?

So tell people that. Tell them that in reality Angela Merkel is their ‘leader’, not the people they have voted for. Ironically and unfortunately, the right wing regimes in eastern Europe may prove to be the ones who point this out first. Which is in line with how Brexit came about, and Trump, but in the end what all this really exposes is that we are all lied to three ways to Sunday, every day of the week.

Perhaps just as ironically, Varoufakis now leads a movement, named DiEM 25, that seeks to democratize the EU. I wish him all the good and then some with that, but I don’t see it. Because you would have to ‘overthrow’ Germany’s dictatorship of Europe, and get Germany to agree to being voluntarily ‘overthrown’. Why would Berlin ever agree to that? That’s even less likely than them agreeing to Varoufakis’ ideas about saving the Greek economy.

I’ve said it many times before, Europe’s nations can work together in many different ways, and the EU is just one of them, and it’s a very bad option. But reforming the EU from within does not look to me to be the way to go. It’s like reforming the US Republican or Democratic parties: they’re rotten to the core; why not start something new that doesn’t come with the whole deep-state-style burden?

 

You will hear and see a lot about how Yanis is naive and/or didn’t know what he was doing and proposing. But the only way in which he may have been naive is that he believed common sense would ultimately rule Europe. He might still have been right, if Tsipras et al had not choked. Which he told them repeatedly before he became Finance Minister would be fatal for Greece. He was right on that too, but he’ll find no pleasure in it.

His fault is that he didn’t – and doesn’t- want to ‘play the game’. That game is the only one in town, and it consists of keeping the established order in charge of everything, and of enhancing that power. It’s about politics, not economics. Or rather, the prevalent economic models suit the power elite just fine, so much so that their very faults help them stay in power, and nobody wants better models.

For trying to swim against that stream, you can blame Yanis, but that is the world turned upside down. Because if you look just a little bit closer, you can see that the present model is not only riddled with nonsensical assumptions, it is, because it is, destroying formerly sovereign nations.

For trying to prevent his country, Greece, from becoming the first nation in the formerly rich world to fall prey to that new-fangled colonialist model, Varoufakis deserves praise, not scorn. Do remember that when you see yet another ‘serious’ reviewer ridicule him for being naive. As in: who’s naive, you or Yanis? Is one naive for not kneeling before dictatorship disguised as democracy?

 

One last issue. It is often mentioned that the reason Brussels acts the way it does towards Greece is to scare off other EU members from ‘trying the same’, i.e. go against the rules set by the EU -which we, thanks to Yanis, know means Germany, and Germany only. But I don’t think that is true. It’s not about going against the EU; it’s doing anything. whatever it is, that would endanger the banks.

What the -scandalous- treatment of EU member and sovereign country Greece reveals is that it’s in the end not even Angela Merkel who calls the shots, but the main German, French, Dutch banks. Why the British would want to remain members of that kind of cabal will never cease to amaze me, but why their banks would does not in the least.

But yeah, so, the banks. That’s where it all started. Europe’s main banks lent Greek banks and corporations, all as corrupt as can be, money ‘up the wazoo’. When that could not be paid back this debt was not restructured, as it would be in any normal bankruptcy case, it was transferred first to the EU and then directly to Greek pensioners and other citizens. That is why Greece is in such a deplorable state.

The banks who made the loans were made whole, through a trick that hadn’t been tried before -and may not have been 100% legal but who cares about law in the EU?- and the entire mess was unloaded upon Greek society. Which is now in an even much bigger mess, with no end in sight, than when Varoufakis became finance minister. He knew that was coming and tried to prevent it.

What Merkel et al have done is to make sure that this ‘salvation’ of Deutsche Bank, Crédit Agricole et al will not be in peril. That’s more important to the system than Portugal or Italy questioning the powers of Berlin or Brussels. It’s not about scaring off other countries, it’s about safe-guarding the banks. It’s not about economics, it’s about raw political power.

In the next economic downfall, watch that dynamic. I’ve often said that the general principle of globalization/centralization, of which the EU is a good example, cannot stand in times of negative growth, because people won’t accept decisions about their lives being taken by far-away ‘leaders’ unless they think they can profit from it.

Wait till the realization dawns that Europe, like the rest of the world, only looks sort of okay because debt levels are rising everywhere. Mario Draghi still buys tens of billions of euros in ‘paper assets’ every month. That’s the European economy, that’s all that keeps it looking good, that’s the pig and that’s the lipstick, right there.

But forst and foremost, read the book. Yanis Varoufakis: “Adults in the Room”, subtitled “My Battle With Europe’s Deep Establishment”, published by The Bodley Head. If you’re at all interested in Greece, politics, economics, Michael Corleone, the EU, the IMF and/or the Sopranos. It reads like a train.

And it tells you a lot about how the world does (not) work. From the inside, and you don’t get to have a lot of views from the inside. “Adults in the Room” is a rare chance. The ruling powers will keep trying to discredit Yanis, but the more they do, the more you should be alerted.

 

 

Sep 042017
 
 September 4, 2017  Posted by at 7:38 am Finance Tagged with: , , , , , , , , , , ,  4 Responses »
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Edouard Manet Jeanne Duval, Baudelaire’s Mistress, Reclining (Lady with a Fan) 1862

 

How To Make The Financial System Radically Safer (AM)
Funding Battle Looms As Texas Sees Harvey Damage At Up To $180 Billion (R.)
Canadians Are Borrowing Against Real Estate At The Fastest Pace Ever (BD)
China Battles “Impossible Trinity” (Rickards)
Socialism For The Best Of Us, Capitalism For The Rest Of Us (CC)
Britain’s Addicted To Debt And Headed For A Crash (G.)
Global Negative Yielding Debt Hits One Year High Of $7.4 Trillion (ZH)
Greece Property Auctions Certain To Drive Market Prices Even Lower (K.)
Italy FinMin Says The Euro Zone Still Faces Problems – Even In Germany (CNBC)
Italy’s 5-Star Says Euro Referendum Is ‘Last Resort’ (R.)
Turkey Will Never Become EU Member, Says Angela Merkel (Ind.)
How Our Immune Systems Could Stop Humans Reaching Mars (Tel.)

 

 

Take away the political power of central banks.

How To Make The Financial System Radically Safer (AM)

At the same time, the new financial reforms haven’t minimized risk. Moreover, they’ve set taxpayers – that’s you – up for a future fleecing. Congressman Robert Pittenger elaborated this fact in a Forbes article last year: “Even Dodd-Frank’s biggest selling point, that it would end “too big to fail,” has proven false. Dodd-Frank actually created a new bailout fund for big banks–the Orderly Liquidation Authority–and the Systemically Important Financial Institution designation enshrines “too big to fail” by giving certain major financial institutions priority for future taxpayer-funded bailouts.” What gives? Regulations, in short, attempt to control something by edict. However, just because a law has been enacted doesn’t mean the world automatically bends to its will. In practice, regulations generally do a poor job at attaining their objectives. Yet, they often do a great job at making a mess of everything else.

Dictating how banks should allocate their loans, as Dodd-Frank does, results in preferential treatment of favored institutions and corporations. This, in itself, equates to stratified price controls on borrowers. And as elucidated by Senator Wallace Bennett over a half century ago, price controls are the equivalent of using adhesive tape to control diarrhea. The dangerous conceit of the clueless… the house of cards they have built is anything but “safe” and they most certainly can not “fix anything”. Listening to their speeches that seems to be what they genuinely believe. A rude awakening is an apodictic certainty, but we wonder what or who will be blamed this time. Not enough regulations? The largely absent free market? As they say, “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” (this quote is often erroneously attributed to Mark Twain: we think it doesn’t matter whether he created it, it is often quite apposite and this is a situation that certainly qualifies).

The point is that planning for future taxpayer-funded bailouts as part of compliance with destructive regulations is asinine. In this respect, we offer an approach that goes counter to Fed Chair Janet Yellen and the modus operandi of all central planner control freaks. It’s really simple, and really effective. The best way to regulate banks, lending institutions, corporate finance and the like, is to turn over regulatory control to the very exacting, and unsympathetic, order of the market. That is to have little to no regulations and one very specific and uncompromising provision: There will be absolutely, unconditionally, categorically, no government funded bailouts. Without question, the financial system will be radically safer.

Read more …

Want to bet it’ll be a lot more?

Funding Battle Looms As Texas Sees Harvey Damage At Up To $180 Billion (R.)

U.S. Treasury Secretary Steven Mnuchin on Sunday challenged Congress to raise the government’s debt limit in order to free up relief spending for Hurricane Harvey, a disaster that the governor of Texas said had caused up to $180 billion in damage. Harvey, which came ashore on Aug. 25 as the most powerful hurricane to hit Texas in more than 50 years, has killed an estimated 50 people, displaced more than 1 million and damaged some 200,000 homes in a path of destruction stretching for more than 300 miles (480 km). As the city of Houston and the region’s critical energy infrastructure began to recover nine days after the storm hit, the debate over how to pay for the disaster played out in Washington. Texas Governor Greg Abbott estimated damage at $150 billion to $180 billion, calling it more costly than Hurricanes Katrina or Sandy, which devastated New Orleans in 2005 and New York in 2012.

The administration of President Donald Trump has asked Congress for an initial $7.85 billion for recovery efforts, a fraction of what will eventually be needed. Even that amount could be delayed unless Congress quickly increases the government’s debt ceiling, Mnuchin said, as the United States is on track to hit its mandated borrowing limit by the end of the month unless Congress increases it. “Without raising the debt limit, I am not comfortable that we will get money to Texas this month to rebuild,” Mnuchin told Fox News. Republican lawmakers, who control both houses of Congress, have traditionally resisted raising the debt ceiling, but linking the issue to Harvey aid could force their hand with people suffering and large areas of the fourth-largest U.S. city under water. Beyond the immediate funding, any massive aid package faces budget pressures at a time when Trump is advocating for tax reform or tax cuts, leading some on Capitol Hill to suggest aid may be released in a series of appropriations.

Katrina set the record by costing U.S. taxpayers more than $110 billion. In advocating for funds to help rebuild his state, Abbott said damage from Harvey would exceed that. Houston Mayor Sylvester Turner said the city expected most public services and businesses to be restored by Tuesday, the first day after Monday’s Labor Day holiday. “Over 95% of the city is now dry. And I‘m encouraging people to get up and let’s get going,” Turner told NBC News. Even so, Houston mandated the evacuation of thousands of people on the western side of town on Sunday to accommodate the release of water from two reservoirs that otherwise might sustain damage. The storm stalled over Houston, dumping more than 50 inches (1.3 m) on the region. Houston cut off power to homes on Sunday to encourage evacuations. The area was closed off on Sunday and military vehicles were stationed on the periphery to take people out.

Read more …

What Canada learned from history.

Canadians Are Borrowing Against Real Estate At The Fastest Pace Ever (BD)

Canadian real estate prices have soared, and so did borrowing against that value. Our analysis of domestic bank filings from the Office of the Superintendent of Financial Institutions (OSFI) shows that loans secured against property has reached an all-time high. More surprising is the unprecedented rate of growth experienced this year.

Loans secured against residential real estate shattered a few records in June. Over $313.66 billion in real estate was used to secure loans, up 3.43% from the month before. The rise puts annual gains 11.16% higher than the same month last year, an increase of $31.51 billion. The monthly increase is the largest increase since March 2012. The annual gain is unprecedented according to an aggregate of domestic bank filings. Not all borrowing against residential property is all bad, sometimes it’s a calculated risk. For example, someone may need to secure a business loan, and use the loan for operating risks. It doesn’t mean the property is safe, but it’s a risk that could potentially boost the economy.

This is opposed to non-business loans, which is used as short-term financing. This type of financing is often used for things like renovations, and putting a fancy car in the driveway. Experts have observed that more homeowners are using these to prevent bankruptcy. Bottom line, it’s not typically healthy looking debt. So let’s remove loans obtained for business reasons, and take a peek at higher risk debt. The majority of these loans are non-business related according to bank filings. The current total is over $266 billion as of June 2017, a 1.01% increase from the month before. This is a 4.9% increase from the same month last year, which works out to $12.49 billion more. Fun fact, that’s around $23,763 per minute. The number is astronomical.

Read more …

“..no country can have an open capital account, a fixed exchange rate and an independent monetary policy at the same time..”

China Battles “Impossible Trinity” (Rickards)

The Impossible Trinity theory was advanced in the early 1960s by Nobel Prize-winning economist Robert Mundell. It says that no country can have an open capital account, a fixed exchange rate and an independent monetary policy at the same time. You can have one or two out of three, but not all three. If you try, you will fail — markets will make sure of that. Those failures (which do happen) represent some of the best profit-making opportunities of all. Understanding the Impossible Trinity is how George Soros broke the Bank of England on Sept. 16, 1992 (still referred to as “Black Wednesday” in British banking circles. Soros also made over $1 billion that day). The reason is that if more attractive total returns are available abroad, money will flee a home country at a fixed exchange rate to seek the higher return.

This will cause a foreign exchange crisis and a policy response that abandons one of the three policies. But just because the trinity is impossible in the long run does not mean it cannot be pursued in the short run. China is trying to peg the yuan to the U.S. dollar while maintaining a partially open capital account and semi-independent monetary policy. It’s a nice finesse, but isn’t sustainable. China cannot keep the capital account even partly closed for long without drying up direct foreign investment. Similarly, China cannot raise interest rates much higher without bankrupting state-owned enterprises. China is buying time until the Communist Party Congress in October. It’s important to realize that for Beijing, the Chinese economy is more than about jobs, goods and services. It’s a means of ensuring its legitimacy.

The Chinese regime is deeply concerned that a faltering economy and mass unemployment could threaten its hold on power. Chinese markets are wildly distorted by the actions of its central bank. Given the problems inherent in trying to manage an economy without proper price signals, the challenge facing Beijing gets harder by the day. China has a long history of violent political fracturing, and the government is deeply worried about regime survival if it stumbles. Many in the West fail to appreciate Beijing’s fears and overestimate the support it has among the disparate Chinese people. What does China do next? Under the unforgiving logic of the Impossible Trinity, China will have to either devalue the yuan or see its reserves evaporate. In the end, China will have to break the yuan’s peg to the dollar in order to stop capital outflows without killing the economy with high rates. The Impossible Trinity really is impossible in the long run. China will find this out the hard way.

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How do we make government independent?

Socialism For The Best Of Us, Capitalism For The Rest Of Us (CC)

To the elected darlings of the free market: I hate to burst your bubble but – you have been living a lie. Your lifetime government pensions: socialism. Overly generous retirement packages, Superannuation and 401ks: socialism. Travel budgets, expense accounts, access to private drivers and town cars, government reimbursement for travel and living arrangements: socialism, socialism, socialism, socialism, socialism. Central banking: socialism. Not to mention fossil-fuel & mining subsidies and tax concessions: socialism, socialism, socialism. The bank bail-outs of 2008: One of the greatest acts of socialism of all time. Where were our free-market representatives then? When the financial system went into melt-down, the banks were not told to suck it up and stand on their own two feet. More than a trillion dollars were poured into the banks, most of which went towards profit margins and CEO bonuses.

These so-called champions of capitalism have the nerve to claim that it is social welfare recipients that are a drain on the system while government representatives take home all kinds of state-provided benefits the rest of us could only dream of: the best health insurance the country has to offer, lifetime pensions and generous retirement packages which drain many more billions from the economy than social welfare ever will. Moreover, corporate welfare pales in comparison to either. The private sector has its own dole system paid for by Federal Governments. Yet many Congressmen, Representatives and MPs still have the nerve to stand before the people who elected them and rail against social spending, claiming people ought to pull themselves up by their bootstraps when no such obligation has ever existed for the corporate sector. Most of the world’s most successful corporations don’t get out of bed without a subsidy.

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If it makes you feel better: Britain’s not alone.

Britain’s Addicted To Debt And Headed For A Crash (G.)

[..] if the debtors at the bottom aren’t at crisis point yet, the signs of a surfeit of debt are everywhere. Alex Brazier, executive director of financial stability at the Bank of England, warned last month that consumer loans had gone up by 10% in the past year, with average household debt having already eclipsed 2008 levels. He warned against the economy having to sit through “endless repeats of the ‘Debt Strikes Back’ movie”. There is something obscurely insulting about being warned about household debt by the Bank of England. It never warns employers about stagnant wages, or the government about the benefit freeze. It only ever mentions these in terms of the impact of inflation, as if any consideration of the human decisions behind them are too political for comment. But personal debt, miraculously, isn’t political at all.

But that doesn’t make Brazier wrong. Edward Smythe of the campaign group Positive Money, breaks it down: “If you look at total outstanding consumer loans, in July, they’re at £200bn, an £18.5bn net increase every year.” Households spent more than their income by £17.5bn in the first quarter of this year. Economists are interested in where that money comes from – whether it’s access to credit, selling assets or spending savings. The government is presumably, in some dusty corner, interested in why that money is needed, whether it is a result of pauperised wages– real wage growth is negative and looks set to decrease – benefit changes, or some rush of blood to the head where we all suddenly need Sky Sports and cigarettes but aren’t prepared to work for them.

The sources of all this debt are changing: about half the net increase was in personal contract purchase car loans. Four in five new cars are now bought by PCP – an inherently unstable system that leaves both consumers and car manufacturers exposed. It’s a bit like a mortgage system for cars, except you don’t own it at the end, ideally you wouldn’t be living in it, and while a housing crash has been seen before, nobody yet knows what a car crash would look like. Student loan debt is counted separately from consumer loans, and stands at £13bn a year. However much you think you’ve accommodated student fees into your picture of Britons’ finances, it is always astounding to consider how life-changing that decision has been for the younger generation.

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“What global recovery?!”

Global Negative Yielding Debt Hits One Year High Of $7.4 Trillion (ZH)

Two weeks ago, we were surprised to find that despite the recent “growth promise” of what has been called a coordinated global recovery, the market value of bonds yielding less than 0% had quietly jumped by a quarter in just one month to the highest since October 2016. Since then, the paradoxical divergence between the reported “strong” state of the “reflating” global economy and the amount of negative yielding debt, has only grown, and as JPM reports as of Friday, Sept. 1, the global market value of government bonds trading with negative yield within the JPM GBI Broad index rose to $7.4 trillion, up 60% from its low of $4.6 trillion at the beginning of the year. Some more details from JPM:

We calculate the market value by multiplying the dirty price with the amount outstanding for each bond within JPM GBI Broad Index and then convert it to US dollars at today’s exchange rate. The market value of bonds trading with negative yield,including central banks’ purchases, stands at 30% of the total JPM GBI Broad index. What makes the latest rise in negative yielding debt especially bizarre is that it was mainly driven by Japan, where 10-year government bond yields have fallen significantly over the past month and have turned negative this week for first time since the US presidential election, even as the Bank of Japan has twice in the past month reduced the amount of JGB debt it purchases in the open market in the 5-to-10 year bucket, following on Friday, by a 30BN yen reduction of buying in the 3-to-5 year debt range.

As a result, the total universe of Japanese bonds trading with negative yield within the JPM global government bond index (GBI Broad) now stands at $4.6tr, or 62% of the outstanding amount. The remaining government bonds trading with negative yields worth $2.8 trillion are from Europe, of which more than half are from France and Germany.

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Capital destruction 101 (thanks, Schaeuble!):

“..the stock of unsold properties of all types comes to 270,000-280,000, in a market with no more than 15,000 transactions per year..”

BTW, the only buyers left are those who want to profit from Airbnb. Mostly foreigners.

Greece Property Auctions Certain To Drive Market Prices Even Lower (K.)

Professionals in the property sector are warning that the auctioning of tens of thousands of buildings in the next few years could evolve into an unknown – probably negative – factor regarding the course of prices in the market. It is estimated that a wave of auctions expected to begin soon will see market rates drop at least 10%. Clearing firms are currently involved in an extensive program of property valuations to establish starting prices for the auctions. Ilias Ziogas, head of property consultancy company NAI Hellas and one of the founding members of the Chartered Surveyors Association, said that the property market is certain to suffer further as a result of the auctions: “The impact on prices will be clearly negative, not because the price of a property will be far lower at the auction than a nearby property, but because it will diminish demand for the neighboring property.”

He added that a market with already reduced demand that receives more supply at more attractive rates through auctions will definitely see buyers turn to the latter. He also said that they will only look at other buildings if they are not satisfied with what the auctions have to offer. This view is also shared by Giorgos Litsas, head of the GLP Values chartered surveyor company, which cooperates with PQH. He told Kathimerini that the only way is down for market rates. “I believe that unless there is an unlikely coordination among the parties involved – i.e. the state (tax authorities, social security funds etc.), the banks and the clearing firms – in order to prevent too many properties coming onto the market at the same time, rates will go down by at least 10%.”

He noted that “we estimate the stock of unsold properties of all types comes to 270,000-280,000, in a market with no more than 15,000 transactions per year. Therefore the rise in supply will send prices tumbling.” Yiannis Xylas, founder of Geoaxis surveyors, added, “I fear the auctions will create an oversupply of properties without the corresponding demand, which translates into an immediate drop in rates that may be rapid if one adds the portfolios of bad loans secured on properties that will be sold to foreign funds at a fraction of their price.”

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He sounds confused.

Italy FinMin Says The Euro Zone Still Faces Problems – Even In Germany (CNBC)

Italy’s finance minister delivered an upbeat tone on his country’s banking sector but highlighted that major hurdles still remain in the euro zone, including in Germany. Germany might be known as the powerhouse of the euro zone economy but it has its own banking problems to deal with, Pier Carlo Padoan told CNBC on the sidelines of the Ambrosetti Forum on Sunday. “I think that there are some German banking problems and I’m confident the German authorities will deal with them,” Padoan said when asked about remarks made by former Prime Minister Matteo Renzi last year. “Germany has been the country that has by far poured much more public money into the banking sector in terms of the hundreds of billions of euros in the past when the rules where different of course.

