Aug 072018
 
 August 7, 2018  Posted by at 9:00 am Finance Tagged with: , , , , , , , , , , ,  


Eugène-Louis Boudin Beach at Étretat 1890

 

Petition To Trump: Pardon Julian Assange (Infowars)
Corporate Censorship Is State Censorship (CJ)
The Myths Of Stocks For The Long Run – Part X (Roberts)
Germany’s Huge Trade Surpluses Are A Burden On Its EU Partners (CNBC)
EU Acts To Protect Firms From Donald Trump’s Sanctions Against Iran (G.)
Mattress Firm Considers Bankruptcy to Get Out of its Real Estate Scams
UK To Run Out Of Food A Year From Now With No-Deal Brexit – Farmers (G.)
Record Number Of UK Police Officers Forced To Take Second Job (Ind.)
Chinese Newspaper: Trump’s Claim Of Winning Trade War ‘Wishful Thinking’ (R.)
China Bans Winnie The Pooh Film After Comparisons To President Xi (G.)
US Coalition Cooperates With Al-Qaeda In Yemen, AP Confirms (ZH)
Brazil Closes, Then Reopens Border To Venezuelan Migrants (AFP)
Humans Are About to Unleash an Irreversible “Hothouse Earth” (Science Alert)

 

 

Yes, Infowars, and I know. But this is about Julian Assange, and about Alex Jones getting thrown out of social media the moment he launched this petition. Please go to Infowars for once and sign!

Petition To Trump: Pardon Julian Assange (Infowars)

Whereas Journalist Julian Assange and his media organization, Wikileaks has, in the respected tradition of American journalism obtained and published information that is classified and newsworthy, a practice shared with the Washington Post, New York Times, Wall Street Journal and others and

Whereas in the eleven years of its existence the authenticity and accuracy of materials published by Wikileaks has ever been questioned or in dispute and

Whereas the material regarding Hillary Clinton and the Democratic National Committee published by Wikileaks served the national interest by exposing the corruption of the Clintons, the Clinton Foundation, the Clinton campaign and the Obama Justice Department and

Whereas assertion by the American Intelligence Services that Julian Assange is the agent of a ‘Hostile Foreign State” or the Russian government are politically suspect and completely unproven and denied by Assange and

Whereas Julian Assange has consistently denied that material obtained from the Democratic National Committee and published by Wikileaks came from the Russian State and has repeatedly offered to prove this for US authorities and

Whereas Assange, now in failing health, has been a veritable prisoner in the Ecuadorian Embassy in London for six years, with the media now reporting Equador is preparing to hand Assange over to British authorities who will presumably extradite Assange to the United States for trial and

Whereas Julian Assange is an impeccably-honest, incredibly-brave, humanitarian journalist, who provides an invaluable platform for whistleblowers exposing corruption and criminality infesting governments, nullifying democracy and obliterating human rights, around the world and

Whereas there are absolutely no legitimate legal grounds to prosecute Assange and, as the U.S. DOJ admitted in 2013, that doing so would expose ALL U.S. journalistic and news outlets to similar criminal jeopardy.

Therefore- we the undersigned urge President Donald J. Trump to issue a full and unconditional pardon to the journalist Julian Assange in the interests of both justice and mercy.

Read more …

“Assange’s mother also reports that this mass removal of Infowars’ audience occurred less than 48 hours after she was approached to do an interview by an Infowars producer.”

Corporate Censorship Is State Censorship (CJ)

Last year, representatives of Facebook, Twitter, and Google were instructed on the US Senate floor that it is their responsibility to “quell information rebellions” and adopt a “mission statement” expressing their commitment to “prevent the fomenting of discord.” “Civil wars don’t start with gunshots, they start with words,” the representatives were told. “America’s war with itself has already begun. We all must act now on the social media battlefield to quell information rebellions that can quickly lead to violent confrontations and easily transform us into the Divided States of America.” Yes, this really happened.

Today Twitter has silenced three important anti-war voices on its platform: it has suspended Daniel McAdams, the executive director of the Ron Paul Institute, suspended Scott Horton of the Scott Horton Show, and completely removed the account of prominent Antiwar.com writer Peter Van Buren. I’m about to talk about the censorship of Alex Jones and Infowars now, so let me get the “blah blah I don’t like Alex Jones” thing out of the way so that my social media notifications aren’t inundated with people saying “Caitlin didn’t say the ‘blah blah I don’t like Alex Jones’ thing!” I shouldn’t have to, because this isn’t actually about Alex Jones, but here it is:

I don’t like Alex Jones. He’s made millions saying the things disgruntled right-wingers want to hear instead of telling the truth; he throws in disinfo with his info, which is the same as lying all the time. He’s made countless false predictions and his sudden sycophantic support for a US president has helped lull the populist right into complacency when they should be holding Trump to his non-interventionist campaign pledges, making him even more worthless than he was prior to 2016. But this isn’t about defending Alex Jones. He just happens to be the thinnest edge of the wedge.

As of this writing, Infowars has been censored from Facebook, Youtube (which is part of Google), Apple, Spotify, and now even Pinterest, all within hours of each other. This happens to have occurred at the same time Infowars was circulating a petition with tens of thousands of signatures calling on President Trump to pardon WikiLeaks editor-in-chief Julian Assange, who poses a much greater threat to establishment narratives than Alex Jones ever has. Assange’s mother also reports that this mass removal of Infowars’ audience occurred less than 48 hours after she was approached to do an interview by an Infowars producer.

Read more …

At some point we’ll have to acknowledge that there is no market.

The Myths Of Stocks For The Long Run – Part X (Roberts)

In early 2017, Byron Wien was asked the question of where we are in terms of the economy and the market to a group of high-end investors. To wit: “The one issue that dominated the discussion at all four of the lunches was whether or not we were in the late stages of the business cycle as well as the bull market. This recovery began in June 2009 and the bull market began in March of that year. So we are more than 100 months into the period of equity appreciation and close to that in terms of economic expansion.“ His point is that markets rotate between bullish and bearish phases. When he made that statement he was simply saying the current economic recovery and the bull market are very long in the tooth. As shown below why shouldn’t we expect a market decline to follow, it has every other time?

[..] There are two problems facing investor outcomes. First, you don’t have 100+ years to invest in the market to get the “average” long-term returns. Second, your “long-term” investment horizon is simply the time you have between today and when you retire. As I stated above, for most people that is about 15 years. So, for argument sake, let’s be generous and assume you have 20-years from today until retirement. As we discussed previously, we know that based on current valuations in the market, forward real total returns in the market will likely be, on average, fairly low to negative.

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Germany and Holland live off the labor of their neighbors. There is no bigger threat to the EU.

Germany’s Huge Trade Surpluses Are A Burden On Its EU Partners (CNBC)

While few European states can pretend to share Germany’s distinction of being a “country of poets and thinkers,” none can rival German abilities to extract so much wealth from the rest of the European Union. Last year, Germany posted a 159.3 billion euro surplus on its goods trade with other countries in the EU — one of the world’s largest free-trade areas and a region with privileged access to German goods and services. That’s the way it’s been since 1958, when Europe’s common market opened up. Germany’s enormous EU bounty consistently accounts for two-thirds of its net foreign trade income in a market structure where Berlin remains an undisputed leader and a principal regulator.

This year looks set to mark another record-high EU trade income for Germany. The surplus during the January-April period was running at an annual rate of 175 billion euro — a 10 percent increase on the country’s EU trades in 2017 — according to statistics from Germany’s Bundesbank. A country representing 28 percent of the monetary union’s economy and living so grandly off the rest of its partners is a structurally destabilizing factor. To this day, economists pointing out that fundamental problem have been ridiculed as hopelessly naive because, as the mantra goes, the European project has always been, and always will be, a political construct to keep the Europeans off each other’s throats.

That charge is not only false, but it also bears the seeds of its own destruction. Taking hundreds of billions of euros of purchasing power out of the monetary union, Germany makes it virtually impossible for other euro area economies to grow and create jobs as they struggle to bring down their public debts and deficits. Instead of accumulating enormous wealth on the back of its euro partners, Germany should stimulate its domestic spending to buy more goods and services from them. [..] Recycling some of last year’s roughly $300 billion trade surplus — through direct investments in the rest of the EU — Germany would boost economic growth and employment in other countries in the bloc, solve the problem of its shrinking manpower and adjust its overflowing external accounts.

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The only choice firms have is who they want to be sanctioned by.

EU Acts To Protect Firms From Donald Trump’s Sanctions Against Iran (G.)

The EU has launched an attempt to protect European businesses from Donald Trump’s sanctions against Iran as the US administration voiced its intent to apply maximum pressure on Tehran by vigorously applying its punitive measures. The sanctions are to enter into force at midnight (US east coast time). At the same time, a blocking statute – last used to protect EU firms from US sanctions against Cuba – will be brought into force in an attempt to insulate firms and keep alive a deal designed to limit the Iranian government’s nuclear aspirations. European firms have been instructed that they should not comply with demands from the White House for them to drop all business with Iran.

Those who decide to pull out because of US sanctions will need to be granted authorisation from the European commission, without which they face the risk of being sued by EU member states. A mechanism has also been opened to allow EU businesses affected by the sanctions to sue the US administration in the national courts of member states. Trump announced his intention to hit firms doing business with Iran when he reneged on a deal struck in 2015 designed to help curtail Tehran’s nuclear ambitions in return for limited sanctions relief.

Read more …

Sharing a laugh with Wolf Richter.

Mattress Firm Considers Bankruptcy to Get Out of its Real Estate Scams

This is so thick it’s hard to believe. It’s far beyond just a Brick & Mortar Meltdown. “I recently sold a small strip center with my last Mattress Firm,” a relieved real estate developer told me earlier this year. “It traded at a 7.1% cap rate, which is just astonishing to me. During due diligence, the buyer’s lawyers focused on every minute risk and mentioned nothing about their parent company once. So crazy.” Mattress Firm’s parent company is Steinhoff, now a familiar name in the Enron lexicon. “Mattress Firm’s strategy is to have multiple stores on the same intersection in every town,” this developer had told me last fall.

“This was accomplished by design and not just mergers. As a developer, I was literally asked to find sites across the street from existing stores in almost every town. Mattress Firm was able to get these sites because they would overpay market rent by up to $10 per square foot in every market that I was focused in, but it is the same all over,” he said. To get out of these leases, and for other reasons, Mattress Firm, the largest mattress retailer in the US, is now considering a bankruptcy filing, people familiar with the matter told Reuters. Restructuring in bankruptcy court would allow Mattress Firm to shut down unprofitable and excess stores and get out from under their over-priced leases. Mattress Firm, which was founded in 1986, is a classic example of a private-equity pump-and-dump that has turned into an alleged real estate scam by insiders. Here is the turn of events:

Read more …

Better plant some more tomatoes in your gardens.

UK To Run Out Of Food A Year From Now With No-Deal Brexit – Farmers (G.)

Britain would run out of food on this date next year if it cannot continue to easily import from the EU and elsewhere after Brexit, the National Farmers’ Union has warned. Minette Batters, the NFU president, urged the government to put food security at the top of the political agenda after the prospect of a no-deal Brexit was talked up this week. “The UK farming sector has the potential to be one of the most impacted sectors from a bad Brexit – a frictionless free trade deal with the EU and access to a reliable and competent workforce for farm businesses is critical to the future of the sector,” she said. Batters’ warning comes a fortnight after the Brexit secretary, Dominic Raab, said Britain would have “adequate food supplies” after Brexit.

While Downing Street has insisted it is confident an agreement can be made in time, the international trade secretary, Liam Fox, warned over the weekend that the prospect of a no-deal Brexit was now at “60-40”, fuelling fears at the NFU and among food importers. Food security in Britain is in long-term decline, with the country producing 60% of what it needs to feed itself, compared with 74% 30 years ago, according to figures from the Department for Environment, Food and Rural Affairs (Defra). In a statement issued by the NFU, Batters expressed concern that Britain would not be able to meet its food needs if Brexit was mismanaged. Research showed 7 August 2019 would be the nominal day that Britain would run out of food if it were asked to be wholly self-sufficient based on seasonal growth, the NFU said.

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The blessings of austerity.

Record Number Of UK Police Officers Forced To Take Second Job (Ind.)

