Jul 172018
 
 July 17, 2018  Posted by at 12:50 pm Finance Tagged with: , , , , , , , , , ,  


Ivan Aivazovsky Among the waves 1898

 

Yeah, just keep ’em coming, right, so that when the last one falls flat on its face people will have already forgotten about it and instead focus on the new one. It’s been the modus operandi of the US MSM ever since Donald Trump emerged as an actual presidential candidate, and they haven’t let go.

They realize by now that it divides the nation, it costs them a large chunk of their potential readers and viewers, and creates chaos all around, but the bottom line is it makes them money. Because those people who fall into the echo chamber trap, tumble into it fast and furious, and will gladly pay to read yet another installment of how bad the man really is.

But it is getting out of hand, guys and gals, it is becoming a real and present danger to the -formerly- United States. The anti-Russia propaganda machine far predates Trump, but manufacturing an ever closer link between the two has proven to be a masterstroke of media genius.

That Vladimir Putin is an existential threat to the US and indeed the entire western world is a narrative taken straight out of Edward Bernays’ playbook. And it works like a charm. The problem is, it is also the biggest threat to peace anywhere on the globe that we have ever seen since WWII.

Putin is a patriot who came to the fore in mostly unexplained ways, named by American puppet Boris Yeltsin as his successor, only to save his country from US-induced plundering and restore Russia as a functioning country. Far from perfect, but functioning. Don’t forget that Russian life-expectancy fell by many years in the post-Gorbachev era. And then look now.

Yes, Putin uses some hard-handed tactics from time to time. He has no choice: the US threat to Russia is an ongoing one. There’s still a huge economic threat, of which US sanctions are but a minor part, there’s an intelligence threat, there’s NATO encroaching upon Russia’s borders.

Thus far, Putin has been able to counter them all. And his popularity among Russia’s population is far higher than that of any western politician. His people understand and recognize what he’s done and why he’s done it. He refuses for his country to be overrun and sold off to the highest bidders.

 

Just a few of the points of contention: Crimea – The US tried to take away Russia’s only warm water port. Putin countered with what through non-western eyes was tactical masterpiece; no violence, no shots fired, an election that saw an overwhelming majority of Crimeans voted to (re-)join Russia.

Connected to Crimea is Ukraine. Putin had -and has- to protect Russian-speaking people in the region. Who were going to be under threat from the very dubious, neo-nazi linked government installed by the US after the coup. All Putin has been able to achieve so far is a very brittle stand still. But ‘his’ people in Eastern Ukraine have strong links to the Russian area just across the border. He’s not going to sell them out.

Connected to Ukraine is MH17. The Netherlands commemorates the victims of the shooting down again today. Several years of investigating have come up with no conclusive proof, even if they say it has. The problem is that the investigation was -is- led by The Netherlands itself. You don’t let the biggest victim conduct an investigation.

What’s worse: the Ukraine was actively involved in the investigation, even when it was a potential culprit. Try to write that scenario into the plot of one of your favorite TV crime series. Won’t fly.

 

Then the novichok ‘events’ in the UK. Again, no evidence, but tons of allegations. And if Russia says it’s not guilty, everyone says and writes: of course they would say that. They get accused anyway. Still, no evidence is no evidence. the time that intelligence agencies were believed on their word is over. And they did it to themselves.

In the regard, it’s useful to see that Robert Mueller was one of the people who ‘swore’ that the Weapons of Mass Destruction ‘evidence’ against Saddam Hussein was real. We now know it was complete and utter fiction. Intelligence has overplayed its hand, and they won’t get it back for a long time.

People now realize they cannot be trusted. Well, not those who read and view the MSM, but then that’s sort of the entire point, isn’t it? That’s where the dividing line is being drawn. The CIA, FBI et al present a view of the world in concoction with the media that they think a sufficient number of people will swallow, and that’s really all they care for.

And boy, it is successful. The vitriol spewed over the Helsinki summit is something to behold. #TreasonSummit was a trending hashtag. For a meeting that was long overdue and aimed at calming down tensions. The by now very poorly named ‘social’ media play an ever bigger role in these things.

People can say whatever they want on them, without feeling they’ll ever actually be tested on their claims. One after the other, and each one trying to outdo the last. It all leads up to one particular worldview at the exclusion of all others. And again, that is very dangerous.

 

Mueller’s indictment of 12 Russians, which just happened to coincide with the first meeting of American and Russian presidents in an exceptionally long time, has been shot full of holes by many commentators, see for instance Adam Carter and Aaron Mate, but those views won’t make it to CNN or the NYT.

But despite the fact that the indictment is hollow and riddled with holes, it’s been a large part of why people call Trump a traitor for meeting with Putin. It ties together their opinions, carefully built along Bernays principles over the past two years. It’s a Matrix, it’s a trap. But then they throw in another story, of a 29 year-old Russian(!) girl arrested for allegedly setting up links between Russia and the NRA when she was 24 or so, and that replaces the Mueller indictment in most attention spans. And so the carrousel goes on. The torture never stops.

See, the idea is that you get yourself informed and then form your own opinion. Not that you let others pre-cook and pre-chew your opinions for you. Still, once you’re inside the deafening echo chamber, that’s what inevitably happens. Because there’s so much one-sided innuendo in there, your head aches and you just give up all resistance. Just to have a quiet moment.

And so very many Americans end up believing that indeed their president is guilty of treason. Because so many pundits claim that he is. But how many of them understand what treason really is, how serious an allegation it is? Is doesn’t really matter anymore, does it? Because all those others say he is, and they can’t all be wrong. And the echo chamber gives you a headache.

This is where I should say that somebody better do something about this, but it’s hard to see what. The divide has grown into a chasm. And that both sides are equally to blame for that doesn’t excuse either side’s wilful blindness. But yes, I hear you, it makes them money.

Still, if a US president can no longer talk to another president without being accused of treason, you’re in a scary predicament.

At some point you’re going to need real proof. And Bob Mueller is not going to get it for you. That’s what his indictment of the 12 Russians, as well as the moment he released it, makes abundantly clear. Mueller is -forever- going to hide behind the ‘Trust me, I’m the FBI’ line. Well, he betrayed you before. Wisen up. Demand evidence.

We know Mueller betrayed America when he made false claims over WMD. We have no evidence that Trump betrayed his country, we have only allegations. He may be a poor choice for president, but that’s not the same thing.

 

 

Feb 132018
 
 February 13, 2018  Posted by at 3:46 pm Finance Tagged with: , , , , , , , , , , ,  


Frank Larson Chrysler reflection, 42nd Street near 5th Ave, New York 1950s

 

Update: Dutch Foreign Minister Halbe Zijlstra resigned at 5pm local time, before the parliamentary debate could take place. But that still leaves Rutte in place with his own version of “when it gets serious, you have to lie”.

 

 

There will be a parliamentary debate in Holland (the Netherlands) today about abject lies about Russia and Vladimir Putin that its Foreign Minister, Halbe Zijlstra, has been telling the country for a few years now. Zijlstra is supposed to fly to Russia tomorrow to meet with his Russian peer, Sergey Lavrov. One would suppose Zijlstra will be fired later today, if only to prevent such a meeting from taking place, but that is by no means a given.

Here’s what happened: in 2006, there was a ‘conference’ in Putin’s dacha outside of Moscow. Zijlstra worked for Shell at the time at a lower level. Later, he has pretended he way present at a meeting with Putin in which the latter supposedly talked about his dreams for a ‘Greater Russia’.

Now, Zijlstra has revealed he was not at that meeting. He claimed ‘a source’ was there and told him about it, and he had wanted to protect the source and therefore pretended he himself was present. That source, then-Shell CEO Jeroen van der Veer, not only never asked for any such protection, he also sent an email to paper De Volkskrant saying that Zijlstra had ‘misinterpreted’ the story Van der Veer had told him (a diplomatic word for he lied).

Putin never talked about ambitions for a Greater Russia, and never said Kazachstan was ‘nice to have’. Zijlstra made that all up. There had been mention of Greater Russia, but in a nostalgic, historical manner. And now Van der Veer, undoubtedly much to his chagrin, gets dragged into this entire false tale.

Because the entire Dutch government, longtime Prime Minister Mark Rutte first and most of all, has said Zijlstra’s lies were somehow acceptable because the ‘inhoud’ (tenor, content, narrative) of his story was true. That is to say, Rutte claims that Putin does indeed dream of land-grabbing, of invading Ukraine, the Baltic States etc.

 

It doesn’t matter if you have no proof of something (see the painfully botched MH17 investigation), and neither does it matter if you just make the whole thing up. The only thing that matters in Holland is that you stick to the narrative. Which, there is no other way to look at it, is fully unproven and entirely made up.

This makes the government of Holland (a NATO member), and certainly Rutte, a danger to world peace. Therefore, Rutte has to go along with Zijlstra. Because he not only condones the latter’s lies and fantasies, maintained in his days as Foreign Minister, Rutte himself also makes claim after claim based on no proof at all. Or at least nothing he has ever revealed.

Holland should never have chaired the MH17 investigation, because it was its main victim (2/3 of the near 300 who died in the plane crash had Dutch passports). In the 3,5 years since the tragedy, not an ounce of evidence has ever been published by the investigators that proves Russia was the culprit. But claims to that end have been freely made over the entire period.

Fro his Putin-bashing, then-Dutch Foreign Minister Frans Timmermans got himself a cushy job as second to EU head Jean-Claude Juncker (and yes, Juncker’s “when it gets serious, you have to lie” comes to mind in the Zijlstra thing). Timmermans, like then-US Secretary of State Joe Biden, wasted no time in fingering Russia as the perpetrator. They both made this claim within minutes. Again, without any proof.

 

None of this is a specific Dutch issue. The western world, led by the US, has created an atmosphere and a narrative in which it’s deemed acceptable to lie about Russia, about Vladimir Putin, about Russian hackers, and about connections Americans and western Europeans who don’t abide by the narrative, have to Russia and everything connected with it.

And well, they are right in one sense: there is a pattern here. The Russiagate investigations in the US into ties of Trump associates with Russians, like the Dutch investigation into MH17, continue ad infinitum without producing a sliver of proof.

Various and multiple claims pertaining to alleged Russian actions in Crimea, Ukraine, Syria etc. have come up hollow. Indeed, what actions Russia has undertaken are largely in response to American and EU ‘provocation’.

And yes, all this plays out against the backdrop of the military-industrial complex that hides behind the identity of NATO, an organization without a reason to exist even since the Berlin wall came down (the wall has now been gone longer than it ever existed). NATO is a convenient entity for the entirety of the western arms industry, and the neocons that still hold sway in various of its member-nations, to publicize its fear-mongering anti-Russia messages from.

Those messages keep being duly publicized by mainstream media. The Russian Foreign Ministry issued a statement today in which it said “bilateral relations with Holland are being overshadowed by an unparalleled anti-Russia campaign in Dutch media.”

“Holland accuses Russia of spreading disinformation (fake news). People in the Dutch government keep on making such unfunded claims.” Dutch media readily and uncritically disperse the idea that Russian authorities are obsessed with the creation of a Great Russia. How is that not an example of fake news?”

 

Holland would be crazy to let Zijlstra go to Moscow tomorrow to talk to Lavrov. But, given what has already been said, one can only conclude that the country is indeed crazy. Or at the very least its government is. Still, even if parliament today decides that Zijlstra must leave his post, chances that they’ll send Rutte packing as well are zero.

Even though as prime minster he’s publicly stated that his Foreign Minister telling outright lies about another country is no problem as long as he stays with the narrative that said country is a threat, a narrative for which apparently no evidence must ever be presented.

At the next EU meeting Rutte is more likely to be hailed for his stance, because the narrative is that of the entire EU, of Brussels, Berlin and Paris. And NATO.

Will this episode wake up the Dutch people? Fat chance. They will focus on Zijlstra, and probably clamor for him to leave, and then go about their daily job of feeding their readers and watchers their, as Moscow puts it, “unparralleled anti-Russia campaign.”

People like Rutte and Merkel do a very good job of showing us that Europeans have more to fear from their own governments than they do of Putin. But nobody is listening. Because their media have become as much of an echo chamber as the US MSM.

Still, make no mistake: what Rutte tells his people is that he cannot be trusted. That there are things more important than the truth: the narrative. This means they will never again be able to trust him to tell them the truth. He just said so himself.

 

 

Jul 182016
 
 July 18, 2016  Posted by at 8:54 am Finance Tagged with: , , , , , , , , , ,  


Arthur Rothstein General store and railroad crossing, Atlanta, Ohio 1938

Ireland Hits Brexit Alarm in Biggest Foreign Crisis in 50 Years (BBG)
Yuan Declines to 2010 Low as Property Prices Slow, Dollar Rises (BBG)
Goodbye Lenin, Hello Bernanke (ABC.au)
Stocks and Bonds Are on a Collision Course (DR)
Bubbles in Bond Land (David Stockman)
Chinese Cities’ Expansion Plans Could House 3.4 Billion People (BBG)
Slowing China Home Price Rises Add To Doubts About Economy (R.)
Under-35s Could Be The First Generation To Earn Less Than Their Parents (DM)
Boom to Bust (Salt)
Justice Department ‘Uses Aged Computer System To Frustrate FOIA Requests’ (G.)
MH-17: Russia Convicted By Propaganda (PCR)
Donald Trump’s Ghostwriter Tells All (New Yorker)
Six Wealthiest Countries Host Less Than 9% Of World’s Refugees (G.)
20 Migrants Dead, 366 Saved From Boats In Mediterranean (NW)

 

 

Huh? Didn’t Ireland grow 26% just last week?

Ireland Hits Brexit Alarm in Biggest Foreign Crisis in 50 Years (BBG)

The prime minister is under pressure, economists are slashing growth forecasts and companies are warning of Brexit’s dire consequences. London? No, Dublin. The intertwining of trade and finance means no other country is feeling the fallout from the U.K.’s vote to leave the European Union more than Ireland. In the year the Irish marked the centenary of their uprising against British rule, the country remains at the mercy of the unfolding drama in its closest neighbor. “It’s the most serious, difficult issue facing the country for 50 years,” said John Bruton, 69, who was Irish prime minister between 1994 and 1997 and later served as the EU’s ambassador to the U.S.

Exporters have warned the plummeting pound will erode earnings and economic growth, just as a recovery had taken hold after the 2010 international bailout that followed the banking meltdown. Irish shares have declined, not least because the U.K. is the top destination for the country’s exports after the U.S. and the biggest for its services. Meantime, Prime Minister Enda Kenny is fending off demands by Northern Irish nationalists for a reunification poll as he comes to terms with the loss of a key EU ally and plotters from his own party try to topple him. Then there’s the future of the U.K.’s only land border with the EU. “The consequences are mind-boggling,” said Eoin Fahy, chief economist at Kleinwort Benson Investors in the Irish capital.

Britain and Ireland joined the European Economic Community in 1973. Ireland was drawn in part to escape what one politician called “our gate-lodge attitude towards England.” More than four decades later, the two countries remain woven together economically as well as culturally and linguistically. Ireland uses the euro, yet does about $45 billion of trade with the U.K. About 380,000 Irish citizens living in Britain were eligible to vote in the Brexit referendum. Britain also chipped in for Ireland’s bailout six years ago, despite not being part of the euro region. When Theresa May took over as British prime minister last Wednesday, Kenny was among three leaders she spoke to, along with Germany’s Angela Merkel and Francois Hollande of France.

Read more …

Bloomberg should simply say: “The yuan fell, and we have no idea why”.

Yuan Declines to 2010 Low as Property Prices Slow, Dollar Rises (BBG)

China’s yuan fell to the weakest level since 2010, pulled down by cooling property prices, a dollar rebounding on haven demand and a weaker central bank fixing. New home prices rose in fewer cities in June compared with a month earlier, according to official data released Monday, blunting optimism prompted by last week’s figures showing forecast-beating economic growth. The monetary authority weakened the yuan’s daily fixing to the lowest since 2010 after the dollar strengthened Friday following a coup attempt in Turkey.

The greenback was supported on Monday also as China said it would hold military exercises in the South China Sea. “The dollar strengthened as orders to buy the currency jumped, pressuring the yuan and the rest of Asian currencies lower,” said Andy Ji, a Singapore-based foreign-exchange strategist at Commonwealth Bank of Australia. “There’s news that China will hold military exercises in the South China Sea later this month,” which could spur some haven-demand for the greenback.

Read more …

Lookalike contest.

Goodbye Lenin, Hello Bernanke (ABC.au)

Maybe it’s just me, but have you noticed the striking similarity between Vladimir Lenin and Ben Bernanke lately? Superficially, there’s the obvious physical resemblance; whippet build, glabrous pate, facial hair and a penchant for stylish, if somewhat conservative, garb. More significantly, both appear to harbour the same ideological distrust of free markets or, at the very least, a burning desire to control them as much as possible. Separated by almost a century, both men have made it a lifelong ambition to impose state control over the economy. And it has to be said, while Vladimir Ilyich Ulyanov Lenin achieved significant success in spreading the word from Russia through developing nations, he and his successors never quite got across the line when it came to the so-called free world.

Maybe it was his reputation as a firebrand, an over-reliance on bloody revolution by force and the frightening prospect – for the ruling elite at least – that wealth would be redistributed to the poor. Enter Ben Bernanke. In the space of a mere eight years, the former Federal Reserve chief has managed to achieve what Vladimir could barely conceive. He’s convinced the United States of America, the United Kingdom, Japan and Europe to embark on a revolutionary journey to completely subvert free market instincts. Unlike his Russian predecessor, Ben has opted for the calm, congenial exterior of Central Banker from Central Casting, complete with a mogadon monotone designed to lull his audience into a state of torpor.

He’s also wisely decided to modify the wealth distribution bit. As western governments have raided the kitty, plunging themselves into an ocean of debt, much of the proceeds have flowed directly into asset markets – stocks, bonds and property – which has helped maintain the flow of wealth towards the wealthy. Brilliant! Last week, Ben was in Japan. And that got twitchy fingered traders across the globe all hot under the collar. Ben, after all, is the man who pioneered the implementation of “unorthodox monetary policy”.

Read more …

“Bond markets are signaling something very nasty coming down the road at us — an all-encompassing, worldwide deflation.”

Stocks and Bonds Are on a Collision Course (DR)

One of the following is correct: A) The stock market is lying. B) The bond market is lying. They both can’t be true. Consider: The stock market has sprung to record highs this week. Shocking, given the world was coming to an end after Brexit. But it’s true. Both the S&P and the Dow eclipsed previous records this week. What does that normally indicate? A rollicking economy in high gear, stability, investor belief in the future. Maybe some “healthy” inflation into the bargain. Now consider: Bonds are also trading at record highs. Meaning yields are at historic lows (prices and yields move in opposite directions – the higher the price, the lower the yield, and vice versa). Yields on 10-year Treasuries plunged to all-time lows this month. Same with 30-year Treasuries.

That would normally signal an economy on the brink of ruin and investors panicking into government bonds. It also means deflation of the hide-the-women-and-children variety. TheTelegraph: “Bond markets are signaling something very nasty coming down the road at us — an all-encompassing, worldwide deflation.” Two completely different narratives. One wrong, one right. Someone’s in for a nasty shock – and probably soon. Says analyst William Koldus, founder of The Contrarian: The tug of war between inflationary and deflationary assets is likely to be resolved in 2016. Either U.S. stock prices, which have been an outlier to the upside, are wrong, and a significant correction awaits stock investors, or U.S. bond prices, and global sovereign bond yields, which have priced in a significant deflationary head wind, are wrong, and safe-haven bondholders are set for losses.

Who’s the jury to believe? Generally, the bond market. As Neil Irwin of The New York Times explains, “Savvy economic analysts have always known the bond market is the place to look for a real sense of where the economy is going, or at least where the smart money thinks it is going.” Here he dumps more rain on the parade: “And right now, if the bond market is correctly predicting the economic path ahead, we should all be terrified.”

Read more …

“Surely, BOJ Governor Kuroda will go down in history as the stupidest central banker of all-time.”

Bubbles in Bond Land (David Stockman)

Last year Japan lost another 272,000 of its population as it marches steadily toward its destiny as the world’s first bankrupt old age colony. At the same time, the return on Japan’s 40-year bond during the last six months has been an astonishing 48%. That’s right! We aren’t talking Tesla, the biotech index or the FANGs. To the contrary, like the rest of the Japanese Government Bond (JGB) yield curve, this bond has no yield and no prospect of repayment. But that doesn’t matter because it’s not really a sovereign bond, anyway. It has actually morphed into a risk free gambling chip. Leveraged front-runners are scooping up whatever odds and sots of JGBs that remain on the market and are selling them to the Bank of Japan (BOJ) at higher, and higher and higher prices.

At the same time, these punters face virtually no risk. That’s because the BOJ already owns 426 trillion yen of JGBs, which is nearly half of the bonds outstanding. And it is buying up the rest at a rate of 80 trillion yen per year under current policy, while giving every indication of sharply stepping up its purchase rate as it segues to outright helicopter money. It can therefore be well and truly said that the BOJ is the ultimate roach motel. Virtually every scrap of Japan’s gargantuan public debt will go marching into its vaults never to return, and at “whatever it takes” bond prices to meet the BOJ’s lunatic purchase quotas. Surely, BOJ Governor Kuroda will go down in history as the stupidest central banker of all-time.