This is a sign that maybe we all have to recognize that we have problems and we all have to recognize that we need to cooperate much more effectively to provide European solutions to those problems,” he said. Though Italy keeps making headlines due to its financial sector, analysts have also warned on banking problems in Germany. These include the reliance on the shipping industry, which used to be a stable investment before the euro zone debt crisis. Other issues include the sheer number of banks in Germany with very little consolidation. There are approximately 2,400 separate banks with more than 45,000 branches throughout the country and over 700,000 employees, according to Commercial Banks Guide, an industry website.

As such, Padoan told CNBC that it is crucial to conclude the banking union – a project created in 2012 in response to the sovereign debt crisis that aims to have one single set of rules for all banks across the European Union. He told CNBC that so far the banking union hasn’t been fully implemented, not because of resistance from certain countries, but because of different national perspectives. “We are however making progress in one thing: That we are building trust among ourselves and we are also recognizing that we have to reconcile historically-driven different traditions in banking sectors and they have to merge into a new European banking culture,” Padoan said.

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He sounds like Varoufakis.

Italy’s 5-Star Says Euro Referendum Is ‘Last Resort’ (R.)

A referendum on Italy’s membership of the euro currency would be held only as a “last resort” if Rome does not win any fiscal concessions from the European Union, a senior lawmaker from the anti-establishment Five-Star Movement said on Sunday. Luigi Di Maio’s comments reflect a striking change of tone by some senior officials in the party in recent months as they have retreated from 5-Star’s original pledge. Seeking to reassure an audience of bankers and business leaders, Di Maio – widely tipped to be 5-Star’s candidate for prime minister at a general election due by next year – played down the referendum proposal, calling it a negotiating tool with the EU. “Austerity policies have not worked, on monetary policy we deserve the credit for triggering a debate… this is why we raised the issue of a referendum on the euro, as a bargaining tool, as a last resort and a way out in case Mediterranean countries are not listened to,” he said.

Two years ago the party gathered the signatures from the public needed to pave the way for a referendum that it said was vital to restore Italy’s fiscal and monetary sovereignty. But now, running neck-and-neck with the ruling Democratic Party (PD) in opinion polls and with the election in sight – scheduled to be held by May 2018 – it is hitting the brakes on the idea. This underlines the crucial challenge facing the party as it seeks to please some core supporters, while trying to shed its populist image and convince foreign capitals and financial markets that it can be trusted in office. [..] The party wants several changes to the euro zone’s economic rules to help its more sluggish economies, like Italy. These include stripping public investment from budget deficits under the EU’s Stability Pact and creating a European “bad bank” to deal with euro zone lenders’ bad loans.

“We are not against the European Union, we want to remain in the EU and discuss some of the rules that are suffocating and damaging our economy,” said Di Maio, who serves as deputy speaker of the Chamber of Deputies. An opinion poll in La Stampa daily on Sunday had 24% of respondents saying Di Maio most deserved to run the country in the next five years, against 17% for former PD Prime Minister Matteo Renzi and 12% for center-right leader Silvio Berlusconi.

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Schulz and Merkel are the same person.

Turkey Will Never Become EU Member, Says Angela Merkel (Ind.)

Germany’s Chancellor, Angela Merkel, has said Turkey should categorically not become a member of the European Union in comments that are expected to further inflame tensions between the Nato allies. Speaking at a televised election debate with her rival, Martin Schulz, she said she would seek a joint EU position with other leaders to ensure Turkey never became a member. “The fact is clear that Turkey should not become a member of the EU,” she said after Mr Schulz said he would stop Turkey’s bid to join the EU if he was elected chancellor. “Apart from this, I’ll speak to my colleagues to see if we can reach a joint position on this so that we can end these accession talks,” she added.

[..] Her comments are likely to worsen already strained ties between the countries after Ms Merkel said Berlin should react decisively to Turkey’s detention of two more German citizens on political charges. It comes just weeks after German Foreign Minister Sigmar Gabriel told Turkey it will never become a member of the EU as long as it is governed by the current president, Recep Tayyip Erdogan. “It is clear that in this state, Turkey will never become a member of the EU,” Mr Gabriel said. Mr Erdogan has urged German Turks to boycott Germany’s main parties in next month’s general election.

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Good to know. Still, if people really want to go, maybe we should just let them.

How Our Immune Systems Could Stop Humans Reaching Mars (Tel.)

The astrophysicist Neil DeGrasse Tyson commented that ‘dinosaurs are extinct today because they lacked the opposable thumbs and brainpower to build a space programme’ Yet although we now have the technological ability to leave Earth, scientists have found another stumbling block to colonising new worlds – our own immune system. Although it is said we are all made of ‘star stuff’ when it comes to travelling away from our home planet humans are far more vulnerable to the rigours of space than our interstellar origins might suggest. Billions of years of evolution has effectively backed mankind into a corner of the Solar System that it may be now be tricky to leave. A team of scientists from Russia and Canada analysed the effect of microgravity on the protein make-up in blood samples of 18 Russian cosmonauts who lived on the International Space Station for six months.

They found alarming changes to the immune system, suggesting that they would struggle to shake off even a minor virus, like the common cold. “The results showed that in weightlessness, the immune system acts like it does when the body is infected because the human body doesn’t know what to do and tries to turn on all possible defense systems,” said Professor Evgeny Nikolaev, of Moscow Institute of Physics and Technology and theSkolkovo Institute of Science and Technology. The effects of spaceflight on the human body have been studied actively since the mid-20th century and it is widely known that microgravity influences metabolism, heat regulation, heart rhythm, muscle tone, bone density, the respiration system. Last year research from the US also found that astronauts who travelled into deep space on lunar missions were five times more likely to have died from cardiovascular disease than those who went into low orbit, or never left Earth.

Astronauts are fitter than the general population and have access to the best medical care, meaning that their health is usually better than the general population. Those of comparable age but who never flew, or only achieved low Earth orbit, had less than a one in 10 chance of death from cardiovascular disease. [..] To gain a deeper understanding of the changes in human physiology during space travel, the research team quantified concentrations of 125 proteins in the blood plasma of cosmonauts. Proteins change as the immune system alters and so can be used as a measure of how it is functioning. Blood was taken from the cosmonauts 30 days before they travelled to the ISS and then on their immediate return to Earth. They were also tested seven days after touchdown. Individual proteins were then counted using a mass spectrometer.

”When we examined the cosmonauts after their being in space for half a year, their immune system was weakened,” said Dr Irina Larina, the first author of the paper, a member of Laboratory of Ion and Molecular Physics of Moscow Institute of Physics and Technology. “They were not protected from the simplest viruses. We need new measures of disorder prevention during a long flight.

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Aug 132017
 
 August 13, 2017  Posted by at 9:20 am Finance Tagged with: , , , , , , , , ,  3 Responses »
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Vincent van Gogh Still life with bible 1885

 

China Takes On State-Owned Firms (Balding)
Trump Warns Xi: Trade War With China Begins Monday (ZH)
The Actual Terrorists (PCR)
How Money Launderers Used Commonwealth Bank of Australia (CNBC)
The Euro Area Is Due for a Reboot. Here’s What Is Being Proposed
Italy’s Midsummer Dream: Shaking Off Sick Man of Europe Label (BBG)
Greece Seen Needing Credit Line To Exit Program (K.)
Stop Targeting the Greeks, says Merkel in First Pre-Election Rally (GR)
Canada Orders Ships To Reduce Speed To Prevent Whale Deaths
Scientists Discover 91 Volcanoes Below Antarctic Ice Sheet (G.)

 

 

A very communist style economy still.

China Takes On State-Owned Firms (Balding)

A little-noticed statement last week could portend the next big battle in China’s effort to control its debt. On Aug. 2, the finance ministry issued directives that state-owned companies improve returns, control risks and make sure that “projects are financially viable before decisions are made.” That the government feels the need to spell out such obvious goals tells you the depth of the problem. China’s sprawling array of state-owned enterprises — with millions of employees across all sectors of the economy — may be the biggest obstacle to its broader effort at financial reform. Previous attempts to rein them in have largely failed. But if the government has any hope of real deleveraging, this time will have to be different. SOEs are huge, and so are their liabilities. They’re responsible for non-financial corporate debt equal to 90% of GDP.

Facing limited competitive pressure, they’ve driven the worst of China’s debt-led excess: Return on assets for these firms in 2016 was a paltry 2.9%, compared to 10.2% in the private sector. One reason is that China’s banking industry, which is itself almost exclusively state-owned, channels loans to SOEs in the expectation that they’ll have an implicit government guarantee. SOEs provide only 16% of China’s jobs and less than a third of its output, but they receive an astonishing 30% of all loans. With credit so easily available, they have little incentive to economize. They’re also burdened with conflicts of interest. Despite the new directive to focus on profitability, SOEs are still subject to orders from Party committees that sit above their corporate boards. Some firms have chafed at this arrangement, but in general political objectives – such as maximizing local employment – take priority over profits. Party leaders even refer to privatization as “wrongheaded thinking.”

China’s “Belt and Road” initiative offers a case in point. Even amid a broad crackdown on overseas investment, firms are being prodded to plow hundreds of billions of dollars into the initiative — mostly for unprofitable infrastructure projects — while simultaneously being told to prioritize return on investment. They can be forgiven for being a little confused. Given all these challenges, complying with the new directives will be difficult. Regulators have tried numerous reform strategies in the past. One has been to merge multiple inefficient SOEs, in the unlikely hope that combined they will create one efficient SOE. Another has been to draw distinctions between “commercial” and “public service” SOEs, hoping to give the former some private-sector-like flexibility. But as long as these companies can fall back on favorable bank loans, the impetus to improve efficiency will be limited.

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Xi understands. But the risk is he will use it as a rallying cry at the Communist Party Congress in the fall.

BTW, I don’t want to comment on Charlottesville. Other than: there’s so much underlying hatred in America, built up over so many years, and something other than blame seems necessary.

Trump Warns Xi: Trade War With China Begins Monday (ZH)

As if there weren’t enough geopolitical stress points in the world to fill a lifetime of “sleepy, vacationy” Augusts, late on Friday night President Trump spoke to Chinese President Xi Jinping and told him that he’s preparing to order an investigation into Chinese trade practices next week, according to NBC. Politico confirms that Trump is ready to launch a new trade crackdown on China next week, citing an administration official, a step that Trump delayed two weeks ago under the guidance of his new Chief of Staff Gen. Kelly, but now appears imminent. It is also an escalation which most analysts agree will launch a trade war between Washington and Beijing. As Politico details, Trump on Monday will call for an investigation into China over allegations that the nation violated U.S. intellectual property rights and forced technology transfers, the official said.

While it’s unclear how much detail Trump will get into in the announcement, administration officials expect U.S. Trade Representative Robert Lighthizer to open an investigation against China under Section 301 of the Trade Act of 1974. The ordering of the investigation will not immediately impose sanctions but could lead to steep tariffs on Chinese goods. Trump has expressed frustration in recent months over what he sees as China’s unfair trade policies. As we discussed two weeks ago, Trump had planned to launch the trade investigation more than a week ago, but he delayed the move in favor of securing China’s support for expanded U.N. sanctions against North Korea, the senior administration official said.

The pending announcement also comes amid heightened tension between the United States and China, even after the Trump administration scored a victory in persuading Beijing to sign onto new United Nations sanctions on North Korea. Still, Trump has delayed trade action before, amid pressure from business groups and major trading partners: Two Commerce Department reports examining whether to restrict steel and aluminum imports on national security grounds were expected by the end of June but have been bottled up in an internal review. Trading partners raised threats of retaliation and domestic steel users complained of being hurt by price increases and restricted supply.

The trade investigation will immediately strain relations between the U.S. and China as the two countries wrestle with the unpredictable situation over North Korea. Should Trump follow through, the move will lay the groundwork for Trump to impose tariffs against Chinese imports, which will mark a significant escalation in his efforts to reshape the trade relationship between the world’s two largest economies. In other words, even if there is now conventional war announced with either North Korea or Venezuela, Trump’s next step is to launch a trade war against China.

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Bit confusing at times with reagrds to who said what, but the gist is clear.

The Actual Terrorists (PCR)

This is an article written by an Austrian, Klaus Madersbacher, who, somehow, was able to see through the heavy blanket of Amerian propaganda that suffocates the ability to think and to pereive throughout the entirety of Europe. He correctly undersands the Western destruction of Libya as a war crime. Germans were executed by the Nuremberg Tribunal for less. Madersbacher is correct that Libya was a monstrous war crime committed by the Obama regime and Washington’s NATO puppets. However, Libya is a worse crime than the Nazis committed, as is Afghanistan, Iraq, Yeman, Somalia, and parts of Syria. The Germans never destroyed entire countries and murdered the leaderships. Life in Nazi-occupied France was not as pleasant as in unoccupied France, but it was far more pleasant than life today in Afghanistan, Iraq, Libya, Somalis, Yemem, and part of Syria after America “brought democracy” to the countries.

Under the Nuremberg standard, the country (or countries) that originates war is the country that is responsible for the war crimes. The irony is that World War 2 was the responsibility of the British and French who started the war by declaring war on Germany. So under the Nuremberg standard it is Britian and France who are responsible for the war crimes. Madersbacher believes, as I did prior to reading David Irving’s book, Nuremberg, that Robert Jackson, the chief prosecutor, succeeded in establishing the legal principle that it is a war crime to launch a war of aggression. In actual fact, the principle was not established. Irving points out that no other Tribunal was ever formed until the Clinton regime sent the Serbian president, Milosevic, to a tribunal that cleared Milosevic of the orchestrated charges.

Of course, as Madersbacher understands, for now Washington’s “might makes right” prevails, and no one is going to send the criminal regines of Clinton, George W. Bush, Obama, and Trump if he follows their path, to a War Crimes Tribunal. But if Washington one day is militarily defeated or suffers economic collapse that makes the US dependent on foreign support, Washington’s war criminals, who exceed in number Nazi war criminals, could be finally held accountable. As Madersbacher writes, we await a Stalingrad 2.0 that paves the way to a Nuremberg 2.0.

The actual terrorists – Klaus Madersbacher, www.antikrieg.com

”Sometimes I ask myself about the value of a ‘culture’ which isn´t able to provide people with sufficient mental capacity to enable them to recognize if they are lied to as impudently as it is presently done by the media. It doesn´t need to be said that these are targeting the interests of the overwhelming majority of mankind.” I wrote this in July 2011, when three big European nations of culture and civilization together with some smaller ones under the leadership of the cultural superpower bombed peaceful Libya into ruins and systematically devastated the whole country. This is exactly the kind of crime the Nazi leaders have been hanged for. The crime against peace, which apparently only very few seem to know that it does exist at all. The crime against peace – “To initiate a war of aggression, therefore, is not only an international crime, it is the supreme international crime differing only from other war crimes in that it contains within itself the accumulated evil of the whole.” – the International Court at Nuremberg declared.

Simply said that means, that the party which initiates a war is responsible for all crimes committed in the context of this war. In the next two paragraphs, Madersbacher is saying, I think, that countries called democracies are excluded as war criminals because a parliament or congress acting for the people fund the war. He disagrees, correctly in my opinion, from this excuse for criminality. It’s not like that, that killing or hurting people in war is no crime, that the destruction of houses etc. is no crime, when carried out by means of high tech war machinery by armies financed by a budget decided by a parliament. Even if such outstanding democratic institutions as the Congress of the United States of America, her Majesties´ Parliament or the German Bundestag authorize such activities, this wouldn´t change a fart of the fact that these are crimes.

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Slap on the wrist. Want to bet?

How Money Launderers Used Commonwealth Bank of Australia (CNBC)

In a run-down mall in one of Sydney’s biggest Chinese neighborhoods in 2015, 29-year-old Jizhang Lu showed up at the top-floor offices of a meat export company carrying a carrier bag stuffed with hundreds of thousands of dollars in cash. According to police documents filed in court and reviewed by Reuters, Lu said he made the trip to the shopfront of CC&B International eight times over three weeks. Each time a CC&B employee would hand him a receipt showing a different company had bought tens of thousands of kilograms of meat. The cash — as much as A$530,200 ($416,840) at a time — was then deposited at a Commonwealth Bank of Australia (CBA) branch, according to the police statement of facts agreed by Lu.

But the apparent purchases were fake, and last year Lu was jailed for two years after pleading guilty to helping launder A$3.2 million of what police allege were proceeds from an unidentified international drug syndicate. The court records reviewed by Reuters did not name Lu’s lawyer. Lu could not immediately be contacted directly because he was in custody. The police case against Lu is now one of several being cited by financial intelligence agency AUSTRAC in its statement of claim against CBA, the largest civil court action of its kind in Australian corporate history.

AUSTRAC has accused CBA of “serious and systemic” breaches of money-laundering and counter-terrorism financing rules, alleging the country’s second biggest mortgage lender failed to detect suspicious transactions nearly 54,000 times. It faces fines potentially amounting to billions of dollars. CBA has said it will fight the AUSTRAC lawsuit, saying it would never deliberately undertake action that enables any form of crime. CBA said a coding error with new automated teller machines was behind most of the breaches but that it recognized there were “other serious allegations” in AUSTRAC’s claim were unrelated to that software problem.

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Europe needs to step back from these ever more Europe plans.

The Euro Area Is Due for a Reboot. Here’s What Is Being Proposed

When France elected Emmanuel Macron in May, the prospects of mending the euro’s inherent flaws suddenly brightened. Adopted in 1999, the common European currency was intended as a political project to foster unity, but the crisis in Greece a decade later exposed the euro’s inability to enforce shared rules, principally on government debt and spending. The French president is pushing for greater fiscal integration among the 19 nations that now use the euro as a way to address at least some of those shortcomings. With Germany indicating an openness to Macron’s calls, the political stars may be aligning to overhaul the euro, and so reboot the European Union.

A common budget Macron has proposed the creation of a euro-area budget, aiming to help fund investments to boost growth, provide emergency financial assistance and streamline the bloc’s response to economic crises. While nations would still have discretion over their own budgets, this common pool of resources could be a boon during periods of financial turmoil and would reduce reliance on the European Central Bank to stimulate the euro-zone economy. Access to this budget would be contingent on states sticking to the bloc’s rules. German Chancellor Angela Merkel has said she’s open to the idea. “I’ve personally always said: it depends on how,” Merkel said during a July 13 press conference in Paris. “I have nothing against a euro-area budget. I have proposed in 2012 a smaller euro-area budget and failed miserably.” “I’m very glad that this idea is being introduced again,” she said.

A single finance minister Macron has also proposed creating the role of a finance chief for the euro area, an idea long supported by German Finance Minister Wolfgang Schaeuble. This person would be responsible for a budget and could operate under the supervision of the European Parliament. Schaeuble has said that such a change would require adjusting EU treaties, which isn’t realistic at the moment.

Debt sharing Perhaps the most controversial proposal is the issuance of debt that would be guaranteed by the euro states, an idea that has been rejected by Schaeuble as putting too much risk on taxpayers. In an effort to quell objections, the commission floated the creation of so-called European Safe Assets, a financial instrument that would bundle sovereign debt from across the currency bloc so it can be sold to investors as one product.

A European Monetary Fund One idea supported by large euro-area members including Germany is to turn the Luxembourg-based European Stability Mechanism – the euro-area bailout fund – into a European Monetary Fund by giving it greater power on fiscal monitoring and more say over future rescue programs. This would allow the fund to monitor the finances of countries that are in trouble and oversee future bailouts, a move that could take some powers away from the European Commission, which is in charge of fiscal surveillance. Giving the ESM a broader remit would also hand more powers to the fund’s board of governors — euro-area finance ministers themselves. Germany is in favor, pushing to strengthen the role of the fund, while the commission would most likely prefer to keep as many of its powers concentrated in Brussels.

Completing the banking union Many officials argue that the most crucial reforms are in the field of financial regulation. This primarily means concluding the so-called third leg of the banking union: a common deposit guarantee framework. Germany has so far resisted, concerned that its taxpayers might end up responsible for problems lurking on bank balance sheets in other countries. Instead, Berlin is seeking risk reduction among member states through limiting lenders’ exposure to government debt. But this idea has few supporters (beyond Germany, only Finland and the Netherlands have been in favor) and has been vehemently opposed by other countries such as Italy. States are also trying to complete the establishment of a common financial backstop to the single resolution fund, an entity designed to foot the bill for winding down failed banks. While the commission and countries including France and Italy have been pushing for the ESM to offer a credit line for that backstop, Germany has been strongly opposed.

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Something tells me it’s much worse than this.

Italy’s Midsummer Dream: Shaking Off Sick Man of Europe Label (BBG)

Italy is working hard to shake off the sick man tag. Through government tensions, bank rescues and a migrant crisis, business sentiment has improved and the economy managed to maintain consistent growth after multiple false dawns. A report on second-quarter economic expansion this week is expected to top off a streak of encouraging numbers ranging from the labor market to exports. Yet, the country still has challenges from a drought that hit farming and – longer term – a less favorable monetary policy and elections next year that may produce a hung parliament. GDP probably rose 0.4% in the three months through June, economists forecast, matching the pace of the previous quarter. That gain would boost expectations that full-year growth could top 1% for first time since 2010, helping the economy regain ground lost in the financial crisis of a decade ago.

Italy’s recovery from a record-long recession is still lagging behind growth in euro-area peers Germany, France and Spain, while the economy faces more uncertainty in the coming months. Elections are due in the first half of next year and about the same time the ECB is expected to start rolling back its stimulus, progressively reducing its purchase of Italy’s government bonds. Finance Minister Pier Carlo Padoan has downplayed the effect of less expansionary monetary conditions, telling SkyTg24 television on Aug. 3 that the economy is strong enough to withstand higher interest rates and bond yields. According to UniCredit economist Loredana Federico, a 0.4% quarterly growth pace would help Italy reduce its debt ratio, which at more than 130% of GDP is the second highest in the euro area. “It would certainly allow it to weather the possible difficulties of higher debt-financing costs” as quantitative easing ends, she said.

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Keep walking in chains.

Greece Seen Needing Credit Line To Exit Program (K.)