A record number of police officers are being forced to take on second jobs because they cannot afford essentials on their wages, a survey has found amid warnings the service is “in crisis”. The Police Federation said some officers were resorting to food vouchers and welfare schemes, while dealing with “unprecedented” demand, rising violent crime and terrorism. Almost 8 per cent of the 27,000 members who responded to the association’s annual pay and morale survey said they had taken up a second job, compared with 6 per cent the previous year. The roles included becoming driving instructors, personal trainers or leasing properties.

A further 45 per cent of officers said they worry about finances on a daily basis, 12 per cent said they do not have enough money to cover essentials and 88 per cent do not feel fairly paid. John Apter, the new chair of the Police Federation of England and Wales, warned that some officers were in “dire straits”. “Our members are under immense pressure to deliver, with dwindling resources and rising crime, particularly violent crime, leading to a demand for our services that has never been higher,” he said. “All they want is to be adequately paid for the job that they do. “We know officers are struggling and some have had to resort to food vouchers and other welfare schemes. This clearly cannot be right or acceptable that those employed to keep the public safe cannot make ends meet or put food on tables for their families.

Read more …

These kinds of things show that China is nervous.

Chinese Newspaper: Trump’s Claim Of Winning Trade War ‘Wishful Thinking’ (R.)

Chinese state media kept up their criticism of U.S. President Donald Trump’s trade policies, with a newspaper on Tuesday describing as “wishful thinking” Trump’s belief that a fall in Chinese stocks was a sign of his winning the trade war. As the world’s two biggest economies remained locked in a heated tariff dispute, Beijing and Washington have kept up a blistering rhetoric with threats and counter-threats of more punitive trade measures. The editorial in the official China Daily underscored an increasingly aggressive stance adopted by Chinese state media against Trump, a shift from their previous approach of tempering any direct criticism against the U.S. president.

On Monday, the overseas edition of the Communist Party’s People’s Daily newspaper singled out Trump, saying he was starring in his own “street fighter-style deceitful drama of extortion and intimidation”. [..] The China Daily referred to a Saturday Tweet by Trump which said “Tariffs are working far better than anyone anticipated. China market has dropped 27 percent in last four months.” China’s stock market was performing poorly before the U.S. administration imposed tariffs, said the English-language newspaper, asserting that the downturn was partly due to Beijing’s attempts to cut corporate debt. The paper said Trump’s claim that “tariffs are working big time” was undermined by data showing the U.S. trade deficit climbed $3 billion to $46.3 billion in June, the first increase in four months.

Read more …

Catchy, but not too likely. So you get the whole build-up and then towards the end: “China only allows 34 foreign films to be released in cinemas each year..”

China Bans Winnie The Pooh Film After Comparisons To President Xi (G.)

Who’s afraid of Winnie the Pooh? The Chinese government, apparently. Chinese censors have banned the release of Christopher Robin, a new film adaptation of AA Milne’s beloved story about Winnie the Pooh, according to the Hollywood Reporter. The Winnie the Pooh character has become a lighthearted way for people across China to mock their president, Xi Jinping, but it seems the government doesn’t find the joke very funny. It started when Xi visited the US in 2013, and an image of Xi and then president Barack Obama walking together spurred comparisons to Winnie – a portly Xi – walking with Tigger, a lanky Obama. Xi was again compared to the fictional bear in 2014 during a meeting with Japan’s prime minister, Shinzo Abe, who took on the part of the pessimistic, gloomy donkey, Eeyore.

As comparisons grew and the meme spread online, censors began erasing the images which mocked Xi. The website of US television station HBO was blocked last month after comedian John Oliver repeatedly made fun of the Chinese president’s apparent sensitivity over comparisons of his figure with that of Winnie. The segment also focused on China’s dismal human rights record. Another comparison between Xi and Winnie during a military parade in 2015 became that year’s most censored image, according to Global Risk Insights. The firm said the Chinese government viewed the meme as “a serious effort to undermine the dignity of the presidential office and Xi himself”.

[..] Another reason for the film’s rejection by the authorities may be that China only allows 34 foreign films to be released in cinemas each year. That leaves Hollywood summer blockbusters, family films and contenders from across the world jockeying for a tiny number of spots.

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Like we didn’t know already.

US Coalition Cooperates With Al-Qaeda In Yemen, AP Confirms (ZH)

Perhaps we could simply shrug our shoulders and say it’s better late than never for the mainstream media. A new Associated Press report confirms what was long ago detailed by a number of independent investigative journalists, and even in some instances buried deep within sporadic mainstream reports of past years: the US-coalition in Yemen is actually cooperating with al-Qaeda terrorists in the campaign to dislodge Shia Houthi militants. The AP report begins dramatically as follows:

“Again and again over the past two years, a military coalition led by Saudi Arabia and backed by the United States has claimed it won decisive victories that drove al-Qaida militants from their strongholds across Yemen and shattered their ability to attack the West. Here’s what the victors did not disclose: many of their conquests came without firing a shot. That’s because the coalition cut secret deals with al-Qaida fighters, paying some to leave key cities and towns and letting others retreat with weapons, equipment and wads of looted cash, an investigation by The Associated Press has found. Hundreds more were recruited to join the coalition itself.”

And contrary to the normative response of US officials to such allegations, which as in the case of US support to jihadists in Syria typically runs something like “we didn’t know” while hiding behind a system of ‘plausible deniability’ — in the case of Yemen officials involved have now admitted to the AP that coalition allies knowingly allowed al-Qaeda in the Arabian Peninsula (AQAP) to survive and flourish. Somewhat surprising for the AP, its report underscores this with zero ambiguity, even illustrating for the reader the terrorists’ linkage to 9/11:

“These compromises and alliances have allowed al-Qaida militants to survive to fight another day — and risk strengthening the most dangerous branch of the terror network that carried out the 9/11 attacks. Key participants in the pacts said the U.S. was aware of the arrangements and held off on any drone strikes.” Similar to the US role in Syria, American officials are now apparently quite comfortable admitting they are willing to utilize designated terrorist groups ultimately as a weapon against pro-Iran interests.

Read more …

“It is not justified to take the easy path to ‘close the doors’ because of difficulties in hosting refugees,” Supreme Court justice Rosa Weber said..”

Brazil Closes, Then Reopens Border To Venezuelan Migrants (AFP)

Brazil briefly closed then reopened its northern border to Venezuelans on Monday as it struggled to contain mass migration from the South American country saddled with a crippling political and economic crisis, police said. A Supreme Court justice overturned a lower court judge’s decision that had suspended for a few hours the entry of more Venezuelans until other immigrants from the country were transferred elsewhere in Brazil. “It is not justified to take the easy path to ‘close the doors’ because of difficulties in hosting refugees,” Supreme Court justice Rosa Weber said in her ruling issued shortly before midnight.

The border had remained open to Brazilians and other nationalities, as well as to Venezuelans seeking to return to their home country. It’s a main crossing point for tens of thousands of Venezuelan migrants, an influx that has increased dramatically over the past two years. President Michel Temer was opposed in a “non-negotiable” way to the border closure, Human Rights Minister Gustavo Rocha was quoted as saying by state-run Agencia Brasil. Roraima state’s capital Boa Vista has hosted the largest number of Venezuelan immigrants in the country — around 25,000 out of a total of 330,000 city dwellers. An estimated 500 Venezuelans cross the land border into Brazil each day.

Read more …

Feedback loops. Methane is becoming a bigger factor all the time.

Humans Are About to Unleash an Irreversible “Hothouse Earth” (Science Alert)

The coasts are gone. The waves crash high into what were once mountains. Many have perished, for food is scarce, and the deadly heat is inescapable. This bleak future scenario – called a “Hothouse Earth” – could be realised sooner than we think, scientists warn, if the planet breaches a pivotal climate threshold from which there may ultimately be no coming back. The worst part? Scientists say we could exceed this threshold even if we meet the carbon emission reductions called for in the Paris Agreement – and manage to keep global temperatures to 2°C above pre-Industrial levels. Achieving that goal would be a global success story. But it might not be the end of the story.

“Human emissions of greenhouse gas are not the sole determinant of temperature on Earth,” says Earth system scientist Will Steffen from the Australian National University. “Our study suggests that human-induced global warming of 2°C may trigger other Earth system processes, often called ‘feedbacks’, that can drive further warming – even if we stop emitting greenhouse gases.” In a new perspective study, Steffen and an international team of researchers outline a number of these ‘positive feedback’ systems that exist on Earth and can “amplify a perturbation and drive a transition to a different state”. One example is permafrost thaw. As the world gets hotter due to heat-trapping carbon emissions, there’s worrying evidence that melting permafrost soils are releasing even more carbon into the atmosphere – making a bad situation potentially catastrophic.

Read more …

Feb 212018
 
 February 21, 2018  Posted by at 10:32 am Finance Tagged with: , , , , , , , , , ,  


Vincent van Gogh Landscape with House and Ploughman 1889

 

90% Of Americans Strongly Opposed To Each Other (Onion)
Mueller’s Comic Book Indictment (David Stockman)
Foreigners Flock In As Buyers Of US Government Debt (CNBC)
Foreign Investors Cut Treasury Buying As US Flogs Record Level Of Debt (MW)
It’s Going to Be a Long Year for Bond Traders (BBG)
The Bear Still Cometh (Roberts)
Technical Charts Suggest Another Stock-Market Drop Is Coming (ElliottWave)
Final Version Of TPP Trade Deal Dumps Rules The US Wanted (R.)
UK Farmers: Lack Of Migrant Workers Now ‘Mission Critical’ (G.)
Vancouver’s Hot Housing Market Gets Tougher for Wealthy Chinese (BBG)
Amazon Tracks Its Workers Using Wristbands (Jacobin)
Come the Recession, Don’t Count on That Safety Net (NYT)
Plastic Bans Worldwide Will Dent Oil Demand Growth – BP (G.)
There Is No Time Left (CP)

 

 

I know, it’s sad if you need to open with the Onion. But that’s how sad things have become.

“..the 10% of survey participants who indicated otherwise did so because they didn’t consider those they disagreed with to actually be Americans..”

90% Of Americans Strongly Opposed To Each Other (Onion)

In a new study published Tuesday that surveyed U.S. residents about their attitudes toward current events, the Pew Research Center found that approximately 90 percent of Americans described themselves as strongly opposed to each other. “In the questionnaire we administered, nine out of 10 participants indicated they fundamentally disapproved of the actions currently being taken by their fellow citizens,” said polling analyst Babette Randolph, noting that the rate of opposition remained consistent across all 50 states and virtually every demographic regardless of age, gender, race, religion, or political identification. “The vast majority of poll respondents signaled they were dead set against the U.S. populace, condemning in forceful terms the way others have handled things over the past year and giving the people of their nation historically low ratings.” Randolph went on to note that the 10% of survey participants who indicated otherwise did so because they didn’t consider those they disagreed with to actually be Americans.

Read more …

Stockman goes through the whole comedy act and leaves little standing. Prior to the “13 Russians”, the Mueller investigation seemed dead. So note the timing.

Mueller’s Comic Book Indictment (David Stockman)

[..] with his comic book indictment, Robert Mueller has actually made himself a mortal threat to America’s democracy and national security. That’s because his indictment is unleashing a rabid anti-Russian mania in the Democratic party and turning flaming liberals and leftwing progressives, who used to form the backbone of the peace party in America, into outright war-mongers. The Donald tweeted over the weekend about Moscow “laughing its ass off” about the Mueller indictment, but we think he missed the mark. It is the Deep State on the banks of the Potomac that is bursting with glee – literally licking its collective chops – about the endless budget boondoggles now assured to be coming its way.

The neocons and military/industrial complex had already taken control of the GOP lock, stock and barrel. Then, his campaign rhetoric about “America First” notwithstanding, Trump abdicated to his empire-minded generals in order to concentrate on his Twitter account. And now in the wake of the RussiaGate hysteria being given a powerful new boost from Mueller’s comic book, the Dems are lining up to say we will see your $700 billion budget and crank it up from there. The truth is, there is a screaming fiscal crisis coming hard upon Imperial Washington. That’s owing to the $15 trillion of new deficits that are now built-in for the next decade – at the very time when the Fed has shut down is massive bond-buying experiment and the Baby Boom is hitting the social security and medicare rolls in droves.

Absent the RussiaGate hoax and the Dems descent into mindless, anti-Putin hysteria, there would have been a moment of maximum danger for the Deep State’s hideously inflated military, intelligence and surveillance operations. In the coming battle against fiscal collapse, they surely would have been on the fiscal chopping block like at no time since the aftermath of Vietnam in the 1970s. But rescue is now at hand. The Dems have been shell-shocked ever since the evening of November 8, 2016, and have worked themselves into deliriums about how it was all a big mistake enabled by Russian meddling and collusion with the Trump campaign. To a substantial degree, however, those narratives were on their last legs until the Mueller indictment came along. For anyone who takes the trouble to read it, of course, it’s just a potpourri of nonsense, marginalia and irrelevance.