But in the interim the man is contributing — along with Draghi, Yellen and the rest of the central bankers guild — to absolute mayhem in the global fixed income market. That’s because these fools have succeeded in unleashing a pincer movement among market participants that is flat-out suicidal. That is, the leveraged fast money gamblers are chasing prices ever higher as sovereign bonds become increasingly scarce. At the same time, desperate bond fund managers, who will lose their jobs for just sitting on cash, are chasing yields rapidly lower on any bond that still has a positive current return. This is the reason the 30-year U.S. treasury bond has produced a 22% return during the last six months. To say the least, that’s not shabby at all considering that its current yield is just 2.25%.

Read more …

Want to see a real housing crisis?

Chinese Cities’ Expansion Plans Could House 3.4 Billion People (BBG)

New areas planned by China’s small cities could accommodate 3.4 billion people by 2030 – or almost half the world’s current population – a target that even Chinese state media calls problematic. A report by the National Development & Reform Commission, China’s central planning agency, found that small- and medium-sized cities were planning more than 3,500 new areas that could accommodate more than twice the country’s current population of 1.4 billion. The entire world has a population of 7.4 billion, according to U.S. Census estimates. The findings were detailed in an analysis by the official Xinhua News Agency, which criticized the planned new areas as unworkable: “Who’s going to live in them? That’s a problem,” the piece said.

The expansion comes amid urbanization calls by President Xi Jinping and Premier Li Keqiang as China prepares for another 100 million people to move from the countryside to urban metropolises by the end of the decade. People tend favor bigger markets with more opportunities and fewer than 1-in-10 migrant workers moved to small cities last year, according to an NDRC report published in April. Even without the new areas, China already has more housing than it needs and “ghost cities” have proliferated. China has been building more than 10 million new units annually for the past five years, outstripping an estimated of demand of less than 8 million, according to an analysis by Bloomberg Intelligence Economists Tom Orlik and Fielding Chen.

Read more …

Look, Reuters, there comes a point where things like “..a construction-led rebound in the economy may not be sustainable..” become meaningless. We reached that point quite a while ago.

Slowing China Home Price Rises Add To Doubts About Economy (R.)

Home price rises in China slowed in June for a second straight month, adding to fears that a construction-led rebound in the economy may not be sustainable. The property market is a key driver of the world’s second-largest economy and a robust recovery in home prices and sales gave a stronger-than-expected boost to activity in the first half of the year. But slowing price growth in smaller cities and cooling property investment show the bounce may already be fading, raising the risk of weaker economic growth in coming months. Home prices in China’s 70 major cities rose 7.3% in June from a year earlier, an official survey showed on Monday, accelerating from a 6.9% rise in May.

To be sure, some of the biggest cities showed eye-popping gains on a yearly basis, with prices in the southern boomtown of Shenzhen up 46.7% and Shanghai up 27.7%. Gains on a monthly basis continued to slow, however, as cities tightened policies amid fears of a housing price bubble. The monthly rise slowed slightly to 0.8% in June, easing from 0.9% in May, according to a Reuters calculation based on data issued by the National Bureau of Statistics (NBS). “We continue to expect the property rebound to subside and property investment growth to fall in the second half of the year,” economists at Nomura said in a note, predicting sales would stabilize and a large glut of unsold homes would keep pressure on prices in some areas.

Read more …

Stupidest term in a long time: “generational pay progress”.

Under-35s Could Be The First Generation To Earn Less Than Their Parents (DM)

Millennials could become the first generation to earn less than their predecessors, analysis by a think-tank has found. The Research Foundation found that under-35s have been hit hardest by the recent pay squeeze and earned £8,000 less during their 20s than a typical person in the previous generation – known as generation X. The finding comes just days after new Prime Minister Theresa May warned of a ‘growing divide between a more prosperous older generation and a struggling younger generation’. The report, which comes as the thank-tank launches its Intergenerational Commission, warns that a post-Brexit downturn could depress millennials’ wages further.

The Intergenerational Commission report states that while some of the pay squeeze is down to millennials entering the job market as the recession hit, it also found generational pay progress had actually stopped before the 2007/08 financial crash. If the future pay of millennials follows the path of generation X, that would reduce their lifetime earnings to around £825,000 – making them the first ever generation to earn less than their predecessors over the course of their working lives. The comparable figure for Generation X is around £832,000. Even if their wages followed a more optimistic path and improved rapidly like their baby boomer parents, their lifetime earnings would be around £890,000. This would be just 7% more than generation X and a third of the size of the pay progress that generation X are set to enjoy over the baby boomers.

Read more …

“Boomers got the Pill, free love, free education and easy jobs. Gen X got AIDS, HECS and the GFC.”

Boom to Bust (Salt)

I feel sorry for Generation X, those of you born between 1965 and 1983 and who are now straddling the load-bearing years of the late 30s and 40s. There is no escaping the big responsibilities at this time in the life cycle. At this very moment, Xers are raising families and paying taxes and working flat out… and yet nary a peep from this lot does anyone hear. It’s all about the baby boomers, and if it’s not about the baby boomers and their interminable retirement woes then it’s all about their gifted Generation-Y children. Are we paying you enough, Gen Y? Is anyone being mean to you? Can I get you a pillow? You do realise that I am a Generation Xer, trapped inside a baby boomer body. The reason I feel sorry for the Xers is that they’re always in the wrong place at the wrong time.

Xers are the pissed-off generation. They are heartily sick of baby boomers and their cultural chest-beating. Yes, boomers, we know it was you who saved humanity from the Vietnam War. Yes, we know you discovered free love in the 1960s. No one had thought of sex prior to that, had they? This is what I mean about being pissed off. Baby boomers got the Pill and free love when they were coming of age. But what did older Xers get when they passed through their teens and 20s? The 1980s. Out went the concept of free love; in came the mortal threat of HIV-AIDS. Kind of puts a dampener on the sex thing, don’t you think?

Boomers got fee-free university education courtesy of Gough Whitlam. When did most Xers go to uni? Oh, that’d be after 1989, when we decided fee-free tertiary education was unsustainable and in came HECS. When did many Xers enter the workforce? Oh, that’d be in the early 1990s, when unemployment peaked at nearly 12 per cent. And then they worked for baby boomer managers, biding their time, pacing, scheming, forever waiting for the boomers to let go of the reins. And when was it that baby boomer management let go of the reins? Oh, that’d be around the time of the global financial crisis. “Here you go Xers, it’s your turn now. We’re off on a Rhine River cruise. Make sure you pay your taxes. Bye.”

Read more …

If the Department of Justice won’t obey the law, what do you get?

Justice Department ‘Uses Aged Computer System To Frustrate FOIA Requests’ (G.)

A new lawsuit alleges that the US Department of Justice (DoJ) intentionally conducts inadequate searches of its records using a decades-old computer system when queried by citizens looking for records that should be available to the public. Freedom of Information Act (Foia) researcher Ryan Shapiro alleges “failure by design” in the DoJ’s protocols for responding to public requests. The Foia law states that agencies must “make reasonable efforts to search for the records in electronic form or format”. In an effort to demonstrate that the DoJ does not comply with this provision, Shapiro requested records of his own requests and ran up against the same roadblocks that stymied his progress in previous inquiries.

A judge ruled in January that the FBI had acted in a manner “fundamentally at odds with the statute”. Now, armed with that ruling, Shapiro hopes to change policy across the entire department. Shapiro filed his suit on the 50th anniversary of Foia’s passage this month. Foia requests to the FBI are processed by searching the Automated Case Support system (ACS), a software program that celebrates its 21st birthday this year. Not only are the records indexed by ACS allegedly inadequate, Shapiro told the Guardian, but the FBI refuses to search the full text of those records as a matter of policy. When few or no records are returned, Shapiro said, the FBI effectively responds “sorry, we tried” without making use of the much more sophisticated search tools at the disposal of internal requestors.

“The FBI’s assertion is akin to suggesting that a search of a limited and arbitrarily produced card catalogue at a vast library is as likely to locate book pages containing a specified search term as a full text search of database containing digitized versions of all the books in that library,” Shapiro said.

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Will be a big story again when Holland produces its ‘objective’ report. Which has lost all credibility way before publication.

MH-17: Russia Convicted By Propaganda (PCR)

Today is the second anniversary of the downing of Malaysia Airlines Flight 17, and we still do not know the explanation. Washington and its European vassal politicians and media instantly politicized the event: The Russians did it. End of story. After 15 months of heavy anti-Russian propaganda had imprinted the message on peoples’ minds, the Dutch Safety Board issued its inconclusive report. By then, it was irrelevant what the report said. Everyone already knew that “the Russians did it.” I remember when pre-trial media accusations resulted in dismissed cases. Anyone declared guilty prior to presentation of evidence and conviction was considered to have been convicted in advance and unable to receive a fair trail. Such cases were dismissed by judges.

Washington’s story never made any sense. Neither Russia nor the separatists in the Donetsk region had any reason to shoot down a Malaysian airliner. In contrast Washington had enormous incentives as Washington’s propaganda machine could place the blame on Russia and use the incident to compel European governments to accept Washington’s sanctions placed on Russia. It worked for Washington. Washington successfully used the incident to wreck Europe’s political and economic relationships with Russia. Four months into the anti-Russian propaganda campaign, a website called Bellingcat, claiming to be an open source site for citizen journalists, but which could be a MI-5, MI-6, or CIA front, issued a report that the Buk missile was fired by a Russian unit, the 53rd Buk Brigade, based in the Russian city of Kursk.

This allegation exposed the propaganda for what it is. Whereas it is possible that separatists unfamiliar with the Buk weapon system could accidentally shoot down a civilian airliner, it is not possible for a Russian military unit to make such a mistake. Moreover, it is unclear why separatists or the Ukrainian government would have any reason to use Buk missiles in their conflict. The separatists have no air force. The Ukrainians attack the separatists at ground level with ground attack aircraft and helicopters, not with high altitude bombing. The Buk missile is a high altitude missile. The only way the separatists could have acquired Buk missiles is by overrunning and capturing Ukrainian positions that for unfathomed reasons had deployed Buk missiles.

It seems to me that if a Buk missile was present in the conflict area, it was moved there for a reason unrelated to the conflict. A European air traffic controller said that MH-17 and the airliner carrying Russian President Vladimir Putin were initially on the same course. Possibly Washington and its vassal in Kiev thought MH-17 was Putin’s plane and destroyed the Malaysian flight by mistake.

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Brought to you by the Clinton Foundation: “I put lipstick on a pig,” he said. “I feel a deep sense of remorse that I contributed to presenting Trump in a way that brought him wider attention and made him more appealing than he is.” He went on, “I genuinely believe that if Trump wins and gets the nuclear codes there is an excellent possibility it will lead to the end of civilization.”

Donald Trump’s Ghostwriter Tells All (New Yorker)

Last June, as dusk fell outside Tony Schwartz’s sprawling house, on a leafy back road in Riverdale, New York, he pulled out his laptop and caught up with the day’s big news: Donald J. Trump had declared his candidacy for President. As Schwartz watched a video of the speech, he began to feel personally implicated. Trump, facing a crowd that had gathered in the lobby of Trump Tower, on Fifth Avenue, laid out his qualifications, saying, “We need a leader that wrote ‘The Art of the Deal.’ ” If that was so, Schwartz thought, then he, not Trump, should be running. Schwartz dashed off a tweet: “Many thanks Donald Trump for suggesting I run for President, based on the fact that I wrote ‘The Art of the Deal.’ ”

Schwartz had ghostwritten Trump’s 1987 breakthrough memoir, earning a joint byline on the cover, half of the book’s five-hundred-thousand-dollar advance, and half of the royalties. The book was a phenomenal success, spending forty-eight weeks on the Times best-seller list, thirteen of them at No. 1. More than a million copies have been bought, generating several million dollars in royalties. The book expanded Trump’s renown far beyond New York City, making him an emblem of the successful tycoon. Edward Kosner, the former editor and publisher of New York, where Schwartz worked as a writer at the time, says, “Tony created Trump. He’s Dr. Frankenstein.”

Starting in late 1985, Schwartz spent eighteen months with Trump—camping out in his office, joining him on his helicopter, tagging along at meetings, and spending weekends with him at his Manhattan apartment and his Florida estate. During that period, Schwartz felt, he had got to know him better than almost anyone else outside the Trump family. Until Schwartz posted the tweet, though, he had not spoken publicly about Trump for decades. It had never been his ambition to be a ghostwriter, and he had been glad to move on. But, as he watched a replay of the new candidate holding forth for forty-five minutes, he noticed something strange: over the decades, Trump appeared to have convinced himself that he had written the book. Schwartz recalls thinking, “If he could lie about that on Day One—when it was so easily refuted—he is likely to lie about anything.”

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While being responsible for 91% of them fleeing in the first place.

Six Wealthiest Countries Host Less Than 9% Of World’s Refugees (G.)

The six wealthiest countries in the world, which between them account for almost 60% of the global economy, host less than 9% of the world’s refugees, while poorer countries shoulder most of the burden, Oxfam has said. According to a report released by the charity on Monday, the US, China, Japan, Germany, France and the UK, which together make up 56.6% of global GDP, between them host just 2.1 million refugees: 8.9% of the world’s total. Of these 2.1 million people, roughly a third are hosted by Germany (736,740), while the remaining 1.4 million are split between the other five countries. The UK hosts 168,937 refugees, a figure Oxfam GB chief executive, Mark Goldring, has called shameful.

In contrast, more than half of the world’s refugees – almost 12 million people – live in Jordan, Turkey, Palestine, Pakistan, Lebanon and South Africa, despite the fact these places make up less than 2% of the world’s economy. Oxfam is calling on governments to host more refugees and to do more to help poorer countries which provide shelter to the majority of the world’s refugees. “This is one of the greatest challenges of our time yet poorer countries, and poorer people, are left to shoulder the responsibility,” said Mark Goldring, chief executive of Oxfam GB. “It is a complex crisis that requires a coordinated, global response with the richest countries doing their fair share by welcoming more refugees and doing more to help and protect them wherever they are.

“Now more than ever, the UK needs to show that it is an open, tolerant society that is prepared to play its part in solving this crisis. It is shameful that as one of the richest economies the UK has provided shelter for less than 1% of refugees.”

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Look away.

20 Migrants Dead, 366 Saved From Boats In Mediterranean (NW)

Rescuers saved 366 migrants from rickety boats trying to cross the Mediterranean to Italy but at least 20 people were reported to have drowned, Italian police said on Saturday. The survivors, who were rescued in four separate operations, were crammed onto three rubber dinghies and a wooden fishing boat. They were all taken to the Sicilian port of Augusta, where they were questioned on Friday evening by the Italian police unit Interforce, which combats illegal immigration.

The Norwegian ship Siem Pilot went to the aid of one dinghy that sank in the Sicilian Channel, but many migrants were already in the sea when it arrived, Antonio Panzanaro, an Interforce official, told Reuters. One corpse was recovered but survivors said that at least 20 people had drowned before the ship arrived, he said. There were 82 women and 25 children among the 366 people rescued, he said. The survivors were mainly from Nigeria, Ethiopia, Eritrea and Bangladesh. Seven people were arrested from the four boats, including their drivers, on suspicion of people-trafficking, he said.

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Oct 202015
 
 October 20, 2015  Posted by at 9:11 am Finance Tagged with: , , , , , , , , , ,  


Hans Behm Windy City tourists at Monroe Street near State 1908

Another Quarter Of Remarkably Precise China GDP Growth Data (Reuters)
China’s Better-Than-Expected GDP Prompts Skepticism From Economists (WSJ)
Chinese Economists Have No Faith In 7% Growth ‘Target’ (Zero Hedge)
China’s Capital Outflows Top $500 Billion (FT)
China Heads For Record Crude Buying Year (Reuters)
Britain’s Love Affair With China Comes At A Price (AEP)
The Perfect Storm That Brought Britain’s Steel Industry To Its Knees (Telegraph)
Deutsche Bank, Credit Suisse Set to Scale Back Global Ambitions (Bloomberg)
Wal-Mart Puts The Squeeze On Suppliers To Share Its Pain (Reuters)
Brazil’s Corruption Crackdown Can’t Be Stopped (Bloomberg)
US Supreme Court May Weigh In on a Student Debt Battle (Bloomberg)
New Canada PM Justin Trudeau: Out of Father’s Shadow and Into Power (Bloomberg)
Farewell Fossil Fools – Harper And Abbott Both Dispatched (CS)
Death by Fracking (Chris Hedges)
Is There A War Crime In What The Dutch Safety Board Is Broadcasting? (Helmer)
Stranded in Cold Rain, a Logjam of Refugees in the Balkans (NY Times)
Without Safe Access To Asylum, Refugees Will Keep Risking Their Lives (Crawley)
Merkel In Turkey: Trade-Offs And Refugees (Boukalas)
Greek Coast Guard Rescues 2,561 Migrants Over The Weekend (AP)

Maybe Beijing is just very good at predicting.

Another Quarter Of Remarkably Precise China GDP Growth Data (Reuters)

China GDP releases are starting to look like near-perfect landings each and every time, in all kinds of weather conditions and visibility. Yet another quarter has just gone by – literally less than three weeks ago – and already statisticians have reported that growth slowed a tiny sliver from Beijing’s 2015 target of 7% recorded for the first half of the year. Now it’s 6.9%, slightly above the Reuters consensus forecast from 50 economists of 6.8%. It is difficult to understate just how precise such figures are in the grand scheme of economic data reporting. It is also difficult to ignore just how remarkable this stability is considering the Chinese authorities are trying to rebalance the entire economy away from reliance on exporting manufacturing goods toward domestic consumer spending.

And that worry about a Chinese growth slowdown was one of the main reasons cited by the U.S. Federal Reserve for holding off last month on its first rate rise in nearly a decade. That’s also not to mention that China growth concerns dominated the International Monetary Fund and World Bank’s latest meetings in Lima, Peru. In the past three years, Chinese GDP data as reported have only missed the Reuters Polls consensus three times, and on each occasion it was because the reported growth figure beat by just 0.1 percentage point. For the periods of Q4 2013 through to Q1 of this year, the reported figure was exactly on forecast.

Other large and important global economies are nowhere near as accurate. U.S. growth data have taken even the most pessimistic forecaster completely off guard on several occasions since the financial crisis, most recently in the first quarter of last year. The initial report for Q1 GDP this year also matched the lowest forecast. Initial U.S. growth data have only actually been reported exactly in line with expectations three times in the last half decade. It seems implausible that economists, who are often widely panned as a group for failing to predict economic turning points, are uncannily able to nail Chinese GDP within a few tiny slivers of a percentage point each and every time.

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Not much use trying to analyze something so obvious.

China’s Better-Than-Expected GDP Prompts Skepticism From Economists (WSJ)

Within minutes of China’s publishing its rosier-than-expected numbers, a wave of skepticism emanated from economists over the accuracy of the official 6.9% third-quarter growth figure. Economists’ doubts centered in part on the apparent disconnect between the headline figure and the underlying data. Both exports and imports declined during the third quarter, and industrial production was weaker than expected. Factories have seen 43 consecutive months of falling prices and—despite a flood of government infrastructure spending—fixed-asset investment decelerated in September. While retail sales and services have held up, and new lending data in September point to a pickup in demand, these factors haven’t been enough to offset the parade of negative data, economists said.

“When you look at the numbers, it’s not entirely easy to see how GDP growth held up so well,” said Société Générale CIB economist Klaus Baader. The weak reports leading up to Monday’s GDP release had strengthened the impression that China is increasingly under siege to reach its 2015 growth target of about 7%, which already would be its slowest pace in a quarter century. Economists say the world’s second-largest economy is far from collapsing, though a number of them say they believe actual growth is one or two percentage points below the official figure. China’s official growth statistics have long been viewed with skepticism. Although the methodology has improved exponentially since the days of the 1958-61 Great Leap Forward, when cadres were encouraged to inflate production statistics to please Chairman Mao, many say there is still a focus on reaching a predetermined number, even when underlying conditions change.

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Much better index, and Pettis explaining how China is both much worse and not all that bad (I disagree).

Chinese Economists Have No Faith In 7% Growth ‘Target’ (Zero Hedge)

Earlier today in “The Truth Behind China’s GDP Mirage: Economic Growth Slows To 1999 Levels”, we pointed out that Beijing may be habitually understating inflation for domestic output, which has the effect of making “real” GDP less “real” than nominal GDP. This is what we’ve called the “deficient deflator math” problem and it raises questions about whether China is netting out import prices when they calculate the deflator. If they’re not, then the NBS is likely overstating GDP during periods of rapidly declining commodities prices. If Beijing is indeed understating the deflator it’s not entirely clear that it’s their fault, as robust statistical systems take time to implement, especially across an economy the size of China’s.

That said, there are plenty of commentators who believe that the practice of overstating GDP is policy and exists with or without an understated deflator. Put simply: quite a few people think China is simply lying about its economic output. To be sure, there’s ample evidence to suggest that Beijing’s critics are right. After all, the Li Keqiang index doesn’t appear to be consistent with the numbers coming out of the NBS and the degree to which the data tracks the Communist party’s “target” is rather suspicious (and that’s putting it nicely).

In effect, everyone is perpetually in an awkward scenario when it comes to Chinese GDP data. Economists are forced to “predict” a number that they know is gamed and while that’s pretty much always the case across economies (just see “double adjusted” US GDP data for evidence), with China it’s arguably more blatant than it is anywhere else, and one could run up a pretty impressive track record simply by betting with Beijing’s “target.” It’s with all of this in mind that we bring you the following clip from University of Peking economist Michael Pettis, whose outlook is apparently far more dour than his compatriots:

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I can’t see how or why this would stop.