Not everyone in the government shares the optimism that Prime Minister Alexis Tsipras expressed recently that Greece will be able to achieve a “clean exit” from the bailout program in August 2018, in other words without the support of a credit line. Finance Ministry officials are preparing for the start of the third review, which involves pushing through a number of prior actions that have to be completed. They are also preparing new legislation and planning for the possibility of Greece needing a credit line after the bailout program ends. This would come with conditions, although they would be less strict than the terms Athens currently has to meet. In its strictest form, the European Stability Mechanism’s credit line, or ECCL, foresees a quarterly review. It is said that finance ministers are always more conservative than their prime ministers and it appears that Euclid Tsakalotos is no exception.

For Greece to make a clean exit from its program, it needs the full confidence of the markets so that it can borrow at a reasonable rate. Sources on the institutions’ side do not believe this will be possible. The credit line would provide some security, helping secure better borrowing terms from the market. Exactly what will happen, though, is still under discussion. The third review is expected to begin after the German elections, which are scheduled for September 24. According to sources, though, the Greek negotiating team will hold preliminary talks with the lenders toward the end of August or beginning of September either via teleconference or in Brussels. The aim of the meeting will be to set a timetable for the negotiations.

[..] The Finance Ministry does not foresee the IMF asking for additional measures in 2018, even though the IMF does not expect Greece to reach its 3.5% of GDP primary surplus target. Athens does not rule out the possibility that the IMF will ask for the reduction to the tax-free threshold to be brought forward by a year and implemented in 2019, along with the planned pension cuts.

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No one has more responsibility for what happened to Greece than Merkel, but: “We should not generalize and say that Greeks cannot work, or that the Germans have a fetish with austerity. Every person has its own dignity..”

Stop Targeting the Greeks, says Merkel in First Pre-Election Rally (GR)

Chancellor Angela Merkel kicked off her re-election campaign on Saturday with a plea to European solidarity and the values that govern the European Union. Speaking in Dortmund, she focused mainly on the economy, but she also highlighted the importance of the EU for Germany. “It should be clear that, despite the difficulties, it is in our own interest, in the interests of peace and prosperity that we remain engaged in Europe,” she said. In this context and referring to the values that govern the EU – “freedom, solidarity, justice, social market economy, protection of human dignity” – the Chancellor asked everyone to refrain from targeting other nations and stop categorizing them.

“We should not generalize and say that Greeks cannot work, or that the Germans have a fetish with austerity. Every person has its own dignity…In Germany, as in any other nation, there are both lazy and hardworking people,” she said. Merkel is far ahead of her rivals in opinion polls but, wary of complacency setting in among her supporters, she plans 50 rallies in towns and cities across Germany in the run-up to the September 24 election, when she will seek a fourth term in office.

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Horses and barns.

Canada Orders Ships To Reduce Speed To Prevent Whale Deaths

Certain ships are being ordered to reduce speed because of the deaths of at least 10 North Atlantic right whales in Canada’s Gulf of St Lawrence during the past two months, the government said on Friday. The deaths have made 2017 the deadliest year for the endangered marine mammal since scientists began tracking their numbers in the 1980s, researchers said. The ministries of transport and fisheries issued a temporary order for vessels 20 meters or longer to slow to a maximum of 10 knots in the western portion of the Gulf, which stretches from Quebec to north of Prince Edward Island. There have been an increase in right whales in the area over the last three to four years, said Tonya Wimmer, director of the Marine Animal Response Society.

Human activity has caused at least some of the deaths. Three whales died from blunt force trauma consistent with being struck by a large vessel and one was entangled in fishing nets. Wimmer said reducing ship speeds can improve the chance of survival for the whales. The whales can weigh up to 96,000 kilograms (105.8 tons). The order will be enforced by Transport Canada inspectors and the Canadian Coast Guard. It is effective immediately and will be lifted once the whales have migrated from the area, usually by the time of the northern winter. Ships violating the order could be fined up to C$25,000 ($19,706.76). There are only 300 to 500 North Atlantic right whales left, and despite conservation efforts since the 1930s, there is no evidence of population growth, according to the World Wide Fund for Nature (WWF).

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“..the densest region of volcanoes in the world..”

Scientists Discover 91 Volcanoes Below Antarctic Ice Sheet (G.)

Scientists have uncovered the largest volcanic region on Earth – two kilometres below the surface of the vast ice sheet that covers west Antarctica. The project, by Edinburgh University researchers, has revealed almost 100 volcanoes – with the highest as tall as the Eiger, which stands at almost 4,000 metres in Switzerland. Geologists say this huge region is likely to dwarf that of east Africa’s volcanic ridge, currently rated the densest concentration of volcanoes in the world. And the activity of this range could have worrying consequences, they have warned. “If one of these volcanoes were to erupt it could further destabilise west Antarctica’s ice sheets,” said glacier expert Robert Bingham, one of the paper’s authors. “Anything that causes the melting of ice – which an eruption certainly would – is likely to speed up the flow of ice into the sea. “The big question is: how active are these volcanoes? That is something we need to determine as quickly as possible.”

The Edinburgh volcano survey, reported in the Geological Society’s special publications series, involved studying the underside of the west Antarctica ice sheet for hidden peaks of basalt rock similar to those produced by the region’s other volcanoes. Their tips actually lie above the ice and have been spotted by polar explorers over the past century. But how many lie below the ice? This question was originally asked by the team’s youngest member, Max Van Wyk de Vries, an undergraduate at the university’s school of geosciences and a self-confessed volcano fanatic. He set up the project with the help of Bingham. Their study involved analysing measurements made by previous surveys, which involved the use of ice-penetrating radar, carried either by planes or land vehicles, to survey strips of the west Antarctic ice.

[..] These newly discovered volcanoes range in height from 100 to 3,850 metres. All are covered in ice, which sometimes lies in layers that are more than 4km thick in the region. These active peaks are concentrated in a region known as the west Antarctic rift system, which stretches 3,500km from Antarctica’s Ross ice shelf to the Antarctic peninsula. “We were amazed,” Bingham said. “We had not expected to find anything like that number. We have almost trebled the number of volcanoes known to exist in west Antarctica. We also suspect there are even more on the bed of the sea that lies under the Ross ice shelf, so that I think it is very likely this region will turn out to be the densest region of volcanoes in the world, greater even than east Africa, where mounts Nyiragongo, Kilimanjaro, Longonot and all the other active volcanoes are concentrated.”

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Aug 062017
 
 August 6, 2017  Posted by at 8:26 am Finance Tagged with: , , , , , , , , ,  7 Responses »
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Giorgio de Chirico Piazza d’Italia 1913

 

The Bursting of the China Credit Bubble (Crescat)
The Swamp Is So Undrainable It Will End Up Making Mincemeat Of Trump (Stockman)
How The Trump Administration Broke The State Department (FP)
Have Smartphones Destroyed a Generation? (Atl.)
Amazon Isn’t The No. 1 Villain In Retail Sector’s Demise (Katsenelson)
On The Beach (John Pilger)
Merkel Is Kowtowing To The German Car Industry (Spiegel)
North Korea Sanctions Bring Nuclear Issue To ‘Critical Phase’, Says China (G.)
What If Every Government Paid Off Its National Debt? (Connelly)
Are Greek Capital Controls Easing? (K.)
More People Live Inside This Circle Than Outside It (WEF)
Is Global Ocean Circulation Collapsing? (Forbes)

 

 

A tour de force PDF by private firm Crescat on China and its potential influence on the world of finance. It echoes a longtime theme of mine: China’s shadow banking sector could bring it all down.

The Bursting of the China Credit Bubble (Crescat)

History has proven that credit bubbles always burst. China by far is the biggest credit bubble in the world today. We layout the proof herein. There are many indicators signaling that the bursting of the China credit bubble is imminent, which we also enumerate. The bursting of the China credit bubble poses tremendous risk of global contagion because it coincides with record valuations for equities, real estate, and risky credit around the world. The Bank for International Settlements (BIS) has identified an important warning signal to identify credit bubbles that are poised to trigger a banking crisis across different countries: Unsustainable credit growth relative to GDP in the household and (non-financial) corporate sector. Three large (G-20) countries are flashing warning signals today for impending banking crises based on such imbalances: China, Canada, and Australia.

The three credit bubbles shown in the chart above are connected. Canada and Australia export raw materials to China and have been part of China’s excessive housing and infrastructure expansion over the last two decades. In turn, these countries have been significant recipients of capital inflows from Chinese real estate speculators that have contributed to Canadian and Australian housing bubbles. In all three countries, domestic credit-to-GDP expansion financed by banks has created asset bubbles in self-reinforcing but unsustainable fashion. Post the 2008 global financial crisis, the world’s central bankers have kept interest rates low and delivered just the right amount of quantitative easing in aggregate to levitate global debt, equity, and real estate valuations to the highest they have ever been relative to income.

Across all sectors of the world economy: household, corporate, government, and financial, the world’s aggregate debt relative to its collective GDP (gross world product) is the highest it has ever been. Central banks have pumped up the valuation of equities too. The S&P 500 has a cyclically adjusted P/E of almost 30 versus a median of 16, exceeded only in 1929 and the 2000 tech bubble. The US markets are also in a valuation bubble because US-owned financial assets have never been more richly valued relative to income as we show below. The picture is equally frothy if we include real estate, also at record valuations to income. China’s capital outflow spillover from its credit bubble has driven up real estate valuations around the world.

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“And then the Donald will be gone, and well before August 2018, too…”

The Swamp Is So Undrainable It Will End Up Making Mincemeat Of Trump (Stockman)

What will be the trigger that finally sends the establishment after Trump? Ultimately, the hammer of fiscal crisis and a crashing stock market will break any remaining loyalty of the GOP elders as they smell the 2018 elections turning into a replay of the rout of 1974. And then the Donald will be gone, and well before August 2018, too. I told an audience in Vancouver last Friday that it could happen by February. The bottom line is that the Swamp is so undrainable that it will end up making mincemeat of Donald Trump. Needless to say, the ultimate causes of his demise are anchored deep in the failing status quo. America is so addicted to war, debt and central bank driven false prosperity that even the most resourceful and focused challenger would be taken down by its sheer inertia.

But the Donald is so undisciplined, naïve, out-of-touch, thin-skinned, unfocused and megalomaniacal that he is making it far easier for the Swamp critters than they deserve. To a very considerable extent, in fact, he is filling out his own bill of indictment. Moreover, he is totally clueless about how to manage his presidency or cope with the circling long knives of the Deep State which are hell bent on removing him from office. Accordingly, the single most important thing to know about the present risk environment is that it is extreme and unprecedented. In essence, the Donald is the ultimate bull in an exceedingly fragile China shop — and an already badly wounded one at that. So it is no understatement to suggest that the S&P 500 at 2470 and the Dow at 22,000 is about as fragile as the “market” has ever been.

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Is Trump trying the drain the swamp anyway? Or Tillerson? Foreign Policy can’t quite decide on the latter. But these lines, intended as positives, sort of say it all:

“..the legacy of decades of American diplomacy is at risk..”, or this one: “I used to wake up every morning with a vision about how to do the work to make the world a better place..”

How The Trump Administration Broke The State Department (FP)

Employees at the State Department couldn’t help but notice the stacks of cubicles lined up in the corridor of the seventh floor. For diplomats at the department, it was the latest sign of the “empire” being built by Secretary of State Rex Tillerson’s top aides. The cubicles are needed to accommodate dozens of outsiders being hired to work in a dramatically expanded front office that is supposed to advise Tillerson on policy. Foreign service officers see this expansion as a “parallel department” that could effectively shut off the secretary and his advisors from the career employees in the rest of the building. The new hires, several State officials told Foreign Policy, will be working for the policy planning staff, a small office set up in 1947 to provide strategic advice to the secretary that typically has about 20-25 people on its payroll.

One senior State Department official and one recently retired diplomat told FP that Tillerson has plans to double or perhaps triple its size, even as he proposes a sweeping reorganization and drastic cuts to the State Department workforce. Veterans of the U.S. diplomatic corps say the expanding front office is part of an unprecedented assault on the State Department: A hostile White House is slashing its budget, the rank and file are cut off from a detached leader, and morale has plunged to historic lows. They say President Donald Trump and his administration dismiss, undermine, or don’t bother to understand the work they perform and that the legacy of decades of American diplomacy is at risk.

By failing to fill numerous senior positions across the State Department, promulgating often incoherent policies, and systematically shutting out career foreign service officers from decision-making, the Trump administration is undercutting U.S. diplomacy and jeopardizing America’s leadership role in the world, according to more than three dozen current and former diplomats interviewed by FP. “I used to wake up every morning with a vision about how to do the work to make the world a better place,” said one State Department official, who spoke on condition of anonymity for fear of retaliation. “It’s pretty demoralizing if you are committed to making progress. I now spend most of my days thinking about the morass. There is no vision.”

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Interesting, but it can’t be just one generation.

Have Smartphones Destroyed a Generation? (Atl.)

The more I pored over yearly surveys of teen attitudes and behaviors, and the more I talked with young people like Athena, the clearer it became that theirs is a generation shaped by the smartphone and by the concomitant rise of social media. I call them iGen. Born between 1995 and 2012, members of this generation are growing up with smartphones, have an Instagram account before they start high school, and do not remember a time before the internet. The Millennials grew up with the web as well, but it wasn’t ever-present in their lives, at hand at all times, day and night. iGen’s oldest members were early adolescents when the iPhone was introduced, in 2007, and high-school students when the iPad entered the scene, in 2010. A 2017 survey of more than 5,000 American teens found that three out of four owned an iPhone.

The advent of the smartphone and its cousin the tablet was followed quickly by hand-wringing about the deleterious effects of “screen time.” But the impact of these devices has not been fully appreciated, and goes far beyond the usual concerns about curtailed attention spans. The arrival of the smartphone has radically changed every aspect of teenagers’ lives, from the nature of their social interactions to their mental health. These changes have affected young people in every corner of the nation and in every type of household. The trends appear among teens poor and rich; of every ethnic background; in cities, suburbs, and small towns. Where there are cell towers, there are teens living their lives on their smartphone. To those of us who fondly recall a more analog adolescence, this may seem foreign and troubling.

The aim of generational study, however, is not to succumb to nostalgia for the way things used to be; it’s to understand how they are now. Some generational changes are positive, some are negative, and many are both. More comfortable in their bedrooms than in a car or at a party, today’s teens are physically safer than teens have ever been. They’re markedly less likely to get into a car accident and, having less of a taste for alcohol than their predecessors, are less susceptible to drinking’s attendant ills. Psychologically, however, they are more vulnerable than Millennials were: Rates of teen depression and suicide have skyrocketed since 2011. It’s not an exaggeration to describe iGen as being on the brink of the worst mental-health crisis in decades. Much of this deterioration can be traced to their phones.

Even when a seismic event—a war, a technological leap, a free concert in the mud—plays an outsize role in shaping a group of young people, no single factor ever defines a generation. Parenting styles continue to change, as do school curricula and culture, and these things matter. But the twin rise of the smartphone and social media has caused an earthquake of a magnitude we’ve not seen in a very long time, if ever. There is compelling evidence that the devices we’ve placed in young people’s hands are having profound effects on their lives—and making them seriously unhappy.

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More on the iPhone.

Amazon Isn’t The No. 1 Villain In Retail Sector’s Demise (Katsenelson)

Retail stocks have been annihilated recently, despite the economy eking out growth. The fundamentals of the retail business look horrible: Sales are stagnating and profitability is getting worse with every passing quarter. Jeff Bezos and Amazon get most of the credit, but this credit is misplaced. Today, online sales represent only 8.5% of total retail sales. Amazon, at $80 billion in sales, accounts only for 1.5% of total U.S. retail sales, which at the end of 2016 were around $5.5 trillion. Though it is human nature to look for the simplest explanation, in truth, the confluence of a half-dozen unrelated developments is responsible for weak retail sales. Our consumption needs and preferences have changed significantly. Ten years ago we spent a pittance on cellphones.

Today Apple sells roughly $100 billion worth of i-goods in the U.S., and about two-thirds of those sales are iPhones. Apple’s U.S. market share is about 44%, thus the total smart mobile phone market in the U.S. is $150 billion a year. Add spending on smartphone accessories (cases, cables, glass protectors, etc.) and we are probably looking at $200 billion total spending a year on smartphones and accessories. Ten years ago (before the introduction of the iPhone) smartphone sales were close to zero. Nokia was the king of dumb phones, with sales in the U.S. in 2006 of $4 billion. The total dumb cellphone handset market in the U.S. in 2006 was probably closer to $10 billion. Consumer income has not changed much since 2006, thus over the last 10 years $190 billion in consumer spending was diverted toward mobile phones.

It gets more interesting. In 2006 a cellphone was a luxury only affordable by adults, but today 7-year-olds have iPhones. Our phone bill per household more than doubled over the last decade. Not to bore you with too many data points, but Verizon’s wireless’s revenue in 2006 was $38 billion. Fast-forward 10 years and it is $89 billion – a $51 billion increase. Verizon’s market share is about 30%, thus the total spending increase on wireless services is close to $150 billion. Between phones and their services, this is $340 billion that will not be spent on T-shirts and shoes. But we are not done. The combination of mid-single-digit health-care inflation and the proliferation of high-deductible plans has increased consumer direct health-care costs and further chipped away at our discretionary dollars. Health-care spending in the U.S. is $3.3 trillion, and just 3% of that figure is almost $100 billion.

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“A lobotomy is performed on each generation. Facts are removed. History is excised and replaced by what Time magazine calls “an eternal present”.”

On The Beach (John Pilger)

“This is the way the world ends; Not with a bang but a whimper”. These lines from T.S. Eliot’s poem The Hollow Men appear at the beginning of Nevil Shute’s novel On the Beach, which left me close to tears. The endorsements on the cover said the same. Published in 1957 at the height of the Cold War when too many writers were silent or cowed, it is a masterpiece. At first the language suggests a genteel relic; yet nothing I have read on nuclear war is as unyielding in its warning. No book is more urgent. Some readers will remember the black and white Hollywood film starring Gregory Peck as the US Navy commander who takes his submarine to Australia to await the silent, formless spectre descending on the last of the living world.

I read On the Beach for the first time the other day, finishing it as the US Congress passed a law to wage economic war on Russia, the world’s second most lethal nuclear power. There was no justification for this insane vote, except the promise of plunder. The “sanctions” are aimed at Europe, too, mainly Germany, which depends on Russian natural gas and on European companies that do legitimate business with Russia. In what passed for debate on Capitol Hill, the more garrulous senators left no doubt that the embargo was designed to force Europe to import expensive American gas. Their main aim seems to be war – real war. No provocation as extreme can suggest anything else. They seem to crave it, even though Americans have little idea what war is. The Civil War of 1861-5 was the last on their mainland. War is what the United States does to others.

The only nation to have used nuclear weapons against human beings, they have since destroyed scores of governments, many of them democracies, and laid to waste whole societies – the million deaths in Iraq were a fraction of the carnage in Indo-China, which President Reagan called “a noble cause” and President Obama revised as the tragedy of an “exceptional people”. He was not referring to the Vietnamese. Filming last year at the Lincoln Memorial in Washington, I overheard a National Parks Service guide lecturing a school party of young teenagers. “Listen up,” he said. “We lost 58,000 young soldiers in Vietnam, and they died defending your freedom.” At a stroke, the truth was inverted. No freedom was defended. Freedom was destroyed. A peasant country was invaded and millions of its people were killed, maimed, dispossessed, poisoned; 60,000 of the invaders took their own lives. Listen up, indeed.

A lobotomy is performed on each generation. Facts are removed. History is excised and replaced by what Time magazine calls “an eternal present”. Harold Pinter described this as “manipulation of power worldwide, while masquerading as a force for universal good, a brilliant, even witty, highly successful act of hypnosis [which meant] that it never happened. Nothing ever happened. Even while it was happening it wasn’t happening. It didn’t matter. It was of no interest.”

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Original tile: “‘Made in Germany’ Label Badly Damaged By Car Scandal”. But the power politics behind it are far more revealing.

Merkel Is Kowtowing To The German Car Industry (Spiegel)

Since the days of former Chancellor Gerhard Schröder, who served from 1998 to 2005, Germany’s leaders have been nicknamed the “Auto Chancellor” for their close ties to the industry. Schröder felt he was a patron of the industry. And Merkel, his successor, was quick to see the connection between maintaining close ties to the key industry and staying in power. On Sept. 23, 2008, she spoke to workers at a Volkswagen factory. “The German government stands behind VW. VW is a great piece of Germany.” The sheer mass of 18,000 workers seemed to awe her. She had likely never spoken in front of that many people at one time. She said she would travel home with the feeling that many workers at Volkswagen wanted “Germany to be doing well.” Observers of the chancellor say that visit to Wolfsburg had a deep impact on Merkel.

A short time later, as the world faced a major economic crisis, she gave employees and executives at Germany’s car companies a gift worth billions of euros in the form of government subsidies that saved jobs and kept the floor from falling out on the industry. The unsavory symbiosis between the government, the industry and the lobbying groups – and the revolving door of personnel moving between them – seems to be the root of the evil. This ensures that the industry has influence and access, and assures employees money and access to the career ladder. It can also cause a bit of head-scratching. A public servant who is supposed to one day passionately fight for the good of the people, is suddenly ready to contribute to their systematic poisoning only a moment later.

Former German Transportation Minister Matthias Wissmann, who served as a member of Merkel’s cabinet and is also a friend, sticks out. Today he’s the president of the German Association of the Automotive Industry (VDA). All he has to do to get the chancellor’s attention is send her a text message on his mobile phone. Merkel’s former chief of staff at the national headquarters of her conservative Christian Democratic Union (CDU) party, Michael Jansen, now works at Volkswagen as the head of the VW’s Berlin office, which conducts the company’s lobbying. A few months ago, carmaker Opel’s chief lobbyist, Joachim Koschnicke, left his job to join the CDU’s election campaign team. All have showered the federal government with emails and letters in recent years to ensure that their companies’ interests are fulfilled.