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Dick Bove. I know. But even he can’t make it all up.

Foreigners Flock In As Buyers Of US Government Debt (CNBC)

Last week the United States Treasury Department released its latest data related to foreign buying of United States debt. It was a shocker. It showed that in the 12 months leading up to November 2016, the month that Donald Trump was elected president, foreigners had been net sellers of $339 billion in U.S. Treasurys. In the 12 months leading up to December 2017, they had shifted to being net buyers of $20 billion. Contrast this to the prior administration’s record. In November 2008, when Barack Obama was elected president, the trailing 12-month figures showed that foreigners had been net buyers of $301 billion in Treasurys. This dropped to the $339 billion outflow figure in November 2016, just noted, when he lost power. Putting the two sets of numbers together one sees that foreigners swinging $640 billion to the negative during the Obama presidency.

During the Trump presidency to date, foreigners swung positive by $359 billion. Wow!! It appears that foreign U.S. debt buyers are as enthused by the Trump agenda as much as domestic equity buyers are. Or, that the faith in the U.S. economic recovery is global in nature. The largest foreign holding of U.S. debt would be the combined portfolio of China and Hong Kong. It is about 6% of outstanding Treasury debt. This portfolio, if looked at year-over-year numbers, was up 1.5% in August, 2.1% in September, 6.1% in October, 11.1% in November and 10.4% in December. Overall, it grew by $145 billion. Other big buyers year over year were Saudi Arabia (up $47.1 billion), the United Kingdom (up $34.2 billion), Singapore (up $28.1 billion), India (up $26 billion), Switzerland (up $19.3 billion), Russia (up $15.6 billion) Korea (up $11.2 billion) and France (up $10.1 billion). The biggest sellers were Japan (down $47.1 billion) and Germany (down $14.7 billion).

Finally, of note, Ireland’s holdings jumped $51.3 billion possibly due to Brexit. The importance of these numbers cannot be understated. If one segregates the buyers of U.S. debt into its four main categories foreign buying is most important. Presently, it is believed that foreigners own 31.2% of outstanding U.S. debt. American households and businesses own 29.1%; Social Security and other government pension funds own 27.5%; and the Federal Reserve holds 14.2%. There is 2% double counting in the figures mainly in the amount held by Americans. This fiscal year due to the tax cut, higher interest rates and possibly other new fiscal programs, it is expected that the government must raise possibly another trillion dollars along with refinancing a portion of the $20 trillion already owed.

Read more …

Err, Wait! We just saw they’re buying, and now they’re not?

Foreign Investors Cut Treasury Buying As US Flogs Record Level Of Debt (MW)

As traders and analysts debate over who will harbor enough appetite to snap up $250 billion of debt sales this week, one group of investors has steadily retreated into the shadows — foreign bond-buyers. With the Federal Reserve halting its asset purchases several months ago, it’s unclear who will take up its place to soak up the deluge of issuance without demanding dramatically higher yields. An increase to spending caps and Republican tax cuts have escalated the Treasury Department’s borrowing needs, with some estimating more than $1 trillion of net issuance this year. Against that backdrop of increased supply, the diminished presence of a key bulwark to the bond market is troubling. “We expect that any increase in [foreign central bank] demand this year will be modest relative to the scale of supply, and that foreign private investor demand will be sporadic,” said strategists at Credit Suisse.

Foreign investors have slowly reduced their participation in Treasury auctions since the 2007-’09 financial crisis, according to Deutsche Bank. In 2008, in the throes of a global recession, foreign bond-buyers rushed into U.S. government paper, one of the largest liquid markets for safe assets in the world. From 2009 to 2011, Wall Street banks and international investors took down around 80% of the U.S. debt issued. But by 2017, foreign buyers took up 16% of the debt sold through auctions, compared with 29% in 2009. t’s not just auctions data that shows foreign investors are pulling back. The international share of the total U.S. debt fell to less than 45% in September 2017, down from 57% in December 2008. Though there was a slight uptick last year, for the most part the downtrend has remained intact.

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With one source saying foreigners are buying, and the other denying that, no wonder it’s going to be a long year.

It’s Going to Be a Long Year for Bond Traders (BBG)

It’s not even March yet, and bond investors probably can’t wait for the year to be over. The Bloomberg Barclays U.S. Aggregate Bond Index has fallen 2.12% since the end of December through Feb. 16, and there’s little on the horizon to suggest a rebound anytime soon. U.S. Treasuries fell across the board Tuesday as the government began flooding the market with supply to rebuild its cash balance and start paying for the recently enacted tax cuts. Investors were asked to digest $179 billion in Treasury bills and two-year notes in a matter of hours, resulting in the highest borrowing rates for the government since 2008. While that’s good news for savers who have suffered with near-zero rates since the financial crisis, it’s not so good for borrowers. Overall, the government is forecast to at least double its debt sales this year to more than $1 trillion- the most since 2010.

In a research note, the strategists at Goldman Sachs wrote that they now see 10-year Treasury yields, which were at 2.89% on Tuesday, rising to 3.25%, up from their prior forecast of 3%. And since Treasuries are the global benchmark, the firm also boosted its yield forecasts for German bunds, U.K. gilts and Japanese government bonds. The nonpartisan Committee for a Responsible Federal Budget said it expects the U.S. budget deficit to swell to $1.2 trillion in fiscal 2019 alone after the Trump administration enacted tax cuts late last year that will reduce federal revenue by $1.5 trillion over a decade. The auctions continue Wednesday, with the sale of $35 billion in five-year notes followed by the sale of $29 billion of seven-year notes on Thursday.

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Central banks make for bigger crises.

The Bear Still Cometh (Roberts)

In April, the current economic expansion will become the second longest in U.S. history. However, that period of expansion will also be the slowest, based on annualized economic growth rates, as well. Could the current economic expansion become the longest in U.S. history? Absolutely. Over the next several weeks, or even months, the markets can certainly extend the current deviations from long-term means even further. But such is the nature of every bull market peak, and bubble, throughout history as the seeming impervious advance lures the last of the stock market “holdouts” back into the markets. The correction over the last couple of weeks did little to correct these major extensions OR significantly change investor’s mental state from “greed” to “fear.”

As discussed above, the bullish trend remains clearly intact for now, but all “bull markets” end….always. Do not be mistaken, the next “bear market” is coming. Of that, there is absolute certainty. As the charts clearly show, “prices are bound by the laws of physics.” While prices can certainly seem to defy the law of gravity in the short-term, the subsequent reversion from extremes has repeatedly led to catastrophic losses for investors who disregard the risk. There are substantial reasons to be pessimistic about the markets longer-term. Economic growth, excessive monetary interventions, earnings, valuations, etc. all suggest that future returns will be substantially lower than those seen over the last eight years. Bullish exuberance has erased the memories of the last two major bear markets and replaced it with “hope” that somehow “this time will be different.”

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Don’t think we really needs technical charts for that.

Technical Charts Suggest Another Stock-Market Drop Is Coming (ElliottWave)

With the market rally experienced over the past week, many in the media are now reconsidering their recent perspective regarding the demise of the bull market. Not only did the market strike the minimal upside target we laid out for members a week ago — once we broke through 2646 on the Emini S&P 500 — it even exceeded our minimal target by about 25 points. However, just as the market has everyone now considering how much more upside we can see, I think we may be setting up for another drop to begin this week. Due to the lack of impulsive patterns evident off the recent lows in many of the charts I am following, it would suggest the stock market is likely going to see a retest of the prior lows, or a lower low before this wave (4) has run its course.

Again, I want to remind you that 4th waves are the most variable of the Elliott Wave 5-wave structure. For this reason, we almost have to expect many twists and turns, especially during the b-wave of that structure. Currently, we are still in the b-wave of this wave (4), and unless we see an impulsive drop below the 2700 support region on the S&P 500 SPX, -0.58% we may remain in this b-wave for the next several weeks. In other words, should we drop below the 2700 region this week in a corrective and overlapping fashion, we will likely be only dropping in a (b) wave within a larger b-wave, as presented in the attached charts in yellow. However, if the market does provide us with an impulsive structure below 2700 for wave 1 of the c-wave down, then we will likely be targeting the 2400 region within the next few weeks.

Yet, the drop we experienced on Friday off the high was not clearly the start of an impulsive structure. While the market has certainly struck the minimum target we set for this wave (4) between 2424 and 2539, the structure of the rally off that low is suggesting that this wave (4) will likely take more time and provide more whipsaw in the coming weeks. However, as long as we hold over the 2400 region support, my expectation is that we have a date with the 3011-3223 region for the S&P, which will likely be struck by the end of 2018 or early 2019. It will be at that point that I expect we can begin a 20%-30% correction.

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Without exports we’re all dead?!

Final Version Of TPP Trade Deal Dumps Rules The US Wanted (R.)

The final version of a landmark deal aimed at cutting trade barriers in some of the Asia-Pacific’s fastest-growing economies was released on Wednesday, signalling the pact was a step closer to reality even without its star member the United States. More than 20 provisions have been suspended or changed in the final text ahead of the deal’s official signing in March, including rules around intellectual property originally included at the behest of Washington. The original 12-member deal was thrown into limbo early last year when U.S. President Donald Trump withdrew from the agreement to prioritize protecting U.S. jobs. The 11 remaining nations, led by Japan, finalized a revised trade pact in January, called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). It is expected to be signed in Chile on March 8.

The deal will reduce tariffs in economies that together amount to more than 13% of the global GDP — a total of $10 trillion. With the U.S., it would have represented 40%. “The big changes with TPP 11 are the suspension of a whole lot of the provisions of the agreement. They have suspended many of the controversial ones, particularly around pharmaceuticals,” said Kimberlee Weatherall, professor of law at the University of Sydney. Many of these changes had been inserted into the original TPP 12 at the demand of U.S. negotiators, such as rules ramping up intellectual property protection of pharmaceuticals, which some governments and activists worried would raise the costs of medicine. The success of the deal has been touted by officials in Japan and other member countries as an antidote to counter growing U.S. protectionism, and with the hope that Washington would eventually sign back up.

“CPTPP has become more important because of the growing threats to the effective operation of the World Trade Organisation rules,” New Zealand Trade Minister David Parker said on Wednesday.

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In reality, these farmers don’t care where workers come from, they just want them dirt cheap. Give them a good wage and the whole thing changes, you can get Britons to work for you.

UK Farmers: Lack Of Migrant Workers Now ‘Mission Critical’ (G.)

Farmers are running out of patience with what they see as government inaction over the future availability of seasonal fruit and vegetable pickers, the environment secretary has been told. Michael Gove was confronted over the issue at the National Farmers’ Union annual conference, but told delegates that while he understood their plight he did not have the power to accede to their demands for a new deal for non-EU workers on temporary contracts on farms. Ali Capper, who chairs the NFU’s horticulture team, told Gove that the availability of workers to pick fruit and vegetables was now “mission critical for 2018”. Gove told her the NFU’s demand for clarity on labour was “powerfully and loudly” made but that the lead department in the matter was the Home Office, not his.

“It’s already the case that the supply of labour from EU27 countries is diminishing as their economies recover and grow. So, in the future, we will need to look further afield,” he added later, saying he had to abide by decisions in a collective government. Capper welcomed Gove’s acknowledgement that labour shortages were now so great that farmers needed to go beyond the EU, but said time was running out. “We just need action; without wanting to blaspheme, I’m sick of hearing ‘we understand the issue, we know you need access to non-EU and EU workers’,” she said. Meurig Raymond, the outgoing NFU president, told Gove that this was a critical issue for farming, citing a recent Guardian report of a fruit farmer in Herefordshire moving part of his business to China because of Brexit.

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Yesh, like 5% more tax will work miracles.

Vancouver’s Hot Housing Market Gets Tougher for Wealthy Chinese (BBG)

Vancouver, one of the hottest housing markets in North America, is getting a little tougher for wealthy Chinese buyers. British Columbia Finance Minister Carole James announced measures targeting foreign buyers and speculators in the first budget since her government was elected on a pledge to make housing more affordable for residents of Canada’s Pacific Coast province. Starting Wednesday, foreigners will pay the province a 20% tax on top of the listing value, up from 15% now, and a levy on property speculators will be introduced later this year, according to budget documents released Tuesday. The government will also crack down on the condo pre-sale market and beneficial ownership to ensure that property flippers, offshore trusts and hidden investors are paying taxes on gains.