China’s Capital Outflows Top $500 Billion (FT)

Capital outflows from China topped $500bn in the first eight months of this year, according to new calculations by the US Treasury that highlight the shifting fortunes in the global economy. The outflows, which peaked at about $200bn during the market turmoil in August according to the estimates released on Monday, have also contributed to a shift by Washington in its assessment of the valuation of China’s currency, the renminbi. In its latest semi-annual report to Congress on the global economy, the US Treasury dropped its previous assessment that the renminbi was “significantly undervalued”. Instead, the Treasury said the Chinese currency was “below its appropriate medium-term valuation”. “Given economic uncertainties, volatile capital flows and prospects for slower growth in China, the near-term trajectory of the RMB is difficult to assess,” Treasury economists wrote.

“However, our judgment is that the RMB remains below its appropriate medium-term valuation.” The new language reflects the cautious welcome that the Obama administration has given to Beijing’s efforts in recent months to prop up the renminbi since China announced on August 11 that it would allow a greater role for the market in setting the currency’s exchange rate. It is also a sign of the recognition in Washington that even as it believes China’s currency should strengthen in the longer term, in the short term the renminbi is facing downward pressures because of several factors including what amount to historic outflows from China and other emerging economies. “Market factors are exerting downward pressure on the RMB at present, but these are likely to be transitory,” the Treasury said. Among those factors, Treasury economists wrote, was the unwinding of carry trades betting on the appreciation of the renminbi.

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Q: what will happen to prices when Chinese storage has filled up its teapots?

China Heads For Record Crude Buying Year (Reuters)

As China closes in on the US as the world’s biggest crude oil importer, demand from private refiners and stockpiling of cheap oil is expected to keep imports at record levels after a wobble in the third quarter. Despite slower growth in recent months – crude imports rose just 1.3% in September on a year earlier – buying for October-November delivery has picked up strongly, traders and analysts say. The purchases will ease concerns of a sharp slowdown in Chinese buying and support prices in coming months, analysts said. The increased buying has shown up in tanker movements and freight rates, said Energy Aspects analyst Virendra Chauhan, and analysts are upgrading earlier forecasts for second half growth. “Despite a slowing Chinese economy, crude imports remain robust on the back of accelerated stockpiling activities into operating and commercial storage,” said Wendy Yong, analyst at oil consultancy FGE.

Since July, China has also granted nearly 700,000 barrels per day (bpd) of crude import quotas to small refiners, known as “teapots”, or roughly 10% of China’s current total imports, as part of efforts to boost competition and attract private investment, creating a new source of demand. “The teapots are super-active,” said one oil trader, with many racing to fill their new quotas. And state-owned refiners are restocking after a third-quarter lull. Unipec, the trading arm of Asia’s top refiner Sinopec, bought 6 million barrels of North Sea Forties crude and 2.9 million barrels of Russian ESPO for loading this month, and it has also stepped up Angolan crude purchases for November. To accommodate the oil, new storage tanks on southern Hainan island have either been put to use or are due to be filled with crude from end-2015.

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Something to do with licking certain body parts.

Britain’s Love Affair With China Comes At A Price (AEP)

It is a sobering experience to travel through eastern China with a British passport. Again and again you run into historic sites that were burned, shelled or sacked by British forces in the 19th century. The incidents are described in unflattering detail on Mandarin placards for millions of Chinese national pilgrims, spiced with emotional accounts of the Opium Wars. The crown jewel of this destructive march was the Summer Palace of the Chinese emperors outside Beijing, looted of its Qing Dynasty treasures by Lord Elgin in 1860, and burned to ground. It was a reprisal for the murder of 18 envoys by the Chinese court, but the exact “casus belli” hardly matters anymore. The defilement lives on in the collective Chinese mind as a high crime against the nation, the ultimate symbol of humiliation by the West.

The Communist Party has carefully nurtured the grievance under its “patriotic education” drive. David Marsh, from the Official Monetary and Financial Institutions Forum, says Britain’s leaders are implicitly atoning for a colonial past by rolling out the red carpet this week for Chinese President Xi Jinping, and biting their tongue on human rights. They are acknowledging that British officialdom is in no fit position to lecture anybody in Beijing. The exact line between good manners and kowtowing is hard to define, but George Osborne came close to crossing it on his trade mission to China last month, earning plaudits from the state media for his “pragmatism” and deference. But as the Chancellor retorted, you have to take risks in foreign policy. Moral infantilism is for the backbenches. “China is what it is,” he said.

The proper question for David Cameron and Mr Osborne is whether they have accurately judged the diplomatic and commercial trade-off in breaking ranks with other Western allies and throwing open the most sensitive areas of the British economy to Chinese expansion, and whether they will reap much in return. The US Treasury was deeply irritated when the Chancellor defied Washington and signed up to the Asian Infrastructure Investment Bank (AIIB), China’s attempt to create an Asian rival to the Bretton Woods institutions controlled by the West. Mr Osborne was correct on the substance. Congress acted foolishly in trying to smother the AIIB in its infancy and stem the rise of China as a financial superpower. It was tantamount to treating the country as an enemy, an approach that soon becomes self-fulfilling.

The AIIB is exactly what is needed to recycle China’s trade surpluses back into the world economy, just as the US Marshall Plan recycled American surpluses in the 1950s. The problem is that Britain carelessly undercut a close ally, putting immediate mercantilist interests ahead of a core strategic relationship. Anglo-American ties are now at their lowest ebb for years, a risky state of affairs at a time when the UK faces a showdown with the European Union.

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Overinvestment.

The Perfect Storm That Brought Britain’s Steel Industry To Its Knees (Telegraph)

Britain’s steel industry is caught in a “perfect storm”, ravaged by global economics and politics, reducing an industry that once led the world to a mere bit player on the global stage. Just 12m tonnes of the metal that is a basic raw material for the modern world were produced in the UK in 2013, according to the World Steel Association, out of a global total of 1.65bn. In 1983 this figure was 15m tonnes out of a total 663bn. However, the number of people employed making the metal in Britain has dropped from 38,000 in 1994 to less than 18,000 today. While productivity improvements account for some of the decline, with worldwide demand more doubling than in a generation, there are other factors that are inflicting a much heavier toll on the industry. Globalisation is the main one, according to Chris Houlden at commodities analyst CRU.

“The issue facing UK steel has been developing since the financial crisis,” he says. “Demand for steel in Britain and the EU has fallen and not recovered and there’s persistent global overcapacity.” While things weren’t all sunshine and roses ahead of the crash – the sector faced the universal pressures to find efficiencies and savings – Britain’s steel industry could function successfully with the growing global economy gobbling up available output, led by China’s burgeoning growth. Today things are different. Beijing is pencilling in annual growth of about 7pc, half the rate seen in heady pre-crisis times as its economy industrialised, placing huge demand on the country’s steel mills to turn out the beams and sheets needed for machines and construction.

Thanks to heavy investment in its steel industry, China is now responsible for half of the world’s steel output – up from 10pc a decade ago – and is reluctant to let it go to waste. As a result, China’s mills are dumping excess output abroad, and the country’s overcapacity is estimated to be 250m tonnes a year. “China’s production is not abating,” says Peter Brennan, European editor at steel industry data provider Platts. “You might have thought they would cut capacity but in a country where industry is effectively government controlled, it’s not happened. In what’s arguably a more unstable society, the government has no intention of cutting masses of jobs.”

The sentiment is echoed by the International Steel Statistics Bureau. “It would take a major reversal of the slowdown in the Chinese economy to prevent them pushing steel abroad,” says ISSB commercial manager Steve Andrews. “That’s why they are looking externally. There’s not the political will to remove capacity. They have taken some of the old and highly polluting plants out as they look at improving air quality but a lot of their stuff is big and modern.” The result is cheap steel coming on to the market, pushing prices down. But it’s not just China that is dumping output. “China is not unique,” says Houlden. “There’s low to no growth in a lot of other major steel producers such as Brazil and Russia, so they are doing it, too. Japan, the world’s second largest producer, is also looking to export more steel.”

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All banks are in deep shit.

Deutsche Bank, Credit Suisse Set to Scale Back Global Ambitions (Bloomberg)

Europe’s last global banks are caving in to pressure from regulators and preparing to tell investors just how much their aspirations will shrink. “The European banks were too long holding onto the past and not realizing that this change is for good – it’s permanent,” said Oswald Gruebel, a former chief executive officer of both UBS and Credit Suisse. “The main reason for reducing global investment banking is that with the capital requirements which the regulators put on these banks, you cannot make any decent return.” Deutsche Bank announced sweeping management changes on Sunday, less than two weeks before co-CEO John Cryan will present his plans to scale back the trading empire built by his predecessor.

On Wednesday, Tidjane Thiam will probably reveal a strategy to prune Credit Suisse’s investment bank in favor of wealth management. Barclays, BNP Paribas and Standard Chartered are also trimming operations. Europe’s global lenders are struggling to adapt to rising capital requirements, record-low interest rates and shrinking opportunities for growth. Their retrenchment risks further squeezing lending to economies in the region and handing more business to U.S. competitors, which were quicker to raise capital levels and are benefiting from growth at home. “Everything that’s being done should have been done years ago,” said Barrington Pitt Miller at Janus Capital in Denver. “The European muddle-through scenario has been proven not to be a terribly good one.”

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Very predictable, and very blind too: “..Wal-Mart believes it can grow sales by 3 to 4% a year over the next three years..”

Wal-Mart Puts The Squeeze On Suppliers To Share Its Pain (Reuters)

Suppliers of everything from groceries to sports equipment are already being squeezed for price cuts and cost sharing by Wal-Mart. Now they are bracing for the pressure to ratchet up even more after a shock earnings warning from the retailer last week. The discount store behemoth has always had a reputation for demanding lower prices from vendors but Reuters has learned from interviews with suppliers and consultants, as well as reviewing some contracts, that even by its standards Wal-Mart has been turning up the heat on them this year. “The ground is shaking here,” said Cameron Smith, head of Cameron Smith & Associates, a major recruiting firm for suppliers located close to Wal-Mart’s headquarters in Bentonville, Arkansas. “Suppliers are going to have to help Wal-Mart get back on track.”

For the vendors, dealing with Wal-Mart has always been tough because of its size – despite recent troubles it still generates more than $340 billion of annual sales in the U.S. That accounts for more than 10% of the American retail market, excluding auto and restaurant sales, and the company increasingly sells a lot overseas too. To risk having brands kicked off Wal-Mart’s shelves because of a dispute over pricing can badly hurt a supplier. On Wednesday, Wal-Mart stunned Wall Street by forecasting that its earnings would decline by as much as 12% in its next fiscal year to January 2017 as it struggles to offset rising costs from increases in the wages of its hourly-paid staff, improvements in its stores, and investments to grow online sales.

This at a time when it faces relentless price competition from Amazon.com, dollar stores and regional supermarket chains. Keeping the prices it pays suppliers as low as it can is essential if it is to start to claw back some of this cost hit to its margins. Helped by investments to spruce up stores and boost worker pay, Wal-Mart believes it can grow sales by 3 to 4% a year over the next three years, or by as much as $60 billion, offering suppliers new opportunities to boost their own revenues.

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Here’s hoping.

Brazil’s Corruption Crackdown Can’t Be Stopped (Bloomberg)

In a continent of peacocks, Brazilian federal judge Sergio Moro makes an unlikely celebrity. Laconic and poker-faced, he has little time for the spotlight, and yet his name is emblazoned on t-shirts and protest banners, and splashed across social media. Why the fuss? Check out the 13th federal district court, where Moro has presided over the largest corruption investigation in the country’s history, sent muckety-mucks to jail and helped restore civic pride in a land where too often justice has been honored in the breach. So after the Brazilian Supreme Court ruled last month to take a high-profile defendant named by witnesses in the landmark Petrobras case away from the 13th district, worried citizens hit the streets. Is the so-called Operation Carwash investigation into looting at the state oil company in danger of getting derailed, as some claim?

Brazil’s white-collar crooks should be so lucky. True, the scope of the scam at Latin America’s biggest corporation might never have come to light had it not been for the 43-year-old judge, who specializes in money-laundering cases, and a dedicated cadre of prosecutors. From their base in Curitiba, a city in southern Brazil, investigators exposed what Prosecutor General Rodrigo Janot called a “complex criminal organization” bent on skimming money from padded supply contracts with Petrobras into political coffers. But getting to Curitiba took the collaboration of the best minds in public service, from the federal police to the Finance Ministry’s financial intelligence unit. That web of sleuths and wonks is the best assurance that the effort to shut down Brazil’s most brazen political crime ring will carry on, no matter who holds the gavel.

The probe began when federal police watching a gas station and one-time car wash (hence the name) in the nation’s capital uncovered a money-changing scheme to spirit gains overseas. The public prosecutor’s office took up the chase and, tapping into finance ministry data, followed the money trail to Petrobras. Janot took the investigation across the Atlantic, where Swiss prosecutors found evidence pointing to the head of Brazil’s lower house, as well as to corporate leaders. Some of Brazil’s biggest oil and construction executives are behind bars, and dozens of politicians are under investigation, including the head of the senate. And despite recently ruling to spin off parts of the investigation, the Supreme Court has consistently buttressed Moro’s authority in the past.

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“One in four borrowers is either delinquent or in default on his or her student loans.”

US Supreme Court May Weigh In on a Student Debt Battle (Bloomberg)

Mark Tetzlaff is a 57-year-old recovering alcoholic who has been convicted of victim intimidation and domestic abuse. He may also be the person with the best shot at upending the way U.S. courts treat student debt for bankrupt borrowers. Tetzlaff has spent three years battling lawyers for the Department of Education over the right to have his student loans canceled in bankruptcy. On Thursday, he appealed his case to the Supreme Court. If the nation’s highest court takes the case on, it will be one of the rare occasions when it has addressed the $1.3 trillion pile of student debt held by 41 million Americans. Tezlaff also got a new attorney after representing himself for most of his case. The lawyer, Douglas Hallward-Driemeier, successfully argued part of the landmark June case that made same-sex marriage a legal right in all 50 states.

Hallward-Driemeier and his team have asked the court to clarify 1970s-era rules that prevent borrowers from getting rid of education debt in bankruptcy, except in cases in which repaying it would constitute an “undue hardship.” Lawmakers never fully defined “undue hardship,” leaving it to the courts to define these special, and rare, circumstances in individual cases. Tetzlaff has said that the standard being applied to his case is unconstitutional. The Supreme Court may be tempted to consider the case partly because it would be able to resolve a split between federal courts in their interpretation of the law, according to court documents. Courts disagree mainly on which of two tests should be used to determine whether someone can erase his or her debt in bankruptcy.

The so-called Brunner test is used in most federal courts and was applied in Tetzlaff’s case. It is the strictest version of the standard because it requires debtors to prove that they have diligently tried to repay their loans, that making any payments would deprive them of a “minimal” standard of living, and that the hardship affecting them today will persist long into the future. Over the past two decades, lawyers arguing on behalf of the government have further pushed courts to take the most stringent view of each one of those components. Tezlaff’s legal team has said the Supreme Court should instead apply a less harsh alternative to the Brunner test, known as the “totality of the circumstances” test, which has been gaining ground in courts across the country.

[..] It would be hard to overstate the significance of this case for people struggling with student debt. Student loans are the largest source of consumer debt aside from mortgages. The total amount of outstanding student debt is expected to double to $2.5 trillion in the next decade. One in four borrowers is either delinquent or in default on his or her student loans.

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Surprisingly nice write-up of Trudeau for Bloomberg. I wish Justin well, but Canada’s in for very hard times.

New Canada PM Justin Trudeau: Out of Father’s Shadow and Into Power (Bloomberg)

As a young man, Justin Trudeau continually sought respite from his father’s long shadow. He debated in university as Jason Tremblay, boxed as Justin St. Clair and eventually settled on Canada’s west coast – as far in Canada as he could get from being Pierre Trudeau’s eldest and still be close to great skiing. Now 43, he has come full circle, reviving a moribund Liberal Party to a solid majority amid a new wave of the Trudeaumania that swept his father to power in 1968. In ousting Stephen Harper Monday, he becomes the country’s first inter-generational prime minister and gets to move back into his childhood home. Trudeau campaigned on a brand of optimism, transparency and youthful energy – while promising government activism to stimulate a weak economy and address middle class anxiety over income inequality and retirement security.

In contrast to the departing Harper, he will run deficits willingly, reduce Canada’s combat role against the Islamic State and get behind the Iran nuclear deal. He’ll also rule out the purchase of F-35 fighters in favor of more spending on the navy and join President Barrack Obama in Paris in pushing for aggressive action on climate change. He is, in many ways, the happy faced anti-Harper. Trudeau’s political role model is not so much his beloved “papa,” whose public persona over 15 years as prime minister mixed charisma and aloofness, but his maternal grandfather, Jimmy Sinclair, a consummate glad-handing, baby-kissing Scottish immigrant to Canada and Rhodes scholar.

It was no accident that Trudeau held his final campaign event Sunday night in the Vancouver constituency his grandfather represented from 1940 to 1958. “I’m not sure if love of campaigning has any kind of genetic component, but if it does, I can trace my passion for it straight back to grandpa,” he told an enthusiastic crowd on what was the birthday of both his father and his eldest son, eight-year-old Xavier James, named for Sinclair. “He loved knocking on doors, getting out, meeting with people, taking the time to really listen to what they had to say. It’s his style that I’ve adopted as my own.”

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“Both of them had a penchant for using precisely the same words to describe the country’s future as an “Energy Superpower”.

Farewell Fossil Fools – Harper And Abbott Both Dispatched (CS)

The prospects for the forthcoming global climate conference to be held in Paris later this year have received a significant diplomatic boost. The two developed world leaders most intent on undermining the conference – Australia’s Tony Abbott and Canada’s Stephen Harper – have been dispatched to the political wilderness. Based on early Canadian election vote counting Monday night, Harper’s Conservative Party look set to lose office, with the centrist Liberals having been declared the winner of 173 seats at the time of writing and projected to win 184 of the 338 lower house seats (according to Canada’s Globe and Mail), giving them the ability to rule in their own right. The Conservatives have suffered big losses, with latest counting giving them 92 seats with a projection of 102 seats.

Back in June 2014 when Abbott visited Harper in Canada, the two put on an act of professing concern for climate change while describing a policy that would actually limit carbon emissions as something that would “clobber the economy” in Abbott’s words while being “job killing” in Harper’s words. As Climate Spectator noted in Harper and Abbott: Two fossils fooling no one, what was plainly obvious was that both Harper and Abbott had confused the interests of the coal mining industry (in Abbott’s case) and tar sands (Harper) with the interests of their respective country as a whole.

A year on it appears the two of them had far too narrowly focussed and deeply flawed economic strategies. [..] Harper and Tony Abbott have followed eerily similar strategies. Both of them had a penchant for using precisely the same words to describe the country’s future as an “Energy Superpower”. Unfortunately for them the plummeting price of a barrel of oil and a tonne of coal left them both floundering without a coherent economic narrative for how to drive their respective nations’ future prosperity. They then both resorted in desperation to the bottom of the barrel trying to using fears of terrorism in an attempt to restore their popularity.

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“Resistance will be local. It will be militant. It will defy the rules imposed by the corporate state. It will turn its back on state and NGO environmental organizations. And it will not stop until corporate power is destroyed or we are destroyed.”

Death by Fracking (Chris Hedges)

The maniacal drive by the human species to extinguish itself includes a variety of lethal pursuits. One of the most efficient is fracking. One day, courtesy of corporations such as Halliburton, BP and ExxonMobil, a gallon of water will cost more than a gallon of gasoline. Fracking, which involves putting chemicals into potable water and then injecting millions of gallons of the solution into the earth at high pressure to extract oil and gas, has become one of the primary engines, along with the animal agriculture industry, for accelerating global warming and climate change. The Wall Street bankers and hedge fund managers who are profiting from this cycle of destruction will—once clean water is scarce and crop yields decline, once temperatures soar and cities disappear under the sea, once droughts and famines ripple across the globe, once mass migrations begin—surely profit from the next round of destruction.

Collective suicide is a good business, at least until it is complete. It is a pity most of us will not be around to see the power elite go down. [..] The activists are waging a war against a corporate state that is deaf and blind to the rights of its citizens and the imperative to protect the ecosystem. The corporate state, largely to pacify citizens being frog-marched to their own execution, passes environmental laws and regulations that, at best, slow the ongoing environmental destruction. Corporations, which routinely ignore even these tepid restrictions, largely write the laws and legislation designed to regulate their activity. They rewrite them or overturn them as the focus of their exploitation changes. They turn public hearings on local environmental issues into choreographed charades or shut them down if activists succeed in muscling their way into the room to demand a voice.

They dominate the national message through a pliable and bankrupt corporate media and slick public relations. Elected officials are little more than corporate employees, dependent on industry money to stay in office and, when they retire from “public service,” salivating for jobs in the industry. Environmental reform has become a joke on the public. And the Big Green environmental groups are complicit because they rely on donors, at times from the fossil fuel and animal agriculture industries; they are silent about the reality of corporate power, largely ineffectual, and part of the fiction of the democratic process. Resistance will be local. It will be militant. It will defy the rules imposed by the corporate state. It will turn its back on state and NGO environmental organizations. And it will not stop until corporate power is destroyed or we are destroyed.