In May 2013, VDA head Wissmann wrote to “Dear Angela” that she should try to hinder the European Commission’s “excessive” proposals on CO2 targets. VW lobbyist Jansen also wrote to the Chancellery in July 2015 that, on the issue of “air quality/diesel,” the industry’s proposals should be given the “greatest possible consideration.” When he was still an Opel lobbyist, Joachim Koschnicke warned the head of the KBA when approval was delayed for a new Opel model that without it, there would be “potential effects on our business operations.” He said it jeopardized production at five plants and that the “negative effects would be dramatic in every aspect.” And then there’s Eckart von Klaeden, who served as minister of state in the Chancellery from 2009 to 2013 and has since served as head of global external affairs at Daimler.

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How far will China go?

North Korea Sanctions Bring Nuclear Issue To ‘Critical Phase’, Says China (G.)

The situation on the Korean peninsula is entering “a very critical phase”, China has warned after new United Nations sanctions targeting Pyongyang were announced following its recent intercontinental ballistic missile test. Speaking in Manila before a regional security summit, China’s foreign minister, Wang Yi, said the sanctions had been designed “to efficiently, or more efficiently, block North Korea’s nuclear missile development”. “Sanctions are needed but not the ultimate goal,” Wang added. “The purpose is to pull the peninsula nuclear issue back to the negotiating table, and to seek a final solution to realise the peninsula denuclearisation and long-term stability through negotiations.” “After the resolution is passed, the situation on the peninsula will enter a very critical phase,” Wang warned, according to China’s state broadcaster CGTN.

“We urge all parties to judge and act with responsibility in order to prevent tensions from escalating.” Wang met his North Korean counterpart, Ri Yong Ho, on Sunday who reportedly smiled continuously as he shook the Chinese official’s hand. According to Reuters, journalists were not given access to a meeting between the two men. On Saturday Nikki Haley, the US ambassador to the United Nations, said “further action is required” against North Korea. Earlier, National Security Adviser HR McMaster said Donald Trump had been “deeply briefed” on recent missile tests carried out by Pyongyang, and said the US would do “everything we can to to pressure this regime” while seeking to avoid “a very costly war”. Haley spoke to the UN security council after the 15-member body imposed the new sanctions against North Korea, in response to its two long-range missiles tests in July.

“We should not fool ourselves into thinking we have solved the problem,” Haley said. “Not even close. The North Korean threat has not left us, it is rapidly growing more dangerous. Further action is required. The United States is taking and will continue to take prudent defensive measures to protect ourselves and our allies.” Washington would continue annual military exercises with South Korea, Haley said. The UN-approved sanctions include a ban on exports worth more than $1bn, a huge bite out of North Korea’s total exports, valued at $3bn last year. Countries are also banned from giving any additional permits to North Korean laborers – another source of money for the regime of Kim Jong-un – and all new joint ventures with North Korean companies and foreign investment in existing ones are banned.

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“The national debt is actually the government’s savings account..”

What If Every Government Paid Off Its National Debt? (Connelly)

There were six times in US history in which budget surpluses were achieved for long enough to retire a significant amount of debt. Five of those were followed by depressions, the last of which culminated in the Great Depression of the 1930s. The last time America ran a significant budget surplus (about 2.5 years) was under President Clinton. The 2002 recession is a direct result of Clinton’s 1999 surplus which forced the domestic private sector into deficit. Consumer spending fell, unemployment rose and a recession occurred. The economy crashed first in 2000 and then onwards into the Great Recession that began in 2007. “But reducing or retiring the debt isn’t what caused the economic downturns,” says economist, Ellis Winningham. “It was the surpluses that caused it. Simply put, you cannot operate an economy with no money in it.”

So why have we convinced ourselves that government debt is the mother of all evil? That somehow, if the government is in surplus, our bank accounts will automatically improve? In fact, as we shall see, the precise opposite is what would probably happen. Anyone who has ever been chased by a debt collector has come to associate the word ‘debt’ as necessarily scary, bad and to be avoided. If you are a household, this is likely to be true. But debt has an entirely different meaning for governments. To whom is the national debt owed? That would be us: the people. But this truth has been avoided in favour of eliciting a pavlovian response based entirely on the principle that a government budget is the same as that of a household.

“People think that public debt is like a household debt, hence, they buy into the neoliberal nonsense about the government going ‘bankrupt’ and then it’s financial armageddon and we will all die,” says Winningham. “It’s total nonsense. The public debt is just a bunch of savings accounts that pay interest. “People think it will improve their lives because they believe that the government’s debt is their debt. In reality, the government’s debt is the private sector’s asset.” In truth, there is no such thing as the national debt beyond a rhetorical device used to scare the public into submission. In the US, the National Debt is the sum-total of all US dollars ever issued by the Federal Government, from the nation’s founding up until this very moment, that have never been taxed away by the Federal Government.

“From around the 1790’s until today, 2017, the US government has issued, after taxes, $18 trillion dollars for everyone in the non-government sector to use,” says Winningham. “In fact, the national debt has been around for over 170 years now, so at some point, you’re going to have to start understanding that it is not an actual problem. “Further, you need to start understanding that when you accuse Obama, or Bush, or Trump of adding to the national debt, you’re actually accusing them of adding US dollars to the US economy. Or, more precisely, you’re accusing them of adding US dollars to our national savings.” Put simply, The National Debt is the country’s total exports minus the country’s total imports, and isn’t an actual debt at all, but a “balance of trade”.

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A giant sleight of hand: ..new measures that are billed as easing the capital controls but which will in fact reduce the annual amount of cash bank clients can withdraw

Are Greek Capital Controls Easing? (K.)

The government is gearing up to launch new measures that are billed as easing the capital controls but which will in fact reduce the annual amount of cash bank clients can withdraw. As of September 1, when the new measures come into force, citizens will be able to withdraw a total of 1,800 euros per month. When the controls were first introduced in July 2015, Greeks could only withdraw €60 a day, 365 days a year, but since then they have been allowed to carry that amount forward up to a period of two weeks, giving them a €840 limit every 14 days (fixed, from midnight Friday to midnight two weeks later). That will remain the case until the end of August.

The extension of the cumulative withdrawal period may facilitate transactions, but on an annual basis the total amount a bank customer can withdraw will fall from €21,840 (€840 x 26 two-week periods) to €21,600 (€1,800 x 12 months). Greeks could in fact withdraw more money per year on the original limit of €60 per day, totaling €21,900 a year, as that avoided the fixed-two-week-period problem. In other words the “easing” of restrictions has resulted in curtailing people’s withdrawal limit by €300 per annum, for the right to transfer a withdrawal to another day or week. Bank sources tell Kathimerini it is a positive move that will strengthen confidence, make transactions easier and boost the economy.

The new measures will also affect withdrawals in foreign currency in Greece and the use of Greek debit cards for withdrawals abroad. As of September 1 any recipients of money forwarded from abroad will be able to withdraw 50% of the amount without any restrictions. Companies will also be able to open an account at a credit institution by creating a new customer ID regardless of whether they already have another account there. Farmers, who have not been allowed to open bank accounts since the controls started, will finally be allowed to (provided they do not have one already). Employees will be further able to open a new salary account at a different bank to the one at which they are already a client or if their new employer pays their salary at another lender.

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Perspective.

More People Live Inside This Circle Than Outside It (WEF)


Circle centred on 106.6° East, 26.6° North, projected using GMT, created by BCMM – Brilliant Maps

While the map looks surprising at first glance, it shouldn’t really once you consider it contains all or most of the world’s most populous countries: China, India, Indonesia (fourth), Pakistan (sixth), Bangladesh (seventh) and Japan (tenth). And according to the World Population Prospects 2017, a recently updated UN report, the world population will hit a staggering 9.8 billion by 2050. China (with currently 1.4 billion inhabitants) and India (with currently 1.3 billion inhabitants) will remain the two most populous countries, and Nigeria will overtake the United States to become the third-most populous country in the world.

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Not a new theme at all, the Gulfstream, so why present it as somehow new without any new evidence? Nice map though.

Is Global Ocean Circulation Collapsing? (Forbes)

Scientists have long known about the anomalous “warming hole” in the North Atlantic Ocean, an area immune to warming of Earth’s oceans. This cool zone in the North Atlantic Ocean appears to be associated with a slowdown in the Atlantic Meridional Overturning Circulation (AMOC), one of the key drivers in global ocean circulation. A recent study published in Nature outlines research by a team of Yale University and University of Southhampton scientists. The team found evidence that Arctic ice loss is potentially negatively impacting the planet’s largest ocean circulation system. While scientists do have some analogs as to how this may impact the world, we will be largely in uncharted territory. AMOC is one of the largest current systems in the Atlantic Ocean and the world. Generally speaking, it transports warm and salty water northward from the tropics to South and East of Greenland.

This warm water cools to ambient water temperature then sinks as it is saltier and thus denser than the relatively more fresh surrounding water. The dense mass of water sinks to the base of the North Atlantic Ocean and is pushed south along the abyss of the Atlantic Ocean. This process whereby water is transported into the Northern Atlantic Ocean acts to distribute ocean water globally. What’s more important, and the basis for concern of many scientists is this mechanism is one of the most efficient ways Earth transports heat from the tropics to the northern latitudes. The warm water transported from the tropics to the North Atlantic releases heat to the atmosphere, playing a key role in warming of western Europe. You likely have heard of one of the more popular components of the AMOC, the Gulf Stream which brings warm tropical water to the western coasts of Europe.

Evidence is growing that the comparatively cold zone within the Northern Atlantic could be due to a slowdown of this global ocean water circulation. Hence, a slowdown in the planet’s ability to transfer heat from the tropics to the northern latitudes. The cold zone could be due to melting of ice in the Arctic and Greenland. This would cause a cold fresh water cap over the North Atlantic, inhibiting sinking of salty tropical waters. This would in effect slow down the global circulation and hinder the transport of warm tropical waters north. Melting of the Arctic sea ice has rapidly increased in the recent decades. Satellite image records indicate that September Arctic sea ice is 30% less today than it was in 1979. This trend of increased sea ice melting during summer months does not appear to be slowing. Hence, indications are that we will see a continued weakening of the global ocean circulation system.

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Aug 052017
 
 August 5, 2017  Posted by at 8:54 am Finance Tagged with: , , , , , , ,  4 Responses »
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Pablo Picasso Absinthe Drinker 1901

 

The Body Language of Power (Handelsblatt)
Let This Be Your Final Warning On US Stocks’ Overvaluation (MW)
Beneath The Glow Of Stock-Market Records Lurk Darkly Bearish Trends (MW)
Albert Edwards: Central Banks To Blame For Impending Disaster (CW)
Paul Singer Rages Against Everything From Passive Investing To Safe Spaces (ZH)
The Amazon Effect: Part Time Jobs Soar By 393K, Full Time Jobs Slide (ZH)
Where The Jobs Were: Waiters And Bartenders Topped The List (ZH)
Volkswagen Executive Pleads Guilty In US Emissions Cheating Scandal (R.)
Krauthammer Warns Impeachment Would Be “A Catastrophic Mistake” (ZH)
Russiatosis (Jim Kunstler)
Greece Erasing Asylum Backlog (K.)
Italy Seizes Refugee Rescue Ship (Ind.)

 

 

Germans making fun of Trump and lauding Merkel. What else can they do? She’s as strong as ever. That’s why I added a second picture at the bottom. But someone should write “The Dark Side of Merkel”.

The Body Language of Power (Handelsblatt)

Much about her unique style of power was already evident at the very moment she was closing in on the office of chancellor. It occurred on German television shortly after eight in the evening of September 18, 2005. Germans had just voted, and the polls showed Ms. Merkel’s center-right bloc falling far short of expectations with a tiny lead at 35 percent. The Social Democrats led by the incumbent chancellor Gerhard Schröder were in effect tied at 34 percent. As is customary in Germany, all the parties’ leaders gathered with two journalists to take stock on air. Ms. Merkel, with much larger hair than today, was the only woman among seven men. In the German parliamentary system, various coalition options were still open for either Mr. Schröder or Ms. Merkel to control a majority of the Bundestag. So Mr. Schröder, whom the German press called an “alpha animal”, decided to create facts on the ground.

He burst out with a forceful verbal barrage, insinuating that the moderators were biased, asserting that he was the real winner and disparaging Ms. Merkel. Constantly interrupting all his interlocutors as though in some dominance ritual, he blurted out, “Do you seriously think that my party will take up an offer of coalition talks from Ms. Merkel in this situation, in which she says she wants to be chancellor?” The other men in the round were not his primary targets, but they spent the following 40 minutes sparring with him. Ms. Merkel’s reaction was more interesting. Whenever the camera strayed from the dueling silverbacks and zoomed in on her, she had a neutral expression, or a look of mild puzzlement, but never one of anger or annoyance. Her hands mostly stayed folded on the table in front of her. She hardly spoke at all. In effect, she responded to Mr. Schröder by not reacting.

In the following hours and days, Mr. Schröder’s political career collapsed, as all of Germany wondered what demon had got into him. In at least one interview, he later had to deny that he was drunk during the debate. Meanwhile, Ms. Merkel quietly began coalition negotiations that led her to be sworn in as chancellor two months later, with the Social Democrats as her junior partners. Something had revealed itself that day on television between Mr. Schröder and Ms. Merkel. “When he entered the room, she had lost the election. When he left, she had won the chancellor’s office,” recalls Wolfgang Nowak, a former adviser to Mr. Schröder, who nowadays also has the ear of Ms. Merkel. “Nobody is like her,” says Gregor Gysi, who was opposition leader in parliament for much of Ms. Merkel’s current term. Mr. Gysi is widely considered the wittiest speaker in German politics, and his job in the Bundestag was to needle and provoke the chancellor. But all of his attacks fell flat. Merkel never took his baits; he never got a rise out of her.

Mr. Gysi, now retired, does not contest the point. Ms. Merkel, he says, reminds him of his experience in the 1970s, when he was a lawyer in the East German dictatorship. During interrogations he could always crack the men, he says, but against a certain kind of woman he had “no chance”, provided they did not make the mistake of trying to be like men. Hillary Clinton made that mistake, Mr. Gysi says. She blew a presidential election in America against a man who is almost comical in his pseudo-virility. By contrast, Mr. Gysi says, “Merkel’s secret is that she has found a method against the men, but the men have found no method against her.” “Merkel gets stronger by letting the men be men,” Mr. Nowak agrees. Many of these encounters resemble that televised encounter with Mr Schröder. “She let him do all his wrestling poses,” recalls Mr. Nowak. And in the end the macho always throws himself on the mat, with her left standing.


The flipside. Pic posted on Twitter with caption: “Don’t play with superglue”

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“People on Wall Street always tell you “this time is different,” but it never has been yet.”

Let This Be Your Final Warning On US Stocks’ Overvaluation (MW)

The Shiller PE [..] compares stocks against the average earnings of the past 10 years, rather than just one year, as Wall Street likes to do. The argument is that longer-term measures smooth out the distortions of booms and busts. Shiller has tracked his data back to 1881. The stock market’s average reading has been about 16 over that time. But that’s masked a wide range, from the single digits all the way up to 45 in early 2000. Critics sometimes like to argue that the reading of late has been distorted because it includes the abysmal corporate earnings during the 2008-2009 crash. So I decided to exclude those, and just compare stock prices to the average of the past five years, rather than 10, to see how that affected the measure. And, yes, it does. But it only cuts the reading from 31 to 25.5.

For reference, it’s only reached a level of about 25 on five previous occasions: 1901, 1928-9, 1966, 1996-2002 and 2003-2007. Each one ended with a crash. People on Wall Street always tell you “this time is different,” but it never has been yet. The “new era” of the 1920s, the “Nifty Fifty” stocks of the 1970s, the “new economy” of the 1990s. Investors in those eras have been told to ignore the lessons of the past and look only to the bright and unprecedented future. Each time they’ve lost their shirts. Other metrics with long-term records are also flashing yellow or red. Those include the so-called Tobin’s q, which compares stock valuations to how much it would cost to rebuild all those companies from scratch; and the Warren Buffett indicator, which compares the value of the stock market to the size of the national economy. (Buffett himself has somewhat backed away from that measure recently.)

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“As the indexes continue to produce a series of higher highs, subsurface conditions are painting an entirely different picture..”

Beneath The Glow Of Stock-Market Records Lurk Darkly Bearish Trends (MW)

Major U.S. stock-market indexes are trading near record levels, but does that statistic simply mask an ominous picture that’s being painted behind the scenes? Market breadth, a measure of how many stocks are rising versus the number that are dropping, has turned “exceedingly negative,” according to Brad Lamensdorf, a portfolio manager at Ranger Alternative Management. Lamensdorf writes the Lamensdorf Market Timing Report newsletter and runs the AdvisorShares Ranger Equity Bear, an exchange-traded fund that “shorts” stocks, or bets that they will fall. “As the indexes continue to produce a series of higher highs, subsurface conditions are painting an entirely different picture,” Lamensdorf wrote in the latest edition of the newsletter. He noted that the year-to-date advance in equities — the S&P 500 is up 10.6% in 2017 — has been driven by outsize gains in some of the market’s biggest names.

Most notably, the so-called FAANG stocks, which refers to a quintet of technology and internet names, have by themselves contributed more than 28% of the benchmark index’s gain. Separately, megacap names like Boeing and Johnson & Johnson have also outperformed the broader market. “The good performance of these large companies is masking the fact that many stocks, including REITs and those in the retail sector, have already entered bear-market territory,” Lamensdorf wrote, referring to real estate investment trusts. According to an analysis of FactSet data, 79 components of the S&P 500 are trading at least 20% below their 52-week high; a bear market is typically defined as a 20% drop from a peak. However, more than half the components are in what could be deemed bull market territory — at least 20% above their 52-week low.

Lamensdorf also cited a measure that compares market volume on advancing days to volume on days when the major indexes decline. This is a volatile metric, one that has both spikes and pronounced dips. However, since mid-2016, the spikes have topped out at progressively smaller highs. “This situation has occurred while the indexes have simultaneously hit higher highs; a classic negative divergence illustrating that large institutional sponsorship has not been following the indexes,” he wrote.

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Wait. Wasn’t that my line?

Albert Edwards: Central Banks To Blame For Impending Disaster (CW)

Notoriously bearish strategist Albert Edwards believes the UK is sitting on a ‘massive credit bubble that is primed to burst’ as another recession looms. The Société Générale global strategist said the recent sharp decline in household saving ratios (SR) in the UK and the US was last seen in 2007 just before the global financial crisis. This week, the US saw a substantial downward revision to its SR, with 1.5% lopped off the estimates taking the ratio to 3.8%, a level which Edwards claimed was last seen prior to the recession. In the UK, household SR slumped in the first quarter of this year to 1.9%, which he said was ‘shockingly low’. He said: ‘I’m genuinely getting tired of bashing the major central banks, but every day more evidence mounts that almost exactly the same debt excesses that caused the global financial crisis in 2008 are present today.

‘The UK Bank of England and US Federal Reserve deserve particular vilification for failing to remove the monetary punchbowl quickly enough just like the 2003-2007 period, allowing grotesque debt excesses to build.’ Edwards previously said he believed the US corporate sector ‘borrowing binge’ will take ‘centre stage in the next credit crisis’, but now thinks the household sector will play a bigger part thanks to the latest SR data. Blaming the Fed, he said: ‘QE has not only inflated corporate debt to grotesque levels, but finally the US SR has responded to the surge in household paper wealth that QE has produced. ‘Typically the SR always declines with rising wealth. Why do you need to bother saving if interest rates are close to zero and house and stock prices are rising?’

Edwards also believes the Bank of England (BoE) should have normalised rates ‘long ago’ and thinks it is ‘100%’ the BoE’s ‘own responsibility’ if credit growth spirals out of control. Comparing the UK to SR data from other European countries, Edwards said huge swings in the SR, representing credit booms and busts, are most apparent in the UK – ‘especially relative to the stability of somewhere like France.’ He added: ‘But the recent decline in the UK SR is almost without historical precedent. It is a credit disaster waiting to happen.’

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“..most fiscal and monetary policymakers’ knowlege of the world is somewhere between “close to nothing” and “way less than zero..”

Paul Singer Rages Against Everything From Passive Investing To Safe Spaces (ZH)

On Central Bankers: The combination of central banker-applied brute force (buying everything in sight) and deity-like central banker pronouncements has dampened market volatility and frisky free-lancing, but at the same time it has encouraged risk taking (in market positioning, not it business formation). We have thought, and still think, that confidence in central banks and policymakers has been unjustified and thus could erode or collapse at any time. Since the major financial institutions which comprise the financial system are still way overleveraged and opaque (in fact with record amounts of debt and derivatives at present), such a break in confidence could happen abruptly and without warning. Investors should come to grips, intellectually and viscerally, with the likelihood that most fiscal and monetary policymakers’ knowlege of the world is somewhere between “close to nothing” and “way less than zero,” and that their pronouncements and policies usually range from “silly but harmless” to “dumb and dangerous.

On whether labor markets are tight: Short answer: no. Programs which foster long-term dependency are not creating social justice; rather, they are creating demeaned citizens and preventing people from experiencing the dignity and contribution to society of work. Given record stock prices and low unemployment rates, the slow rate of increases in wages is “surprising.” But it clearly demonstrates that there is something wrong with the existing prosperity-delivering mechanism. In this regard, America is catching up (but not in a good way) with Europe, which long has lived with much higher rates of unemployment and long-term dependency.

On Chinese Debt: In response to the world economic slowdown after the GFC, China undertook a large debt-fueled stimulus. In 2008, it had a non-financial sector debt-to-GDP ratio of 141% or $6.6 trillion; by 2016 that number was 257% or $27.5 trillion. Combined with wild real estate booms and overbuilding, plus an unhealthy dose of corruption and severe neglect in “rule of law” infrastructure, a serious economic dislocation (or crash) is the obvious (but not necessarily correct) expectation based on the numbers, the leverage, the interconnectivity and the likely quality of debt. A Chinese financial market collapse would likely push the global economy into a deep recession.