Premier John Horgan faces formidable demands after taking power in a fiercely contested election last July. His New Democratic Party made expensive promises to topple the Liberals, whose 16-year-rule brought the fastest growth in Canada, but also surging property while incomes stagnated. Public outrage has surged amid perceptions that global capital seeking a stable sanctuary, especially from China, is driving double-digit gains in Vancouver, the country’s most expensive property market. “The expectations that we will do everything in our first budget are huge,” James told reporters in the capital Victoria. “Our goal is fairness – fairness for the people who live here, who work here and pay their taxes here.”

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Dickens Redux. Very interesting overview of worker control since the 19th century.

Amazon Tracks Its Workers Using Wristbands (Jacobin)

The latest scandal to emerge from Amazon’s warehouses centers on the company’s newly patented wristband, which gives it the ability to track and record employees’ hands in real time. Some have described the technology as a “dystopian” form of surveillance. Amazon has countered that journalists are engaging in “misguided” speculation. To hear the retail giant tell it, all the device does is move its inventory-tracking equipment from workers’ hands to their wrists — what’s the big deal? Given the level of surveillance and regimentation already in place in Amazon warehouses, the company isn’t completely off base. Currently, warehouse workers called pickers carry a scanner that directs them from product to product. All shift they race the countdown clock, which shows them how many seconds they have to find the item, place it in their trolley, and scan the barcode.

A variation on this method exists in warehouses where robots bring the shelves to workers. There, workers stand in place as stacks of products present themselves one by one. For ten and a half hours, they must stoop and stretch to retrieve an item every nine seconds. The scanners control workers’ behavior by measuring it, preventing slowdowns and allowing managers to create new performance benchmarks. Quick workers raise the bar for everyone, while slow workers risk losing their job. The wristbands introduce a wrinkle to this regimentation, monitoring not just the task but the worker herself. It’s a distinction managers first became obsessed with more than a century ago and crystallized in the “scientific management” movement of the period. Amazon’s peculiar culture notwithstanding, the wristbands in many ways don’t offer anything new, technologically or conceptually. What has changed is workers’ ability to challenge this kind of surveillance.

The first workers required to mechanically record their location while working were the nineteenth-century watchmen. Hired to walk around plants at night, watchmen would look out for irregularities like fires, thieves, open windows, or bad odors. But employers had a problem: who would watch the watchmen? In 1861, they received their answer when the German inventor John Bürk patented one of the first practicable time detectors — a huge watch with a strip of paper running around the casing’s interior. Employers would chain different keys in each room of their property. When watchmen entered a room, they would have to insert the key into the watch, making an indentation on the strip of paper hidden inside. Since each key had a unique pattern, and since the strip of paper was tied to the hands of the clock, the employer could come in the next morning, pull the strip out, and examine a record of when the watchman visited each room.

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Sorry, NYT, it’s not the Republicans who cause this. It’s the Ponzi models. But a good warning: don’t count on the safety net.

Come the Recession, Don’t Count on That Safety Net (NYT)

What will President Trump’s first recession look like? The question is not that far-fetched. The current economic expansion is already the third longest since the middle of the 19th century, according to the National Bureau of Economic Research. If it makes it past June of next year it will be the longest on record. While the economy is hardly booming, trundling along at an annual growth rate of about 2.5%, investors are getting jittery. The stock market tumble after the government reported an uptick in wages last month suggests just how worried investors on Wall Street are that the Federal Reserve might start increasing interest rates more aggressively to forestall inflation. And the tax cuts and spending increases pumped into an expanding economy since December shorten the odds that the Fed will step in forcefully in the not-too-distant future to bring an overheated expansion to an end.

It is hardly premature to ask, in this light, how the Trump administration might manage the fallout from the economic downturn that everybody knows will happen. Unfortunately, the United States could hardly be less prepared. Not only does the government have precious few tools at its disposal to combat a downturn. By slashing taxes while increasing spending, President Trump and his allies in Congress have further boxed the economy into a corner, reducing the space for emergency government action were it to be needed. The federal debt burden is now the heaviest it has been in 70 years. And it is expected to get progressively heavier, as the budget deficit swells.

To top it off, a Republican president and a Republican Congress seem set on completing the longstanding Republican project to gut the safety net built by Presidents Franklin D. Roosevelt and Lyndon B. Johnson, which they blame for encouraging sloth, and replace it with a leaner welfare regime that closely ties government benefits to hard work. As noted in a new set of proposals by leading academics to combat poverty, published Tuesday by the Russell Sage Foundation, anti-poverty policies and related social-welfare benefits over the last quarter-century “have largely shifted from a system of guaranteed income support to a work-based safety net.”

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We waste oil to make petrol, and we waste it the make plastics. It’s like there’s a big plan to get rid of the stuff ASAP. Like nature developed mankind to get rid of a carbon imbalance issue.

Plastic Bans Worldwide Will Dent Oil Demand Growth – BP (G.)

Bans around the world on single use plastic items such as carrier bags will dent growth in oil demand over the next two decades, according to BP. However, the UK-headquartered oil and gas firm said it still expects the global hunger for crude to grow for years and not peak until the late 2030s. Spencer Dale, the group’s chief economist, said: “Just around the world you see increasing awareness of the environmental damage associated with plastics and different types of packaging of one form of another. “If you live in the UK that’s clearly been an issue, but it’s not just a UK-specific thing; you see it worldwide, for example China has changed some of its policies.” Theresa May has branded plastic waste an environmental scourge, and MPs have called for charges on plastic bags to be extended to disposable coffee cups.

Dale predicted such measures around the world could mean 2m barrels per day lower oil demand growth by 2040. But he said single use plastics were only about 15% of all non-combusted oil, which is used for petrochemicals, an industry that BP expects to be a big driver of global growth in crude demand. The company’s energy outlook report, published on Tuesday, forecasts demand peaking at about 110m barrels per day between 2035 and 2040, up from . Much of the growth comes from rising prosperity in the developing world. But Dale said his position was that “nobody knows when it’s going to peak because small changes can shift it by five to 10 years”.

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Robert Hunziker first says that only drastic measures will do, and then blames the US for not adhering to CON21, which has no such drastic measures. It’s hard.

There Is No Time Left (CP)

Imagine a scenario with no temperature difference between the equator and the North Pole. That was 12 million years ago when there was no ice at either pole. In that context, according to professor James G. Anderson of Harvard University, carbon in the atmosphere today is the same as 12 million years ago. The evidence is found in the paleoclimate record. It’s irrefutable. Meaning, today’s big meltdown has only just started. And, we’ve got 5 years to fix it or endure Gonzo World. That’s one big pill to swallow! That scenario comes by way of interpretation of a speech delivered by James G. Anderson at the University of Chicago in January 2018 when he received the Benton Medal for Distinguished Public Service, in part, for his groundbreaking research that led to the Montreal Protocol in 1987 to mitigate damage to the Ozone Layer.

At the time, Anderson was the force behind the most important event in the history of atmospheric chemistry, discovering and diagnosing Antarctica’s ozone hole, which led to the Montreal Protocol. Without that action, ramifications would have been absolutely catastrophic for the planet. Stratospheric ozone is one of the most delicate aspects of planet habitability, providing protection from UV radiation for all life forms. If perchance the stratospheric ozone layer could be lowered to the ground, stacking the otherwise dispersed molecules together, it would be 1/8th of an inch in thickness or the thickness of two pennies. That separates humanity from burning up as the stratospheric ozone absorbs 98% of UV radiation. In his acceptance speech, Anderson, Harvard professor of atmospheric chemistry, now warns that it is foolhardy to assume we can recover from the global warming leviathan simply by cutting back emissions.

Accordingly, the only way humanity can dig itself out of the climate change/global-warming hole is by way of a WWII type effort with total transformation of industry off carbon and removal of carbon from the atmosphere within five years. The situation is so dire that it requires a worldwide Marshall Plan effort, plus kneeling in prayer. Additionally, Anderson says the chance of permanent ice remaining in the Arctic after 2022 is zero. Already, 80% is gone. The problem: Without an ice shield to protect frozen methane hydrates in place for millennia, the Arctic turns into a methane nightmare. This is comparable to poking the global warming monster with a stick, as runaway global warming (“RGW”) emerges from the depths. Interestingly enough, the Arctic Methane Emergency Group/UK, composed of distinguished scientists, seems to be in agreement with this assessment.

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Oct 182017
 
 October 18, 2017  Posted by at 9:14 am Finance Tagged with: , , , , , , , , , ,  


Marcel Bovis Lovers, Paris 1934

 

No, China Isn’t Fixing Its Economic Flaws (BBG)
US Senators Reach Bipartisan Deal On Obamacare, Trump Indicates Support (R.)
Fixing Macroeconomics Will Be Really Hard (BBG)
Carney Reveals Europe’s Potential Achilles Heel in Brexit Talks (ZH)
Money Will Divide Europe After Brexit (R.)
Dalio’s Fund Opens $300 Million Bet Against Italian Energy Firm (BBG)
Boeing’s Attack on Bombardier Backfires (BBG)
The Gig Economy Chews Up And Spits Out Millennials (G.)
Greek Growth Data Cast Doubt On Recovery
Debt-Ridden Greece to Spend $2.4bn Upgrading its F-16 Fighter Jet Fleet (GR)
Canada Methane Emissions Far Worse Than Feared (G.)
The Lie That Poverty Is A Moral Failing Is Back (Fintan O’Toole)

 

 

Antidote for the Party Congress.

No, China Isn’t Fixing Its Economic Flaws (BBG)

In our China Beige Book, we quiz over 3,300 firms across China about the performance of their companies as well as the broader economy. Their responses reveal that much of the exuberance about China today is based on dangerous misconceptions. The first and most obvious myth is that China is actually deleveraging, as officials claim. Responses from Chinese bankers support the notion that regulators, at least for the moment, have successfully targeted certain forms of shadow financing such as wealth management products. Companies, however, don’t seem to be feeling much pressure to curb their excesses. In the second quarter, while firms reported facing moderately higher interest rates and borrowing modestly less, that only slowed the pace of leveraging instead of reversing it. And even that progress has since stalled.

Third-quarter loan applications rose, rejections fell and companies borrowed more. Interest rates at both banks and shadow financials slid. What officials are calling deleveraging – rolling back excess credit – still represents more, uneven leveraging. If the restrictions on financials do extend to companies in 2018 and deleveraging actually begins, the process could be much more traumatic for the Chinese economy than most people currently recognize. The second myth is that the Chinese economy has finally begun to rebalance away from manufacturing and investment to services and consumption. In reality, China’s stronger 2017 performance has depended almost entirely on a revival of the old economy; the improvement in both growth and jobs drew heavily upon commodities, property and, most consistently, manufacturing. Call it “de-balancing.”

[..] China hasn’t slashed overcapacity in commodities sectors. Xi has incessantly touted what he calls “supply-side reforms,” which would seem to give Chinese companies very strong incentive to report results showing such cuts. Yet for more than a year, firms have indicated the opposite. While some gross capacity has been taken offline to much fanfare, net capacity has continued to rise. From July through September, hundreds of coal, steel, aluminum and copper companies reported a sixth straight quarter of overall capacity rising, not falling.

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Getting Bernie to support the same as Trump is an achievement.

US Senators Reach Bipartisan Deal On Obamacare, Trump Indicates Support (R.)

Two U.S. senators on Tuesday reached a bipartisan agreement to shore up Obamacare for two years by reviving federal subsidies for health insurers that President Donald Trump planned to scrap, and the president indicated his support for the plan. The deal worked out by Republican Senator Lamar Alexander and Democratic Senator Patty Murray would meet some Democratic objectives, including reviving the subsidies for Obamacare and restoring $106 million in funding for a federal program that helps people enroll in insurance plans. In exchange, Republicans would get more flexibility for states to offer a wider variety of health insurance plans while maintaining the requirement that sick and healthy people be charged the same rates for coverage.