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John Helmer has written a deep-digging and extensive series on the Dutch MH17 report (h/t Yves Smith). I’ve left the topic alone, because Holland was never in a position to write a neutral analysis. From the get-go it was made clear that Russia and the rebels were responsible, proof be damned, because that fitted the overall anti-Russia mood whipped up by US and EU. What’s perhaps most galling is that the question of intent has been taken off the table altogether: whoever shot down the plane, did they do it on purpose? In ignoring that question, the answer is implied, and analysis makes way for propaganda. Victims’ families be damned.

Is There A War Crime In What The Dutch Safety Board Is Broadcasting? (Helmer)

Tjibbe Joustra, chairman of the Dutch Safety Board, wants it to be very clear that Russia is criminally responsible for the destruction of Malaysian Airlines Flight MH17 on July 17, 2014; that a Russian-supplied ground-to-air missile, fired on Russian orders from territory under Russian control, exploded lethally to break up the MH17 aircraft in the air, killing everyone on board; and that Russian objections to these conclusions are no more than cover-up and dissimulation for the guilty. Joustra also wants to make sure that no direct evidence for what he says can be tested, not in the report which his agency issued last week; nor in the three Dutch government organs which prepared and analysed the evidence of the victims’ bodies, the aircraft remains, and the missile parts on contract to the Dutch Safety Board (DSB) – the Dutch National Aerospace Laboratory (NLR), the Netherlands Organization for Applied Scientific Research (TNO), and the Netherlands Forensic Institute (NFI).

So Joustra began broadcasting his version of what he says happened before the release of the DSB report. He then continued in an anteroom of the Gilze-Rijen airbase, where the DSB report was presented to the press; in a Dutch television studio; and on the pages of the Dutch newspapers. But when he and his spokesman were asked today for the evidence for what Joustra has been broadcasting, they insisted that if the evidence isn’t to be found in the DSB report, Joustra’s evidence cannot be released. So, if the evidence for Joustra’s claims cannot be found in the NLR, TMO and NFI reports either, what exactly is Joustra doing – is he telling the truth? Is he broadcasting propaganda? Is he lying? Is he covering up for a crime?

In the absence of the evidence required to substantiate what the DSB chairman is broadcasting, is the likelihood that Joustra is concealing who perpetrated the crime equal to the probability that he is telling the truth? And if there is such a chance that Joustra is concealing or covering up, is this evidence that Joustra may be committing a crime himself? In English law, that may be the crime of perverting the course of justice. In US law, it might be the crime of obstruction of justice. In German law, it might be the crime of Vortäuschung einer Straftat. By the standard of World War II, Joustra’s crime might be propagandizing for the losing side, that’s to say the enemy of the winning side.

When William Joyce, an Anglo-American broadcaster on German radio during the war and known as Lord Haw-Haw, was prosecuted in London in 1945, he was convicted of treason and hanged. The treason indictment said he “did aid and assist the enemies of the King by broadcasting to the King’s subjects propaganda on behalf of the King’s enemies.” The legality of this indictment and the conviction was upheld by the Court of Appeal and the House of Lords.

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They’re going to die like flies.

Stranded in Cold Rain, a Logjam of Refugees in the Balkans (NY Times)

After weeks of warnings about the dangers involved in Europe’s migrant influx, and fears about winter’s arrival, the worries of public officials and humanitarian groups were realized on Monday when thousands of asylum seekers, many of them families with small children, began to back up at crossings and were stranded in a chilly rain. The backups came just two days after Hungary closed its border with Croatia, and occurred as countries on the north end of the Balkan route tightened border controls while states to its south quarreled over how to manage the unabated human flow into Europe.

The logjam followed a month of relative stability across the Balkans and Central Europe, as countries unofficially worked together to create a safe and relatively quick route north and west by transporting asylum seekers by bus or train from one border to the next, where they could exit on their way toward Germany, Sweden and other desired destinations. The arrangement filled the void left by the European Union, which has talked, bickered and failed to come up with a common solution to the problem of accommodating hundreds of thousands of new arrivals, many fleeing war in Syria, Iraq and Afghanistan, or repression in places like Eritrea in northern Africa.

A recent effort to stem the flow of migrants by keeping them in Turkey, and preventing them from entering the European Union through Greece, faltered over the weekend, when little progress was reported in talks between Chancellor Angela Merkel of Germany and Turkish leaders. No other plans appear to be on the table, and the safety of the migrants has depended upon the cooperation of the countries along the route, many of them dubious about the migration from the start and resentful that Germany has encouraged it by agreeing to accommodate asylum seekers. That policy by the government of Ms. Merkel has created tensions in Germany, as well, where the weekend stabbing of the politician in charge of refugee affairs in Cologne heightened the polemics surrounding the influx.

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“I could get there and back for just €30. That’s because I’m British. I am not Syrian, Afghan, Palestinian, Iraqi, Somali or Eritrean.”

Without Safe Access To Asylum, Refugees Will Keep Risking Their Lives (Crawley)

I stood in the corner of a dusty cemetery on the Greek island of Lesvos and watched a mother bury her child. As the tiny body of a baby boy wrapped in a white sheet was lifted from the boot of a car, she fell to her knees and howled with pain. The child had slipped from her arms into the cold waters of the Aegean as she made the journey from Turkey to join her husband, who had already travelled to Germany to seek protection from the war that is ravaging their home country, Syria. Her baby should not have died. The journey from Turkey to Lesvos is short and safe. If I wanted to take a ferry trip from the port of Mytiline to Ayvalik on the Turkish coast, the trip would take around an hour. I could get there and back for just €30. That’s because I’m British. I am not Syrian, Afghan, Palestinian, Iraqi, Somali or Eritrean.

I am not required to put my life at risk by paying a smuggler hundreds or even thousands of euros to sit in the bottom of a motorised dingy with 30 or 40 other people to take the exact same journey. I do not need to close my eyes and pray that my children and I will make it to the other side without drowning. After a long summer of protracted negotiations about how to respond to the crisis in the Mediterranean region, this is what European asylum policy still looks like in practice. Although (most) EU member states have reluctantly agreed to redistribute 160,000 of those who have already arrived, there is still no legal route for refugees to enter Europe. And with no hope of a better life at home, thousands of people continue to make the illegal, expensive and potentially dangerous journey across the sea. They know the risks, but the water seems like a better option than the alternatives.

Although Turkey offers temporary protection to Syrian refugees, it is not a signatory to the 1967 Protocol which extends the protection available under the 1951 Refugee Convention to those coming from outside Europe. That means no guaranteed access to employment, education or even basic health care. Conditions for Syrian refugees in Turkey are well documented and known to be deteriorating. There is no prospect that things will improve, no hope for a better future. Those who are not from Syria get nothing. And so they come to Europe. Since the beginning of 2015, more than a quarter of a million people have arrived on Lesvos by sea, and still more are coming. More than 70,000 people arrived in September alone and, according to the International Organisation for Migration (IOM), the numbers are set to be even higher for October.

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Cattle trade.

Merkel In Turkey: Trade-Offs And Refugees (Boukalas)

The gilded thrones may have been the perfect expression of Turkish President Recep Tayyip Erdogan’s sultanic ambitions but they appeared to make his guest, Angela Merkel, somewhat uncomfortable judging by the customary photographs. Maybe the German chancellor was thinking that such a lavish setting was not appropriate for discussing the fate of thousands of people whose only surviving assets are their bodies, their children and whatever dollars or euros they have managed to save up to pay their traffickers. Maybe Merkel, as she sat in the kind of showy opulence that usually reveals something deeper, was thinking that she was being used by the Turkish president as a propaganda tool, that her presence in Istanbul just a few days before elections in Turkey was giving Erdogan a powerful boost.

Particularly at a time when the Turkish government is facing so many accusations: of waging war against the Kurds and brushing off every proposal for a peace settlement in a bid to appeal to those who want authoritarian rule; of racism and intolerance; of persecuting its political rivals; and of quashing free speech by cracking down on “unorthodox” journalists who don’t propagate the Erdogan narrative. Merkel cannot be unaware of all this, and even if her own advisers failed to brief her 100 Turkish university professors did in an open letter. Let us accept that on a mission during which she was not just representing Germany but the EU as a whole, Merkel decided to strike a concessionary tone for the sake of the issue at hand: the protection of the refugees, or, rather, the stemming of the flow of refugees.

The idea is that the refugee influx will abate not as a result of peace in Syria but by convincing Turkey to be more vigilant of its borders, to accept the creation of camps on its territory where refugees can be identified and documented and to grant passage to Europe to those who are deemed eligible for refugee status. It is a technical solution to a political problem; ergo, no solution at all. Turkey, naturally, did not just demand financial remuneration for its cooperation. It asked that its own people be given easier to access to Europe. And it got it. It asked that its European accession be speeded up even though it has fulfilled only a handful of the 40 criteria. And it was promised this would happen by the most powerful voice in Europe: the German one.

And what about the refugees? If only they had been the main topic of discussion at that meeting. Instead, they will keep drowning. And if the complex war in Syria continues unabated, even the winter will not prevent them from trying to get across.

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Most shocking: nobody’s shocked by dead babies anymore.

Greek Coast Guard Rescues 2,561 Migrants Over The Weekend (AP)

Greece’s coast guard says it has rescued 2,561 people in dozens of incidents in the eastern Aegean over the weekend as Europe’s refugee crisis continues unabated. The coast guard said Monday the rescues occurred in 69 operations from Friday morning until Monday morning near eight Aegean islands. The number doesn’t include those who make it ashore themselves from the nearby Turkish coast, often in overcrowded and unseaworthy vessels. On Sunday, the bodies of two women, a baby and a teenager were recovered near the remote island of KastelLorizo after their vessel overturned, while 12 others were rescued by a passing sailing boat. The deaths came a day after a 7-year-old boy died after falling into the water from a boat carrying 80 people who reached the island of Farmakonisi.

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Jul 282015
 
 July 28, 2015  Posted by at 9:02 am Finance Tagged with: , , , , , , , ,  Comments Off on Debt Rattle July 28 2015


John Collier FSA housing project for Martin aircraft workers, Middle RIver, MD 1943

Weakness in Asia Batters Currencies Abroad (WSJ)
Wealth Doesn’t Trickle Down, It Just Floods Offshore -$32 Trillion (Guardian)
Hong Kong Is Feeling China’s Pain (Bloomberg)
The Good News in China’s Stock Plunge (Pesek)
How Much Worse Can the Junk-Bond Sell-Off Get? (WolfStreet)
The Few Who Won’t Say ‘Sorry’ for Financial Crisis (Ritholtz)
Varoufakis Unplugged: The London Call Transcript (FT)
Statement on the FinMin’s Plan B Working Group (Yanis Varoufakis’ office)
Varoufakis: It Would Be Irresponsible Not To Have Drawn Up Contingency Plans (E)
Yanis Varoufakis Admits ‘Contingency Plan’ For Euro Exit (Guardian) /td>
Contingency Plans (Paul Krugman)
Greece’s Headache: How To Lift Capital Controls (AFP)
Germany Rides Into Its Greek Colony On The “Quadriga” (Zero Hedge)
IMF Paints Dim Europe Picture, Says More Money Printing May Be Needed (Reuters)
How the Greek Deal Could Destroy the Euro (NY Times)
The Way To Fix Greece Is To Fix The Banks (Coppola)
France Wants To Outlaw Discrimination Against The Poor (Guardian)
Dutch Journalist, MH17 Expert: ‘UN Tribunal Attempt to Hide Kiev’s Role’ (RI)
Potemkin Party (Jim Kunstler)
It’s Really Very Simple (Dmitry Orlov)

Any country heavily dependent on commodities trade must suffer the inevitable.

Weakness in Asia Batters Currencies Abroad (WSJ)

The global commodities slump is testing the resilience of resource-driven economies, pushing currencies from Australia, Canada and Norway to lows not seen since the financial crisis. Weakening energy and metals prices are punishing investors, companies and governments. Slumping demand from China, the world’s biggest purchaser of many materials, is rippling through foreign-exchange markets, reflecting expectations that a valuable source of export growth is drying up. But few countries are being battered as badly as Canada, due to its dependence on the hard-hit energy industry and its central bank’s decision this month to cut its key overnight interest rate for the second time this year.

The Bank of Canada expects Canada’s gross domestic product to rise a paltry 1.1% this year, down from previous forecasts of 1.9% made earlier in the year, as a persistent decline in oil prices and a drop in exports that the central bank described as “puzzling” hampered growth. The decision to reduce rates is adding to the woes of the Canadian dollar, which is called the loonie, underscoring the delicate balance that policy makers must strike at a time of uneven global growth and whipsaw trading in currency markets. At the same time, a boost in exports—often billed as one of the silver linings of a currency’s decline—has yet to arrive.

“My gut feeling is that it’s going to be bad for some time to come,” said Thomas Laskey at Aberdeen Asset Management, which has US$483 billion under management. Mr. Laskey said he is shorting the Canadian dollar—a bet that the currency will fall—until he sees an improvement in Canadian oil-and-gas companies’ investment spending. The loonie is down 8.1% against the U.S. dollar since May 14 in New York trading, making it one of the biggest victims of the steep decline in global commodity prices since then. In that same period, the Australian dollar is down 10% and the Norwegian krone, which is pegged to the euro, has dropped 9.8% against its U.S. counterpart.

Plunging commodity prices and the end of a mining investment boom have pushed the Reserve Bank of Australia to cut interest rates twice this year. The central bank said that while it is open to further easing monetary policy, it is also wary of some of the unintended consequences of lower rates, such as burgeoning real-estate prices in Sydney. Norway’s central bank cut interest rates in June in a bid to boost its flagging economy, which is closely tied to oil exports. Norges Bank said more reductions are likely before the end of the year.

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“Inequality is much, much worse than official statistics show, but politicians are still relying on trickle-down to transfer wealth to poorer people. “This new data shows the exact opposite has happened..”

Wealth Doesn’t Trickle Down, It Just Floods Offshore -$32 Trillion (Guardian)

The world’s super-rich have taken advantage of lax tax rules to siphon off at least $21 trillion, and possibly as much as $32tn, from their home countries and hide it abroad – a sum larger than the entire American economy. James Henry, a former chief economist at consultancy McKinsey and an expert on tax havens, has conducted groundbreaking new research for the Tax Justice Network campaign group – sifting through data from the Bank for International Settlements (BIS), the IMF and private sector analysts to construct an alarming picture that shows capital flooding out of countries across the world and disappearing into the cracks in the financial system.

Comedian Jimmy Carr became the public face of tax-dodging in the UK earlier this year when it emerged that he had made use of a Cayman Islands-based trust to slash his income tax bill. But the kind of scheme Carr took part in is the tip of the iceberg, according to Henry’s report, entitled The Price of Offshore Revisited. Despite the professed determination of the G20 group of leading economies to tackle tax secrecy, investors in scores of countries – including the US and the UK – are still able to hide some or all of their assets from the taxman. “This offshore economy is large enough to have a major impact on estimates of inequality of wealth and income; on estimates of national income and debt ratios; and – most importantly – to have very significant negative impacts on the domestic tax bases of ‘source’ countries,” Henry says.

Using the BIS’s measure of “offshore deposits” – cash held outside the depositor’s home country – and scaling it up according to the proportion of their portfolio large investors usually hold in cash, he estimates that between $21tn and $32tn in financial assets has been hidden from the world’s tax authorities. “These estimates reveal a staggering failure,” says John Christensen of the Tax Justice Network. “Inequality is much, much worse than official statistics show, but politicians are still relying on trickle-down to transfer wealth to poorer people. “This new data shows the exact opposite has happened: for three decades extraordinary wealth has been cascading into the offshore accounts of a tiny number of super-rich.”

In total, 10 million individuals around the world hold assets offshore, according to Henry’s analysis; but almost half of the minimum estimate of $21tn – $9.8tn – is owned by just 92,000 people. And that does not include the non-financial assets – art, yachts, mansions in Kensington – that many of the world’s movers and shakers like to use as homes for their immense riches.

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“Chinese tour group visitors to Hong Kong plunged 40% in the first two weeks of July compared with the same period a year earlier..”

Hong Kong Is Feeling China’s Pain (Bloomberg)

For Hong Kong, it’s been one thing after another when it comes to China. A series of anti-China and pro-democracy protests last year prompted stores to close and mainland tour groups to cancel bookings. Meanwhile, a slowing Chinese economy and President Xi Jinping’s anti-corruption and austerity campaigns have also made the Chinese more wary of buying pricey cognac and Gucci bags in the city. While the biggest outbound destination for Chinese tour groups last year, Hong Kong is in danger of losing its lead to regional rivals such as Thailand and South Korea, as well as mainland alternatives including Shenzhen and Shanghai. Mainland Chinese travelers to Hong Kong last year grew by the slowest pace since 2009, Bloomberg Intelligence data show.

Chinese tour group visitors to Hong Kong plunged 40% in the first two weeks of July compared with the same period a year earlier, the Hong Kong Economic Times reported Monday, citing Michael Wu, head of the city’s Travel Industry Council. With fewer mainland Chinese staying overnight, average daily rates at Hong Kong’s hotels fell for a ninth straight month through June. In addition, China slashed tariffs on products such as face creams and imported sneakers from June 1, reducing Hong Kong’s draw as a cheaper shopping destination. The effect on Hong Kong’s retailers has been immediate and painful. Retail sales fell in four of the five months through May, with jewelry, watches and other high-end gifts the worst hit.

Burberry Group Plc, whose stores in Hong Kong’s Causeway Bay and Tsim Sha Tsui shopping districts sell HK$18,500 ($2,400) handbags and HK$24,000 dresses, has said it may try and lower its rent bill to offset a worsening slump in Hong Kong, while Emperor Watch & Jewellery, which sells Cartier and Montblanc watches, said it may shut one or two of its Hong Kong stores when their leases end this year. And the news out of China doesn’t inspire much confidence. French distiller Remy Cointreau reported first-quarter sales that missed analyst estimates as Chinese wholesalers continued to hold back on cognac orders. Prada also reported first-quarter profit that trailed analyst estimates on slumping sales in China, while foreign carmakers including Audi have stepped up discounts to woo buyers.

So there’s no relief in sight for Hong Kong. The tourism board forecasts overall visitor arrival growth to slow to 6.4% in 2015 from 12% last year, with mainland Chinese tourist arrivals expected to drop by half to 8%. Hong Kong’s economy expanded 2.1% in the first quarter from a year earlier, weaker than a revised 2.4% expansion in October through December. “We’re just too exposed to China,” said Silvia Liu at UBS. “Structurally, until the tourism sector consolidates and Hong Kong finds new growth engines, I don’t see the way out yet.”

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It will force a free market?!

The Good News in China’s Stock Plunge (Pesek)

Panic is in the air as China suffers its biggest one-day stock plunge since 2007. It shouldn’t be. The 8.5% slide in the Shanghai Composite Index is actually a development that could leave China better off eight years from now. I’m focusing on eight both because it’s an auspicious number in Chinese folklore (the Beijing Olympics didn’t begin on 8/8/08 by accident) and Beijing’s idea of nirvana. Growth returning to 8% (relative to this year’s 7% target) would buttress President Xi Jinping’s reformist bona fides. Instead, stocks fell by that much Monday as Xi’s magic has lost potency. Why is that a good thing? It’s at once a reminder that rationality is returning to mainland markets and a message to Xi to stop putting the financial cart before the proverbial horse.

Since mid-June, when shares began sliding, Xi’s market-rescue squad has tried everything imaginable: interest-rate cuts, margin-lending increases, bans on short selling, a moratorium on initial public offerings, hauling supposedly rogue traders in for a talking to, ordering state-run institutions to buy shares, halting trading in at least half of listed companies, you name it. What Xi hasn’t tried is upgrading the economy and financial system in such a way as to help the stock market thrive. To find out what he should do next, Xi could do worse than to check in with Henry Paulson. Even though Paulson might regard with scorn China’s love of the number eight, it was on his watch as Treasury secretary in 2008 that the U.S. had its own brush with financial collapse.

Paulson has been merciless in his all-hype-and-no-fundamentals critique of Xi’s government. “China is especially vulnerable at this point because while its economy has grown and matured, its capital markets have lagged behind,” he wrote in the Financial Times. “It is no surprise that those ideologically opposed to markets would use recent events to make the opposite argument — that to prevent market instability, Beijing should slow the pace of financial liberalisation or perhaps even abandon market-based reforms altogether.” Yet, he argued, “while Beijing’s instinct to protect investors is understandable, the best way of doing so is to create a modern capital market.”

That’s why ambivalence toward Xi’s titanically large market interventions could be a positive. It refocuses Beijing on what’s needed to re-create the vibrant markets that prevail in New York and Hong Kong. Xi’s Communist Party has tried and failed to stabilize things by edict. In fact, heavy-handed manipulation has set back Beijing’s designs on making the yuan a global reserve currency and getting Shanghai shares included in MSCI’s indexes.

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Junk bonds dive with commodities.

How Much Worse Can the Junk-Bond Sell-Off Get? (WolfStreet)

Commodities had once again an ugly week. Copper hit the lowest level since June 2009. Gold dropped below $1,100 an ounce. Other metals dropped too. Agricultural commodities fell; corn plunged nearly 7% for the week. Crude oil swooned, with West Texas Intermediate dropping nearly 7% to $47.97 a barrel, a true debacle for energy junk-bond investors. It was the kind of rout that bottom fishers a few months ago apparently didn’t think was possible. For example, in March, coal miner Peabody Energy had issued 10% second-lien notes due 2022 at 97.5 cents on the dollar. Now, these junk bonds are trading at around 49 cents on the dollar, having lost half their value in four months, and 17% in July alone, according to S&P Capital IQ’s LCD HY Weekly.