Whether they will succeed or fail is completely unknown as this letter is written. A reasonable conclusion about China is that it is foolish to ignore the signs of developing storm but also ill-advised to put a “clock” on it or deem it to be inevitable. Our instinct is that close to perfection will be required to avoid a very painful sequence of events in the global financial system and hence the world economy.

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Still haven’t got a serious way to measure job quality. A job is a job is a job is nonsense.

The Amazon Effect: Part Time Jobs Soar By 393K, Full Time Jobs Slide (ZH)

On the surface the July jobs report was solid, with 209K jobs added, more than the expected, as the recent auto sector slowdown appears to skip the labor market (for now), with Trump quick to take credit for the report. However, digging through the numbers reveals some troubling features: while the Household survey reported that an impressive 345K jobs were added, more than 50% higher than the Establishment survey, the bulk of these jobs was part-time. According to the BLS, in July 393,000 part time jobs were added, offset by a drop of 54,000 full-time workers.

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Most jobs now go to people with high school or less.

Where The Jobs Were: Waiters And Bartenders Topped The List (ZH)

We already showed that contrary to the strong headline payrolls print, the sole source of job gains in July was part-time jobs, which rose by 393K in the month, the biggest monthly increase since September 2016, as full-time jobs sunk by 54K. Which is why it should not surprise that of the 209K jobs added according to the Establishment survey, the sector that added the most jobs was the “food services and drinking places”, i.e. “waiters and barenders” category, which added 53,000 jobs, the highest monthly increase since March 2014. There have now been 89 consecutive months without a decline for waiter and bartender jobs, the strongest sector for US employment. Needless to say, these jobs fall within leisure and hospitality, that sector pays the worst wages, an average of $13.35 an hour, and $331.08 a week.

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Will the others pick a plea deal as well now?

Volkswagen Executive Pleads Guilty In US Emissions Cheating Scandal (R.)

Volkswagen executive Oliver Schmidt pleaded guilty on Friday in U.S. District Court in Detroit in connection with a massive diesel emissions scandal that has cost the German automaker as much as $25 billion. Under a plea agreement, Schmidt faces up to seven years in prison and a fine of between $40,000 and $400,000 after admitting to conspiring to mislead U.S regulators and violating clean air laws. Schmidt will be sentenced on Dec. 6. In March, Volkswagen pleaded guilty to three felony counts under a plea agreement to resolve U.S. charges it installed secret software in vehicles to evade emissions tests. U.S. prosecutors have charged eight current and former Volkswagen executives.

Earlier this year, Schmidt was charged with 11 felony counts and federal prosecutors said he could have faced a maximum of up to 169 years in prison. As part of his guilty plea, prosecutors agreed to drop most of the counts and Schmidt has consented to be deported at the end of his prison sentence. After being informed of the existence of the emissions software in the summer of 2015, according to the agreement, Schmidt conspired with other executives to avoid disclosing “intentional cheating” by the automaker in a bid to seek regulatory approval for its model 2016 VW 2 liter diesel vehicles. During the period in question, Schmidt was working at the companys Wolfsburg, Germany, headquarters as one of three subordinates to the head of engine development. He was arrested when he traveled to the United States in early January.

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“..if you think a man is unfit, you vote against him. But you don’t remove him from office..”

Krauthammer Warns Impeachment Would Be “A Catastrophic Mistake” (ZH)

“I think [impeaching Trump] would be a catastrophic mistake,” warned outspoken conservative, and Fox News contributor, Charles Krauthammer, noting that there’s no evidence Trump has committed any crime. As The Hill reports, Krauthammer stressed that he doesn’t defend Trump, but only thinks that impeachment is a mistake. “Again, I think he’s unfit,” Krauthammer said, “but that’s not the grounds for removal.” “I don’t think he’s very well fit for the presidency. But fitness is not a reason for impeachment and removal.” Crucially, Krauthammer notes, as demonstrated by last night’s rally in West Virginia… Trump’s base is still firmly behind him and worries “I think we’re really headed into very choppy and dangerous constitutional waters” “Here’s a guy whose numbers are down in the 30s,” Krauthammer said on Fox News’s “Tucker Carlson Tonight.”

“He’s got this grand jury, reports of a grand jury being convened, he’s got the walls kind of closing in on him in Washington. And here he’s going out into the country and saying ‘These are my people. These are real people. Forget about the numbers. Forget about the chatter in Washington. Forget about the stories about Russia – which he spent a lot of time on – but I represent a huge constituency of tremendous support and enthusiasm.’” Townhall notes that Krauthammer then stressed the importance of our democratic process. “Again, I think he’s unfit but that’s not the grounds for removal,” Krauthammer said. What it means is, if you think a man is unfit, you vote against him. But you don’t remove him from office and that’s where I’m afraid we are headed given the forces that are surrounding the president. I just hope that cooler heads prevail. There will be another election – there always are – people can make their choices.”

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“All of this psychotic political behavior screams for the rise of a new party, or more than one new party..”

Russiatosis (Jim Kunstler)

So what exactly was Mr. Trump thinking when he signed the “deeply flawed” (his words) Russian Sanctions bill coughed up like a hairball by congress? It’s a ridiculous piece of legislation from any angle. It limits the president’s own established prerogatives for negotiating with foreign nations (probably unconstitutionally), and will only provoke economic warfare (at least) against the US that can easily lead to shattering global trade relations entirely. Some observers say he had to sign it because the vote for it in congress was so overwhelming (419 to 3) that they would only override a Trump veto. But the veto would have had, at least, symbolic value in the Jacksonian spirit that Trump pretended to want to emulate at the outset of his term. Perhaps he sees the Deep State endgame and is tired of resisting.

On the home front, Russia paranoia is at the center of Robert Mueller’s intensifying probe of Trump and his political associates as he calls a federal grand jury to hear testimony — which implies that he some lined up. This opens up all kinds of opportunities for prosecutorial mischief, for instance going after every business transaction Trump made as a private citizen before he ran for president, and coercing Trump intimates into immunization deals in exchange for testimony, real or cooked-up, to enable the establishment’s ultimate goal of shoving Trump out. The “Russian meddling in our election” story hasn’t produced any credible evidence after a full year — and speaking to foreign diplomats is not a crime — but the Russian meddling juggernaut rolls on perfectly well, and might accomplish its ends, without it.

Just repeating “Russian meddling” five thousand times on CNN has surely induced many poorly-informed citizens to believe that Russia changed the numbers in American voting machines though, in fact, voting machines are not connected to the Internet. All of this psychotic political behavior screams for the rise of a new party, or more than one new party, composed of men and women who have not lost their minds. I’m sure they’re out there. Plenty of traces on the Internet attest to the existence of a higher and better political consciousness in this country. It just hasn’t found a way to congeal. Yet.

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It’s still a godalmighty mess. And we can thank Merkel for that, too.

Greece Erasing Asylum Backlog (K.)

Greece has taken a significant step toward restoring the credibility of its asylum system as – according to the latest data from sources within the Migration Policy Ministry – authorities have processed 97.5 percent of a backlog of about 84,000 claims submitted under the old procedure in place before 2011. Progress has been achieved mostly thanks to an amendment to Law 4375/2016. Adopted in the wake of an EU-Turkey deal aimed at stemming the flow of migrants into Europe, the law introduced a series of changes to the institutional framework. Now applicants for international protection who lodged a claim more than five years ago, have a pending appeal and possess a valid asylum seeker’s permit are granted a residence permit on humanitarian grounds. The measure affects about 800 cases.

“It’s a fair decision as these people have lived in the country for many years with no final decision on their cases without it being their fault. They have become integrated and grown ties with Greece and the people. Some may have even made a family here,” Maria Stavropoulou, head of the Greek Asylum service, told Kathimerini. “It would be harsh and unfair to demand after all those years that these people return to their country of origin,” she said. With the same amendment that was voted in Parliament early last week, individuals with pending appeals under the old system who have not appeared before the Greek authorities to renew their asylum-seeker permit for a minimum of eight months are considered to have implicitly withdrawn their applications – and their claims are thereby discontinued.

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Another case of non-existent collusion, played out in the media for political reasons.

Italy Seizes Refugee Rescue Ship (Ind.)

Italian authorities have seized a refugee rescue ship operated by a German charity over allegations volunteers had contact with Libyan smugglers. Prosecutors in Trapani said an investigation started in October had uncovered evidence suggesting that the Iuventa was used “to aid and abet illegal immigration”. The vessel, operated by Jugend Rettet, was seized on the island of Lampedusa on Wednesday after it was ordered to take rescued migrants to shore there and its crew have been interviewed by police. Ambrogio Cartosio, a public prosecutor from Trapani, said there was evidence some members had contact with smugglers during one incident in September and two others in June. “There were contacts, meetings, understandings,” between the group’s boat and the smugglers, he said.

The prosecutor alleged that migrants were “handed over” to the Iuventa by smugglers rather than being “rescued”, and later transferred to other ships to be taken ashore in Italy. “The evidence is serious,” Mr Cartosio said. “We have evidence of encounters between traffickers, who escorted illegal immigrants to the Iuventa, and members of the boat’s crew.” But the prosecutor stressed that there was no evidence of Jugend Rettet receiving any money from Libyan traffickers and no indication of a wider conspiracy between the two groups – a favourite theory of the European far-right. “My personal conviction was that the motive is humanitarian, exclusively humanitarian,” Mr Cartosio said. “It would be fantasy to say there was a coordinated plan between the NGOs and the Libyan traffickers.”

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Jul 032017
 
 July 3, 2017  Posted by at 9:32 am Finance Tagged with: , , , , , , , , , ,  6 Responses »
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Paul Klee Girl in Mourning 1939

 

Merkel Promises Full Employment In Party Platform (R.)
Theresa May Steps Back From Public Sector Pay Cap Amid Austerity Backlash (Ind.)
Donald Trump May Make ‘Sneak’ Visit To UK Within Fortnight (G.)
Maine, New Jersey Lawmakers Scramble To End Partial Government Shutdowns (R.)
Illinois House Approves Major Income Tax Hike (CTrib)
China Inc’s $7.8 Billion of Dividend Payments Will Stress the Yuan (BBG)
Japan PM Abe’s Party Suffers Historic Defeat In Tokyo Election (R.)
Abe’s Mentor Says BOJ Needs Fresh Face as Kuroda Is Out of Ideas (BBG)
Saudi Arabia, Allies Give Qatar Two More Days To Accept Demands (R.)
The Crash of 1929 (Jesse’s Café/PBS)
Italy Urges EU Ports To Take Migrants As Pressure Builds (AFP)
‘Our Future Is Slavery, The West Gets Everything’ – Congo (RT)

 

 

Note: tomorrow’s a travel day for me. Not sure about a Debt Rattle.

 

 

Plus tax relief. Plus support for young families to build new housing. Now compare that to Greece, where over half of young people are unemployed, and where taxes are being raised all the time and pensions cut. That, too, is a German decision. But Greeks don’t get to vote for or against Merkel.

Merkel Promises Full Employment In Party Platform (R.)

Chancellor Angela Merkel’s conservatives will promise to all but eliminate unemployment in Germany by the year 2025 when they announce their 2017 election campaign platform on Monday. Merkel’s Christian Democrats (CDU) and their Bavarian sister party, the Christian Social Union (CSU), will present their platform for the Sept. 24 election on Monday with other already known policies such as income tax cuts worth 15 billion euros per year and promises to build flats. “A major point is that we’d like to achieve full employment,” Horst Seehofer, CSU chairman and state premier in Bavaria, said on Sunday on his way into a meeting of the conservative leadership. The CDU/CSU consider full employment to be a jobless rate of less than 3% – compared to 5.5% now.

Those “Economic Miracle” levels of unemployment have not been seen in the country since the mid-1970s. The two parties also want to add 15,000 police officers in the 16 federal states. The sister parties, however, will not agree on a joint position on refugees. The CSU wants an upper limit of 200,000 per year, which Merkel and the CDU rejects. “We agree to disagree on that,” Interior Minister Thomas de Maiziere (CDU) said in a Bild am Sonntag newspaper interview, referring to the issue that split the two parties badly since some 1 million refugees arrived in late 2015. The CDU/CSU hold a 16%age point lead over the center-left Social Democrats in opinion polls with a 40-24 lead, but would still need a coalition partner. They rule with the SPD and in the past they have ruled with the Free Democrats (FDP).

[..] Earlier on Sunday, CDU Finance Minister Wolfgang Schaeuble said in a radio interview there could be room to cut taxes by more than the €15 billion already announced. Germany has had balanced budgets since 2014 and the government plans to have no new borrowing in its planning through 2021. Schaeuble told Deutschlandfunk radio he hoped there could be tax relief beyond that already promised €15 billion income tax cut. “We’re planning, all in all, to do more than just correcting the income taxes by €15 billion,” he said, referring to plans to reduce the country’s “cold progression” tax increases – or clandestine tax increases. [..] Schaeuble said aside from fighting “cold progression”, the Christian Democrats want to support young families to build new housing while also supporting research and development for small- to medium-sized companies.

Read more …

Messing it up as they go along.

Theresa May Steps Back From Public Sector Pay Cap Amid Austerity Backlash (Ind.)

Tory austerity appeared to be crumbling at the edges today, as Theresa May further distanced herself from a hated public sector pay freeze. Downing Street said the Government would consider potential wage increases for nurses, police officers and firefighters on a “case by case” basis after a string of top cabinet ministers signalled backing for an end to the blanket 1 per cent cap on all public servants. Environment Secretary Michael Gove said the Government should now listen to the recommendations of salary review bodies ignored by ministers for almost ten years. Education Secretary Justine Greening and Health Secretary Jeremy Hunt are also both reported to be pushing for new deals for teachers and nurses. The Independent reported last week how the Government faced a first ever strike from the Royal College of Nursing over a crisis in the profession.

There has also been mounting pressure from Jeremy Corbyn’s Labour – whose party fought a successful election campaign on an anti-austerity message. A Downing Street spokesman defended the Government’s record, but pointed to potential changes ahead. He said: “Dealing with the economic mess we inherited from Labour has meant hard work and sacrifice, including for public sector workers. That hard work and those tough decisions have helped get our deficit down by three quarters, and public sector pay restraint has helped us protect jobs. “Independent public sector pay review bodies are currently reporting to Government and we are responding to them on a case-by-case basis. While we understand the sacrifice that has been made, we must also ensure we continue to protect jobs and deal with our debts.”

Read more …

What is the Queen would be received like this?:

“MPs and trade unions vowed to hold the largest demonstrations in UK history if Donald Trump made a state visit to the UK..”

Donald Trump May Make ‘Sneak’ Visit To UK Within Fortnight (G.)

Anti-Donald Trump protesters are preparing to spring into action at short notice, after it emerged that Downing Street is braced for a snap visit from the US president in the next two weeks. A formal state visit, which was expected to take place over the summer, was postponed last month, amid fears that it could be disrupted by mass protests, despite Theresa May extending the invitation personally when she visited the White House late last year. But Whitehall sources confirmed the government has now been warned that the president could visit Turnberry, his golf resort in Scotland, during his trip to Europe, between attending the G20 summit in Hamburg next weekend and joining celebrations for Bastille Day in France on 14 July.

Trump would be expected to come to Downing Street to meet the prime minister for informal talks as part of any such visit – though final confirmation would be likely to be given with just 24 hours’ notice, to minimise the risk of disruption. May invited Trump to Britain seven days after his inauguration when she became the first foreign leader to visit him in the White House. In February activists, MPs and trade unions vowed to hold the largest demonstrations in UK history if Donald Trump made a state visit to the UK, forming The Stop Trump coalition, even hiring a permanent staff member. In early June, just after the UK general election, it emerged that the US president had told May that he did not want to go ahead with the state visit to Britain until the British public supports his coming, fearing large-scale demonstrations.

Read more …

How about you borrow some more, guys? Or, you know, come clean and tell people their pensions are shot.

Maine, New Jersey Lawmakers Scramble To End Partial Government Shutdowns (R.)

Partial government shutdowns in Maine and New Jersey entered a second day on Sunday as lawmakers returned to their respective state capitals in a bid to break budget impasses that have led to the suspension of many nonessential services. In Maine, a bipartisan legislative committee met in Augusta in hopes of breaking a stalemate between Republican Governor Paul LePage and Democratic lawmakers. The shutdown came after LePage threatened to veto a compromise reached by lawmakers in the state’s $7.055 billion, two-year budget. In New Jersey, the legislature was due to reconvene to resolve a political fight over a controversial bill that Governor Chris Christie said must be passed alongside the state’s budget.

After House Republicans in Maine voted to reject a compromise deal on Saturday, the Bangor Daily News reported that Republican Minority Leader Ken Fredette presented a $7.1 billion plan he said could get the governor’s approval, but some Democrats noted that was costlier than the rejected compromise. “The Speaker thinks it is unconscionable that Maine doesn’t have a budget, especially leading into the holiday weekend,” Mary-Erin Casale, a spokeswoman for Democratic House Speaker Sara Gideon, said Sunday morning. If the budget committee meeting on Sunday in Augusta agrees on a deal, the measure would go to the full legislature. LePage has insisted on a budget with deeper spending cuts than those contemplated by lawmakers and has promised to veto any spending plan that raises taxes.

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Sign of things to come.

Illinois House Approves Major Income Tax Hike (CTrib)

The Illinois House on Sunday approved a major income tax increase as more than a dozen Republicans broke ranks with Gov. Bruce Rauner amid the intense pressure of a budget impasse that’s entered its third year. The Republican governor immediately vowed to veto the measure, saying Democratic House Speaker Michael Madigan was “protecting the special interests and refusing to reform the status quo.” The measure, which needed 71 votes to pass and got 72, is designed to start digging the state out of a morass left by the lengthy stalemate. Madigan, in a statement, praised the action as “a crucial step toward reaching a compromise that ends the budget crisis by passing a fully funded state budget in a bipartisan way.”

The tax hike now heads to the Senate, but whether there will be enough votes to send it to Rauner’s desk is in question. When the Senate approved its own tax hike in late May, no Republicans voted for it and several Democrats voted against it. Senators return to the Capitol on Monday. The crucial vote in the House was the big story Sunday, though. Ultimately, pressure that had built up in districts across the state moved enough Republicans to defy the governor. With state government operating without a budget for two full years, public universities risk losing their accreditation, social service providers are closing their doors and layoffs of road construction workers are imminent.

Adding to lawmakers’ anxiety was a promised downgrade of the state’s credit rating to junk status, which could spike the cost of borrowing at a time when the state has $15 billion in unpaid bills. Left out of the House budget package was a plan for dealing with the unpaid bills, though both sides generally agree that some amount of borrowing will be needed. Rauner, a former private equity specialist from Winnetka, had spent tens of millions of dollars on legislative campaigns and TV ads to prop up the Illinois Republican Party as a counterweight to Madigan and his labor union allies. And Republican lawmakers largely had stuck by their governor — until Sunday. [..] The proposal mirrors a plan the Senate passed earlier this year and calls for raising the personal income tax rate from the current 3.75% to 4.95%, which would generate roughly $4.3 billion. An increase in the corporate income tax rate from 5.25% to 7% would bring in another $460 million.

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Bearish on the dollar? You sure?

China Inc’s $7.8 Billion of Dividend Payments Will Stress the Yuan (BBG)

The yuan’s rebound may be undermined by a seasonal hunt for dollars as Chinese companies prepare to pay dividends to shareholders overseas. Demand for the greenback and other currencies will peak at $7.8 billion in July, a substantial sum considering that local lenders settled an average of $11.8 billion in foreign-exchange for clients in the first five months of 2017. China’s currency reserves have shrunk every July in the last three years, with former regulator Guan Tao saying last week that demand for foreign-exchange surges in this period. China’s exchange rate has turned more volatile in the past two months, climbing the most in more than a year in May and then declining in June before suspected central bank intervention spurred a rally.

Goldman Sachs warned capital outflows have picked up, while recent data suggest the economy is showing signs of slowing as an official deleveraging drive crimps spending. “The need for dividend payouts will pressure the yuan and may pressure a recent increase in China’s foreign reserves,” said Xia Le at BBVA. “The yuan’s advance in the past few days is not sustainable – short-term factors such as dividend payments and long-term ones like capital outflows will work together to push the currency weaker in the coming months.” Offshore-listed Chinese firms need to pay a combined $16 billion of dividends in foreign exchange in the three months through August. That includes $2.4 billion in June and $5.9 billion for August.

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Abe will shuffle his cabinet to deflect attention from himself. But he’s in trouble.

Japan PM Abe’s Party Suffers Historic Defeat In Tokyo Election (R.)

Prime Minister Shinzo Abe’s Liberal Democratic Party suffered an historic defeat in an election in the Japanese capital on Sunday, signaling trouble ahead for the premier, who has suffered from slumping support because of a favoritism scandal. On the surface, the Tokyo Metropolitan assembly election was a referendum on Governor Yuriko Koike’s year in office, but the dismal showing for Abe’s party is also a stinging rebuke of his 4-1/2-year-old administration. Koike’s Tokyo Citizens First party and its allies took 79 seats in the 127-seat assembly. The LDP won a mere 23, its worst-ever results, compared with 57 before the election. “We must recognize this as an historic defeat,” former defense minister Shigeru Ishiba was quoted as saying by NHK.

“Rather than a victory for Tokyo Citizens First, this is a defeat for the LDP,” said Ishiba, who is widely seen as an Abe rival within the ruling party. Past Tokyo elections have been bellwethers for national trends. A 2009 Tokyo poll in which the LDP won just 38 seats was followed by its defeat in a general election that year, although this time no lower house poll need be held until late 2018. [..] “We must accept the results humbly,” said Hakubun Shimomura, a close Abe ally and head of the LDP’s Tokyo chapter. “The voters have handed down an extremely severe verdict.” Abe is expected to reshuffle his cabinet in coming months in an effort to repair his damaged ratings, a step often taken by beleaguered leaders but one that can backfire if novice ministers become embroiled in scandals or commit gaffes.