The Trump administration said last week it would stop paying billions of dollars to insurers to help lower-income Americans pay medical expenses, part of the Republican president’s effort to dismantle Obamacare, former Democratic President Barack Obama’s signature healthcare law. The subsidies to private insurers cost the government an estimated $7 billion this year and were forecast at $10 billion for 2018. Trump’s move to scuttle them had raised concerns about chaos in insurance markets. Trump hoped to make good on his campaign promise to dismantle the law when he took office in January, with Republicans, who pledged for seven years to scrap it, controlling Congress. But he has been frustrated with their failure to pass legislation to repeal and replace it.

Obamacare, formally known as the Affordable Care Act, extended health insurance coverage to 20 million Americans. Republicans say it is ineffective and a massive government intrusion in a key sector of the economy. The Alexander-Murray plan could keep Obamacare in place at least until the 2020 presidential campaign starts heating up. “This takes care of the next two years. After that, we can have a full-fledged debate on where we go long-term on healthcare,” Alexander said of the deal.

[..] Senator Bernie Sanders threw his weight behind the effort. In an interview with Reuters, Sanders said Alexander was a “well-respected figure” known for bipartisanship and that the Tennessee senator’s reputation would help propel the legislation through the Senate. Trump, during comments at the White House, suggested he could get behind the Alexander-Murray plan as a short-term solution. In remarks later at the Heritage Foundation, a conservative think tank, Trump commended the work by Alexander and Murray, but said: “I continue to believe Congress must find a solution to the Obamacare mess instead of providing bailouts to insurance companies.”

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Nuff said: “Most modern econ theories posit that recessions arrive randomly, instead of as the result of pressures that build up over time.”

Fixing Macroeconomics Will Be Really Hard (BBG)

A presentation by Blanchard and Summers provides a useful summary of how elite thinking has changed. They basically draw three lessons from the crisis: 1) the financial industry matters, 2) government should use a wider array of policies to fight recessions, and 3) recessions can last longer than expected. [..] The real sea change is the third one – the reconsideration of what recessions really are. Most modern econ theories posit that recessions arrive randomly, instead of as the result of pressures that build up over time. And they assume that recessions are short-lived affairs that go away of their own accord. If these assumptions are wrong, then most of the theories written down in macroeconomics journals over the past several decades – and most of those being written as we speak – are of questionable usefulness.

Blanchard and Summers are hardly the first to raise this possibility – economists have known for decades that recessions might not be random, short-lived events, but the idea always remained on the fringes. One big reason was simple mathematical convenience – models where recessions are like rainstorms, arriving and departing on their own, are mathematically a lot easier to work with. A second was data availability – unlike in geology, where we can draw on Earth’s whole history, reliable macroeconomic data goes back less than a century. If economic fluctuations really do have long-lasting effects, it will be very hard to identify those patterns from just a few decades’ worth of history.

If macroeconomists heed Blanchard and Summers’ advice, they will have to do harder math, and they will find better data to test their models. But their challenges won’t end there. If the economy can linger in a good or bad state for a long time, it’s almost certainly a chaotic system. Researchers have known for decades that unstable economies are very hard to work with or predict. In the past, economists have simply ignored this unsettling possibility and chosen to focus on models with only one possible long-term outcome. But if Blanchard and Summers are any indication, the Great Recession might mean that’s no longer an option.

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Derivatives.

Carney Reveals Europe’s Potential Achilles Heel in Brexit Talks (ZH)

This morning, BoE Governor Mark Carney discussed the risks of a hard Brexit during his testimony to the UK Parliamentary Treasury Committee. There was renewed weakness in Sterling during his testimony. Ironically, given the fall in Sterling, Carney explained why Europe’s financial sector is more at risk than the UK from a “hard” or “no-deal” Brexit. We wonder whether Juncker and Barnier appreciate the threat that a “no-deal” Brexit poses for the EU’s already fragile financial system? When asked does the European Council “get it” in terms of potential shocks to financial stability, Carney diplomatically commented that “a learning process is underway.” Having sounded alarm bells about clearing in his last Mansion House speech, he noted “These costs of fragmenting clearing, particularly clearing of interest rate swaps, would be born principally by the European real economy and they are considerable.”

Calling into question the continuity of tens of thousands of derivative contracts, he stated that it was “pretty clear they will no longer be valid”, that this “could only be solved by both sides” and has been “underappreciated” by Europe. Moving on to the possibility that there might not be a transition period, Carney had a snipe at Europe for its lack of preparation “We are prepared as we should be for the possibility of a hard exit without any transition…there has been much less of that done in the European Union.” Maybe it’s Europe, not the UK, that needs the transition period most.

In Carneys view “It’s in the interest of the EU 27 to have a transition agreement. Also, in my judgement given the scale of the issues as they affect the EU 27, that there will ultimately be a transition agreement. There is a very limited amount of time between now and the end of March 2019 to transition large, complex institutions and activities…If one thinks about the implementation of Basel III, we are alone in the current members of the EU in having extensive experience of managing the transition for individual firms of various derivative and risk activities from one jurisdiction back into the UK. That tends to take 2-4 years. Depending on the agreement, we are talking about a substantial amount of activity.”

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Europe borrows from the future.

Money Will Divide Europe After Brexit (R.)

The British government once hoped that the Oct. 19-20 meeting would be the moment when the Brexit negotiations could move on to discuss trade. That aspiration now seems hopeless. European leaders look set to insist on further delay until there is more progress in the first stage of talks, above all in reaching agreement on how much Britain will have to pay to settle its obligations when it leaves.

[..] If economic size and time favor the EU, the British government’s strongest card is money – one that it has played in various guises for centuries with its continental neighbors – and it is naturally reluctant to show its full hand too early. Even so May has already made an important concession. As part of the transition period of around two years that she called for in her emollient Florence speech last month, Britain would continue to pay in to the EU budget to ensure that none of the member states was out of pocket owing to the decision to leave. These net payments of around €10 billion ($11.8 billion) a year would fix the immediate problem facing the EU, the hole that would otherwise open up in its finances during the final two years of its current budgetary framework, which runs from 2014 to 2020.

But that extra money from aligning Britain’s effective date of departure with the end of the EU’s budgeting plan will not be enough, for two reasons. One is the way the EU in effect borrows from the future, by making spending commitments that it pays for later. In principle, the EU cannot borrow to pay for expenditure. But, through its accounting procedures, the EU can and does commit it to spending that will be paid for by future receipts from the member states. What this means is that even after 2020 there will still be payments due on commitments made under the current seven-year spending plan. That pile of unpaid bills, eloquently called the “reste à liquider” (the amount yet to be settled), is forecast to be €254 billion at the end of 2020.

Estimates of what Britain might owe towards this vary, but taking into account what might have been spent on British projects it could be around €20 billion. On top of that – and the second main reason why the EU is holding out for more – the EU has liabilities, notably arising from the unfunded retirement benefits of European staff estimated at €67 billion at the end of 2016, which it is expecting Britain to share. Even taking into account some potential offsets from its share of assets, Britain may face a bill of between €30 billion and €40 billion on top of the €20 billion paid during the transition period.

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Biggest threat of all to Europe may be Italy’s weaknesses.

Dalio’s Fund Opens $300 Million Bet Against Italian Energy Firm (BBG)

Bridgewater Associates is adding to its billion-dollar short against the Italian economy. The world’s largest hedge fund disclosed a $300 million bet against Eni SpA, Italy’s oil and gas giant, data compiled by Bloomberg show. Bloomberg previously reported that Ray Dalio’s firm had wagered more than $1.1 billion against shares of six Italian financial institutions and two other companies. This latest bet is the hedge fund’s second-largest against an Italian company, trailing only the $310 million against Enel SpA, the country’s largest utility. Eni’s majority holder is the Italian government via state lender Cassa Depositi e Prestiti SpA and the Ministry of Economy. The public involvement also is reflected in the government’s role in appointing the chief executive officer. Current CEO Claudio Descalzi has been at the helm since 2014 and was reconfirmed this year.

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Airbus buys C Series for $1?!

Boeing’s Attack on Bombardier Backfires (BBG)

Boeing’s diminutive Canadian rival just found itself one heck of a wingman. The world’s largest aerospace company tried to block Bombardier’s all-new C Series jet from the U.S. by complaining to the government about unfair competition. Now that move is backfiring as Boeing’s primary foe, Airbus, takes control of the Canadian aircraft – with plans to manufacture in Alabama. The deal leaves Boeing’s 737, the company’s largest source of profit, to face a strengthened opponent in the market for single-aisle jetliners, where Airbus’s A320 family already enjoys a sales lead. The European planemaker is riding to the rescue of a plane at the center of a trade dispute that soured U.S. relations with Canada and the U.K., where the aircraft’s wings are made.

“For Boeing, its decision to wage commercial war on Bombardier has arguably had some unintended negative outcomes,” Robert Stallard, an analyst at Vertical Research Partners, said in a report. “As well as damaging relations with the Canadian and U.K. governments and some major airline customers, it has now driven Bombardier into the arms of its arch competitor.” Boeing on Tuesday held firm to its stance against the C Series, saying the deal with Airbus would have “no impact or effect on the pending proceedings at all” in the trade dispute. Boeing won a preliminary victory against Bombardier last month when President Donald Trump’s administration imposed import duties of 300% on the C Series.

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Self-employment as a means to hide unemployment.

The Gig Economy Chews Up And Spits Out Millennials (G.)

Huws says the golden age for the gig economy was some time around 2013, when companies took a smaller cut and there were fewer drivers/riders/factotums to compete with. “As Deliveroo pass on all risk to the rider, there’s nothing to stop them over-recruiting in an area and flooding the city with riders, which is exactly what we saw last winter,” says Guy McClenahan, another Brighton rider (Deliveroo maintain that the hundreds of riders in the area earn on average well above the national living wage). Over time, Uber has increased the commission it takes from drivers while reducing fares. Drivers are finding themselves working much longer hours in order to make the same pay – or far less. (There are currently no time limits on how many hours Uber drivers can work a week in the UK, but the company is testing changes and says it plans to introduce limits over a 24-hour period.)

TaskRabbit, the online platform for handymen and odd jobs, which was recently bought by Ikea, took away a rate in which contractors would earn more money for repeat commissions – and buried that news in an email about introducing the option for clients to tip. [..] Huws points out that the gig economy has always existed: cash-in-hand or on-call work or people turning up at building sites or dockyards in the hope of a day’s work. But since the 2008 crash, jobs that provide a secure income have become harder to come by. It is true that the unemployment rate among 16- to 24-year-olds in the UK is 12%, while in parts of Europe it is 40%. But that doesn’t mean much if many of those people are in precarious “self-employment” – the McKinsey Global Institute estimates this may be up to 30% of working-age adults across Europe. Huws says the notion of a career is being eroded, with young people often working a patchwork of different occupations.

[..] Huws worries about something else, too: the wellbeing of gig-economy millennial workers. This kind of employment can be “really damaging for self-esteem”, she says. As Hughes and Diggle both say, crowd work can be lonely. “Especially if you’re working a double shift,” says Diggle. “Or sometimes you don’t feel human. You’re just handing a bag over and some people take the bag, don’t look at you and close the door. And then don’t tip. One day I’ll be on stage singing, and the next I’m delivering food on my bicycle and it does feel … deflating.”

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A Greek recovery is mathematically impossible.

“..taxation on products increased 7.8%..”

Greek Growth Data Cast Doubt On Recovery

Greece was in recession last year, as revised data from the Hellenic Statistical Authority (ELSTAT) showed on Tuesday that the economy shrank 0.2% compared to 2015 against a previous estimate for zero growth. Furthermore, the Foundation for Economic and Industrial Research (IOBE) forecast that 2017 will close with growth of just 1.3%, against a government estimate of 1.8%. That the way out of the crisis is proving more arduous and uncertain than many had predicted was underscored by the two sets of data released on Tuesday, with IOBE Director General Nikos Vettas warning that the recovery may turn out to be “short-term and fragile” unless the pending crucial structural reforms are implemented.

ELSTAT’s downward revision for 2016 is mainly based on consumer spending, which declined 0.3% compared to 2015, against a previous estimate in March 2017 for an increase of 0.6%. Even in March, when ELSTAT announced zero growth for 2016, the figures created a headache for Prime Minister Alexis Tsipras, who had previously said the economy had grown in 2016. Yesterday’s revision turned stagnation into recession for another year. It is also impressive that while the economy shrank 0.2%, taxation on products increased 7.8%, against a hike of 1.7% in 2015 and 0.8% in 2014. The revision also revealed that 2014 saw growth of 0.7%, against an estimate of 0.3% in March. That upward course was clearly interrupted by the January 2015 election.