Yield-hungry fund managers that bought them at issuance and stuffed them into their bond funds that people hold in their retirement accounts should be sued for malpractice. Among the bonds: Cliffs Natural Resources down 27.6%, SandBridge down 30%, Murray Energy down 21.2%, and Linn Energy down 22.3%, according to Bloomberg. For example, Linn Energy 6.25% notes due in 2019 were trading at 78 cents on the dollar at the beginning of July and at 58 on Friday, according to LCD. There was bloodshed beyond energy, such as AK Steel’s 7.625% notes due in 2021. They were trading at 62 cents on the dollar, down 22% from the beginning of July. “The performance is a disappointment to investors who purchased about $40 billion of junk-rated bonds from energy companies this year, thinking that the worst of the slump was over,” Bloomberg noted.

The riskiest junk bonds, tracked by the BofA Merrill Lynch US High Yield CCC or Below Effective Yield Index, have been hit hard, with yields jumping from the ludicrous levels below 8% of last summer to 12.19% as of Thursday, the highest since July 2012. Note the spike in yield during the “Taper Tantrum” in the summer of 2013 when the Fed discussed ending “QE Infinity.” After which bonds soared once again and yields descended to record lows, until the oil panic set in, as investors in the permanently cash-flow negative shale oil revolution were coming to grips with the plunging price of oil. But in the spring, bottom fishers stepped in and jostled for position as energy companies sold them $40 billion in new bonds, including coal producer Peabody. Now a lot of people who touched these misbegotten bonds are scrutinizing their burned fingers.

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“..the Gramm-Leach-Bliley Act of 1999..”

The Few Who Won’t Say ‘Sorry’ for Financial Crisis (Ritholtz)

“Some people look at subprime lending and see evil. I look at subprime lending and I see the American dream in action. My mother lived it as a result of a finance company making a mortgage loan that a bank would not make. – Former U.S. Senator Phil Gramm”

Many elected or appointed officials have a specific belief system that they may act upon in the implementation of policies. When the policies that flow from those beliefs go terribly wrong, it is natural to want to learn why. As is so often the case, that underlying ideology is usually a good place to begin looking. In the aftermath of the great credit crisis, we have seen all manner of contrition from responsible parties. Most notably, Alan Greenspan admitted error, saying as much in Congressional testimony. Greenspan was unintentionally ironic when he answered a question about whether ideology led him down the wrong path when it came to preventing irresponsible lending practices in subprime mortgages: “Yes, I’ve found a flaw. I don’t know how significant or permanent it is. But I’ve been very distressed by that fact.”

Other contributors to the crisis have been similarly humbled. In “Bailout Nation,” I held former President Bill Clinton, and his two Treasury secretaries, Robert Rubin and Larry Summers, responsible for signing the ruinous Commodity Futures Modernization Act that exempted derivatives from regulation and oversight. The CFMA was passed as part of a larger bill by unanimous consent, and that Clinton signed on Dec. 21, 2000. Clinton joined Greenspan in admitting his contribution to the credit crisis, as well as saying the advice he received from his Treasury secretaries – Rubin and Summers – was wrong. The CFMA removed the standard regulations that all other financial instruments follow: reserve requirements, counter-party disclosures and exchange listings.

Bloomberg reported that Clinton said his advisers argued that derivatives didn’t need transparency because they were “expensive and sophisticated and only a handful of people will buy them and they don’t need any extra protection. The flaw in that argument was that first of all, sometimes people with a lot of money make stupid decisions and make it without transparency.” Even the American Enterprise Institute changed the name of its “Financial Deregulation Project” to the more benign “program on financial policy studies.” That is as close to an apology as we can expect for its part in pushing for market deregulation.

The exception to any post-crisis self-reflection is former Senator Phil Gramm. Although he was one of the chief architects of the radical gutting of financial regulations and oversight rules during the two decades that preceded the financial crisis, the former senator remains a stubborn believer that banks and markets can regulate themselves. Perhaps more than anyone else, Gramm drove the legislation that allowed banks to get much bigger and derivatives to run wild. His name is on the law – the Gramm-Leach-Bliley Act of 1999 – that overturned the Glass-Steagall Act, a Depression-era law that forced commercial banks to get out of the risky investment-banking business.

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It really is very revealing. How about: “Marsh wraps up the teleconference [..], reminding everyone Varoufakis’ remarks were under the so-called Chatham House rules, which means the information can be passed on but Varoufakis should not be cited as the source of the information.

Varoufakis Unplugged: The London Call Transcript (FT)

The London-based Official Monetary and Financial Institutions Forum, headed by two ex-Financial Times scribes – chairman John Plender and managing director David Marsh – on Monday released a 24-minute audiotape of a teleconference they held nearly two weeks ago with Yanis Varoufakis, the former Greek finance minister. Details of the call were first revealed by the Greek daily Kathimerini, and much of most sensational revelations Varoufakis made were about a surreptitious project he and a small team of aides worked on to set up a parallel payments system that could be activated if the European Central Bank forced the shutdown of the Greek financial system.

But Varoufakis also made some other interesting allegations, including claims the IMF believes the Greek bailout is doomed and that Alexis Tsipras, the Greek prime minister, offered him another ministry shortly after he was relieved as finance minister. We’ve had a listen to the entire call, and transcribed most of it – excluding some inconsequential asides to the teleconference’s hosts, Messrs Marsh and Norman Lamont, the former UK finance minister.

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Have the tapes taken Plan B off the table for good?

Statement on the FinMin’s Plan B Working Group (Yanis Varoufakis’ office)

During the Greek government’s negotiations with the Eurogroup, Minister Varoufakis oversaw a Working Group with a remit to prepare contingency plans against the creditors’ efforts to undermine the Greek government and in view of forces at work within the Eurozone to have Greece expelled from the euro. The Working Group was convened by the Minister, at the behest of the Prime Minister, and was coordinated by Professor James K. Galbraith. It is worth noting that, prior to Mr Varoufakis’ comfirmation of the existence of the said Working Group, the Minister was criticized widely for having neglected to make such contingency plans. The Bank of Greece, the ECB, treasuries of EU member-states, banks, international organisations etc. had all drawn up such plans since 2012.

Greece’s Ministry of Finance would have been remiss had it made no attempt to draw up contingency plans. Ever since Mr Varoufakis announced the existence of the Working Group, the media have indulged in far-fetched articles that damage the quality of public debate. The Ministry of Finance’s Working Group worked exclusively within the framework of government policy and its recommendations were always aimed at serving the public interest, at respecting the laws of the land, and at keeping the country in the Eurozone. Regarding the recent article by “Kathimerini” newspaper entitled “Plan B involving highjacking and hacking”, Kathimerini’s failure to contact Mr Varoufakis for comment and its reporter’s erroneous references to “highjacking tax file numbers of all taxpayers” sowed confusion and contributed to the media-induced disinformation.

The article refers to the Ministry’s project as described by Minister Varoufakis in his 6th July farewell speech during the handover ceremony in the Ministry of Finance. In that speech Mr Varoufakis clearly stated: “The General Secretariat of Information Systems had begun investigating means by which Taxisnet (Nb. the Ministry’s Tax Web Interface) could become something more than it currently is, to become a payments system for third parties, a system that improves efficiency and minimises the arrears of the state to citizens and vice versa.” That project was not part of the Working Group’s remit, was presented in full by Minister Varoufakis to Cabinet, and should, in Minister Varoufakis’ view, be implemented independently of the negotiations with Greece’s creditors, as it will contribute considerable efficiency gains in transactions between the state and taxpayers as well as between taxpayers.

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What I said yesterday.

Varoufakis: It Would Be Irresponsible Not To Have Drawn Up Contingency Plans (E)

Google Translate: Official statement issued by Yanis Varoufakis to be placed in relation to what came to light during the last two days after the publication of “Kathimerini” leaving clear spikes in the newspaper, noting that it would be irresponsible not to have alternative plans the Ministry of Finance . In its notification, the former Minister of Finance notes that “During the negotiations, and until the day of the Referendum, the t. Finance Minister. Yanis Varoufakis, as required, and at the behest of Prime Minister, oversaw working group which, coordinator Professor James K. Galbraith , elaborating emergency plan and response of the government to undermine plans by lenders , including the country known extrusion projects outside the eurozone. ”

Former Finance Minister points out that before the announcement that there was such a group accept continuous and intense criticism for the lack of response plan in the country to undermine plans by lenders. He adds, in fact, that “The Bank of Greece (which had, for example, ready PNP plan for a bank holiday), the ECB, the EU country governments, banks and international organizations have such groups and design by 2012. Indeed, it would be of utmost irresponsibility not drafted such plans the Ministry of Finance . ” “Since the t. Minister of Finance, announced the existence of that working group, the media inundated with imaginative “story” that affect the quality of public debate by trying to delineate as a group “conspiring” to restore national currency. This is pure slander.

The working group of the Ministry of Finance has always worked in the government policy and recommendations had as a permanent reference to the public interest, compliance with legality and stay in the country in the eurozone, “noted the statement of Yanis Varoufakis press office. In response to the “Daily report” leaves clear spikes in the newspaper stating that ” the pension “neglected” to request explanations and commentary by Mr. Varoufakis Before publishing inaccurate references to “tapping AFM of all taxpayers.” So, deliberately or not, sowed confusion contributed to widespread misinformation of SMEs “.

“In substance, the report appears to refer to plans of the Ministry of Finance that section. Minister stated boldly in the account at the ministry handover ceremony on July 6 with the following reference: The General Secretariat of Information Systems has started to process how whom taxisnet can become something more than what it is, be a payment system and to third parties, a system that increases efficiency and minimizes arrears of government to citizens and to businesses “noted the statement.

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What I said.

Yanis Varoufakis Admits ‘Contingency Plan’ For Euro Exit (Guardian)

Greece’s former finance minister, Yanis Varoufakis, has been thrust back in the spotlight as he vigorously defended plans to launch a parallel payment system in the event of the country being ejected from the euro. Saying it would have been “remiss” of him not to have a “plan B” if negotiations with the country’s creditors had collapsed, the outspoken politician admitted that a small team under his control had devised a parallel payment system. The secret scheme would have eased the way to the return of the nation’s former currency, the drachma. “Greece’s ministry of finance would have been remiss had it made no attempt to draw up contingency plans,” he said in a statement.

But Varoufakis, who resigned this month to facilitate talks between Athens’ left-led government and its creditors, denied that the group had worked as a rogue element outside government policy or beyond the confines of the law. “The ministry of finance’s working group worked exclusively within the framework of government policy and its recommendations were always aimed at serving the public interest, at respecting the laws of the land, and at keeping the country in the Eurozone,” the statement said. Earlier on Monday the Official Monetary and Financial Institutions Forum, which had organized a conference call between Varoufakis and investors, released a recording of the conversation held between the former minister and financial professionals on 16 July .

Varoufakis is heard saying that he ordered the ministry’s own software programme to be hacked so that online tax codes could be copied to “work out” how the payment system could be designed. “We were planning to create, surrepticiously, reserve accounts attached to every tax file number, without telling anyone, just to have this system in a function under wraps,” he says, adding that he had appointed a childhood friend to help him carry out the plan. “We were ready to get the green light from the PM when the banks closed.” The plan was denounced by Greek opposition parties, which in recent weeks have called for Varoufakis to be put on trial for treason. The academic-turned-politician has been blamed heavily for the handling of negotiations with Greece’s creditors which saw Greece come close to leaving the eurozone.

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” I think he called it wrong, but God knows it was an awesome responsibility – and we may never know who was right.”

Contingency Plans (Paul Krugman)

People are apparently shocked, shocked to learn that Greece did indeed have plans to introduce a parallel currency if necessary. I mean, really: it would have been shocking if there weren’t contingency plans. Preparing for something you know might happen doesn’t show that you want it to happen. Someday, maybe, we’ll know what kind of contingency plans the United States has had over the years. Plans to invade Canada? Probably. Plans to declare martial law in the event of a white supremacist uprising? Maybe. The issue now becomes whether Tsipras was right to decide not to invoke this plan in the face of what amounted to extortion from the creditors. I think he called it wrong, but God knows it was an awesome responsibility – and we may never know who was right.

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Be its own master?!

Greece’s Headache: How To Lift Capital Controls (AFP)

It is just the headache Greece’s government does not need right now: How can it loosen the capital controls that are shielding its banks, but strangling the rest of the economy? For the past month, Greece has been financially cut off from the rest of the world. It is almost impossible for most Greeks to take money out of the country, thanks to a raft of capital control measures put in place on June 29 amid fears of a catastrophic bank run. For companies, the capital controls have meant waiting for a government commission to sign off on large bills owed to foreign firms – a process that has slowed payments so much that distrustful suppliers started asking to be paid in advance.

Bank of Greece chief Yannis Stournaras on Friday loosened the restrictions to allow banks to greenlight companies’ foreign payments up to €100,000 But people remain unable to open new foreign bank accounts, buy shares, or transfer large sums of money. Athens is tolerating two main exceptions to the rules: Greek students abroad can receive €5,000 per quarter, while citizens having medical treatment in other countries can receive up to €2,000. Cash withdrawals were limited to €60 per day after Greeks emptied ATMs, worried for the safety of their savings. Greek Economy Minister Giorgos Stathakis warned on July 12 that it could be “several months” before it is deemed safe to lift the measures completely.

Announced in the throes of the crisis, when Greece appeared to be teetering on the brink of a chaotic eurozone exit, the capital controls were brought in with just one immediate concern in mind: protect the banks. Some €40 billion euros have left the banks’ coffers since December. As the world waits to see whether Greece and its creditors can hammer out a bailout worth up to €86 billion, staving off a panicked outpouring of the country’s cash remains a paramount concern. According to Diego Iscaro, an economist at consultancy IHS, the problem with capital controls is that they are “easy to implement but very difficult to lift.” Or as Moody’s analyst Dietmar Hornung put it: “Confidence (in the banks) is lost quickly, but it takes time to restore it.”

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“Apparently (and unfortunately), this is not a joke.”

Germany Rides Into Its Greek Colony On The “Quadriga” (Zero Hedge)

With creditors’ motorcades having officially returned to the streets of Athens in the wake of Greek lawmakers’ approval of the second set of bailout prior actions last Wednesday, tensions are understandably high. After all, these are the same “institutions” which Yanis Varoufakis famously booted from Greece after Syriza swept to power in January, and they’ve come to represent the oppression of the Greek people and are now a symbol of the country’s debt servitude. Although an absurd attempt was made to rebrand the dreaded “troika” earlier this year, the new and rather amorphous moniker – “the institutions” – never really stuck and perhaps because everyone involved felt the need to put a new name to the group that Greeks regard as the scourge of the Aegean in order to make negotiators feel safer on their trips to Athens, creditors have now added the ESM to their collective and rebranded themselves “The Quadriga.” Apparently (and unfortunately), this is not a joke. Here’s MNI:

The source from the Commission also noted that the group formerly known as Troika is now being renamed as “Quadriga”, to note the inclusion of the ESM in the talks. “Quadriga is the name inspired by Commission President, Jean-Claude Juncker for the new Greek project” the Commission source said, adding that “the EU side is a bit nervous of not knowing the IMF stance.”

We assume the reference to the IMF’s “stance” there refers to the size of the bailout and the prospects for debt relief and not to the new nickname choice, but whatever the case, here’s the definition of “quadriga” from Wikipedia:

A quadriga (Latin quadri-, four, and iugum, yoke) is a car or chariot drawn by four horses abreast (the Roman Empire’s equivalent of Ancient Greek tethrippon). It was raced in the Ancient Olympic Games and other contests. It is represented in profile as the chariot of gods and heroes on Greek vases and in bas-relief. The quadriga was adopted in ancient Roman chariot racing. Quadrigas were emblems of triumph; Victory and Fame often are depicted as the triumphant woman driving it. In classical mythology, the quadriga is the chariot of the gods; Apollo was depicted driving his quadriga across the heavens, delivering daylight and dispersing the night.

We’re not sure what’s more ironic there, the fact that an image which once appeared on Greek ceramics is now the symbol of serfdom or the fact that it’s the “chariot of the gods”, who in this case would be eurocrats and IMF officials. As amusing – and somewhat sad – as this is, perhaps the most tragically ironic part of the entire rebranding effort is that one of the most significant representations of a quadriga the world over sits atop the Brandenburg Gate in Berlin.

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IMF tells China central bank to cool it down, and at the same time tells ECB to turn up the heat. Vested interests?!

IMF Paints Dim Europe Picture, Says More Money Printing May Be Needed (Reuters)

The IMF warned on Monday that the euro zone’s prospects were modest and that more money printing than planned may be needed. Contrasting the IMF’s relative gloom, however, German think tank Ifo reported improving confidence the 19-country bloc’s largest economy. The IMF, saying medium-term growth would be subdued, urged the ECB to keep its money presses rolling, perhaps beyond the target late next year. “The important thing is that the ECB intends to stay the course until September 2016 and that, we think, will be necessary,” said Mahmood Pradhan, deputy director of the IMF’s European department, referring to QE. Letting the €1 trillion plus scheme to buy chiefly government bonds run longer could be better still, he suggested. “It may need to go beyond that,” he said.

Worries about the global economy, prompted by a slowdown in China where shares slid more than 8% on Monday , are weighing on many countries in Europe. Manufacturing confidence in the Netherlands, with huge exposure to international trade though several of Europe’s largest ports, slipped back in July, reflecting pessimism among companies over the prospects for the coming three months. Finnish consumer and industry confidence also weakened in July compared to the previous month. But the data was mixed, with the positive Ifo report on German business confidence after two monthly drops and the ECB reporting a boom in lending for home buyers, which could bolster the bloc’s economy.

The ECB also said is M3 measure of money circulating in the euro zone, which is often an early indicator of future economic activity, grew by 5.0% in June, in line with the previous month. But lending to companies fell by 0.2% in June. This was a slower pace of decline for the 11th month in a row, but still suggested most of the ECB’s largest is going to consumers not companies. In its report on the euro zone, the IMF said that the bloc was getting stronger thanks to lower oil prices, a weaker euro and central bank action, but that medium-term prospects were for an average potential growth of just 1%. The IMF said euro area GDP should accelerate to 1.7% next year from 1.5% in 2015, with inflation of 1.1% from zero.

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“In essence, Germany established that some democracies are more equal than others.”

How the Greek Deal Could Destroy the Euro (NY Times)

Indeed, the European institutions led by Germany seem to have decided that waging an ideological battle against a recalcitrant and amateurish far-left government in Greece should take precedence over 60 years of European consensus built painstakingly by leaders across the political spectrum. By imposing a further socially regressive fiscal adjustment, the recent agreement confirmed fears on the left that the EU could choose to impose a particular brand of neoliberal conservatism by any means necessary. In practice, it used what amounted to an economic embargo — far more brutal than the sanctions regime imposed on Russia since its annexation of Crimea — to provoke either regime change or capitulation in Greece. It has succeeded in obtaining capitulation.

Through its actions, Germany has made a broader political point about the governance of the euro. It has confirmed its belief that federalism by exception — the complete annihilation of a member state’s sovereignty and national democracy — is in order whenever a eurozone member is perceived to challenge the rules-based functioning of the monetary union. In essence, Germany established that some democracies are more equal than others. By doing so, the agreement has sought to remove politics and discretion from the functioning of the monetary union, an idea that has long been very dear to the French.

The negotiations leading to the Greek agreement also destroyed the constructive ambiguity created by the Maastricht Treaty by making it absolutely clear that Germany is prepared to amputate and obliterate one of its members rather than make concessions. Germany appears to believe that the single currency ought to be a fixed exchange-rate regime or not exist at all in its current form, even if this means abandoning the underlying project of political integration that it was always meant to serve. Finally, and perhaps most importantly, Germany signaled to France that it was prepared to go ahead alone and take a clear contradictory stand on a critical political issue.

This forceful attitude and the several taboos it broke reveal that the currency union that Germany wants is probably fundamentally incompatible with the one that the French elite can sell and the French public can subscribe to. The choice will soon be whether Germany can build the euro it wants with France or whether the common currency falls apart. Germany could undoubtedly build a very successful monetary union with the Baltic countries, the Netherlands and a few other nations, but it must understand that it will never build an economically successful and politically stable monetary union with France and the rest of Europe on these terms.

Over the long run, France, Italy and Spain, to name just a few, would not take part in such a union, not because they can’t, but because they wouldn’t want to. The collective GDP and population of these countries is twice that of Germany; eventually, a confrontation is inevitable.

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Yeah, but which banks? Only the Greek ones? Would that suffice? How about the rest of Europe?

The Way To Fix Greece Is To Fix The Banks (Coppola)

Successive bailout strategies for Greece have failed to grasp the nettle of the zombie banks. The banking sector is highly concentrated, with 90% of banking assets held by four players — Alpha Bank, Eurobank, Piraeus Bank and National Bank of Greece (not to be confused with Bank of Greece, which is the central bank). All four required recapitalisation in 2012 when the “public sector involvement” restructuring impaired their holdings of Greek sovereign debt. The funds to do this were provided by eurozone and IMF creditors via the Hellenic Financial Stability Fund, the entity created in 2010 to channel bailout funds to banks. The HFSF now holds majority stakes in all four. However, recapitalising did not mean restructuring them. Nor did it mean ensuring good practice in balance sheet management.