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If Kuroda’s out of ideas, that means Abenomics has failed. And that in turn means Abe should go too.

Abe’s Mentor Says BOJ Needs Fresh Face as Kuroda Is Out of Ideas (BBG)

Haruhiko Kuroda shouldn’t serve another term as governor of the Bank of Japan because the central bank will need fresh ideas as it moves toward exiting years of unprecedented monetary easing, according to an adviser to the prime minister. “An exit will surely come up within the next five years and we need someone who can prepare for it,” said Nobuyuki Nakahara, a former BOJ board member. “He will fall into inertia and struggle to come up with bold new ideas. It’s the same in the private sector when a corporate president stays too long,” he said. Nakahara’s comments come amid growing speculation among private economists that Prime Minister Shinzo Abe will reappoint Kuroda, 72, after his five-year term ends in April.

Nakahara, who was close to Abe’s father, Shintaro, has known the prime minister since he was young and has advised him for years. In an interview on June 29, Nakahara, one of the architects of Abenomics, said he didn’t have any replacements for Kuroda in mind. But he said change at the top of the BOJ would be good because the government and central bank should strike a new accord and form a new strategy for the next five years. The current accord, issued in January 2013, says the central bank should aim for price stability at an annual inflation rate of 2%, while the government is responsible for strengthening competitiveness and the nation’s growth potential. More than four years later, the inflation target remains far off.

[..] Kuroda’s propensity to surprise markets with innovative ideas has been waning, according to Nakahara. And the strains of his record easing are particularly evident in the bank’s purchases of exchange-traded funds, which are distorting the market, he said. “They can’t keep holding ETFs forever,” he said. Nakahara offered a possible solution. How about getting companies to buy back their own shares from the BOJ? Or the BOJ could tell companies it plans to sell the shares on the market. If the companies need funding for share buybacks, the central bank could help with a loan-support program. “That’s my secret strategy,” he said.

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Really, close Al Jazeera? What an awful signal that would be. Why not close CNN then?!

Saudi Arabia, Allies Give Qatar Two More Days To Accept Demands (R.)

Four Arab states that accuse Qatar of supporting terrorism agreed to extend until Tuesday a deadline for Doha to comply with a list of demands, as U.S. President Donald Trump voiced concerns about the dispute to both sides. Qatar has called the charges baseless and says the stiff demands – including closing Qatar-based al Jazeera TV and ejecting Turkish troops based there – are so draconian that they appear designed to be rejected. Saudi Arabia, Bahrain, Egypt and the United Arab Emirates (UAE) have raised the possibility of further sanctions against Qatar if it does not comply with the 13 demands presented to Doha through mediator Kuwait. They have not specified what further sanctions they could impose on Doha, but commercial bankers in the region believe that Saudi, Emirati and Bahraini banks might receive official guidance to pull deposits and interbank loans from Qatar.

According to a joint statement on Saudi state news agency SPA, the four countries agreed to a request by Kuwait to extend by 48 hours Sunday’s deadline for compliance. Foreign ministers from the four countries will meet in Cairo on Wednesday to discuss Qatar, Egypt said on Sunday. Kuwait state media said its Emir Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah had received a response by Qatar to the demands. It did not elaborate. The four states cut diplomatic and commercial ties with Qatar on June 5, accusing it of supporting terrorism, meddling in their internal affairs and cosying up to regional adversary Iran, all of which Qatar denies. Mediation efforts, including by the United States, have been fruitless. Trump spoke separately to the leaders of Saudi Arabia, Qatar and the Crown Prince of Abu Dhabi in the UAE to discuss his “concerns about the ongoing dispute”, the White House said.

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For history buffs.

The Crash of 1929 (Jesse’s Café/PBS)

“…people believed that everything was going to be great always, always. There was a feeling of optimism in the air that you cannot even describe today.” “There was great hope. America came out of World War I with the economy intact. We were the only strong country in the world. The dollar was king. We had a very popular president in the middle of the decade, Calvin Coolidge, and an even more popular one elected in 1928, Herbert Hoover. So things looked pretty good.” “The economy was changing in this new America. It was the dawn of the consumer revolution. New inventions, mass marketing, factories turning out amazing products like radios, rayon, air conditioners, underarm deodorant…One of the most wondrous inventions of the age was consumer credit. Before 1920, the average worker couldn’t borrow money. By 1929, “buy now, pay later” had become a way of life.”

“Wall Street got the credit for this prosperity and Wall Street was dominated by just a small group of wealthy men. Rarely in the history of this nation had so much raw power been concentrated in the hands of a few businessmen…” “One of the most common tactics was to manipulate the price of a particular stock, a stock like Radio Corporation of America…Wealthy investors would pool their money in a secret agreement to buy a stock, inflate its price and then sell it to an unsuspecting public. Most stocks in the 1920s were regularly manipulated by insiders ” “I would say that practically all the financial journals were on the take. This includes reporters for The Wall Street Journal, The New York Times, The Herald-Tribune, you name it. So if you were a pool operator, you’d call your friend at The Times and say, “Look, Charlie, there’s an envelope waiting for you here and we think that perhaps you should write something nice about RCA.”

And Charlie would write something nice about RCA. A publicity man called A. Newton Plummer had canceled checks from practically every major journalist in New York City… Then, they would begin to — what was called “painting the tape” and they would make the stock look exciting. They would trade among themselves and you’d see these big prints on RCA and people will say, “Oh, it looks as though that stock is being accumulated. Now, if they are behind it, you want to join them, so you go out and you buy stock also. Now, what’s happening is the stock goes from 10 to 15 to 20 and now, it’s at 20 and you start buying, other people start buying at 30, 40. The original group, the pool, they’ve stopped buying. They’re selling you the stock. It’s now 50 and they’re out of it. And what happens, of course, is the stock collapses.”

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Prediction: the EU will offer more money. They simply don’t understand that some things are not about money.

Italy Urges EU Ports To Take Migrants As Pressure Builds (AFP)

The French and German interior ministers met with their Italian counterpart Marco Minniti in Paris on Sunday to discuss a “coordinated response” to Italy’s migrant crisis, hours after Minniti had called on other European countries to open their ports to rescue ships. The working dinner at the French interior ministry – also attended by EU Commissioner for Refugees Dimitris Avramopoulos – was aimed at finding “a coordinated and concerted response to the migrant flux in the central Mediterranean (route) and see how to better help the Italians,” a source close the talks said. The four-way talks between Minniti, Thomas de Maiziere of Germany, Gerard Collomb of France and Avramopoulos will also prepare them for EU talks in Tallinn this week. “The talks went off very well,” a member of the Italian delegation told AFP after the Paris meeting, with the “Italian proposals being discussed”.

“We are under enormous pressure,” Minniti had said earlier Sunday in an interview with Il Messaggero. With arrivals in Italy up nearly 19% over the same period last year, Rome has threatened to close its ports to privately-funded aid boats or insist that funding be cut to EU countries which fail to help. “There are NGO ships, Sophia and Frontex boats, Italian coast guard vessels” saving migrants i the Mediterranean, Minniti said, referring to the aid boats as well as vessels deployed under EU border security missions. “They are sailing under the flags of various European countries. If the only ports where refugees are taken to are Italian, something is not working. This is the heart of the question,” he said. “I am a europhile and I would be proud if even one vessel, instead of arriving in Italy, went to another European port. It would not resolve Italy’s problem, but it would be an extraordinary signal” of support, he said.

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I’ve often said that the Congo is perhaps richer in resources than any other country. It should be prosperous, but instead it ranks 227th out of 230 countries for GDP per capita. That’s our doing.

From July 5, see documentary at https://rtd.rt.com/films/congo-my-precious/

‘Our Future Is Slavery, The West Gets Everything’ – Congo (RT)

RT Documentary travels to the vast, landlocked Democratic Republic of Congo, prized for its mineral resources, but plagued by centuries of colonial rule, dictatorship, civil wars and lawlessness, and meets people trying to make a living in one of the most desperate places on Earth. The documentary crew’s key to understanding the country, seven times the size of Germany, was Bernard Kalume Buleri, born in 1960, the same year DRC was granted its independence from Belgium. Buleri served as an interpreter, guide, and finally the hero and symbol of the country, having been a direct participant in some of its bloodiest chapters. “I can’t say that the Congolese, we are in control of our destiny. No, because the ones who benefit from our minerals are not the local population, but Western countries are the ones who are taking everything.

They make themselves rich, while we are getting poorer and poorer,” says Buleri. The country of almost 80 million is one of the world’s largest exporters of diamonds, coltan – essential for electronics – and has massive deposits of copper, tin and cobalt. “I’m afraid even for my children. Because they will continue in this system to be slaves forever. We’ll never be powerful enough to challenge the Western countries. So, the future will be the future of slaves,” Buleri continues. There is plenty of blame to go around for the predicament of what is also a fertile and scenic land. With almost no educated elite, DRC was poorly-prepared for its separation from Belgian rule, now best remembered for the atrocity-filled reign of King Leopold II, which may have killed as many as half of the country’s population.

The vacuum was filled by the archetype-setting African kleptocrat Mobutu Sese Seko, who ruled the country for more than three decades, until he was deposed in 1997, plunging Africa into a series of continent-wide conflicts that may have resulted in as many as 5 million deaths through violence, starvation and disease. The country’s below-ground wealth means that it was never left alone for long enough to reform and wean itself off its reliance on metals and gems – the widely-mentioned “mineral curse.” The mines the RT crew passes are now owned by local warlords, chiefs and officials, with exports mostly going to China. [..] Millions of locals – perhaps as many as one-fifth of the adult population – are employed in what is known as artisanal mining, inefficient small-scale prospecting with simple handheld tools, with no safety measures or guaranteed wages. But for a country that ranks 227th out of 230 for GDP per capita, according to World Bank data, any job at all is a matter of survival.

Read more …

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 May 31, 2017  Posted by at 9:22 am Finance Tagged with: , , , , , , , , , ,  1 Response »
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Johannes Vermeer Woman in Blue Reading a Letter 1662-3

 

China Is The Greatest Financial Bubble in History (Rickards)
In Watershed Event, Europe Unveils Plan To Securitize Sovereign Debt (ZH)
EU Executive To Say Eurozone May Need Treasury, Minister, Budget (R.)
Sterling Dips After Poll Suggests Hung UK Parliament (BBC)
Theresa May Asks Voters To Imagine Jeremy Corbyn ‘Naked And Alone’ (M.)
US Starts Shipping Weapons To Syrian Kurds (ZH)
The Plot To Overthrow Trump Is Very Real (Martin Armstrong)
‘She’s Finally Understood She Needs To Solve Europe’ (Exp.)
Merkel Comes Out Swinging At Trump And Misses (Luongo)
After A Year’s Delay, Dutch Approve Ukraine Treaty (R.)
Two-Thirds Of Greek Construction Jobs Have Vanished (K.)
Once Costly Deep-Sea Oil Turns Cheap, to OPEC’s Dismay (BBG)
US Army Veterans Find Peace In Protecting Rhinos From Poaching (G.)

 

 

“The toxic combination of government debt, corporate debt, WMPs, and unrealistic growth expectations have set up China for the greatest market crash in history. But, not yet. As analysis will continue to prove, political forces will put off a day of reckoning until early 2018.”

China Is The Greatest Financial Bubble in History (Rickards)

China is in the greatest financial bubble in history. Yet, calling China a bubble does not do justice to the situation. This story has been touched on periodically over the last year. China has multiple bubbles, and they’re all getting ready to burst. If you make the right moves now, you could be well positioned even as Chinese credit and currency crash and burn. The first and most obvious bubble is credit. The combined Chinese government and corporate debt-to-equity ratio is over 300-to-1 after hidden liabilities, such as provincial guarantees and shadow banking system liabilities, are taken into account. Paying off that debt requires growth, but the growth itself is fueled by more debt. China is now at the point where enormous new debt is required to achieve only modest new growth. This is clearly non-sustainable.

The next bubble is in investment instruments called Wealth Management Products, or WMPs. Picture this. You’re a middle-class Chinese saver and you walk into a bank. They offer you two investment options. The first is a bank deposit that pays about 2%. The other is a WMP that pays about 7%. Which do you choose? In the past ten years, bank customers have chosen almost $12 trillion of WMPs. That might be fine if WMPs were like high-quality corporate or municipal bonds. They’re not. They’re more like the biggest Ponzi scheme in history. Here’s how they work. Proceeds from sales of WMPs are loaned to speculative real estate developers and unprofitable state owned enterprises (SOEs) at attractive yields in the form of notes. So, WMPs resemble collateralized debt obligations, CDOs, the same product that sank Lehman Brothers in the panic of 2008.

The problem is that the borrowers behind the WMPs can’t pay their debts. They’re relying on further bubbles in real estate or easy credit from the government to meet their interest obligations. What happens when a WMP matures? Usually the bank customer is encouraged to rollover the investment into a new WMP. What happens if the customer wants her money back? The bank sells a new WMP to another customer, then uses those sales proceeds to redeem the first customer. The new customer now steps into the shoes of the first customer with the same pile of bad debt. That’s where the Ponzi dynamic comes in. Simply put, most of the debts backing up the WMPs cannot be repaid, which means it’s just a matter of time before the WMP market goes into a full meltdown and triggers a banking panic.

Finally, there is an infrastructure bubble. As explained in more detail below, China has kept its growth engine humming mostly with investment instead of aggregate demand from consumers. Investment is fine if it is directed at long-term growth projects that produce a positive expected return and help the broader economy grow as well. But, that’s not what China has done. About half of China’s investment in the past ten years has been wasted on “ghost cities,” white elephant transportation facilities, and prestige projects that look good superficially, but that don’t produce enough revenue or efficiencies to pay for themselves. Much of this investment was financed with debt. If the project itself is not revenue producing then the associated debt cannot be repaid, and will go into default.

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Watershed Ponzi.

In Watershed Event, Europe Unveils Plan To Securitize Sovereign Debt (ZH)

Less than a decade after various complex, synthetic, squared, cubed and so on securitized debt structures nearly brought down the financial system, here come “Sovereign Bond-Backed Securities.” Moments ago, the FT reported that in a watershed event for the European – and global – bond markets, Brussels is pressing for sovereign debt from across the eurozone to be “bundled into a new financial instrument and sold to investors as part of a proposal to strengthen the single currency area.” Call it securitized sovereign debt. In the latest attempt by Europe to create a common bond market, a European Commission paper on the future of the euro seen by the Financial Times, advocates the launching of a market of “sovereign bond-backed securities” — packaging different countries’ national debt into a new asset.

The logic is simple: combine all the debt from strong and weak countries into one big pool, eliminating the outliers on both sides, then tranche it out, and sell it based on required yield returns. “Officials hope that the plans would boost demand for debt issued by governments with relatively weaker economies, and encourage banks to manage their risks better by diversifying their portfolios, while avoiding old political battles over whether the currency bloc should issue common bonds”. Why now? Because as has been Germany’s intention all along, Berlin has been hoping to create a fiscally intergrated Europe (with a shadow government in Berlin of course), call it a (quasi) “fiscal union”, and which is much more stable and resilient than the current iteration which is only as strong as its weakest link. Securitizing the sovereign debt resolves virtually all outstanding problems.

“The commission paper is the latest in a series of efforts to kick-start integration inside the eurozone. Such integration efforts have stalled since financial markets became convinced in 2013 that the European Central Bank would not allow the eurozone to break up. The last successful integration project was the creation of an EU banking union three years ago.” There is another reason why now: over the next year, the ECB’s QE, which has been instrumental to implement Draghi’s “Whatever it takes” bluff, will start hiking rates and eventually unwinding its balance sheet, the world’s biggest. That’s when the European bond market may have its next freak out moment. As a result, Brussels and Frankfurt are hoping to preempt this potential unwind by coming up with today’s “ingenious” solution.

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Brussels wants the opposite of what the people want.

EU Executive To Say Eurozone May Need Treasury, Minister, Budget (R.)

The EU executive will suggest on Wednesday the euro zone might need to issue collective debt and run a joint budget, among proposals for bolstering the single currency that echo ideas from new French President Emmanuel Macron. People familiar with the European Commission reflection paper told Reuters the scenario of a finance minister managing common revenue, spending and borrowing had been worked on for many months in Brussels, but now appears a much more likely option since centrist former banker Macron won power on May 7. German conservatives dislike an idea they say means paying for poorer neighbors. But Chancellor Angela Merkel, seeking re-election in September, has welcomed Macron’s victory and EU officials said they hoped governments might start working on a plan to forge a more cohesive euro zone from next year.

The Commission paper examines possible reforms to the bloc after the 2010-2012 sovereign debt crisis that nearly destroyed it and which triggered a wave of quick fixes for its weak spots. While some problems have been addressed, there is a lot more EU governments need to do to have an optimally functioning Economic and Monetary Union (EMU), the Commission will say. The document, part of a wider series on the future of the EU, comes as the EU is to start talks with Britain on the terms of its withdrawal – a great setback to European integration but one that will see the euro zone make up nearly four-fifths of the EU’s economy, up from two thirds today. The Commission will avoid making any clear suggestions as to the evolution of the single currency area, leaving it up to EU governments to decide which of the ideas they like. But it does say that in the later stages of deepening euro zone integration, not least because it would require politically difficult and time-consuming changes to EU treaties, the bloc could establish a euro zone treasury.

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May’s fall is swift.

Sterling Dips After Poll Suggests Hung UK Parliament (BBC)

The value of the pound dropped after a projection suggested the Conservatives could fail to win an outright majority in the election on 8 June. Previous opinion polls suggested Prime Minister Theresa May’s party would increase its majority, which is currently 17 seats. But the projection, published in the Times and based on YouGov research, suggests a possible hung parliament. Sterling fell by more than half of one per cent, but recovered some losses. By early Wednesday morning, it was trading 0.44% lower against the dollar at $1.28020 and 0.29% lower against the euro at €1.146. The Times said the YouGov data suggested that the Tories could lose up to 20 of the 330 seats they held in the last parliament, with Labour gaining nearly 30 seats.

The Conservatives would still be the biggest party, but would not have an overall majority. The model is based on 50,000 interviews over a week, with voters from a panel brought together by YouGov. It uses a new “constituency-by-constituency” model for polling, which the paper says allows for big variations. According to the Times, “the estimates were met with scepticism by Tory and Labour figures.” YouGov’s chief executive, Stephan Shakespeare said the model had been tested during the EU referendum campaign, when it consistently put the winning Leave side ahead. But he added: “It would take only a slight fall in Labour’s share and a slight increase in the Conservatives’ to result in Mrs May returning to No 10 with a healthy majority.”

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Fear rules the waves. Telegraph headline today: “Tax on homes ‘to treble under Labour plans for Land Value Tax’ “

Theresa May Asks Voters To Imagine Jeremy Corbyn ‘Naked And Alone’ (M.)

Flapping Theresa May fired off a volley of insults at Jeremy Corbyn today after Labour surged in general election polls. The desperate Prime Minister even conjured up an image of the Labour leader naked in Brussels as she urged voters to consider the impact of propelling Mr Corbyn to No 10. She used a Labour legend’s quote as she mocked Mr Corbyn over what she claimed would be his weakness in tough EU divorce talks. “With his position on Brexit , he will find himself alone and naked in the negotiating chamber,” she said. “I know that’s an image that doesn’t bear thinking about but actually this is very serious.” The barb was particularly wounding for Labour by borrowing the charge from one of the party’s heroes, NHS founder Aneurin Bevan.

Urging Labour conference delegates in October 1957 not to support unilateral nuclear disarmament, he warned: “You will send a British Foreign Secretary, whoever he may be, naked into the conference chamber.” Challenged by the Mirror, Mrs May denied demeaning the office of Prime Minister with her outspoken attacks. And she was later forced to deny they showed she was getting “desperate”, saying: “It represents the difference between myself, having prepared for the negotiations, having a clear plan for the negotiations, and Jeremy Corbyn and the Labour Party who have said they would tear up the plan we have produced.” Speaking at the former railway station in Wolverhampton, Mrs May claimed her rival’s performance in the Sky News/Channel 4 TV showdown proved he could not be PM. “Despite being a Member of Parliament for 34 years, despite being the leader of the Labour Party for the last two years, he’s simply not ready to govern, and not prepared to lead,” she said.

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Some are trying to turn this into a war with Iraq.

US Starts Shipping Weapons To Syrian Kurds (ZH)

Just three weeks after reports first emerged that the Trump administration was considering arming the Syrian Kurd militia caught in the crossfire between Turkish and Syrian army forces, NBC reported that the American military has started shipping weapons and equipment to the Kurdish fighters of the Syrian Democratic Forces, also known as YPG, a key US ally on the ground in Syria. Citing an unnamed official, NBC adds that the U.S. began providing the equipment in the last 24 hours. Details were scarce, with no specifics about what weapons and supplies the US is sending the Syrian Democratic Forces or how those items are being delivered however when the report first emerged, the U.S. military announced it would provide the YDF with ammunition, rifles, armor, radios, bulldozers, vehicles, and engineering equipment.

Pentagon spokesman Eric Pahon told RT taid that this move represents the “early steps to prepare for the eventual liberation of Raqqa,” which the Islamic State has declared the capital of its self-proclaimed caliphate. “Overall, the equipment the US-led coalition will provide to the SDF includes small arms, ammunition, heavy machine guns and weapons capable of defeating specific threats our partner forces are expected to encounter as they take the fight to a desperate enemy, such as heavily-armored vehicle-borne IEDs,” Pahon said. Earlier this month US officials said that Trump had signed off on a plan “to equip Kurdish elements of the Syrian Democratic Forces” in the fight to retake the Syrian city of Raqqa from ISIS. “The SDF, partnered with enabling support from U.S. and coalition forces, are the only force on the ground that can successfully seize Raqqa in the near future,” Pentagon spokeswoman Dana White said in a statement.