IOBE undercut the government’s growth estimates for this year and next, with its president, Takis Athanasopoulos, saying, “Indeed, our economy is showing signs of improvement, but its rate remains below what is necessary for the country to leave the crisis behind it for good.” Next year IOBE anticipates growth of 2%, against an official forecast of 2.4%, putting the achievement of fiscal targets into question. The weak 1.3% recovery rate seen for this year, compared to the original 2.7% estimate of the budget and the bailout program, is according to IOBE due to the weak momentum of investments.

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Wonder who pays the bill. Which is not as bas as it seems.

Debt-Ridden Greece to Spend $2.4bn Upgrading its F-16 Fighter Jet Fleet (GR)

The United States has approved the possible sale of more than 120 upgrade kits from Lockheed Martin to the Greeks for their F-16 fighter jet fleet. The deal, worth $2.4bn, was announced as U.S. President Donald Trump met with Greek Prime Minister Alexis Tsipras in Washington, D.C. Trump, who has repeatedly criticized NATO countries for not meeting the alliance’s defense budget targets, applauded Greece for meeting the goal of each member spending two percent of their gross domestic product on their military and highlighted the F-16 upgrade plans. “They’re upgrading their fleets of airplanes – the F-16 plane, which is a terrific plane,” Trump said ahead of a bilateral meeting. “They’re doing big upgrades.”

“This agreement to strengthen the Hellenic Air Force is worth up to 2.4 billion U.S. dollars and would generate thousands of American jobs,” Trump said during his joint press conference with Tsipras. Greek Defense Minister Panos Kammenos sought later to downplay the cost of the deal for Greece. In a message on twitter he said that the cost to Greece will be 1.1 billion euros. “The ceiling in the budget for the upgrading of the F-16 is 1.1 billion euros”, he said. “The rest will come from aid programs and offsets”, he added. According to the U.S. Defense Security Cooperation Agency (DSCA) there are currently no known offsets. However, Greece typically requests offsets. Any offset agreement will be defined in negotiations between Greece and the contractor, Lockheed Martin. .

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“..the type of heavy oil recovery used released 3.6 times more methane than previously believed..”

Canada Methane Emissions Far Worse Than Feared (G.)

Alberta’s oil and gas industry – Canada’s largest producer of fossil fuel resources – could be emitting 25 to 50% more methane than previously believed, new research has suggested. The pioneering peer reviewed study, published in Environmental Science & Technology on Tuesday, used airplane surveys to measure methane emissions from oil and gas infrastructure in two regions in Alberta. The results were then compared with industry-reported emissions and estimates of unreported sources of the powerful greenhouse gas, which warm the planet more than 20 times as much as similar volumes of carbon dioxide.

“Our first reaction was ‘Oh my goodness, this is a really big deal,” said Matthew Johnson, a professor at Carleton University in Ottawa and one of the study’s authors. “If we thought it was bad, it’s worse.” Carried out last autumn, the survey measured the airborne emissions of thousands of oil and gas wells in the regions. Researchers also tracked the amount of ethane to ensure that methane emissions from cattle would not end up in their results. In one region dominated by heavy oil wells, researchers found that the type of heavy oil recovery used released 3.6 times more methane than previously believed. The technique is used in several other sites across the province, suggesting emissions from these areas are also underestimated.

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UBI.

The Lie That Poverty Is A Moral Failing Is Back (Fintan O’Toole)

By the time he died, in 1950, Bernard Shaw, as the most widely read socialist writer in the English-speaking world, had done as much as anyone to banish the fallacy that poverty is essentially a moral failing – and conversely that great riches are proof of moral worth. His most passionate concern was with poverty and its causes. He was haunted by the notorious Dublin slums of his childhood. As his spokesman Undershaft puts it in Major Barbara: “Poverty strikes dead the very souls of all who come within sight, sound or smell of it.” The question – why are the poor poor? – has a number of possible answers in the 21st century, just as it had in the late 19th. A Eurobarometer report in 2010 examined attitudes to poverty in the European Union. The most popular explanation among Europeans (47%) for why people live in poverty was injustice in society.

[..] In the preface to Major Barbara, Shaw attacks “the stupid levity with which we tolerate poverty as if it were … a wholesome tonic for lazy people”. His great political impulse was to de-moralise poverty, and his most radical argument about poverty was that it simply doesn’t matter whether those who are poor “deserve” their condition or not – the dire social consequences are the same either way. He assails the absurdity of the notion implicit in so much rightwing thought, that poverty is somehow more tolerable if it is a punishment for moral failings: “If a man is indolent, let him be poor. If he is drunken, let him be poor. If he is not a gentleman, let him be poor. If he is addicted to the fine arts or to pure science instead of to trade and finance, let him be poor … Let nothing be done for ‘the undeserving’: let him be poor. Serve him right! Also – somewhat inconsistently – blessed are the poor!”

In an era when many on the left purported to despise money and romanticised poverty, Shaw argued that poverty is a crime and that money is a wonderful thing. He recognised that there is no relationship between poverty and a supposed lack of a work ethic: Eliza Doolittle is out selling her flowers late at night in the pouring rain but she is still dirt poor. (Conversely, when she is “idle” and being kept by Higgins, she leads a life of relative luxury.) And therefore the cure for poverty can never be found in moral judgments. The cure for poverty is an adequate income. “The crying need of the nation,” he wrote, “is not for better morals, cheaper bread, temperance, liberty, culture, redemption of fallen sisters and erring brothers, nor the grace, love and fellowship of the Trinity, but simply for enough money.

And the evil to be attacked is not sin, suffering, greed, priestcraft, kingcraft, demagogy, monopoly, ignorance, drink, war, pestilence, nor any other of the scapegoats which reformers sacrifice, but simply poverty.” The solution he proposed was what he called a “universal pension for life”, or what we now call a universal basic income.

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Mar 242016
 
 March 24, 2016  Posted by at 9:28 am Finance Tagged with: , , , , , , , , , , ,  


John M. Fox National Peanut Corp. store on Broadway, NY 1947

Goldman to Fed: Stop Worrying So Much About the Stronger Dollar (BBG)
China Sends Fed A Warning: Devalues Yuan By Most In 2 Months (ZH)
Pimco Sees 7% Drop For Yuan, ‘No. 1 Risk For Global Economy This Year’ (BBG)
Kyle Bass Is Wrong On China: Policy Adviser Li (CNBC)
China’s Debt Bubble Threatens Global Economy (Nikkei)
China Online P2P Financing Firms Face More Regulation (WSJ)
There’s No Sign of a China Rebound (BBG)
China Exports Its Environmental Problems (BBG)
Liquidity Death Spiral Traps Credit Suisse (BBG)
Japan’s Bond Market Is Close to Breaking Point (BBG)
US Oil Falls After Big Jump In Stockpiles (Reuters)
Osborne’s Disability Cuts Are Devastating Families (G.)
Trump Is Right – Dump NATO Now (David Stockman)
Methane and Warming’s Terrifying New Chemistry (McKibben)
EU Border Agency Has Less Than A Third Of Requested Police (AFP)
Key Aid Agencies Refuse Any Role In ‘Mass Expulsion’ Of Refugees (G.)

Everybody knows a stronger dollar is inevitable. Priced in.

Goldman to Fed: Stop Worrying So Much About the Stronger Dollar (BBG)

It’s time for the Federal Reserve to end its dollar fixation. That’s the takeaway from a Goldman Sachs report Wednesday that suggests the U.S. currency poses little threat to the Fed’s inflation goals, challenging policy makers’ comments to the contrary. That’s good news for dollar bulls who are betting on expanded monetary-policy divergence between the U.S., Europe and Japan. Inflation is at the heart of the Fed’s debate about the timing of interest-rate increases as officials look to normalize monetary policy after seven years of near-zero interest rates. With a stronger dollar not translating into significantly cheaper import prices, Goldman Sachs suggests the central bank faces fewer headwinds to hiking rates than markets are currently pricing in.

“The majority of the effects of a stronger dollar on import prices have already been realized,” analysts Zach Pandl and Elad Pashtan wrote in the note. “Inflation data to date appears to be more closely tracking a path with less dollar pass-through to core inflation” than implied by the Fed’s projections for consumer prices. Investors agree. The gap between yields on Treasury Inflation-Protected Securities and nominal 10-year notes, known as the break-even rate, climbed to the highest since August earlier this week. The measure indicates inflation will average about 1.59% over the next decade, compared with 1.2% last month. The Bloomberg Dollar Spot Index, which tracks the currency versus 10 peers, advanced 0.7% on Wednesday, extending its longest streak of gains since the period ending Feb. 16.

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Fed must hike?!

China Sends Fed A Warning: Devalues Yuan By Most In 2 Months (ZH)

With the USD Index stretching to its longest winning streak of the year, jawboned by numerous Fed speakers explaining how April is ‘live’ (and everyone misunderstood the dovishness of Yellen), it appears that The PBOC wanted to send a message to The Fed – Raise rates and we will unleash turmoil on your ‘wealth creation’ plan. Large unexpected Yuan drops have rippled through markets in recent months spoiling the party for many and tonight, by devaluing the Yuan fix by the most since January 7th, China made it clear that it really does not want The Fed to hike rates and cause a liquidity suck-out again. The last 4 days have seen nearly a 1% devaluation in the Yuan fix with today’s drop the biggest in over 2 months…

 

And while everyone is quietly commenting on how “stable” the Yuan has been this year, the truth is that is only the case against the USD, the Yuan basket has been consistently devaluing since PBOC admitted it was more focused on that than the USD only…

The last time they sent a message, The Fed rapidly acquiesced and decided a rate hike was inadvisable due to global market turmoil… we wonder what happens this time.

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Only question is will it be voluntary.

Pimco Sees 7% Drop For Yuan, ‘No. 1 Risk For Global Economy This Year’ (BBG)

The offshore yuan dropped to a one-week low after China’s central bank weakened its daily fixing and Pimco. said it sees further depreciation for the currency. The People’s Bank of China lowered its reference rate by 0.33%, the most since Jan. 7, following an overnight advance in the dollar on comments from Federal Reserve officials on the possibility of an interest-rate increase as soon as April. The yuan, “by far the single biggest risk for the global economy and markets this year,” is expected to depreciate 7% against the dollar over the next year, according to a Pimco report issued Wednesday. “If the Fed raises interest rates in April, the dollar will rebound sharply and pressure the yuan weaker,” said Gao Qi at Scotiabank, who sees a June move as more likely. “We expect the yuan to depreciate modestly to 6.7 against the greenback by the end of this year” as capital leaves, the economy slows and the dollar advances.

The yuan’s share of global payments dropped to the lowest since October 2014, according to the Society for Worldwide Interbank Financial Telecommunications, with data affected by the one-week Lunar New Year holiday. China’s growth will likely decelerate as a trend, with mini-cycles of weak recovery and slowdown led by policy swings, Morgan Stanley economists Chetan Ahya and Elga Bartsch wrote in a note. China won’t devalue the yuan to boost exports, and is confident that the nation’s economy will expand by more than 6.5% annually in the next five years, Premier Li Keqiang said in a speech in Boao, Hainan province, on Thursday. Although pressures for the yuan to depreciate do exist, the nation will be able to keep the exchange rate basically stable as long as the economy stays sound, PBOC adviser Huang Yiping said on Wednesday.

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Saying it does not inspire confidence.

Kyle Bass Is Wrong On China: Policy Adviser Li (CNBC)

Many assumptions about China held by global market players, such as thinking Beijing wants a weaker yuan or that low oil prices are caused by the mainland’s slowing growth, are simply wrong, according to a leading Chinese policy adviser. Li Daokui, director of the Center for China at Tsinghua University and former member of the People’s Bank of China (PBOC) monetary policy committee, said prominent hedge fund managers, including the likes of Kyle Bass, have misunderstood the world’s second-largest economy. For one, focusing on the currency is “the biggest mistake in reading the Chinese economy,” said Li on the sidelines of Thursday’s Boao Forum for Asia conference. “There is no need for the Chinese economy to rely on a big boost of exports….the economy is still facing a big trade surplus.”

Ever since Beijing surprised the world by unexpectedly depreciating the renminbi in August, money managers such as Kyle Bass, David Tepper and Bill Ackman have ramped up bearish bets against the yuan. Goldman Sachs predicts the dollar will be fetching 7 yuan by the end of the year, from 6.5 currently, amid expectations for looser monetary policy and the government’s desire to boost sagging exports. But exports are no longer as important as before the global financial crisis, Li explained, adding that the sector now makes up 20% of GDP, compared with 35% previously. “The renminbi is already an international currency in the region, so when it devalues, everybody devalues. The net impact is almost zero,” he added.