Although the proximate cause of the 2012 bailout was the PSI, their performance had declined sharply since 2008 and they have been persistently lossmaking since about 2010. The biggest single-year loss was in 2012, but the underlying decline in profitability is actually far more damaging both to the banks themselves and to the Greek economy. The headline explanation for the banks’ problems is lack of liquidity. From 2009, successive credit rating downgrades of their own bonds and Greek sovereign debt increased their cost of funding at the same time as deposit flight increased their need of it. They lost market access in 2009 and have since relied entirely on eurosystem aid, both funding from the ECB and emergency liquidity assistance from Bank of Greece. Since March 2015, only ELA has been available, and this is currently capped by the ECB.

The banks’ dependence on official sector liquidity makes it easy to claim that their problems are caused by the restriction of it — what the former Greek finance minister Yanis Varoufakis called “asphyxiation”. Although providing liquidity beyond their credit appetite does not increase lending, restricting liquidity does force them to avoid activities that could create funding gaps. Lending, by its very nature, creates a funding gap: if banks are not confident of being able to obtain the funding to settle loan drawdowns, they will not lend. But liquidity restriction is not the whole story. The other side of the banks’ balance sheets is also to blame for the credit crunch. Since 2009, non-performing loans have risen considerably and now make up at least a third of Greek bank assets: some estimates put the figure as high as 50%.

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They can start with Greece then.

France Wants To Outlaw Discrimination Against The Poor (Guardian)

In France it could soon be illegal to discriminate against people in poverty. Under proposed legislation – already approved by the senate and likely to be passed by the chamber of deputies – it would be an offence in France to “insult the poor” or to refuse them jobs, healthcare or housing. Similar laws banning discrimination on the grounds of social and economic origin already exist in Belgium and Bolivia, but the French version is said to be the most far-reaching. Anyone found guilty of discrimination against those suffering from “vulnerability resulting from an apparent or known economic situation” would face a maximum sentence of three years in prison and a fine of €45,000.

It is easy to judge the proposed French law as showing the worst excesses of the state, or to bemoan the practicalities of how difficult it could be to implement. But most of us are content to outlaw discrimination on the grounds of race, religion, or sex. Is it so ridiculous to add poverty to that list? And if it does feel ridiculous, why is that? Whether it’s the discrimination of people in poverty or how government should respond to it, this is not a problem just for other countries. “People think that because we are poor, we must be stupid,” Oréane Chapelle, an unemployed 31-year-old from Nancy told Le Nouvel Observateur. Micheline Adobati, 58, her neighbour, who is a single mother with no job and five children, said: “I can’t stand social workers who tell me that they’re going to teach me how to have a weekly budget.”

One study reported by The Times found that 9% of GPs, 32% of dentists and 33% of opticians in Paris refused to treat benefit claimants who lacked private medical insurance. Doctors say they are “reluctant to take on such patients for fear that they will not get paid”. Does any of this sound familiar? These are attitudes – and even outright discrimination – that have been growing in Britain for some time. You can hear it in stories about local authorities monitoring how much people drink or smoke before awarding emergency housing payments. Or when politicians respond to a national food bank crisis by saying the poor are going hungry because they don’t know how to cook. It is there in the fact that it’s now all too common for landlords to refuse to rent flats to people on benefits. Britain is front and centre of its own discrimination of the poor – whether that’s low-income workers, benefit claimants, or the recurring myth that these are two separate species.

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Another farce that keeps on giving.

Dutch Journalist, MH17 Expert: ‘UN Tribunal Attempt to Hide Kiev’s Role’ (RI)

The proposed UN-backed MH17 tribunal is a “desperate attempt to hide Kiev’s responsibility”, Dutch journalist and blogger Joost Niemoller argues in his post “How Chess Player Putin Wins the MH17 Game”. Niemoller is no layman. In October 2014 he published a book on the MH17 disaster whose title De Doofpotdeal (“The Cover Up Deal”) summarizes its key argument. The inside flap explains what the author means:

“The Netherlands took charge of the investigation into the cause of the disaster, but agreed to grant a covert deal to Kiev. It thus became a pawn in an international political chess game. Unvarnished Cold War rhetoric is making a comeback. Putin here is the ultimate bad guy. What he says is labeled as poisonous propaganda in the West. Meanwhile, it seems, all those concerned suffer from tunnel vision. Can we still be assured that the investigators do their work independently and objectively?”

In his piece, Niemoller laments the shortcomings of the Dutch Safety Board, the body charged with conducting the investigations on the MH17 disaster. The ever-postponed deadline – the final report might be released at the end of the year, hence one and a half year after the crash, but that too is still uncertain – he finds perplexing:

“When the co-operating countries, the JIT (Joint Investigation Team), intend to complete their probe, is not known. Then, something gets leaked to the press: ‘At the end of this year’. With which legal framework? It is not yet known. Under which conditions? No idea. How will the co-operation between the Ukrainian, the JIT and Dutch Safety Board unfold?” “Everything is vague and secret. That is not the way it should be for such an important study.”

Niemoller contrasts this with the approach taken by Moscow:

“Russia proposed last year to conduct an international study based on research carried out by the UN – and not by means of a secret deal of countries, where one of the possible culprits, namely Ukraine, has veto power.”

Niemoller, a Dutchman, laments the dubious role of his country, especially when considering that it was the one affected most by the MH17 tragedy: 193 of the 298 victims were Dutch. And yet, Niemoller says:

“What we know for sure is that the Netherlands from day zero intensely cooperates with Kiev. What we know is that the Russians are kept out and that there is a blame game played against Putin.”

Now Niemoller focuses his attention on the role Russia is about to play. He argues that Moscow holds all the cards, and that Kiev & co apparently hold none:

“When the Russians said that if a BUK had been fired by the separatists, they would have certainly seen it on their radar, the Russians indicated that they know much more”. “After a year, there is still no evidence of that alleged separatist Buk on the table. Kindergarten-level work from Bellingcat has been dismissed. And there was no ‘Buk-track’ through the Donbas region.”

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“..1) our society faces a crisis, and 2) the existing political parties are not up to the task of comprehending what society faces.”

Potemkin Party (Jim Kunstler)

The “to do” list for rearranging the basic systems of daily life in America is long and loaded with opportunity. Every system that is retooled contains jobs and social roles for people who have been shut out of the economy for two generations. If we do everything we can to promote smaller-scaled local farming, there will be plenty of work for lesser-skilled people to do and get paid for. Saying goodbye to the tyranny of Big Box commerce would open up vast vocational opportunities in reconstructed local and regional networks of commerce, especially for young people interested in running their own business.

We need to prepare for localized clinic-style medicine (in opposition to the continuing amalgamation and gigantization of hospitals, with its handmaidens of Big Pharma and the insurance rackets). The train system has got to be reborn as a true public utility. Just about every other civilized country is already demonstrating how that is done — it’s not that difficult and it would employ a lot of people at every level. That is what the agenda of a truly progressive political party should be at this moment in history. That Democrats even tolerate the existence of evil entities like WalMart is an argument for ideological bankruptcy of the party. Democratic Presidents from Carter to Clinton to Obama could have used the Department of Justice and the existing anti-trust statutes to at least discourage the pernicious monopolization of commerce that Big Boxes represented.

By the same token, President Obama could have used existing federal law to break up the banking oligarchy starting in 2009, not to mention backing legislation to more crisply define alleged corporate “personhood” in the wake of the ruinous “Citizens United” Supreme Court decision of 2010. They don’t even talk about it because Wall Street owns them. So, you fellow disaffected Democrats — those of you who can’t go over to the other side, but feel you have no place in your country’s politics — look around and tell me who you see casting a shadow on the Democratic landscape. Nobody. Just tired, corrupt, devious old Hillary and her nemesis Bernie the Union Hall Champion out of a Pete Seeger marching song.

I’ve been saying for a while that this period of history resembles the 1850s in America in two big ways: 1) our society faces a crisis, and 2) the existing political parties are not up to the task of comprehending what society faces. In the 1850s it was the Whigs that dried up and blew away (virtually overnight), while the old Democratic party just entered a 75-year wilderness of irrelevancy. God help us if Trump-o-mania turns out to be the only alternative. Oh, by the way, notice that the lead editorial in Monday’s New York Times is a plea for transgender bathrooms in schools. What could be more important?

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The western model has died.

It’s Really Very Simple (Dmitry Orlov)

The old world order, to which we became accustomed over the course of the 1990s and the 2000s, its crises and its problems detailed in numerous authoritative publications on both sides of the Atlantic—it is no more. It is not out sick and it is not on vacation. It is deceased. It has passed on, gone to meet its maker, bought the farm, kicked the bucket and joined the crowd invisible. It is an ex-world order. If we rewind back to the early 1980s, we can easily remember how the USSR was still running half of Europe and exerting major influence on a sizable chunk of the world. World socialist revolution was still sputtering along, with pro-Soviet regimes coming in to power here and there in different parts of the globe, the chorus of their leaders’ official pronouncements sounding more or less in unison.

The leaders made their pilgrimages to Moscow as if it were Mecca, and they sent their promising young people there to learn how to do things the Soviet way. Soviet technology continued to make impressive advances: in the mid-1980s the Soviets launched into orbit a miracle of technology—the space station Mir, while Vega space probes were being dispatched to study Venus. But alongside all of this business-as-usual the rules and principles according which the “red” half of the globe operated were already in an advanced state of decay, and a completely different system was starting to emerge both at the center and along the periphery. Seven years later the USSR collapsed and the world order was transformed, but many people simply couldn’t believe in the reality of this change.

In the early 1990s many political scientists were self-assuredly claiming that what is happening is the realization of a clever Kremlin plan to modernize the Soviet system and that, after a quick rebranding, it will again start taking over the world. People like to talk about what they think they can understand, never mind whether it still exists. And what do we see today? The realm that self-identifies itself as “The West” is still claiming to be leading economically, technologically, and to be dominant militarily, but it has suffered a moral defeat, and, strictly as a consequence of this moral defeat, a profound ideological defeat as well. It’s simple.

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Dec 262014
 
 December 26, 2014  Posted by at 9:23 pm Finance Tagged with: , , , , , ,  


Dorothea Lange Drought hit OK farm family on way to CA Aug 1936

From just about as early in my life as I can remember, growing up as a child in Holland, there were stories about World War II, and not just about Anne Frank and the huge amounts of people who, like her, had been dragged off to camps in eastern Europe never to come back, but also about the thousands who had risked their lives to hide Jewish and other refugees, and the scores who had been executed for doing so, often betrayed by their own neighbors.

And then there were those who had risked their lives in equally courageous ways to get news out to people, putting out newspapers and radio broadcasts just so there would be a version of events out there that was real, and not just what the Germans wanted one to believe. This happened in all Nazi – and Nazi friendly – occupied European nations. The courage of these people is hard to gauge for us today, and I’m convinced there’s no way to say whom amongst us would show that kind of bravery if we were put to the test; I certainly wouldn’t be sure about myself.

Still, without wanting to put myself anywhere near the level of those very very real heroes, please don’t get me wrong about that, that’s not what I mean, I was thinking about them with regards to what is happening in our media today. I’ve mentioned before that I don’t think Joseph Goebbels had anything on US and European media today.

That propaganda as a strategic and political instrument has been refined to a huge extent over the past 70-odd years since Goebbels first picked up on Freud’s lessons on how to influence the unconscious mind, and the ‘mass-mind’, as a way to ‘steer’ an entire people, not just as a means to make them buy detergent. These days, the media can make people believe just about anything, and they have the added benefit that they can pose as friends of the people, not the enemy.

But there is a reason why such a large ‘industry’ has developed on the web with people writing articles that don’t say what the mass media say. That reason for is, obviously, first and foremost that not everybody believes whatever they are told. The problem is equally obvious: not nearly enough people are being reached to make a true difference, and to question the official narratives.

Me, I have no claim to fame outside of the appreciation I get from first, my readers and second, from my colleagues and peers. I get a lot of both, and I thank you for that, but this certainly is not about me. If anything, it’s about trying to live up to the desire for truth in the face of odds squarely stacked against it, and against the people I try to reach out to. Trying to do just 0.1% of what the WWII underground press was about.

A few days ago, I wrote in About That Interview :

The FBI claims they are certain the hackers are North Korean, but they have provided no proof of that claim. We have to trust them on their beautiful blue eyes. I think if anything defines 2014 for me, it’s the advent of incessant claims for which no proof – apparently – needs to be provided. Everything related to Ukraine over the past year carries that trait. The year of ‘beautiful blue eyes’, in other words. Never no proof, you just have to believe what your government says.

And that truly defines 2014 for me. A level of propaganda I don’t recognize, and I don’t think I’ve ever seen before. 2014 has for me been the year of utter nonsense. To wit, it just finished in fine form with a 5% US GDP growth number, just to name one example. Really, guys? 5%? Really? With all the numbers presented lately, the negative Thanksgiving sales data – minus 11% from what I remember -, the so-so at best Christmas store numbers to date, shrinking durable goods in November and all? Plus 5%?

It really doesn’t matter what I say, does it? You have enough people believing ridiculous numbers like that to make it worth your while. After all, that’s all that counts. It’s a democracy, isn’t it? If a majority believes something, it becomes true. If you can get more than 50% of people to believe whatever you say, that’s case closed.

With well over 90 million working age Americans counted as being out of the labor force, and with 43 million on food stamps, you can still present a 5% GDP growth number, if only you can get a sufficiently large number of people to ‘believe’. And you do, I’ll give you that. As far as the media goes, we have achieved the change we can believe in. We may not have that change, but we sure do believe we have, don’t we? And isn’t that what counts? Are congratulations in order?

Well, not where I’m at, they’re not. I should do a shout out to the likes of Zero Hedge, Yves Smith, David Stockman, Wolf Richter, Mish, Steve Keen, Jim Kunstler, and so many others, we’re a solid crowd by now even if we’re neglected, and please don’t feel left out if you’re not in that list, I know who you are. The problem is, we’re all completely neglected by the mass media, even though there are a ton of very sharp minds in this ‘finance blogosphere’. And perhaps we should make it a point to break through that ridiculous black-out in 2015.

2014, in my eyes, has been the year of propaganda outdoing even its own very purpose, and succeeding too. We are supposed to be living in a time of the best educated people in the history of mankind, and everyone thinks (s)he’s mighty smart, but precious few have even an inkling of a clue of what transpires in the world they live in. Talk about a lost generation. Or two.

We really need to question the value of higher education, if all we get for it is a generation of people so easily duped by utter blubber. What do they teach people at our universities these days? Certainly not to think for themselves, that much is clear. And then what is the use? Why spend all that time raising an entire generation of highly educated pawns, sheep and robots? I can think of some people liking that, but for society as a whole, it’s devastating if that’s all higher education is.

And if you would like to raise doubts here, the very existence of finance blogosphere I mentioned before is proof that we indeed have raised a generation of sheep. If we had functioning media, there’d be no need for that blogosphere. We are the people who keep on pointing out where the mass media fail, let alone the politicians, simply by being there and being supported to the extent we are by the few people who escape the sheep mentality.

But that’s not nearly enough. Journalists, reporters, whatever they call themselves, working for Bloomberg, Reuters, CNBC etc. should at the very least quote Zero Hedge on a daily basis, and Mish, and Steve, and Yves, and perhaps even me – though it’s fine if they continue to ignore me, as long as they give the rest their rightful place.

There are many people in the blogosphere who are many times smarter than the people who write for the mass media, and that’s a very simple and hardly disputable fact that needs to be recognized. When you read something in your paper or at your online news provider, it should be second nature to ask yourself: but what would Tyler Durden say, or the Automatic Earth, or Naked Capitalism, or David Stockman?

But we’re nowhere near that, are we? We’ve been fooled with economic stats for years, not just in the US, not even just in the west, but all over, they all grabbed on to the potential of providing people with numbers that have little to do with reality, but that simply feel good. Or even just look good.

Still, boy, have we been, and are we being, fooled. Then again, most of you wouldn’t know, would you? We people tend to discount the future, to see today as more important than tomorrow, and in the same manner we find our children’s future much less important than our own. Because that feels good too. If we are comfy right now, screw them. Not that we’d ever put it into those terms.

But you know, that’s really all old hack by now. 2014 brought us a whole other class of nonsense. And we swallowed it all hook line and entire sinker.

2014 gave us Ukraine. And you just try and find anyone today who doesn’t think Vladimir Putin is and was the evil genius mind behind the whole thing, including the 4500+ people who died there over the past 10 months. Why is it so hard to anyone who doubts that narrative? Because our media told us Putin is the bogeyman. And ‘we’ never asked for any proof. That is, except for those of us in that same blogosphere.

Meanwhile, round after round of sanctions against Russia have been set up and activated by EU and US, causing hardship for both Russian people and European businesses. But why, what exactly is Putin allegedly guilty of?

The US/EU installed a government in Kiev in February (yeah, yap about it), which is still in place, with a bunch of US citizens recently added for good measure – and for profit-. The chocolate prince president was indeed elected months later, but the prime minister – Yats – was handpicked by America, and is still -amazingly – in place. That’s the same government that had it own army murder thousands of its own citizens, and not a thing has been resolved so far.

The whole thing came to a head when MH17 was shot down over the summer. That too was blamed on Putin. Or was it? Well, not directly, nobody said Putin ordered that plane to be shot. Nor did anyone say Russia shot it. There is the accusation that Russian speaking Ukrainian ‘rebels’ did it, but proof for that was never provided in the 6 months since the incident. And there must be a best before date in there somewhere.

Is it possible the ‘rebels’ did it? We can’t exclude it, but that’s for the same reason we can’t exclude the option that little green Martians did it: we don’t know. But even then, even if they did, there’s the question whether that would have been on purpose. Which seems really stretching it: nothing they want would be served by shooting down a plane full of European, Malaysian and Australian holiday goers.

But here we are: no proof and layer upon layer of sanctions. And nary a voice is raised in the west. If one is, it’s to denounce the Russians as bloodthirsty barbarians. Even though there is no proof they did anything other than protecting what they see as their own people. Something we all would do too, no questions asked.

Ukraine defines 2014 as the year western propaganda came into its own. Not just fictional stories about an economic recovery anymore, no, we had our politico-media establishment ram an entire new cold war down our throats. And we swallowed it whole. We may have had a million more years of higher education than our parents and grandparents, but we sure don’t seem to have gotten any smarter than them.

There is a lot of information out there, written by people inspired by things other than monetary incentives or job security or anything like that, people who simply want to get information out that your trusted media won’t give you anymore than Goebbels’ media did in occupied Europe in the 1940s. And you don’t even have to risk your lives to access that information. All you have to do is to get off your couch.

The Automatic Earth is but a small part of a very valuable and fast growing resource that warrants a lot more attention than it’s been receiving to date. A reported 5% US GDP growth print is one reason why, the entire Ukraine fantasy story is another. The blogosphere is full of functioning neurons, which is more than you can say for your papers and online MSM.

As far as media is concerned, 2014 has been downright scary in its distortion of reality. Let’s try and move 2015 a little bit closer towards what’s actually happening.

Dec 252014
 
 December 25, 2014  Posted by at 1:18 pm Finance Tagged with: , , , , , , , , ,  


Harris&Ewing President Hoover lights Nation’s Capital community Xmas tree Dec 24 1929

US Retailers May Only Just Meet Holiday Sales Forecasts (Reuters)
Oil Tanks On Surge In US Supply And Imports (CNBC)
Oil Slide ‘Turbocharging’ Airline Profits (CNBC)
Make No Mistake, the Oil Slump Is Going to Hurt the US Too (Katusa)
France Has Never Had This Many Unemployed People Before (Reuters)
Why Everyone Is About To Rush Into Subprime Mortgage Debt – Again (Zero Hedge)
UK Growth Revised Down As Current Account Deficit Soars (Guardian)
Italian Government Steps In To Save Giant Steel Plant (BBC)
Russia Claims To Have New Proof Ukraine Involved In Downing Of MH17 (AFP)
Putin Calls For Cap On Vodka Prices Amid Economic Crisis (BBC)
5 Reasons Not To Retire In The US (MarketWatch)
Are Americans Prepared For A Soviet Style Collapse? (Dmitry Orlov)
Supertrawlers To Be Banned Permanently From Australian Waters (Guardian)
Germans Balk At Plan For Wind Power Lines (NY Times)
How France Has Forgotten The Christmas Truce Soldiers (BBC)

But GDP grew at 5% in Q3?!

US Retailers May Only Just Meet Holiday Sales Forecasts (Reuters)

U.S. consumers have not turned out in force for the final shopping days before Christmas, suggesting that traditional retailers will just meet industry sales forecasts in a season marked by deep discounts and growing encroachment from online rivals led by Amazon. Super Saturday – the last pre-Christmas Saturday, which fell on Dec. 20 this year – failed to make up for spotty performance this season. That included a disappointing Black Friday, the day after the U.S. Thanksgiving holiday that is typically one of the busiest shopping days of the year. “The past weekend will not save this holiday season,” said Craig Johnson, president of the retail and consumer product-oriented private equity fund Customer Growth Partners. “But combined with online sales, it would certainly save the year from being a dismal one.” Johnson said if sales hold up in the next few days and the week after Christmas, retailers may finish close to his company’s November and December forecast of 3.4% growth in store and online sales.