The announcement is guaranteed to send Turkey’s president Erdogan into another fit of rage. Earlier this month Erdogan condemned Trump’s decision to arm Syrian Kurds whom Turkey considers to be terrorists and an extension of outlawed Kurdish insurgents within its borders. Three weeks ago Erdogan said: “I hope very much that this mistake will be reversed immediately,” adding that “we want to believe that our allies would prefer [to] be side by side with ourselves rather than with the terror groups.” President Trump and Erdogan met earlier this month and discussed the administration’s plans to arm Kurdish militias in Syria. It was unclear what agreement the two leaders reached on this controverial move.

At the same time, Reuters reported that Syrian rebels say the United States and its allies “are sending them more arms to try to fend off a new push into the southeast by Iran-backed militias aiming to open an overland supply route between Iraq and Syria.” Rebels said military aid has been boosted through two separate channels: a program backed by the CIA, known as the MOC, and regional states including Jordan and Saudi Arabia, and one run by the Pentagon. “There has been an increase in the support,” said Tlass Salameh, head of the Jaish Usoud al-Sharqiya, one of the FSA groups backed via the CIA-backed program. “There’s no way we can let them open the Baghdad-Damascus highway,” he said.

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No doubt there.

The Plot To Overthrow Trump Is Very Real (Martin Armstrong)

There is a very REAL plot to overthrow Trump led by the political establishment and aided by the mainstream press.. This is not simply speculation – this is the real deal. Of course the Washington Post and New York Times are in full swing to get rid of Trump. No matter what it might be, the twist is always against Trump right down to the story how Sean Spicer wanted to see the Pope because he is a devote Catholic and was denied. CNN, of course, is also part of this conspiracy. You will NEVER find any positive article about Trump in mainstream media. Here is CNN and we can see that 50% of the top stories are always against Trump. We have Boehner coming out saying Trump is a disaster. This is the guy who threw people off committees if they did not vote for his agenda. The Kushner story is desperately trying to make something out of nothing.

Here we have after Flynn’s removal, Kushner suggesting setting up a direct channel for diplomatic purposes regarding Syria with the Russians. That is entirely within reason and has been done during confrontations in the past. This was only a suggestion. It was not done, yet the press twist this into somehow supporting Russia who single-handedly defeated Hillary and put Trump in office. They think if they can just keep selling that nonsense it will become a fact.. The press seems to want war with Russia and absolutely nothing else. No such link was established and the last thing you want to do is not talk to your adversary. So why is this a major story? Of yes. It’s again RUSSIA. The press created the Spanish American War. They supported the Vietnam War and kill more than 58,000 American boys, most of my high school friends died thanks to them.

Behind the Curtain, Republican Elites are conspiring to overthrow Trump (including Boehner) to protect the establishment. McCain and Graham are the worst of the lot in office. They obviously picked up the phone and called Boehner for help. The Republicans have lost it. They think this “populism” is over with Macron’s victory in France so it’s time to get rid of Trump and it will all be OK again. I have never seen such an all out effort on a massive coordinated effort to reject the people’s demand for reform. This is HIGHLY dangerous for we can very well move toward civil war. These people think getting rid of Trump and it will all be roses and raining money for them once again. They are DEAD wrong! Our model also warns that that United States can break up as a result of this by 2032-2040.

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No, Merkel has started her campaign.

‘She’s Finally Understood She Needs To Solve Europe’ (Exp.)

Attending a campaign rally ahead of the country’s elections, Angela Merkel claimed that now was the time for Europe to pay more attention to its own interests, and “take our fate into our own hands”. In an uncharacteristically bold speech, she went so far as to suggest that even the US was no longer a reliable partner to the EU – a strong statement, according to officials, who were left stunned. The words appeared to herald a change in transatlantic relations – effectively saying with Donald Trump in charge, the US-European alliance would never be the same. Mrs Merkel’s out of character appearance also signalled a strong pro-European stance to voters in Germany, as well as the wider EU, that Berlin will be playing a more activist role in the bloc. Norbert Spinrath, Europe spokesman in the Bundestag for the Social Democrats, said: “[Mrs] Merkel seems to have finally understood that she really needs to get stuck in and solve Europe’s problems.

“She has to realise that Europe is more than just fiscal consolidation — we need closer integration, we need to strengthen the currency and fight social imbalances.” The speech comes just weeks after newly elected French president Emmanuel Macron announced his plans to spearhead reforms in the Eurozone. It would be a sharp departure from her previous role as the EU’s crisis manager, with Mr Macron’s election pushing the German leader to present a more promising vision of Europe’s future. According to Jan Techau, a foreign policy analyst at the American Academy in Berlin, the speech was more for domestic audiences than those abroad, with the country’s federal elections just four months away. He adds: “It shows she is finally moving into campaign mode. “She’s switched from the international Merkel to the domestic Merkel.”

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What is Trump going to do if Corbyn wins? Or Merkel?

Merkel Comes Out Swinging At Trump And Misses (Luongo)

German Chancellor Angela Merkel will preside over the end of the European Union. Her reaction to the G-7 meeting and U.S. President Donald Trump’s refusal to endorse the Paris Agreement on Climate Change will accelerate the market’s rejection of EU policy. I’ve been warning about this for months in my articles here on Seeking Alpha. Angela Merkel is caught between two stanch nationalists whom Germany depends on: Russian President Vladimir Putin to the east and U.S. President Donald Trump to the right. Last week, I told you that Trump would clash with Merkel over Brexit at the G-7 meeting. “But, the likelihood of that is remote. If anything, there are signs that Trump is getting control of the narrative and his presence at the G-7 meeting this weekend will put the EU, specifically German Chancellor Angela Merkel in her place with respect to Brexit by backing U.K. Prime Minister Theresa May.”

And by all accounts he did that and more, forcing the G-7 to issue a four-page forward statement that outlined the lack of consensus among the participants. This is unprecedented. Trump went overseas and stood athwart the financial and political order to fulfill campaign promises. Now, Angela Merkel is forced to make campaign promises of her own. And she’s not happy about it. Merkel gave a “watershed speech” during a Christian Democratic Union (CDU) rally in Munich. From an AFP report on the speech: “Europe “must take its fate into its own hands” faced with a western alliance divided by Brexit and Donald Trump’s presidency, German Chancellor Angela Merkel said Sunday. “The times in which we could completely depend on others are on the way out. I’ve experienced that in the last few days,” Merkel told a crowd at an election rally in Munich, southern Germany. “We Europeans truly have to take our fate into our own hands,” she added.

And while these are fighting words, they also ring hollow. Merkel is in no position to drive a hard bargain with either the U.S. or the U.K. over trade. Trump went to the G-7 to put the kibosh on the EU’s intransigence over Brexit. He succeeded. Trump is winning control of the political narrative at home. He’s up in the polls, he was deferential to Israel and even handed with the Arabs in Saudi Arabia. This trip and his standing up to G-7 technocrats on behalf of his voters give him the political capital to whip his Republican majority into line on spending, taxes and budgeting. The punditry is right. This is a watershed moment. But, it was not instigated by Merkel. It was instigated by Trump. And it will be the beginning of the next wave of capital flight out of the EU.

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So much for democracy in Holland. Make that Europe. Big mistake, guys.

After A Year’s Delay, Dutch Approve Ukraine Treaty (R.)

The Dutch senate on Tuesday approved a European Union “association agreement” with Ukraine, a final hurdle to the treaty, which strengthens the former Soviet republic’s ties with Western Europe and moves it further from Moscow’s orbit. It did so following amendments made at the EU level to take into consideration the Dutch referendum vote last year against the agreement. “Today’s vote in the Dutch Senate sends an important signal from the Netherlands and the entire European Union to our Ukrainian friends: Ukraine’s place is in Europe. Ukraine’s future lies with Europe,” said EU Commission President Jean-Claude Juncker. The agreement, a treaty, had already been negotiated and approved by all EU governments and by Ukraine in 2014, and had even partially gone into effect pending ratification when it was abruptly rejected by Dutch voters in a snap referendum held in April 2016.

The Dutch vote was as much a rebuke to Prime Minister Mark Rutte and the European Union as a rejection of the treaty, which focuses mostly on trade ties. But Rutte and the European Union diplomats were forced to renegotiate parts of the treaty in order to render it palatable to Dutch parliament or risk seeing it derailed, since it cannot be ratified without support from all European Union legislatures. Ultimately the treaty was amended to underline it does not make Ukraine a candidate for EU membership, does not entitle Kiev to financial aid or military assistance from the bloc, and does not give Ukrainians the right to live and work in EU member states. The amended version passed Dutch parliament in March, and the Senate approved it Monday, both by comfortable margins.

Read more at

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Everything is left to fall apart. As billion-dollar buildings open in Brussels. Union.

Two-Thirds Of Greek Construction Jobs Have Vanished (K.)

The number of companies active in the construction sector has declined by 35.4% since 2004 as a result of the financial crisis and the considerable drop in investment in infrastructure. Worse, compared to the 401,000 employees in the sector during the third quarter of 2008 – just before the recession cycle started – construction employed just 141,800 workers at end-2016, which means that at least 64.6% of the construction workers eight-and-a-half years ago have now been forced out of the sector.

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Ironic quote of the year, from the oil industry: “There is life in deep-water yet..”

Once Costly Deep-Sea Oil Turns Cheap, to OPEC’s Dismay (BBG)

Reports of deep-sea drilling’s demise in a world of sub-$100 oil may have been greatly exaggerated, much to OPEC’s dismay. Pumping crude from seabeds thousands of feet below water is turning cheaper as producers streamline operations and prioritize drilling in core wells, according to Wood Mackenzie. That means oil at $50 a barrel could sustain some of these projects by next year, down from an average break-even price of about $62 in the first quarter and $75 in 2014, the energy consultancy estimates. The tumbling costs present another challenge for OPEC which is currently curbing output to shrink a glut. In 2014, when the U.S. shale boom sparked oil’s crash from above $100 a barrel, the group embarked on a different strategy of pumping at will to defend market share and throttle high-cost projects.

Ali Al-Naimi, the former energy minister of OPEC member Saudi Arabia, said in February 2016 that such producers need to either “lower costs, borrow cash or liquidate.” “There is life in deep-water yet,” said Angus Rodger, director of upstream Asia-Pacific research at Wood Mackenzie in Singapore. “When oil prices fell, many projects were deferred, but the ones that were deferred first were deep-water because the overall break-evens were highest. Now in 2017, we’re seeing signs that the best ones are coming back.” The falling costs make it more likely that investors will approve pumping crude from such large deep-water projects, the process for which is more complex and risky than drilling traditional fields on land. That may compete with OPEC’s oil to meet future supply gaps that the group sees forming as demand increases and output from existing wells naturally declines.

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We should start training young people for this. Send them to Africa to live with the vets and observe. Best teachers ever.

US Army Veterans Find Peace In Protecting Rhinos From Poaching (G.)

The sun has set over the scrubby savannah. The moon is full. It is time for Ryan Tate and his men to go to work. In camouflage fatigues, they check their weapons and head to the vehicles. Somewhere beyond the ring of light cast by the campfire, out in the vast dark expanse of thornbushes, baobab trees, rocks and grass, are the rhinos. Somewhere, too, may be the poachers who will kill them to get their precious horns. The job of Tate, a 32-year-old former US Marine, and the group of US military veterans he has assembled in a remote private reserve in the far north of South Africa is simple: keep the rhinos and the rest of the game in the bush around their remote base alive. The men are not mercenaries, or park rangers –they work for Tate’s Veterans Empowered To Protect African Wildlife (Vetpaw), a US-based nonprofit organisation funded by private donations.

All have seen combat, often with elite military units, in Iraq, Afghanistan and elsewhere. Though equipped with vehicles, trail bikes, assault rifles, sniper suits and radios, the most important weapons in the war against poaching, Tate believes, are the skills and experiences his team gained on successive deployments in conflict zones over the last decade and a half. “We are here for free. We are not going anywhere. Whether it is cold or hot, day or night … we want to work with anyone who needs help,” Tate says. The initiative is not without controversy. Some experts fear “green militarisation” and an arms race between poachers and gamekeepers. Others believe deploying American former soldiers to fight criminals in South Africa undermines the troubled country’s already fragile state. But the scale of the challenge of protecting South Africa’s rhinos is clear to everyone, with a rise in poaching in recent years threatening to reverse conservation gains made over decades.

[..] Tate founded Vetpaw after seeing a documentary about poaching and the deaths of park rangers in Africa. His team now work on a dozen private game reserves covering a total of around 200,000 hectares in Limpopo, the country’s northernmost province. One advantage for local landowners is the protection heavily armed combat veterans provide against the violent break-ins feared by so many South Africans, particularly on isolated rural farmsteads. The team has also run training courses for local guides and security staff. But if one aim of Vetpaw is to counter poaching, another is to help combat veterans in the US, where former servicemen suffer high levels of unemployment and mental illness. “Everyone gets PTSD when they come back from war … you are never going to get the brotherhood, the intensity again.. [There are] all these veterans with billions of dollars of training and the government doesn’t use them. I saw a need in two places and just put them together,” says Tate.

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May 302017
 
 May 30, 2017  Posted by at 8:50 am Finance Tagged with: , , , , , , , , , , ,  5 Responses »
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Inge Morath Paris 1954

 

Australia Hedge Fund Returns Cash To Clients Citing Looming Calamity (SMH)
Hong Kong Throngs of Thousands Defy Bid to Cool Home Market (BBG)
Saudi Foreign Reserves Dip Below $500 Billion in April (BBG)
The Great US Energy Debt Wall (SRSRocco)
Greece, Italy Tensions Hit Euro, Asian Stocks, Lift Yen, Gold (R.)
Draghi Rules Out Including Greece in ECB QE For Now (K.)
Greece Warns Recovery Threatened If Debt Deal Is Blocked At Next Talks (G.)
Deposits And Loans At Greek Banks Continue Slide (K.)
EU Moves To Crack Down On Carmakers In Wake Of VW Emissions Scandal (G.)
Painstaking Detail Of Brexit Process Revealed In EU Documents (G.)
May Battles Against Complacency as UK Election Lead Slips Away (BBG)
Russia Expects China To Help Resolve Syrian Crisis (DS)
Putin, Macron Have ‘Open, Frank Exchange Of Opinions’ (RT)
Let’s All Agree To Lock In This Russophobia For At Least 3.5 More Years (Saker)
The So-Called Resistance (Jim Kunstler)
Germany Steps Up Attack On Trump For ‘Weakening’ The West (G.)
Greece, Germany Agree To Slow Refugee Family Reunification (F24)

 

 

After having milked the bubble for all it’s worth…

Australia Hedge Fund Returns Cash To Clients Citing Looming Calamity (SMH)

Australian asset manager Altair Asset Management has made the extraordinary decision to liquidate its Australian shares funds and return “hundreds of millions” of dollars back to its clients, citing an impending property market “calamity” and the “overvalued and dangerous time in this cycle”. “Giving up management and performance fees and handing back cash from investments managed by us is a seminal decision, however preserving client’s assets is what all fund managers should put before their own interests,” Philip Parker, who serves as Altair’s chairman and chief investment officer, said in a statement on Monday. The 30-year veteran of funds management said that he had on May 15 advised all Altair clients that he planned to “sell all the underlying shares in the Altair unit trusts and to then hand back the cash to those same managed fund investors”.

Mr Parker said he had “disbanded the team for time being”, including his investment committee of chief economist Steve Roberts, senior healthcare analyst Sally Warneford and independent strategist Gerard Minack. “I would like to make clear this is not a winding up of Altair, but a decision to hand back client monies out of equities which I deem to be far too risky at this point,” Mr Parker’s statement said. “We think that there is too much risk in this market at the moment, we think it’s crazy,” Mr Parker said more candidly. “Valuations are stretched, property is massively overstretched and most of the companies that we follow are at our one-year rolling returns targets – and that’s after we’ve ticked them up over the past year.” “Now we are asking ‘is there any more juice in these companies valuations?’ and the answer is stridently, and with very few exceptions, ‘no there isn’t’.”

Mr Parker outlined a roll call of “the more obvious reasons to exit the riskier asset markets of shares and property”. They included: the Australian east-coast property market “bubble” and its “impending correction”; worries that issues around China’s hot property sector and escalating debt levels will blow up “later this year”; “oversized” geopolitical risks and an “unpredictable” US political environment; and the “overvalued” Aussie equity market. But it was the overheated local property market that was the clearest and most present danger, Mr Parker said. “When you speak to people candidly in the banks, they’ll tell you very specifically that they are extraordinarily worried about the over-leverage of the Australian population in general,” he said.

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More looming calamity.

Hong Kong Throngs of Thousands Defy Bid to Cool Home Market (BBG)

Snaking queues of thousands of prospective apartment buyers in Hong Kong signaled authorities have made no progress in cooling a red-hot property market, where prices are at records. People were lining up on Friday and over the weekend at Victoria Skye, a luxury project at the former airport site of Kai Tak, and at the Ocean Pride development by Cheung Kong Property and MTR. “Successive moves by the government in recent memory to cool the property market only resulted in it becoming crazier,” The Standard newspaper said in an editorial on Monday. “The result is a sea of madness.” The Hong Kong Monetary Authority has been tightening rules for lenders, including restricting levels of lending to developers, as it tries to limit financial risks and take some of the heat out of the market.

The Centaline Property Centa-City Leading Index of existing homes has advanced 23% in the past year, setting new price records week after week. At a Legislative Council meeting on Monday, HKMA Chief Executive Norman Chan said levels of demand were reminiscent of 20 years ago – before Hong Kong suffered a property bust – and he expressed concern that people with limited financial resources were buying just because they thought prices would only keep going up. [..] Developers sold 8,616 homes in the first five months of the year, already more than were sold in any first half since new purchasing rules were introduced in 2013, the Hong Kong Economic Times reported. K&K Property has offered an additional 200 units at Victoria Skye after it sold 306 flats on Saturday, Ming Pao newspaper reported. Cheung Kong will put another 346 up for grabs after selling 496 in a single day, May 26.

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Buying too many weapons. The House of Saud is nervous.

Saudi Foreign Reserves Dip Below $500 Billion in April (BBG)

Saudi Arabia’s net foreign assets dropped below $500 billion in April for the first time since 2011 even after the kingdom raised $9 billion from its first international sale of Islamic bonds. The Saudi Arabian Monetary Authority, as the central bank is known, said on Sunday its net foreign assets fell by $8.5 billion from the previous month to about $493 billion, the lowest level since 2011. That brings the decline this year to $36 billion. “Didn’t really see any major driver for such a huge drop, especially when accounting for the sukuk sale,” said Mohamed Abu Basha at EFG-Hermes, an investment bank. Even if the proceeds from the sale weren’t included, “the reserve decline remains huge,” he said.

Saudi Arabia’s foreign reserves have dropped from a peak of more than $730 billion in 2014 after the plunge in oil prices, prompting the IMF to warn that the kingdom may run out of financial assets needed to support spending within five years. Authorities have since embarked on an unprecedented plan to overhaul the economy and repair public finances. But the pace of the decline in reserves this year has puzzled economists who see little evidence of increased government spending, fueling speculation it’s triggered by capital flight and the costs of the kingdom’s war in Yemen. Finance Minister Mohammed Al-Jadaan said in April that the government didn’t withdraw from its central bank reserves during the first quarter. He said the decline could be attributed to local contractors paying overseas vendors after the government settled its arrears.

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It’s not (just) the shale companies, it’s their lenders who are in danger.

The Great US Energy Debt Wall (SRSRocco)

While the U.S. oil and gas industry struggles to stay alive as it produces energy at low prices, there’s another huge problem just waiting around the corner. Yes, it’s true… the worst is yet to come for an industry that was supposed to make the United States, energy independent. So, grab your popcorn and watch as the U.S. oil and gas industry gets ready to hit the GREAT ENERGY DEBT WALL. So, what is this “Debt Wall?” It’s the ever-increasing amount of debt that the U.S. oil and gas industry will need to pay back each year. Unfortunately, many misguided Americans thought these energy companies were making money hand over fist when the price of oil was above $100 from 2011 to the middle of 2014. They weren’t. Instead, they racked up a great deal of debt as they spent more money drilling for oil than the cash they received from operations.

As they continued to borrow more money than they made, the oil and gas companies pushed back the day of reckoning as far as they could. However, that day is approaching… and fast. According to the data by Bloomberg, the amount of bonds below investment grade the U.S. energy companies need to pay back each year will surge to approximately $70 billion in 2017, up from $30 billion in 2016. That’s just the beginning…. it gets even worse each passing year. As we can see, the outstanding debt (in bonds) will jump to $110 billion in 2018, $155 billion in 2019, and then skyrocket to $230 billion in 2020. This is extremely bad news because it takes oil profits to pay down debt. Right now, very few oil and gas companies are making decent profits or free cash flow. Those that are, have been cutting their capital expenditures substantially in order to turn negative free cash flow into positive.

Unfortunately, it still won’t be enough… not by a long-shot. If we use some simple math, we can plainly see the U.S. oil industry will never be able to pay back the majority of its debt: Shale Oil Production, Cost & Profit Estimates For 2018 • REVENUE = 5 million barrels per day shale oil production x 365 days x $50 a barrel = $91 billion. • EST. PROFIT = 5 million barrels per day shale oil production x 365 days x $10 a barrel = $18 billion. If these shale oil companies do actually produce 5 million barrels of oil per day in 2018, and were able to make a $10 profit (not likely), that would net them $18 billion. However, according to the Bloomberg data, these companies would need to pay back $110 billion in debt (bonds) in 2018. If they would use all their free cash flow profits to pay back this debt, they would still owe $92 billion.

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BILD says Greeks have mentioned defaulting on July payments.

Greece, Italy Tensions Hit Euro, Asian Stocks, Lift Yen, Gold (R.)