Indeed, fears for an Asian currency war hit fever-pitch after August’s historic devaluation. Export-oriented economies, such as neighboring South Korea, are typically flagged as the most vulnerable to a weaker renminbi as their goods appear more expensive overseas, sparking worries that other central banks would weaken their own currencies to maintain trade competitiveness. “When the Chinese economy does devaluation, the momentum of financial markets will kick in to expect more devaluation. The game has no good ending for anyone,” Li said. Li’s views echo those of Premier Li Keqiang, who said on Thursday that depreciation would not help companies be more competitive, repeating that the government would not devalue the yuan to lift exports.

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Non-financial private debt is over 200% of GDP and counting. $21.5 trillion.

China’s Debt Bubble Threatens Global Economy (Nikkei)

Excessive debt held by Chinese companies and households is highlighting a grave reality behind the country’s economy. In a sign that this debt is being regarded as a risk to the global economy, it became a topic of discussion at a meeting of G-20 finance ministers and central bank governors held in February. China even appears to be taking steps similar to Japan’s moves in its own post-bubble era. Total credit to the Chinese private non-financial sector stood at $21.5 trillion at the end of September 2015, accounting for 205% of the country’s GDP, according to the Bank for International Settlements. In Japan, the figure accounted for more than 200% of the nation’s GDP at the end of September 1989, when the country was in the late stage of its economic bubble.

After that bubble burst, the number shot up to 221% by the end of December 1995. Japan had fallen victim to its own excessive debt, and banks wrestled with bad loans for the next 10 years. In the U.S., the boom in subprime housing loans for low-income borrowers evolved into a global financial crisis in 2008. At the end of September that year, total credit to the U.S. private sector reached its peak, accounting for 169% of the country’s GDP. It took U.S. banks about four years to overcome their bad loan problems. And now in China, the outstanding amount of total credit to the private sector has surged 300% from the end of December 2008. After the crisis triggered by the Lehman bankruptcy in 2008, Chinese companies began borrowing money and increasing investment, thanks to the Chinese government’s introduction of economic measures worth 4 trillion yuan (around $586 billion at the time).

That stimulus has helped the country to account for half of the world’s crude steel production. Now, however, China is facing the difficult task of making production adjustments, which is putting deflationary pressure on overseas economies. At the opening session of the 12th National People’s Congress, which ended on March 16, Chinese Premier Li Keqiang announced that the country will accelerate the development of a new economy. He also stated that China will address overcapacity in steel, coal and other industries. Despite the positive stance, though, total credit to Chinese non-financial companies stood at $17.4 trillion at the end of September 2015, accounting for 80% of the total.

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Beijing has let shadow banking grow so big that regulating it is a risk to the economy.

China Online P2P Financing Firms Face More Regulation (WSJ)

China’s online lending companies are bracing for an industry shake-up this year as competition heats up, the economy slows further and regulatory scrutiny tightens following a bevy of scandals. Operators of online lenders, a hot sector in Chinese finance just two years ago, bemoaned the tougher operating environment and the industry’s battered reputation. Speaking at a forum on Wednesday, executives cited rising credit risks and potential new government restrictions on their ability to accept public deposits. They said those firms that aren’t adaptable and lack proper risk controls will likely fail. “When these guys can’t get access to capital, what will they do?” Simon Loong of online financing platform WeLab said at the Boao Forum for Asia, a gathering of business and government leaders.

“They’ll slowly go bust,” and that in turn could rattle the financial system, Mr. Loong said without elaborating. Having made investing easy, major Chinese Internet companies are now competing to sell financial products. Here’s an introduction to some of the popular online investment platforms. Online lending boomed over the past half-decade. Peer-to-peer, or P2P, financing soared, raising capital from wealthier investors and routing it to smaller businesses and consumers often overlooked by commercial banks. P2P platforms numbered 2,595 at the end of last year, up from 880 at the start of 2014, while outstanding loans rose 14-fold to 440 billion yuan ($66.8 billion), according to data provider Wind Information. After the fast rise, however, business conditions deteriorated and some P2P platforms imploded.

Most spectacular was Ezubo Ltd., which collapsed last year, leaving investors short of $7.6 billion and causing regulators to vow to tighten supervision of the sector. While saying greater oversight is welcome, the online lenders at Wednesday’s panel said defended their business models. “The P2P word now seems to have a negative connotation now,” said Yang Fan, CEO of Iqianjin (Beijing) Information. “But P2P financing supplements the existing financial system. It can more effectively direct resources.” The executives said regulators should distinguish between shady operators and credible firms that are trying to manage the risks of loan default. “Those who were accused of illegal fundraising had just put on the hat of P2P” and weren’t genuine operators, said Zhang Shishi, co-founder of online platform Renrendai.

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But they’ll paint the rosy picture anyway.

There’s No Sign of a China Rebound (BBG)

China’s monetary and fiscal stimulus have yet to spur a rebound in the world’s second-largest economy, according to the earliest private economic indicators for March. A purchasing manager’s index focused on small businesses, a gauge of corporate confidence and a new reading of the economy derived from satellite imagery all remained at levels signaling deterioration, though the pace of declines moderated. Sales manager sentiment was unchanged. The reports follow mixed official data showing investment and property sales recovered in the first two months of the year as trade plummeted and manufacturing remained weak. Meanwhile, the newest data show government reforms to slash industrial capacity and shift to a greater reliance on consumption and services haven’t been able to offset the slump.

“Confidence of companies is still slowly bottoming,” Jia Kang, director of the China Academy of New Supply-side Economics, said in a statement. “As long as the supply-side reforms can push forward, the effects will gradually show up.” That’s more unwelcome news for top officials who are gathered this week at the Boao Forum for Asia on the southern island of Hainan to discuss the challenges facing the economy and goals of the reform. Premier Li Keqiang will deliver a keynote speech Thursday and People’s Bank of China Governor Zhou Xiaochuan is scheduled to participate in a panel discussion with Commerce Minister Gao Hucheng and Foreign Minister Wang Yi.

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Obviously.

China Exports Its Environmental Problems (BBG)

One of the best pieces of news in years is that China’s finally getting serious about cleaning up its environment. Renewable energy use is growing rapidly while coal use is declining. Air pollution targets are being tightened. Contaminated farmland is finally getting high-level attention. Yet all that good could be undermined if China simply exports its environmental problems elsewhere. A case in point is China’s campaign to protect its forests. For years, logging ran rampant as the country transformed itself into the world’s biggest buyer of timber and wood products, including everything from furniture to paper. Denuded hillsides contributed to massive floods in 1998 that forced millions to evacuate their homes. Fortunately, according to a study published last week in Science, stricter enforcement of localized logging bans has reversed the trend: Between 2000 and 2010, tree cover increased over 1.6% of Chinese territory (and declined over .38%).

This year, China plans to cut its commercial logging quota another 6.8% and will expand a ban on logging natural forests nationwide. Here’s the problem, though: As China has quieted its chainsaws, the country has become the world’s largest importer of timber; the government predicts that by 2020 it will rely on imports for 40% of its needs. And as buyers, Chinese companies aren’t terribly discerning. According to the London-based think tank Chatham House, China’s purchases of illegally harvested timber nearly doubled between 2000 and 2013, growing to more than 1.1 billion cubic feet. The damage extends across the developing world. China buys up 90% of Mozambique’s timber exports, around half of which were harvested at rates too fast to sustain the forest over the long-term.

In 2013, the World Wildlife Fund declared that illegal logging in the Russian Far East had reached “crisis proportions” after finding that oak was being logged for export to China at more than twice the authorized volumes. That same year, Myanmar tripled the volume of endangered rosewood exported to China (where it’s particularly valued for its use in furniture). At those rates, some of Myanmar’s rosewood species could be extinct by 2017. Despite a total ban enacted in 2014, rosewood exports to China surged last year to levels reportedly not seen in a decade.

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This does not bode well for TBTF banks.

Liquidity Death Spiral Traps Credit Suisse (BBG)

Credit Suisse just got caught up in the same liquidity death spiral that has claimed a growing number of debt funds.Some of the bank’s traders increased holdings of distressed and other infrequently traded assets in recent months without telling some senior leaders, Credit Suisse CEO Tidjane Thiam said on Wednesday. This is bad on several levels. For one, it highlights some pretty poor risk management on the part of senior officers at the Swiss bank.But perhaps more important from a market standpoint, it exposes a trap in the current credit market: Traders are getting increasingly punished for trying to sell unpopular debt at the wrong time. The result has been a growing number of hedge-fund failures, increasing risk aversion by Wall Street traders and further cutbacks at big banks.

This all simply reinforces the lack of trading in less-common bonds and loans. At best, this spiral is inconvenient, especially for mutual funds and exchange-traded funds that rely on being able to sell assets to meet daily redemptions. At worst, it could set the stage for another credit seizure given the right catalyst – perhaps a sudden, unexpected corporate default or two, or the implosion of a relatively big mutual fund. To give a feeling for just how inactive parts of the market have become, consider this: About 40% of the bonds in the $1.4 trillion U.S. junk-debt market didn’t trade at all in the first two months of this year, according to data compiled from Finra’s Trace and Bloomberg. While corporate-debt trading has generally increased by volume this year, more of the activity is concentrated in a fewer number of bonds.

This has made it even harder for big banks to justify buying riskier bonds to make markets for their clients, the way they used to, because they could get stuck holding the bag. That’s what happened with Credit Suisse, apparently. The bank suffered $258 million of writedowns this year through March 11, and $495 million of losses in the fourth quarter, because of its holdings of distressed debt, leveraged loans and securitized products, including collateralized loan obligations [..] Credit Suisse is in a tough spot because it is trying to get out of its hard-to-trade assets at a bad time. It’s re-evaluating its business model under new leadership, higher capital requirements and the shadow of poor earnings. But it’s certainly not alone in feeling the pain from a brutal and unforgiving period in debt markets. JPMorgan Chase, Bank of America and Goldman Sachs are expected to report disappointing trading revenues in the first three months of the year, and Jefferies already reported its train wreck of a quarter.

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Abe’s run out of wiggle room. He can’t even turn around on a dime anymore.

Japan’s Bond Market Is Close to Breaking Point (BBG)

Signs of stress are multiplying in Japan’s government bond market, which is crumbling under pressure from the central bank’s unprecedented asset-purchase program and negative interest rates. BOJ Governor Haruhiko Kuroda has repeatedly said his policies are having the desired effect on markets, including suppressing JGB yields. His success is driving frenzied demand for longer-dated notes as investors avoid the negative yields offered on maturities up to 10 years. And as buyers hang on to debt offering interest returns, the BOJ is finding it harder to press on with bond purchases of as much as 12 trillion yen ($107 billion) a month, sparking sudden price swings leading to yield curve inversions that have nothing to do with economic fundamentals. “We hold a lot, and we’re not selling,” said Yoshiyuki Suzuki, the head of fixed income at Fukoku Mutual Life Insurance, which has $59 billion in assets. “We can get interest income. If we sell, there are no good alternatives.”

Yields on 40-year JGBs dipped below those on 30-year securities Tuesday, and a BOJ operation to buy long-term notes last week met the lowest investor participation on record. Bond market functionality has deteriorated, with 41% of respondents last month rating it as “low,” the highest proportion since the BOJ began the quarterly survey more than a year ago. “It wouldn’t be surprising to see some BOJ operations fail,” said Yusuke Ikawa at UBS in Tokyo. “The biggest risk of that is in superlong bonds.” A dearth of liquidity has driven a measure of bond-market fluctuations to levels unseen since 1999.

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Back on the way to $30 and beyond.

US Oil Falls After Big Jump In Stockpiles (Reuters)

U.S. oil prices fell in Asian trading on Thursday, adding to a slump in the previous session, after stockpiles rose for the sixth week to another record, sapping the strength of a two-month rally in prices. U.S. crude futures were down 10 cents at $39.69 a barrel at 0302 GMT, trading further below the important $40 level. It closed down $1.66, or 4%, at $39.79 a barrel on Wednesday. That marked the sharpest one-day drop for the front-month contract in U.S. crude since Feb. 11. Brent crude futures were up 7 cents at $40.54 a barrel, after trading lower earlier in the session. They finished the last session down $1.32, or 3.2%, at $40.47 a barrel. Earlier this week, both benchmarks had risen by more than 50% from multi-year lows that hit in January.