He estimates that Super Saturday weekend sales, which include store and online, rose 2.5% to $42 billion this year. The National Retail Federation (NRF), the leading industry trade body, forecast a 4.1% rise in holiday sales this year, including online and store sales. The NRF is hoping to meet its expectations amid falling gasoline prices, lower U.S. unemployment and consumer spending which showed signs of increasing during the first two weeks of December. Promotions heated up in the past five days but that did not boost store traffic materially, said Keith Jelinek, senior managing director of FTI Consulting. Most retailers offered an additional 20-30% off on top of 30-40% discounts on a wide range of products, Reuters found during a series of visits to three dozen stores in Chicago over the weekend.

Analytics firm RetailNext, which tracks specialty stores and large footprint retailers, said sales dropped 8.9% over the weekend versus a year ago, and store traffic dipped 10.2%. However, customers who did hit the stores spent more. Specialty stores in the United States include chains like Best Buy and large footprint retailers include Wal-Mart and Target. “Even with this drop in growth, Super Saturday was still better compared to Black Friday,” said Shelley Kohan, vice president of retail consulting at RetailNext. “It generated a tad more in terms of sales on slightly less traffic.” Promotions earlier in November took a toll on in-store sales during the Thanksgiving weekend, when total spending fell by 11% from a year earlier.

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What a great time to increase imports!

Oil Tanks On Surge In US Supply And Imports (CNBC)

Oil futures plunged Wednesday on a government report showing a surge in supplies of U.S. oil and a record level of gasoline production. The U.S. is awash in oil, with record levels of production meeting a rising tide of imports. The U.S. Department of Energy said oil stocks rose by 7.26 million barrels, while analysts had expected a decline of 1.8 million barrels. West Texas Intermediate futures for February, already sliding, took another leg lower after the report, which also showed a 4.1 million barrel build in gasoline, more than six times the expected amount. WTI was off more than 3% to $55.40 per barrel, and Brent slid once more below $60 a barrel. “Refiners produced the highest amount of gasoline ever reported by the EIA — 9.92 million barrels per day,” noted Andrew Lipow, president of Lipow Oil Associates.

He said refiners produced the second-highest amount of distillate fuel ever, at 5.24 million barrels per day, second only to 5.26 million barrels a day in December 2013. Refineries were also running at a high rate, with utilization at 93.5%. “To be able to build crude inventories like that in the face of a 93.5% utilization rate is remarkable. Imports are also rebounding,” said John Kilduff of Again Capital. He said imports of crude rose to 8.3 million barrels per day from 7.1 million the previous week. “Imports were much higher than the market expected, and we saw it in Gulf Coast inventories,” said Lipow. U.S. production slipped slightly to 9.13 million barrels a day from 9.14 million barrels a day. “If I had to guess (on the increase in imports), it was Saudi barrels headed for the Gulf Coast as part of their shock and awe,” said Kilduff.

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We have to doubt this. Or at least, there’s more to it.

Oil Slide ‘Turbocharging’ Airline Profits (CNBC)

Airline profits are set to soar as oil prices remain suppressed when the big four are already flying high, aviation consultant and author Mark Gerchick told CNBC’s “Squawk Box” on Wednesday. “The bigger picture here is oil is turbocharging an industry that has already figured out how to make a profit at $100 a barrel of oil. It’s a boost, and it keeps on giving,” the former Department of Transportation official said. The cost of crude oil is down nearly 50% from highs touched in June.

Prior to the plummet in oil, airline companies had already become more focused on their bottom lines as they sought to pack planes in a so-called process of “densification,” Gerchick said. The focus on the high-end business traveler and fare increases have also changed the revenue picture, he added. There are few signs of a price war, as the four major players in the market — American Airlines, Delta, United, and Southwest Air — have all said they will not add capacity, he said. Gerchick also see little chance of new players entering the market in 2015.

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As noted a hundred times by now.

Make No Mistake, the Oil Slump Is Going to Hurt the US Too (Katusa)

If you only paid attention to the mainstream media, you’d be forgiven for thinking that the US is going to get away from the collapse in oil prices scot free. According to popular belief, America is even going to be a net winner from cheaper oil prices, because they will act like a tax cut for US consumers. Or so we are told. In reality, though, many of the jobs the US energy boom has created in the last few years are now at risk, and their loss could drag the economy into a recession. The view that cheaper oil automatically boosts US GDP is overly simplistic. It assumes that US consumers will spend the money they save at the pump on US-made goods rather than imports. And it assumes consumers won’t save some of this windfall rather than spending it.

Those are shaky enough. But the story that cheap fuel for our cars is good for us is also based on an even more dangerous assumption: that the price of oil won’t fall far enough to wipe out the US shale sector, or at least seriously impact the volume of US oil production. The nightmare for the US oil industry is that the only way that the market mechanism can eliminate the global oil glut—without a formal agreement between OPEC, Russia, and other producers to cut production—is if the price of oil falls below the “cash cost” of production, i.e., it reaches the price at which oil companies lose money on every single barrel they produce. If oil doesn’t sink below the cash cost of production, then we’ll have more of what we’re seeing now.

US shale producers, like oil companies the world over, are only going to continue to add to the global oil glut—now running at 2-4 million barrels per day—by keeping their existing wells going full tilt. True, oil would have to fall even further if it’s going to rebalance the oil market by bankrupting the world’s most marginal producers. But that’s what’s bound to happen if the oversupply continues. And because North American shale producers have relatively high cash costs (in the $30 range), the Saudis could very well succeed in making a big portion of US and Canadian oil production disappear, if they are determined to. In this scenario, the US is clearly headed for a recession, because the US owes nearly all the jobs that have been created in the last few years to the shale boom. All those related jobs in equipment, manufacturing, and transportation are also at stake. It’s no accident that all new jobs created since June 2009 have been in the five shale states, with Texas home to 40% of them.

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Bring on Le Pen.

France Has Never Had This Many Unemployed People Before (Reuters)

More people were unemployed in France in November than ever before, data showed on Wednesday, highlighting continued weak activity in the eurozone’s second-largest economy. The Labour Ministry said the jobless total in mainland France rose by 27,400 to 3.49m in November, a 0.8pc% increase over one month and 5.8pc over one year. The rise was sharpest among unemployed aged 50 or over, up 11pc on the year. President Francois Hollande has seen his popularity fall to the lowest ratings in French polling history, with a key factor being his failure to live up to promises to tackle unemployment.

The jobless increase in November was the third monthly gain in a row after a slight fall in unemployment in August. The French government had been counting on a pick-up in business activity in the second half but has cut its 2014 economic growth estimate to 0.4pc from 1pc previously after the economy stagnated in the first half. Data on Tuesday showed a slight rebound in consumer spending in November while the government confirmed its estimate of GDP growth at just 0.3pc in the third quarter of the year.

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“A lot of the uncertainty around the asset class has been taken away ..”

Why Everyone Is About To Rush Into Subprime Mortgage Debt – Again (Zero Hedge)

If there is one thing the investing public has ‘learned’ in the last few years, it is ‘no matter how bad the fundamentals, if it’s been working, buy moar of it’. And so, it is with almost certain confidence that we should expect a resurgent flood of yield-chasing muppetry into no more egregious idiocy than the subprime-mortgage-debt market. As Bloomberg reports, the subprime-slime-backed securities that were created in the years before the financial crisis in 2008, which marked the last time they were issued, have gained almost 12% this year, or six times more than junk-rated corporate debt, according to Barclays. As one money ‘manager’ proclaims, “a lot of the uncertainty around the asset class has been taken away.” Indeed, home prices will never go down ever again, right? (Just ignore this and this) As Bloomberg reports,

Remember when nobody wanted to touch U.S. subprime-mortgage debt? That’s just a distant memory as it delivers some of the bond market’s best returns. The securities that were created in the years before the financial crisis in 2008, which marked the last time they were issued, have gained almost 12% this year, or six times more than junk-rated corporate debt, according to Barclays Plc. After contributing to the collapse of Lehman Brothers Holdings Inc., bonds tied to the riskiest home loans have returned 75% since 2010, topping speculative-grade corporate debt for three straight years.

The reason…

“A lot of the uncertainty around the asset class has been taken away,” Tom Sontag, a money manager at Neuberger Berman Group LLC, which oversees about $250 billion, said by telephone from Chicago.

While almost 30% of the subprime mortgages tied to bonds are at least 60 days delinquent, the %age has fallen from as much as 41% in 2010, data compiled by Bloomberg show. In the broader market for mortgage securities without government backing, which also includes loans known as Alt-A and jumbo debt, the default rate has fallen to 23% from 30% in 2010.

So – because historical default rate trends (in a ZIRP/QE/no-foreclosure environment) has fallen – but remains high – we should back up the truck because all is forgiven on subprime debt. And sure enough, the ‘pitchers’ are out en masse… “get ’em while they’re hot, they’re lovely”

“It’s going away, there’s a dedicated buyer base and there’s strong fundamentals,” said Carl Bell, the Durham, North Carolina-based deputy chief investment officer at Amundi Smith Breeden, the U.S. unit of the money manager that oversees more than $1 trillion globally.

What could go wrong? Oh apart from FHFA’s Mel Watt enabling 3% downpayments and subsidized homes for the poor and needy… Four words – It’s different this time.

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Running out of women and children to squeeze dry?

UK Growth Revised Down As Current Account Deficit Soars (Guardian)

George Osborne’s hopes of using a strengthening economy as the springboard for victory in the general election next May have been dealt a double blow with news of weaker growth during 2013 and 2014 and one of the biggest current account deficits in the UK’s history. With Britain’s recovery from its worst ever recession set to dominate a tightly fought vote next spring, Labour seized on official figures showing it was unlikely that national output would expand this year by the 3% envisaged by the chancellor in the autumn statement. Osborne has claimed in recent weeks that a combination of stronger growth, falling unemployment and a smaller budget deficit have shown that the government’s plan is working and that sticking to the current course is essential.

But the Office for National Statistics said the economy’s performance through much of 2013 and 2014 had been less impressive than was first thought. It left growth unchanged at 0.7% in the third quarter of 2014, but revised down its estimates for the five previous quarters – cutting the annual growth rate in the year up to the third quarter from 3% to 2.6%. With fresh figures showing America’s economy expanding at an annual rate of 5% in the third quarter, it will now be touch and go whether Britain is the fastest growing of the leading G7 industrial nations in 2014. The data from the ONS added spice to the political battle over economic competence when it said gross domestic product per head – one measure of living standards – was rising, but the 0.6% increase in the third quarter left the measure 1.8% below its pre-recession peak.

An alternative measure of national wellbeing – net national disposable income – remained flat in the third quarter and was 5.6% below its pre-recession peak. The measure makes allowances for depreciation and for income generated in the UK that goes to overseas residents. Meanwhile, the UK’s current account – which measures trade in goods and services together with investment income and payments to multinational bodies – was in the red by £27bn in the July to September quarter. At 6% of gross domestic product, the current account deficit is now higher than it was during the so-called Lawson boom at the end of the 1980s, its previous peak.

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Nice double sided conundrum to have.

Italian Government Steps In To Save Giant Steel Plant (BBC)

The Italian government is intervening in the management of Europe’s biggest steel plant, in an attempt to reform the beleaguered business. A commissioner will be appointed to manage the site in Taranto and could have the task of preparing its sale. Ilva, which is a major employer in the southern Italy, has faced criticisms over its environmental record. Toxic emissions from the Ilva plant have been blamed for unusually high rates of cancer in the area. The privately-owned plant, Europe’s biggest in terms of output capacity, employs at least 14,000 people. Ilva has been making a loss for years and was placed in special administration last year.

Italy’s Prime Minister Matteo Renzi also committed the government to clearing up the polluted areas surrounding the plant, in order to protect children in Taranto, the coastal town in which Ilva is based. The European Commission said in October that the Tamburi area of the town in particular was contaminated and urged the government to take action. Mr Renzi said that the government would consider nationalising the plant and selling it on, if a buyer could be found who promised to protect jobs. “I forecast maximum state intervention of 36 months to clean up Ilva and relaunch it,” he told reporters. The international steel giant ArcellorMittal has reportedly expressed an interest in acquiring Ilva. The plant, owned by the Riva family, was partially closed in 2012 because of the high levels of pollution.

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Let’s get this solved once and for all.

Russia Claims To Have New Proof Ukraine Involved In Downing Of MH17 (AFP)

Russian investigators say they have new proof from a witness that a Ukrainian pilot fired a missile on the day of the Malaysia Airlines crash which killed 298 people, including 38 Australians. The witness, who was not named, worked at an airfield in the Ukrainian city of Dnipropetrovsk where he claimed to have seen a warplane take off on July 17 with air-to-air missiles and return without them. An Investigative Committee statement said the testimony of the man “is important proof that Ukrainian military was implicated in the crash of the Boeing-777”. Flight MH17 from Amsterdam to Kuala Lumpur was shot down over territory in eastern Ukraine controlled by pro-Russian separatists, who have been fighting Kiev forces since April.

Ukraine and the West accused Russia of supplying the rebels with a surface-to-air missile launcher, but Russia has issued several opposing theories, one of which involves a Ukrainian military jet allegedly seen next to the passenger jet. The witness was filmed by Russian tabloid Komsomolskaya Pravda with his back to the camera and even the back of his head blurred. He said he saw a Sukhoi-25 jet take off armed with air-to-air rockets and return to the base without them. “[The plane’s operator] could have launched them into the Boeing out of fear or revenge,” the witness said, identifying the pilot of the jet as having the surname Voloshin.

“Maybe he mistook it for another plane.” Komsomolskaya Pravda claimed the witness showed up at its office and that his identity checked out but did not identify him because his family was still in Ukraine. The Investigative Committee said the man could be enrolled in a witness protection program. There was no evidence previously that Russian investigators had launched an official probe into the crash, in which citizens from 11 countries died, but no Russians. Dutch authorities have been charged with establishing what brought down the plane and are reconstructing part of the aircraft as part of their probe. Preliminary findings indicate only that the plane broke apart due to damage that came from outside.

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Health issues. Russians are known for making lethal homebrew.

Putin Calls For Cap On Vodka Prices Amid Economic Crisis (BBC)

Russian President Vladimir Putin has ordered his government to curb rising vodka prices. Mr Putin, who has been hit by increasing economic woes, said that high prices encouraged the consumption of illegal and possibly unsafe alcohol. Russia’s currency, the rouble, has lost value recently due to falling oil prices and Western sanctions. The country’s former finance minister warned that Russia would enter recession next year. Mr Putin, who promotes a healthy lifestyle, asked “relevant agencies” to think about what he said, adding that the government should fight against the illegal trafficking of alcohol. According to a leading university study last year, 25% of Russian men die before reaching their mid-50s, Reuters reports. Alcohol was found to be a contributing factor in some of these early deaths. Since last year, the government-regulated minimum price of half a litre (17 oz) of vodka has increased by around 30% to 220 roubles ($4.10; £2.64), Reuters adds. It is not just vodka that has seen a price rise. Annual inflation in Russia currently stands at 9.4%.

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I can think of a lot more.

5 Reasons Not To Retire In The US (MarketWatch)

When it comes to retiring, more baby boomers are finding greener (and cheaper) pastures overseas. More than half a million retirees receive their Social Security benefits abroad, according to International Living, a monthly newsletter focusing on retiring overseas. The Social Security Administration currently sends 613,650 retirement-benefit payments outside the U.S., more than double the 242,128 benefit payments sent abroad in 2002. And even that data likely under-represents the actual number of Americans retired overseas, says Dan Prescher, 60, special projects editor of the newsletter. (International Living gets much of its financial support from advertisers who sell overseas real estate to retirees, and other services for those wishing to relocate.)

“San Diego has some of the best weather in the world but most people can’t afford to live there,” Prescher says. He and his wife, Suzan Haskins, live in Cotacachi, Ecuador, and say most ex-pats there have monthly expenses (including rent) of $1,500 to $1,800. “We don’t need heat, we don’t need air conditioning and our electricity bill is $24 a month,” Haskins, 58, says. They live on the equator at 8,000 feet above sea level, so the sun rises at 6 a.m. and goes down at 6 p.m. every day, so it rarely gets too warm or too cold. Haskins adds that they live in a small town where crime isn’t a major concern for them. Their Internet costs about $28 a month and that includes a landline phone.

Of course, boomers abroad who want to work part-time or operate a business still have to pay income taxes — even if they live in the Cayman Islands or St. Kitts and Nevis, which have no personal income taxes. “The U.S. is one of the few countries on the planet that taxes its citizens on income no matter where in the world it’s earned, so we file our U.S. taxes every year, as all U.S. citizens must no matter where they live,” Prescher adds. In fact, some 1,000 U.S. citizens and green-card holders gave up their citizenship in the first quarter of this year to avoid taxes and move abroad, even though acquiring citizenship in another country can often be a complex and expensive process. Here are 5 reasons not to retire in Florida, or anywhere else in the U.S.

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We know the answer to that.

Are Americans Prepared For A Soviet Style Collapse? (Dmitry Orlov)

If the social and financial structure around you collapsed tomorrow, as it did for many people during the fall of the Soviet Union, are you prepared to survive and even prosper? In my latest interview with best selling author Dmitry Orlov we discuss lifestyle and how your lifestyle decisions may dramatically impact how your family will fare if times get tough. Dmitry left Russia with his family in 1976 and settled in the Boston area to pursue an education in computer science and linguistics. Along the way Dmitry realized he was trapped in the traditional American pursuit of a career. He was working day and night to make money to pay for the car and city condo and all the trappings of success. He needed the car and condo and all the trappings of business to keep making money. The same vicious cycle most Americans face every day.

Well Dmitry gave it all up for a life on a sailboat full of travel and freedom. In our interview, I passed along some of your questions as well as my own to get Dmitry’s perspectives. As you probably know if you follow Dmitry or the ClubOrlov blog, Dmitry brings an interesting perspective to the whole lifestyle and survival dialog. In this interview, Dmitry shares his thoughts on why he believes that Russian citizens were far better prepared for a collapse than the typical American citizen. His logic is sound and it definitely makes you question…. “what would my family do in a collapse, faced with”: No lights, No running water, No flushing toilets, No trash removal, No gas at the gas pumps, No government services, No public transportation Strangely enough, quite inadvertently, the Russian citizens may have been far better off to handle such a collapse, and here is why…..

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Decades late.

Supertrawlers To Be Banned Permanently From Australian Waters (Guardian)

Supertrawlers will be permanently banned from Australian waters, the federal government announced on Wednesday. The move follows the temporary bans on supertrawlers imposed by the Labor government two years ago and re-endorsed by Tony Abbott in March. The first ban expired in November and the second was up for review in April. The parliamentary secretary for agriculture, Richard Colbeck, said the government would stop vessels longer than 130m from fishing in Australian waters. This definition of supertrawler does not take into account the processing capacity of a vessel, which proponents of the ban say is just as critical as the size of the vessel.

“This government will introduce regulations under the Fisheries Management Act to give effect to this decision,” Colbeck said in a statement released on Wednesday afternoon. “This decision will have policy effect immediately.” Colbeck said the government “has consulted widely and accepts the legitimate concerns of many in the community, including those involved in recreational and commercial fishing”. “The government is determined that Australian fisheries management remain among the best in the world,” the statement said. Labor banned supertrawlers, or large freezer-factory vessels, after outcry from the public. The Stop the Supertrawler petition has nearly 63,000 signatures.

“Supertrawlers are large freezer-factory fishing trawlers that threaten our unique marine life and fisheries, and the recreational fishing, commercial fishing and tourism industries that rely on these,” the petition said. “Supertrawlers are part of a global problem that has led to the devastation of the world’s fisheries, marine life and local livelihoods, and we don’t want that kind of fishing in Australia.” Abbott addressed the House of Representatives in March, saying: “The supertrawler was banned from Australian waters … it was banned with the support of members on this side of the house. It was banned. It will stay banned.”

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Green is turning dark grey in Germany.

Germans Balk At Plan For Wind Power Lines (NY Times)

Germans have welcomed solar panels glinting on their rooftops and windmills looming over their fields, and they have even put up with a doubling of their electric bills. But enthusiasm for all things green appears to have reached a limit with a plan to string high-voltage transmission lines along the outskirts of cities like Fulda in the center of the country. Dozens of protest groups have sprung up over the past year along the 500-mile path of the project, SuedLink, one of four high-voltage direct current lines that are to carry wind-generated power from north to south. The lines are described as essential to the success of the country’s pivot away from nuclear and coal power and toward mostly renewable energy. But nearly a year into the plans, the SuedLink project has set off an outbreak of not-in-my-backyard syndrome that threatens to disrupt a linchpin of Germany’s commitment to a lower-carbon future.

People like Johannes Lange, who said he had supported Germany’s green efforts for decades, have sprung into action. “I have been following energy policy for 30 years and have gone along with everything,” said Mr. Lange, a self-employed music teacher from Fulda’s eastern Kämmerzell district. “The moment that I heard they wanted to build this behind my house, I thought, enough!” Germany has embraced environmental protection policies since the 1970s, and has been a leader in efforts to move away from fossil fuels toward an energy system that will reduce its carbon emissions — its contribution to a global effort to slow the rise in temperatures that scientists say is already affecting the planet. Businesses have been wary of the growing costs that the policies have imposed on them, but citizens have been largely stoic. They have protested when the government seemed to waver in its commitment, even as the cost of power for an average family of three has climbed to €85 a month, about $103, from €41 since 2000, according to government statistics.