Concerns about a Greek bailout, early Italian elections and comments by the ECB chief about the need for continued stimulus all kept the euro under pressure on Tuesday. European geopolitical fears sapped risk appetite, weighing on Asian stocks and lifting safe havens including the yen and gold, though trading was thin with several markets closed for holidays. The euro slid 0.3% to $1.1129 in its fourth session of declines. James Woods at Rivkin Securities in Sydney attributed most of the currency’s decline on Tuesday to a German press report saying Athens may opt out of its next bailout payment if creditors cannot strike a debt relief deal. “The bailout payments are necessary to meet existing debt repayments due in July, so if Greece were to forgo this bailout payment the probability of a default would spike, reopening the discussion around a Grexit from the Euro zone,” Woods said.

However, he cautioned against reading “too much into it” without more details or confirmation, adding it was unlikely Greece would forego the bailout payment at this stage. Euro zone finance ministers failed to agree with the International Monetary Fund on Greek debt relief or to release new loans to Athens last week, but did come close enough to aim to do both at their June meeting. Comments by former Italian Prime Minister Matteo Renzi on Sunday in favour of holding an election at the same time as Germany’s in September also pulled the euro lower. So did a statement by ECB President Mario Draghi reiterating the need for “substantial” stimulus given subdued inflation.

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If he includes Greece, it becomes harder for Germany to plunder it. And they’re not done with that.

Draghi Rules Out Including Greece in ECB QE For Now (K.)

ECB chief Mario Draghi took the wind out of the government’s sails on Monday, telling the European Parliament that the ECB will not consider including Greece in its QE program before the conclusion of its bailout review and its debt is made sustainable. “First, let’s have an agreement, a full agreement, and let’s find measures that will make the debt sustainable through time,” Draghi told European lawmakers in Brussels, adding that he regretted that “a clear definition of the debt measures was not reached in the last Eurogroup.” Draghi also said that after creditors agree on what sort of debt relief measures Greece will get, the Governing Council of the ECB will carry out its own “fully independent” analysis to see if the debt would also be sustainable in adverse scenarios.

His comments came as Prime Minister Alexis Tsipras said that Greece was hoping that there will be an initiative in June for “a definitive settlement of the crisis through a clear solution of reducing the debt.” “Let there be a solution and let it come when it comes,” he said after his meeting in Athens with Estonian Prime Minister Juri Ratas, adding that the sooner the matter is solved the better. The tough road ahead for Greece was reflected in remarks yesterday by Finance Minister Euclid Tsakalotos, who said the country’s inclusion in QE is indeed “a difficult issue.” “The ECB, like our Lord, works in mysterious ways,” he told reporters. Draghi’s remarks were seen as another another blow, if not the killer, to the government’s narrative regarding the time frame it had laid out for the country to get on the road to economic recovery.

More specifically, Prime Minister Alexis Tsipras’s roadmap stipulated that after the second review of the country’s third bailout is wrapped up, creditors and the IMF would agree on how to make the country’s debt sustainable, and this would in turn allow Greece join the QE program, which would pave the way for the country’s return to international markets. But with the review all but concluded, and no definitive statements from the creditors on what sort of debt relief measures it can expect – or when – the best the government can hope for now is that the sequence of events outlined in the Tsipras roadmap will take place in the fall at the earliest, and definitely after the German national elections in September. The way things stand now, the most the government can expect from the June 15 Eurogroup is the release of the bailout tranche of more than €7 billion, but not the reassurance it wants in order to join the QE program.

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That’s exactly why these deals keep on being blocked. The EU doesn’t want a Greek recovery. Cart, horse.

Greece Warns Recovery Threatened If Debt Deal Is Blocked At Next Talks (G.)

Greece on Monday issued a panic warning that its recovery would be thrown into doubt if Brussels blocked a debt deal at the next meeting of euro area finance ministers. Fearing that Germany will insist on delays to an agreement until at least after elections in September, Athens’ finance minister hinted that the beleaguered nation could be plunged deeper into recession after seeing its economy contract by more than 25% since the start of its financial crisis. With £7.5bn in debt repayments due in July and lenders meeting on 15 June to try and reach an agreement after failing last month, Euclid Tsakalotos made an urgent appeal for clarity on Monday. “It is incumbent on all sides to find a solution,” he told foreign correspondents. “There is very little point in entering a [bailout] programme if the goal is not to leave the programme. And leaving the programme should be the responsibility not just of the debt country but the creditor country as well.”

Athens, Tsakalotos continued, had kept its side of the bargain, legislating highly unpopular reforms to produce savings of 2% of GDP, while the EU and IMF had not kept theirs. “We can’t accept a deal which is not what was on the table,” he said. “What was on the table was if Greece carried outs its reform package then creditors would ensure that there would be a clear runway through clarity for debt.” Instead, the IMF had refused to endorse the proposed solution – saying it fell far short of what was necessary to engender debt sustainability – with the result that Athens had been forced to reject it, Tsakalotos added. The Fund and Berlin – the biggest contributor of Greece’s three rescue programs – have long been in disagreement over how to reduce Greek debt.

Tsakalotos was addressing a hastily arranged press conference. Held in the dining room of the Athens’ mansion that houses the prime minister’s office, it appeared to highlight the mood of nervousness pervading the Greek government. With a debt mountain hovering around €314bn – or 180% of GDP – the Syriza-dominated coalition of Alexis Tsipras has long argued that debt relief is essential to foreign investment and economic recovery. [..] ..time, said Tsakalotos on Monday, was running out. “Our ask is … that everyone keeps their side of the bargain. The position [of creditors] is going to be very difficult to defend. What can they say? That the Greek government did everything but we will send it to the rocks.”

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Which will affect Greek banks, which will affect the state, etc etc. There never was another option.

Deposits And Loans At Greek Banks Continue Slide (K.)

Deposits in Greek banks declined by more than €2.4 billion in the first four months of the year, while credit contraction has continued in 2017 for an eighth consecutive year. Still, April was the second month of credit expansion. The sum of Greek deposits reached almost €118.9 billion at the end of last month, down from about €121.4 billion at end-December 2016, due to the uncertainty that has prevailed over the Greek economy this year. Bank of Greece data show a fresh €313.3 million drop in deposits from end-March to end-April – a result of the €665.3 million decline in the cash flow of corporations, from nearly €20.5 billion in March to almost €19.8 billion last month. In fact the picture of corporate deposits in April looks technically better than it would had it not been for the €620 million share capital increase by Fraport Greece and Sklavenitis’s €400 million bond.

The level of savings has practically reverted to what it was in 2001, when Greece was still using the drachma, and forecasts speak of a stable picture with few fluctuations expected in the rest of 2017. Senior bank officials say the next few months will be difficult despite the projections for more revenues from tourism: The tax obligations starting from July, with income tax and later Single Property Tax (ENFIA) deadlines, are expected to eat further into the savings of households and corporations’ cash flow. Meanwhile the difference between loans issued and old loans paid back has remained in negative territory in 2017, reaching a rate of -0.9% in the first four months. However, April showed a positive flow amounting to €659 million after an expansion of €307 million in March.

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Yeah, they’re going to risk bankrupting German and French carmakers, right?

EU Moves To Crack Down On Carmakers In Wake Of VW Emissions Scandal (G.)

The European Union has moved towards cracking down on carmakers who cheat emissions tests by giving the EU executive more powers to monitor testing and impose fines. The European council overcame initial objections from Germany and agreed to try to reform the system for approving vehicles in Europe in the wake of the Volkswagen emissions scandal. The draft now goes for negotiations with the European commission and the European parliament, where the car industry holds a strong influence. “Above all, the objective is building trust and credibility again in the European type-approval system,” said Chris Cardona, the economy minister of Malta, which holds the EU’s six-month rotating presidency.

The VW emissions scandal erupted in September 2015, with the carmaker admitting it had installed software defeat devices in 11m diesel cars worldwide, meaning the vehicles only cut their nitrogen oxide pollution during certification tests. The draft EU rules call for reducing the power of national authorities and empowering the European commission to test and inspect vehicles, to ensure compliance with emissions standards, and to respond to any irregularities. “This will increase the independence and quality of the EU type-approval system,” the council said in a statement. “The commission could also impose fines for infringements on manufacturers and importers of up to €30,000 [£26,000] per noncompliant vehicle.” Under the draft rules, every EU country will be required to check emissions in one in every 50,000 new vehicles based on real driving conditions.

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The EU comes prepared.

Painstaking Detail Of Brexit Process Revealed In EU Documents (G.)

Just 10 days before the general election, the EU published two documents that will affect every person living in Britain for years to come. Despite being dropped into the maelstrom of an election caused by Brexit, there was hardly a murmur. The documents were the most detailed positions yet from the EU’s chief negotiator, Michel Barnier, on the upcoming divorce talks with the UK. In two policy papers, the bloc has elaborated its stance on the Brexit bill and citizens’ rights. [..] The muted reaction can be explained partly by the fact that the texts were published with zero fanfare, when the country was still reeling from the terrorist atrocity in Manchester. Furthermore, the EU documents contain no surprises. The equivalent of dotting the Is and crossing the Ts, they are a reminder the EU has had 11 months to get ready for Brexit.

That is almost one year to assemble squadrons of specialists to pore over EU treaties and legal tomes to map the way ahead. The 10-page paper on the bill does not put a price on the divorce, but sets out in painstaking detail all EU bodies with a vested interest in the spoils – 40 agencies, eight joint projects on new technologies and a panoply of funds agreed by all countries, from aid for refugees in Turkey to supporting peace in Colombia. No detail is too small. Britain is even on the hook for funding teachers at the elite European schools that educate EU civil servants’ children. On citizens’ rights, the EU spells out in greater detail the protections it wants to secure for nearly 5 million people on the wrong side of Brexit – 3.5 million EU nationals in the UK and 1.2 million Britons on the continent.

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Fear is all they have left. Blunt lies about Corbyn.

May Battles Against Complacency as UK Election Lead Slips Away (BBG)

Theresa May began the U.K. election campaign warning that pollsters giving her a 20-point lead could be wrong. With her lead now slashed, she’s hoping they really are. A series of missteps by May and her advisers, along with a populist Labour campaign, have put the prime minister on the defensive. Activists no longer laugh when she raises the prospect of a Corbyn victory at her rallies and some have questioned the wisdom of building a campaign around her own personal brand, urging people to vote for “Theresa May and her team.” Investors have awoken to the fact that May’s promise of “strong and stable” government — never mind a landslide to match Tony Blair’s in 1997 — could be in jeopardy with the pound dipping after a specific poll showed May’s Conservative Party leading the Labour Party by just five points.

“The Tories are right to be worried if the momentum looks to be with Labour, but they can still turn it around,” Andrew Hawkins, chairman of pollsters ComRes, said in a telephone interview. With a nation still in shock over the Manchester bombing and June 8 elections round the corner, May got back to the campaign trail and reverted to her tested lines on Brexit: That Labour leader Jeremy Corbyn cannot be trusted to navigate Britain through two years of talks. “It’s important as people come closer to that vote – that’s only next week – that they focus on the choice that’s there before them,” the prime minister told activists at a rally in Twickenham, southwest London, on Monday. “If I lose just six seats my government loses its majority, that could mean in 10 days time a government in chaos with Jeremy Corbyn in Number 10.”

But gone was the confidence when she stunned Britain by calling a snap election on April 18. On the day of the announcement, an ICM/Guardian poll gave May’s Tories a lead over Labour of 21 points and surveys in the following weekend’s newspapers suggested leads of 24 and 25 points. Now, she is vulnerable to attack. Interviewer Jeremy Paxman quizzed May about her U-turns, in an interview on Sky News on Monday: “You have backed down over social care, and over national insurance. If I was in Brussels, I would think you are a blowhard who collapses at the first sign of gunfire.” Her rival on the other hand has grown more relaxed, holding his own against the same interviewer who has a reputation for being a rottweiler in his style of questioning. In one instance, Corbyn won a big round of applause when asked about whether he’d want to abolish monarchy: “Do you know what? I had a very nice chat with the Queen.”

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US room to move gets smaller fast.

Russia Expects China To Help Resolve Syrian Crisis (DS)

Moscow hopes for China’s help in solving the Syrian crisis and restoring the country, Russian Deputy Foreign Minister Igor Morgulov said Monday. “Our cooperation with China on Syria at various international venues is unprecedented. We blocked six attempts to pass anti-Syrian resolutions in the U.N. Security Council,” Morgulov said at “Russia and China: Taking on a New Quality of Bilateral Relations” international conference. The Russian deputy foreign minister added that Russia values Beijing’s position on the Syrian crisis, and hopes that, “the Chinese partners will continue their efforts to promote a political settlement.”

“Together we call for a peaceful and political-diplomatic solution to conflicts, without double standards, unilateral action or attempts at ousting regimes. Our approaches coincide, among other things, on the uncompromising fight against terrorism,” Morgulov said. Russia and China have repeatedly vetoed U.N. Security Council resolutions imposing sanctions against the Assad regime. Moscow has long-standing links to the Assad regime and is its key ally, while China has an established policy of non-intervention in other countries’ affairs.

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French interests in Russia are substantial. Macron going after RT and Sputnik is a weird way to not offend Merkel.

Putin, Macron Have ‘Open, Frank Exchange Of Opinions’ (RT)

Russian President Vladimir Putin and his French counterpart, Emmanuel Macron, had “difficult” but “frank” talks during their first meeting in Versailles. The two leaders vowed to improve relations and jointly address international problems. The first meeting of the Russian and French leaders lasted almost three hours, with Macron saying that “Franco-Russian friendship” was at the heart of the talks. The French president admitted, however, that he has “some disagreements” with his Russian counterpart, but said that the two leaders discussed them openly in a “frank exchange of views.” Putin also said that the two leaders have some differences, but said that they view many issues in a similar way, and that French-Russian relations could be “qualitatively” improved. “We sought … common ground [in dealing] with key issues of the international agenda. And I believe that we see it. We are able to … at least try to start resolving the key contemporary problems together,” Putin said.

The Russian leader went on to say that his talks with Macron helped the pair to find common points in dealing with major international problems, and the that two sides would try to further bring together their views on these issues. Putin also invited his French counterpart to Russia, saying: “I hope that he will be able to spend several weeks in Moscow.” French President Macron said that serious international problems cannot be resolved without Moscow, as he stressed the importance of the role Russia plays in the modern world. “No major problem in the world can be solved without Russia,” he told the press conference. Macron then said that France is interested in intensifying cooperation with Russia, particularly in resolving the Syrian crisis. The French leader went on to say that this issue demands “an inclusive political solution.”

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Pretty brilliant. Much more at the link.

Let’s All Agree To Lock In This Russophobia For At Least 3.5 More Years (Saker)

There I was again, flying first class on my shareholders’ dime from New York to San Francisco, when I was deeply saddened to read about the death of Zbigniew Brzezinski, National Security Adviser to Jimmy Carter. For a moment I thought: “Surely I can find some anti-Putin articles to read rather than this one?” Those always make me so happy! But then I remembered that Zbig was a man after my own heart, because he was one of the West’s greatest Russophobes. Even the New York Times talked of his “rigid hatred of the Soviet Union”. Zbig ended the détente led by Nixon as Carter, not Reagan, restarted good, old-fashioned, American Russophobia: Selling the Soviets computers with bugs for industrial sabotage, the propaganda effort of the 1980 Olympic Boycott, the US grain embargo to try and starve the Russian people, the arming of the Taliban’s forerunners to destabilize a left-wing government in Afghanistan and thus unleashing Islamic terrorism on the world, etc.

Just as American Democrats know for an undeniable fact that Jimmy Carter is our nation’s greatest living man of peace, I contend that Zbig’s anti-Russian stance makes him nearly as great a humanitarian, and certainly a model Democrat in 2017. And Zbig knew, as I and all good Democrats know, that the greatest fight of our generation is the fight against Vladimir Putin. Poverty, starvation, refugees, terrorism, climate change – everyone in America is realizing that if we can just get rid of Putin, everything else will surely fall into line. Surely! So I was pretty sad to read of Zbig’s passing, but that’s when it hit me: Just because he’s gone, it doesn’t mean we have to give up hating Russia! We’ve been hating Russia since November – more than 6 months now – and, frankly…it feels awesome! I don’t how long it takes to make a habit permanent, so let’s all agree to lock in this Russophobia for at least 3.5 more years, possibly 7.5!

It would be a fitting testament to a man whose prophetic Russophobia was misunderstood as “anti-communism”. Say it loud: It’s time for progressive Americans to unite behind hating Russians! Again! Let’s party like it’s 1979! Now, I’m as politically-correct a CEO as was ever made -my allegiance to Hillary proves that – but I can tell that some people think that I should equivocate by writing “hating the Russian government” instead of the “Russians”. Well, it’s bold, but being bold is why we CEOs deserve the big bucks and you deserve our crumbs. Not our table crumbs – those are too good for you – I mean the crumbs that fall around our fine, Italian shoes. Here’s the problem with the Russians: Putin’s approval rating is over 85%. It is a testament to the master of evil that he has duped nearly all 144 million Russian citizens. They said that 50 million Elvis fans can’t be wrong, but 124 million Putin fans clearly are. I don’t know anything about Russian domestic politics, but I don’t have to – that’s my right as an American.

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Hillary posing as the resistance says it all. They don’t even have a narrative left.

The So-Called Resistance (Jim Kunstler)

[..] what would a real resistance look like? First, it would oppose the aforementioned asset-stripping that the US economy has become, the transfer of capital in all its forms — monetary, political, cultural, social — from the dis-employed former middle classes to the tiny, select beneficiaries of financial manipulation. Note that the things being manipulated — markets, currencies, securities, and interest rates — are increasingly phantom entities that appear to maintain their value only because the high priests of financial authority say that they do. The shelf-life of that flim-flam approaches its endgame as it self-evidently immiserates the masses and their sheer faith in its recondite promises dwindles away to nothing.

A genuine resistance would begin to deconstruct this clerisy and its institutions, namely Too Big To Fail banks and the Federal Reserve. The best opportunity to accomplish that would have been the early months of Mr. Obama’s turn in the White House, the dark time of the previous financial crash when the damage was fresh and obvious. But the former president blew that under the influence of high priests Robert Rubin and Larry Summers. And the lower order clerics were allowed run their hoodoo machine flat out in the following eight years. Just look at the long chart of the Standard & Poors index. Tragically, this ever-upward arc is now taken to be the normal state of things, and when it fails the implosion will be orders of magnitude more violent than the last time.

One would think that a genuine resistance would also oppose the growing consolidation of power in the now-colossal spying apparatus of the nation — the often averred to “seventeen intel agencies” that show signs of being actively at war against other parts of the government and against citizens themselves. Hence, the non-stop murmur of allegation about “Russian interference in the election,” going back to the summer of 2016 without either any real evidence, or any clarification of what is actually alleged to have happened. Another tragic turn is that this fifth column of rogue intel agencies has recruited the major organs of the news to incessantly repeat its allegations until the public accepts the story as established fact rather than just the manufactured story it so far appears to be. Well, the lives of persons and societies founder on versions of the “reality” they fabricate for their own purposes. A genuine resistance would show foremost some fidelity to a reality beyond the spin-factories of self-delusion.

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Election coming up, perhaps?

Germany Steps Up Attack On Trump For ‘Weakening’ The West (G.)

Germany has unleashed a volley of criticism against Donald Trump, slamming his “short-sighted” policies that have “weakened the west” and hurt European interests. The sharp words from foreign minister Sigmar Gabriel came after the US president concluded his first official tour abroad taking in Saudi Arabia, Israel, Brussels and then Italy for a G7 summit. Angela Merkel warned on Sunday that the US and Britain may no longer be completely reliable partners. Germany’s exasperation was laid bare after the G7 summit, which wrapped up on Saturday with Trump refusing to affirm US support for the 2015 Paris climate accord. Days earlier, in Saudi Arabia, Trump presided over the single largest US arms deal in American history, worth $110bn over the next decade and including ships, tanks and anti-missile systems.

Gabriel said on Monday that “anyone who accelerates climate change by weakening environmental protection, who sells more weapons in conflict zones and who does not want to politically resolve religious conflicts is putting peace in Europe at risk”. “The short-sighted policies of the American government stand against the interests of the European Union,” he said, judging that “the west has become smaller, at least it has become weaker”. “We Europeans must fight for more climate protection, fewer weapons and against religious [fanaticism], otherwise the Middle East and Africa will be further destabilised,” Gabriel said. [..] The relationship between Merkel and Trump contrasts with the warm ties between herself and Barack Obama. The previous US president last week travelled to Berlin to attend a key Protestant conference. Obama’s participation in a forum with Merkel last Thursday came hours before her meeting with Trump in Brussels at the Nato summit.

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Right, election coming up. Which trumps human rights and international law.

Greece, Germany Agree To Slow Refugee Family Reunification (F24)

Greece and Germany have agreed to slow the reunification of refugee families divided between the two nations during their scramble to safety, according to a leaked letter published Monday. “Family reunification transfer to Germany will slow down as agreed,” Greek Migration Minister Yiannis Mouzalas wrote to German Interior Minister Thomas de Maiziere in a May 4 letter obtained by leftist daily Efimerida ton Syntakton. The Greek migration ministry declined to comment, but earlier this month Mouzalas said the slowdown was due to “technical difficulties.” In the letter, Mouzalas reportedly acknowledges that the move – enacted because of the sheer volume of asylum requests – will affect “more than two thousand people” while some “will have to wait for years” to reach Germany even though their requests have been approved.

Asylum seekers – mostly Syrian refugees in Greece’s case – are entitled to join family members elsewhere in the European Union within six months from the date their request is approved. In his letter, Mouzalas said Berlin and Athens had to agree on a “common line” to address “increasingly desperate and critical comments” so that Athens is not blamed for the delays. He then suggests a joint response: “We understand that asylum seekers are eager to meet with their family, but given that both Greece and Germany have very large asylum seeking populations, delays are inevitable.” Ulla Jelpke, a deputy of German far-left Party Die Linke, earlier this month said Berlin had capped the number of refugees eligible for reunification at 70 people per month. Accordingly, Efimerida ton Syntakton said there were just 70 transfers in April compared to 540 in March and 370 in February.

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