The U.S. government’s Energy Information Administration (EIA) said crude stockpiles climbed by 9.4 million barrels last week – three times the 3.1 million barrels build forecast by analysts in a Reuters poll. The continued rise in stockpiles is grinding away at the gains in prices that were largely driven by plans of major producers, including Saudi Arabia and Russia, to freeze production. “OPEC production is still high and Iran is expected to continue to ramp up,” said Tony Nunan at Mitsubishi in Tokyo. “I expect crude to come back down again and test the $35 level again if we continue to get builds,” he said. The market was also supported by a release showing crude stockpiles at the Cushing, Oklahoma, delivery hub – an important data point – fell for the first time in seven weeks.

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People die from austerity.

Osborne’s Disability Cuts Are Devastating Families (G.)

A few stabbings in SW1, a couple of careers seriously injured. Politicians and pundits are frantically trying to shrink the implications of Iain Duncan Smith’s resignation down to Westminster size. So it’s about cabinet feuds and leadership hopes, George Osborne’s snottiness and David Cameron’s way with a swearword. What the welfare secretary’s exit is not about, you understand, is a busted austerity programme that has missed nearly every goal and deadline set forward by its creators. It’s not about a benefits system in chaos – economic chaos being so much uglier a prospect than a flat-pack “Tory civil war”. And it’s certainly not about the people who actually have to use that benefits system.

People like Paul and Lisa Chapman. They won’t pop up in the coverage of the “great social reformer” – yet their story takes you to the heart of what’s wrong with our welfare system. It starts a decade ago when Paul, at only 39, started getting a tremor in his right hand. “Just a small one”, but then his eyes would swell up and his sense of smell disappeared. The doctors guessed what was wrong well before the scans picked it up, but a couple of years ago the diagnosis was confirmed: Parkinson’s disease. Incurable. Evil. Now Paul’s body won’t do what his brain tells it to. Miss any tablets and he shakes “really bad”. Even having taken them cramps still seize his neck, legs and arms. “My speech is going,” Paul begins. “I know what I want to say, but … ” Lisa picks up: “The words come out back to front.”

We were in the Chapmans’ small front room, gazing out on the same Northamptonshire town where Paul had worked for years. “I used to be the quickest postman in Irthlingborough!” He could knock off a round in two hours that would take his colleagues four. Even before taking medical retirement, he was slowing down, sometimes forgetting where he was. Now the same route would take “seven or eight hours”. Anyway, Lisa points out, he no longer has the strength to lift a letterbox. We met two days after Osborne’s announcement of the cuts to the personal independence payment (PIP). Disabilities such as Paul’s cost a lot, – in extra kit, travel and care – and PIP is meant to help. The Chapmans were worried that they’d lose out.

This, famously, was the cut too far for IDS. But the Chapmans told me another story, which underlined how this government’s welfare mess is so much bigger than just one line in a red book. Last summer they were summoned for a medical assessment, to be conducted by Capita for the Department for Work and Pensions. Capita employees apologised for not making a home visit, but said the £4.4bn multinational didn’t have sufficient staff to do one soon (Capita says it initially offered a home visit, which was rescheduled). Lisa asked the assessor if he was a GP. Yes, he said – but on the report he is described as a nurse. [..] The assessor found that Paul wasn’t as disabled as previously thought. He immediately lost £49 a week -a huge blow for the Chapmans.

In front of me, Paul remembered what he told Lisa: “The best thing we can do now is you go round your mum’s. I’ll clear off and I won’t take my tablets or my insulin. And it ll be over then. I won t be here. You go back to work and live your life as normal.” Paul: “I couldn’t face this much aggravation. I felt that bad. I’ve got something which anybody could get and I’m so used to doing 70-80 hours at work.” And now he was reduced to this. [..] A government assessment is made, a brown envelope of bad news is put in the post, and in a terraced house in a small town a sick man is driven to consider suicide.

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NATO does a lot of harm. Which makes a lot of sense given that it’s now 25 years over it’s best-by date.

Trump Is Right – Dump NATO Now (David Stockman)

If you want to know why we have a $19 trillion national debt and a fiscal structure that will take that already staggering figure to $35 trillion and 140% of GDP within a decade, just consider the latest campaign fracas. That is, the shrieks of disbelief in response to Donald Trump’s sensible suggestion that the Europeans pay for their own defense. The fact is, NATO has been an obsolete waste for 25 years. Yet the denizens of the Imperial City cannot even seem to grasp that the 4 million Red Army is no more; and that the Soviet Empire, which enslaved 410 million souls to its economic and military service, vanished from the pages of history in December 1991. What is left is a pitiful remnant -145 million aging, Vodka-besotted Russians who subsist in what is essentially a failing third world economy.

Its larcenous oligarchy of Putin and friends appeared to live high on the hog and to spread a veneer of glitz around Moscow and St. Petersburg. But that was all based on the world’s one-time boom in oil, gas, nickel, aluminum, fertilizer, steel and other commodities and processed industrial materials. Stated differently, the Russian economy is a glorified oil patch and mining town with a GDP the equivalent of the NYC metropolitan area. And that’s its devastating Achilles Heel. The central bank driven global commodity and industrial boom is over and done. As a new cycle of epic deflation engulfs the world and further compresses commodity prices and profits, the Russian economy is going down for the count; it’s already been shrunk by nearly 10% in real terms, and the bottom is a long way down from there.

The plain fact is Russia is an economic and military weakling and is not the slightest threat to the security of the United States. None. Nichts. Nada. Nope. Its entire expenditure for national defense amounts to just $50 billion, but during the current year only $35 billion of that will actually go to the Russian Armed Forces. On an apples-to-apples basis, that’s about 3 weeks of Pentagon spending! Even given its non-existent capacity, however, there remains the matter of purported hostile intention and aggressive action. But as amplified below, there has been none. The whole demonization of Putin is based on a false narrative arising from one single event. To wit, the February 2014 coup in Kiev against Ukraine’s constitutionally elected government was organized, funded and catalyzed by the Washington/NATO apparatus. Putin took defensive action in response because this supremely stupid and illegal provocation threatened vital interests in his own backyard.

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CH4 is some 22 times as powerful as CO2.

Methane and Warming’s Terrifying New Chemistry (McKibben)

Global warming is, in the end, not about the noisy political battles here on the planet’s surface. It actually happens in constant, silent interactions in the atmosphere, where the molecular structure of certain gases traps heat that would otherwise radiate back out to space. If you get the chemistry wrong, it doesn’t matter how many landmark climate agreements you sign or how many speeches you give. And it appears the United States may have gotten the chemistry wrong. Really wrong. There’s one greenhouse gas everyone knows about: carbon dioxide, which is what you get when you burn fossil fuels. We talk about a “price on carbon” or argue about a carbon tax; our leaders boast about modest “carbon reductions.” But in the last few weeks, CO2’s nasty little brother has gotten some serious press. Meet methane, otherwise known as CH4.

In February, Harvard researchers published an explosive paper in Geophysical Research Letters. Using satellite data and ground observations, they concluded that the nation as a whole is leaking methane in massive quantities. Between 2002 and 2014, the data showed that US methane emissions increased by more than 30%, accounting for 30 to 60% of an enormous spike in methane in the entire planet’s atmosphere. To the extent our leaders have cared about climate change, they’ve fixed on CO2. Partly as a result, coal-fired power plants have begun to close across the country. They’ve been replaced mostly with ones that burn natural gas, which is primarily composed of methane. Because burning natural gas releases significantly less carbon dioxide than burning coal, CO2 emissions have begun to trend slowly downward, allowing politicians to take a bow.

But this new Harvard data, which comes on the heels of other aerial surveys showing big methane leakage, suggests that our new natural-gas infrastructure has been bleeding methane into the atmosphere in record quantities. And molecule for molecule, this unburned methane is much, much more efficient at trapping heat than carbon dioxide. The EPA insisted this wasn’t happening, that methane was on the decline just like CO2. But it turns out, as some scientists have been insisting for years, the EPA was wrong. Really wrong. This error is the rough equivalent of the New York Stock Exchange announcing tomorrow that the Dow Jones isn’t really at 17,000: Its computer program has been making a mistake, and your index fund actually stands at 11,000.

These leaks are big enough to wipe out a large share of the gains from the Obama administration’s work on climate change—all those closed coal mines and fuel-efficient cars. In fact, it’s even possible that America’s contribution to global warming increased during the Obama years. The methane story is utterly at odds with what we’ve been telling ourselves, not to mention what we’ve been telling the rest of the planet. It undercuts the promises we made at the climate talks in Paris. It’s a disaster—and one that seems set to spread.

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This is an established pattern.

EU Border Agency Has Less Than A Third Of Requested Police (AFP)

EU border agency Frontex on Wednesday said member states have provided less than a third of the personnel it requested to deal with the record influx of migrants. Frontex, which coordinates border patrols and collects intelligence about the bloc’s frontiers, had called on European countries Friday to provide 1,500 police and 50 readmission experts “to support Greece in returning migrants to Turkey.” Only 396 police officers and 47 re-admission experts have been offered, according to a statement released Wednesday by the Warsaw-based agency. “I am grateful to the countries who have offered (personnel)… but I urge other member states to pledge many more police officers if we want to be ready to support readmission to Turkey as agreed by the EU Council,” Frontex head Fabrice Leggeri said.

Leggeri had earlier said: “It is important to stress that Frontex can only return people once the Greek authorities have thoroughly analyzed each individual case and issued a final return decision.” The European Union struck a landmark deal with Turkey last week to stem the massive influx of migrants. The European Commission has said the implementation of the deal will require the mobilization of some 4,000 personnel, including a thousand security staff and military officers, and some 1,500 Greek and European police. Frontex spokeswoman Ewa Moncure told AFP the officers requested by the agency were part of this figure.

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“Nobody knows. Every five minutes, the orders change. So who knows. Maybe God knows. If you have any communication with God, you can ask him.”

Key Aid Agencies Refuse Any Role In ‘Mass Expulsion’ Of Refugees (G.)

A triple blow has been dealt to the EU-Turkey migration deal after five leading aid groups refused to work with Brussels on its implementation, a Turkish diplomat ruled out changing Turkish legislation to make the deal more palatable to rights campaigners, and a senior Greek official said nobody knew how the agreement was supposed to work. The UN refugee agency said it was suspending most of its activities in refugee centres on the Greek islands because they were now being used as detention facilities for people due to be sent back to Turkey. UNHCR was later joined by Médecins Sans Frontières, the International Rescue Committee, the Norwegian Refugee Council and Save the Children. All five said they did not want to be involved in the blanket expulsion of refugees because it contravened international law.

The UNHCR spokeswoman, Melissa Fleming, said: “UNHCR is not a party to the EU-Turkey deal, nor will we be involved in returns or detention. We will continue to assist the Greek authorities to develop an adequate reception capacity.” In a separate and stronger statement, Marie Elisabeth Ingres, MSF’s head of mission in Greece, said: “We will not allow our assistance to be instrumentalised for a mass expulsion operation and we refuse to be part of a system that has no regard for the humanitarian or protection needs of asylum seekers and migrants.” Over the past year, around 1 million people have crossed the narrow straits between Turkey and Greece to try to claim asylum in Europe. In an attempt to stop this flow, the EU and Turkey reached a deal last week that would see almost all asylum seekers returned to Turkish soil.

To do this, the EU has deemed Turkey a safe country for refugees; a decision strongly contested by rights groups. Turkey is not a full signatory to the UN refugee convention, and while it has accepted more Syrian refugees than any other country, it has sometimes forcibly returned Syrian, Iraqi and Afghan asylum seekers to their countries of origin. Just hours after the EU deal was signed, Amnesty International reported that 30 Afghan refugees were sent back to Afghanistan – in a sign, Amnesty said, of what could be to come. “The ink wasn’t even dry on the EU-Turkey deal when several dozen Afghans were forced back to a country where their lives could be in danger,” said John Dalhuisen, Amnesty’s Europe and Central Asia director.

[..] The deputy mayor of Lesbos, the island where most migrants land, said no Greek official knew exactly how the deportation process would work, nor what to do with the refugees while they waited. When asked by the Guardian if he had received any concrete instructions about how refugees would be processed and returned to Turkey, Giorgos Kazanos said: “No, not yet.” “Nobody knows. Every five minutes, the orders change. So who knows. Maybe God knows. If you have any communication with God, you can ask him.”

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