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Great story from the director of Joyeux Noël.

How France Has Forgotten The Christmas Truce Soldiers (BBC)

Memories of World War One can be seen everywhere in the quiet part of the Artois region in northern France where I was born. The war left a trail of cemeteries with well-tended lawns in the midst of fields. Crops now grow around the edges of these spaces where 20-year-old kids from Australia, New Zealand, Canada, Great Britain and other countries lie. Forty nations buried their sons in the earth of my homeland. While still a kid, I learnt the names and flags of these countries. I was able to revise my geography while learning about the history of this war. Every autumn, my father and I collected artillery shells which had been brought to the surface by ploughing. We carried them in our arms and laid them down at the entrance to our fields. A Renault 4 from the Prefecture came to load them up like potatoes and spirit them away.

Researchers have estimated that the earth will continue to give its own unique account of the Great War for a further seven centuries. Every year, kids still try to unscrew these shells covered in dirt and rust to see what is inside. As a result, they lose a hand, their eyesight or even their lives. The survivors of these unplanned explosions are treated as “war casualties” and receive a pension based on 1914 rates and converted into today’s euros. Every 11 November, my schoolmates and I sang the Marseillaise under the icy stare of a statue infantryman perched on a column engraved with names, each of which we had to read out loud. None of the houses we inhabited were built before the 1920s and none of our furniture pre-dated that decade. Our grandmothers’ wardrobes were no more. Sometimes, one of these houses would subside as it was built over an old tunnel dug by soldiers.

These incidents were treated as war damage and the family was granted government compensation. 1914-1918 was more than just a date written in my school exercise book. It provided the backdrop to my childhood. I later realised that this war was the most important event of the 20th Century. It carried the seeds of the next war while heralding the Soviet era and American hegemony since Europe had pressed the self-destruct button. In 1992, I learned from Yves Buffetaut’s book, Battles of Flanders and Artois, that enemy soldiers on opposing sides fraternised with each other over the Christmas period of 1914. I read that some French soldiers applauded a Bavarian tenor, their enemy a German, on Christmas Eve while others played football with the Germans the next day.

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Dec 072014
 
 December 7, 2014  Posted by at 11:53 am Finance Tagged with: , , , , , , , , ,  


Arthur Rothstein Accident on US 40 between Hagerstown and Cumberland, Maryland Nov 1936

OPEC And American Shale Keep The Oil Price Spiralling Downwards (Guardian)
Oil Poised to Extend Drop After Hitting Five-Year Low (Bloomberg)
Fossil Fuel Companies “The Sub-Prime Assets Of The Future” (Telegraph)
Osborne Oversees Biggest Fossil Fuel Boom Since North Sea Oil (Guardian)
Delinquent US Car Loans Up 27% From Last Year (NY Times)
Goldman Needs Volcker Delay to Avoid Private-Equity Losses (Bloomberg)
Wells Fargo Breaks Citigroup’s 2001 Record for Bank Value (Bloomberg)
Russia Braces For An Economic Winter (Observer)
Why A Moscow Meltdown Could Spread Around The Globe (Observer)
Clashes At Greek Protests To Mark Police Shooting (BBC)
Angry Families Of MH17 Crash Victims Seek UN Investigation (Reuters)
Ukraine’s Made-in-USA Finance Minister (Robert Parry)
Prosecutor Freezes Accounts Of Former Vatican Bank Heads (Reuters)
Australian Banks Seen Needing $25 Billion After Inquiry (Bloomberg)
Minimum Viable Sociopathy (Dmitry Orlov)
Archbishop Calls For £150 Million State-Backed Food Bank System (Daily Mail)
Hunger in UK Shocks Me More Than Africa (Archbishop Of Canterbury)
Has Modern Art Exhausted Its Power To Shock? (BBC)
California’s ‘Hot Drought’ Ranks Worst in at Least 1,200 Years (Bloomberg)

” .. the Chicago Mercantile Exchange reported a huge increase in the number of investors hedging on crude hitting $40.

OPEC And American Shale Keep The Oil Price Spiralling Downwards (Guardian)

Oil prices were back near five-year lows – below $70 per barrel – at the end of last week as commodity traders, analysts and governments struggled to come up with new forecasts for 2015. The benchmark, Brent blend, had recovered from a major drop in the aftermath of last month’s meeting of the oil producers’ cartel, Opec. However, it was back down at $69.17 on Friday as the market bet on a prolonged low in prices. Igor Sechin, Russia’s most senior oil official, warned that Opec’s unwillingness to cut production could push oil down to $60, while the Chicago Mercantile Exchange reported a huge increase in the number of investors hedging on crude hitting $40. Forecasting the future price of oil has always been fraught.

There were few warnings in the first half of the year that prices were set to plunge by 40% from a June high of $115. Analysts at Citi are now expecting Brent to average $80 over the next 12 months, while their counterparts at Natixis believe it could fall as low as $74 – and that the US benchmark, West Texas Intermediate, will slump below $70. Standard Chartered described Opec’s decision to keep the production target unchanged as “extremely negative for oil prices for 2015” and has cut next year’s Brent price forecast by $16 a barrel to $85. The reasons for the cuts are faltering growth in demand as the global economy continues to stutter, plus soaring production from the shale fields of Texas and Pennsylvania.

Lower prices have also been supported by a relatively benign geopolitical environment, because energy supplies have not been endangered by the Russian stand-off with the west over Ukraine or Islamic State’s advances in Syria. A divided Opec is now hoping that falling prices will be devastating for higher-cost US frackers, forcing them to shut down output and gradually bring balance to the wider oil markets. But according to Paul Stevens, oil expert at Chatham House, a similar strategy in the late 1980s did not encourage North Sea and other producers to halt production and the price continued to slide downwards.

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“We’re way oversold in both Brent and WTI, not to mention the products, and the market’s not responding ..”

Oil Poised to Extend Drop After Hitting Five-Year Low (Bloomberg)

West Texas Intermediate and Brent crudes are poised to decline from the lowest closing levels in more than five years after shrugging off a sign that the market has dropped too fast. The 14-day relative strength index (BCOM) for WTI slipped to 27.0364 yesterday, according to data compiled by Bloomberg. Investors typically start buying contracts when the reading is below 30. The 14-day RSI for Brent slipped to 23.6843. The move highlights the extent of the bear market in the face of technical support. “We’re way oversold in both Brent and WTI, not to mention the products, and the market’s not responding,” Bob Yawger, director of the futures division at Mizuho Securities said by phone yesterday. “A market that ignores these bullish signals is heading much lower.”

Futures fell 1.5% in New York and 0.8% in London yesterday. State-run Saudi Arabian Oil extended its discount for Arab Light sales to Asia next month to $2 a barrel below a regional benchmark, according to a company statement Dec. 4. That’s the lowest in at least 14 years. The slide in prices accelerated as the dollar surged to a five-year high, curbing the appeal of commodities as a store of value. WTI for January delivery dropped 97 cents to $65.84 a barrel on the New York Mercantile Exchange yesterday. It was the lowest settlement since July 29, 2009. Prices are down 33% this year.

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There’s a lot of uncertainty about how and to what extent climate agreements will result in stranded assets. Investment in fossil fuels carries a lot of risk, for yet another reason.

Fossil Fuel Companies “The Sub-Prime Assets Of The Future” (Telegraph)

Investing in fossil fuels is becoming increasingly risky because global action to tackle climate change will curb demand, forcing companies to leave unprofitable reserves in the ground, Ed Davey, the energy secretary, has warned. Financial authorities must examine the risks posed by coal, oil and gas companies to prevent pension funds investing in what could become “the sub-prime assets of the future”, Mr Davey said. The comments are Mr Davey’s first intervention into the debate over the “carbon bubble”, the theory that the world’s existing fossil fuel reserves are overvalued because the majority must be left unburned in the ground if extremes of global warming are to be avoided.

Mr Davey told the Telegraph: “One has got to worry about the investments for pensioners. “If pension funds are investing in companies or banks have on their balance sheets huge amounts of assets in fossil fuels, and those assets don’t give the return that people expect – because of changes in technology where low-carbon becomes cheaper or because of the world having to take action against carbon emissions – one has got to protect those pensioners and those investments.”

Keeping global warming within 2C (3.6F), the level scientists say is necessary to prevent catastrophic climate change, will require the world to slash its carbon dioxide emissions, phasing out the unabated burning of fossil fuels for electricity. UN talks are ongoing in Lima this week with the aim of achieving a global emission reduction agreement next year. Mr Davey singled out coal – the dirtiest of the fossil fuels – as “the short-term biggest worry by a long way” as countries including China commit to cap their coal use. “Investing in new coal mines is going to get very risky,” he said.

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The timing is exquisite.

Osborne Oversees Biggest Fossil Fuel Boom Since North Sea Oil (Guardian)

George Osborne has sparked the biggest boom in UK fossil fuel investment since the North Sea oil and gas industry was founded in the 1970s. Analysis of new Treasury data also shows investment in clean energy has plummeted this year and is now exceeded by fossil fuels, while road and airport building is soaring. After years of coalition infighting over green energy, the stark shift marks a major victory for the chancellor. But it conflicts with David Cameron’s recent statement that climate change is “a threat to our national security and to economic prosperity” and his 2010 pledge to the lead the “greenest government ever”. UK ministers are currently at UN climate talks in Peru arguing for strong action against global warming.

In Wednesday’s autumn statement, Osborne added £430m to the billions in tax breaks he has granted the fossil fuel sector since 2012. Taxpayers will also now fund seismic exploration to help companies find more oil and gas and will pay £31m for shale gas research drilling plus another £5m to “ensure the public is better engaged” with fracking. Osborne said the North Sea tax breaks “demonstrate our commitment to the tens of thousands of jobs that depend on this great British industry”. Joan Walley MP, who heads parliament’s environmental audit committee, said: “Taxpayers should not be propping up the fossil fuel industry in the 21st century.

Tax breaks should be used to support firms that come up with innovative clean energy solutions, not to keep us drilling for the fossil energy fuelling climate change.” Matthew Spencer, the director of the thinktank Green Alliance, whose experts performed the new analysis, accused Osborne of political manoeuvring before the general election. “A series of short-term tactical decisions have reversed what was a very encouraging picture for UK infrastructure. These stark figures show that you can’t focus on oil extraction and road building and expect to deliver a cleaner, leaner economy.”

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But all is well?!

Delinquent US Car Loans Up 27% From Last Year (NY Times)

An increasing number of borrowers are falling behind on their car payments, even as the total amount of outstanding debt reaches new heights, according to the latest report by Experian, the credit and research firm. In a presentation on Wednesday, Experian said the balance of loans that were 60 days delinquent increased 27%, to roughly $4 billion, in the third quarter from the same period a year ago. Signs of trouble in the market come after a significant increase in lending to people with damaged credit and limited financial means. Analysts have warned that a loosening of underwriting standards for subprime auto loans could cause widespread losses in the financial system because much of the debt has been securitized and bought by investors around the globe. Some of the highest delinquency rates in the quarter are concentrated across the South in Mississippi, South Carolina and Alabama. North Dakota had the lowest delinquency rate.

Finance companies, which tend to focus more on subprime customers than traditional banks, had the largest increases in delinquencies in the third quarter. As the delinquencies have mounted, so has the regulatory scrutiny. Subprime auto lenders have faced an onslaught of scrutiny from regulators and prosecutors, worried that the high-cost loans take advantage of some of the nation’s most vulnerable borrowers. The examinations have touched on virtually every player in the broader subprime auto lending ecosystem from used car dealers to lenders. In the latest chapter, the American Honda Finance Corporation, a lending unit of the automaker, disclosed on Tuesday that the company was bracing for an enforcement action from the Justice Department and the Consumer Financial Protection Bureau over concerns that it gives more costly loans to minority borrowers. The authorities, the company said in a regulatory filing on Tuesday, notified the lender last month about the looming action.

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Here’s betting they’ll get it.

Goldman Needs Volcker Delay to Avoid Private-Equity Losses (Bloomberg)

Goldman Sachs has $7 billion invested in private equity that it might have to sell at a loss. For Morgan Stanley, it’s $2.5 billion. The big sums explain why Wall Street has been lobbying regulators to delay a July deadline for complying with the Volcker Rule, which restricts banks from investing in private equity as part of a ban on making market bets with their own capital. Banks argue that if they dump holdings quickly, they will have to accept discount prices. Analysts and lawyers for the financial industry say Wall Street’s concerns have begun to make headway with the Federal Reserve, which plans to decide on an extension soon. “There’s considerable pressure the Fed is feeling in that they don’t want institutions to have a bloodbath trying to divest funds,” said Kevin Petrasic, a partner at Paul Hastings in Washington. “The Fed has been indicating flexibility.”

The Volcker deadline underscores the tension regulators face between enforcing rules meant to curb risk-taking and responding to banks’ complaints that many Dodd-Frank Act reforms aren’t workable. The Fed is deciding what to do after lawmakers lambasted it at congressional hearings last month for weak oversight of Wall Street. Before the 2008 financial crisis, banks purchased shares in thousands of private-equity and venture-capital funds. The money invested was used to buy stakes in private companies, meaning it’s locked up for years until the businesses are sold. When Congress included the Volcker Rule in the 2010 Dodd-Frank law, it realized banks might have difficulty dumping holdings. As a result, lawmakers authorized the Fed to put the deadline off for several years. Banks want an extension until 2022, which would allow them to keep their private-equity investments until they expire. Fed General Counsel Scott Alvarez told a conference of banking lawyers last month that the central bank will make a decision soon.

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Hardly a recovery, if there’s one at all, but banks are worth more than before the crisis. This is us. This is what we do.

Wells Fargo Breaks Citigroup’s 2001 Record for Bank Value (Bloomberg)

Wells Fargo finished trading yesterday as the most valuable U.S. bank ever, surpassing Citigroup’s 2001 record. Wells Fargo closed with a market capitalization of $285.5 billion, based on 5.19 billion shares outstanding on Oct. 31, according to data compiled by Bloomberg. That beats the previous record set by Citigroup on Feb. 5, 2001, when its value reached $283.4 billion, the data show. Wells Fargo, which counts Warren Buffett’s Berkshire Hathaway as its largest shareholder, doubled its size in 2008 by outmaneuvering New York-based Citigroup to purchase Wachovia Corp. Chief Executive Officer John Stumpf made one of out every four U.S. mortgages last year and now oversees the most U.S. bank branches.

“Our focus is on doing what is right for our customers every day, and we are pleased our investors place their confidence in Wells Fargo,” Ancel Martinez, a bank spokesman, said in a statement. Wells Fargo rose 1% to $55.03 in New York, and the stock’s 21% gain this year tops the 7.7% advance for the KBW Bank Index of 24 U.S. lenders. Berkshire’s stake in the San Francisco-based bank is valued at more than $25 billion, according to data compiled by Bloomberg.

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Russia will act when it’s had enough of this.

Russia Braces For An Economic Winter (Observer)

A website that was going viral on Russian social networks last week shows the rouble-dollar exchange rate, the rouble-euro exchange rate and the price of Brent crude changing in real time against a backdrop of slowly breaking waves, as soothing music plays in the background. “Russian zen: meaningless and merciless”, reads the bottom of the page Zenrus.ru. It is a play on a famous quote that Russian revolt is “meaningless and merciless.” A zen-like calm is probably hard to come by for those watching the exchange rate and the price of oil: the rouble fell to new all-time lows of more than 54 to the dollar last week after the Opec oil producers’ group decided not to reduce production, which would have bolstered sinking oil prices. Russia is especially vulnerable to those prices, since energy exports make up half of its budget, and on Monday its currency recorded its largest single-day decline since the Russian financial crisis of 1998.

In all, the rouble has sunk by more than 40% this year as Russia has been buffeted by sanctions over its role in the Ukraine crisis and steep falls in the oil price. By the end of the week Brent was hovering below $70 a barrel, down from more than $105 at the start of the year. The picture of Russia’s economic future is grim, despite the rosy outlook President Vladimir Putin tried to put on it in his annual address to the federal assembly on Thursday. Inflation has been rising, and recession next year is all but certain. On Tuesday, the economic development ministry reduced its GDP growth forecast for 2015 from 1.2% to –0.8%. State-owned banks have sought help from the government after the Ukraine sanctions cut them off from the western financial industry and its cheaper credit.

According to Vladimir Tikhomirov, an economist at Russian bank BKF, the two main factors responsible for Russia’s economic woes – sanctions and a low oil price – probably won’t change any time soon. “Oil has a stronger effect on the economy than sanctions, and the oil price and sanctions are speeding up macroeconomic processes that were already there,” Tikhomirov says. “The economy was slowing down due to structural difficulties even when oil prices were high. I think that next year there won’t be new sanctions but the current sanctions will remain; I think next year the oil price will be around $80 a barrel; and I think that the economy will shrink.”

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Merkel herself has said it would be a bad thing if Russia goes into a financial crisis.

Why A Moscow Meltdown Could Spread Around The Globe (Observer)

Russia matters. It mattered in 1998 when the shock waves from its debt default reverberated around the world. And it would matter again should the plunging oil price lead to economic collapse. That’s despite the fact that Russia is a massive land mass with a relatively small economy. It accounts for only 3% of global GDP and it is dominated by an energy sector that is responsible for 70% of exports. To an extent, the structure of Russia’s economy should mitigate contagion risks. Lacking a modern manufacturing sector, it is not vital for global supply chains and, in theory, any other energy producer could make good the disruption to oil and gas supplies in the event of a deep and damaging recession. But there are at least five ways in which a crisis for Russia could spread. Russia’s immediate problems have been caused by the sharp drop in the price of crude and it is not the only one to be suffering. Venezuela and Iran are finding it hard to cope with oil down at $70 a barrel. If Russia goes, it will be a case of: who’s next?

Second, Russia still has close economic links with eastern Europe, so a collapse would have serious consequences for countries such as Poland and an already imploding Ukraine. Western Europe, too, would be affected if for any reason gas supplies through Russia’s pipeline were cut off. Third, confidence would be hit. Germany’s weak economic performance since the spring can, in part, be attributed to the gloomier economic mood. The slowdown in the rest of the eurozone has probably had a bigger impact on German activity but the tension between Moscow and Kiev has certainly not helped. Russia might be enough to tip Germany into recession, which in turn would be enough to ensure that the European Central Bank began a quantitative easing programme.

Fourth, nobody is quite sure how Vladimir Putin, pictured, would respond to the most challenging economic circumstances since 1998. Any confidence effects from an economic crisis would be exacerbated by the knowledge that Russia is controlled by a president able to make felt his country’s still considerable geo-political and military clout. Finally, the assumption is that financial market exposure to Russia is relatively limited given that overseas banks had $209bn (£134bn) of loans to Russia when sanctions were imposed in March. On the face of it, western investors do not look all that vulnerable and have had time to get their money out. But that was also the assumption in 1998, when Barclays had to set aside £250m to cover its Russian losses. Financial trades are now so complex and leveraged, it is impossible to know for sure how big losses might be this time.

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Is Greece set to explode again?

Clashes At Greek Protests To Mark Police Shooting (BBC)

Clashes have erupted in the capital of Greece during protests marking six years since police shot dead an unarmed teenager. At least 5,000 demonstrators marched in Athens on Saturday. Some attacked shops and hurled petrol bombs at riot police. Police officers used tear gas and a water cannon to disperse protesters. The demonstrators had been marking the anniversary of 15-year-old Alexis Grigoropoulos’ death. He was shot by an officer who has since been jailed. Mr Grigoropoulos’ killing on 6 December 2008 sparked violent riots across Greece, with cars being set alight and shops looted in a number of cities. Clashes have also broken out on previous anniversaries of his death. On Saturday, anti-establishment protesters attacked banks and damaged shops and bus stops.

At one point, demonstrators looted a clothes shop and set fire to the merchandise in the street, the Associated Press news agency reported. According to Reuters, police said they detained close to 100 protesters. Clashes primarily took place in Athen’s Exarchia neighbourhood, but violence was also reported in Thessaloniki, in northern Greece. No injuries were reported in either city. Protesters have also been expressing support for Nikos Romanos, a friend of Mr Grigoropoulos who witnessed his death. Romanos, 21, has been jailed for attempted bank robbery. He is currently on hunger strike, demanding study leave after he was accepted onto a university course.

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WHile the government can’t stop blabbing about respect for vistims and their families, the familes themselves say: “The Netherlands “has completely botched” the fact-finding investigation and the legal framework of the case..” “There is no coordination, there is no leadership whatsoever (by) Holland.”

Angry Families Of MH17 Crash Victims Seek UN Investigation (Reuters)

Relatives of MH17 crash victims, angered by what they see as Dutch mishandling of inquiries into the disaster, want a special U.N. envoy to launch an international investigation. A letter sent to Prime Minister Mark Rutte on Friday, a copy of which was seen by Reuters, said Dutch officials had failed to build a case. They asked that inquiries by the Safety Board and prosecution service be handed over to the United Nations. Rutte should “request the U.N. to appoint a special envoy to take over,” said the letter written by Van der Goen Attorneys. Malaysia Airlines flight MH17 was downed on July 17 over eastern Ukraine, killing all 298 passengers and crew, two-thirds of them Dutch. Experts say the most likely cause was a ground-to-air missile fired from territory held by pro-Russian separatists. The Dutch launched the largest criminal investigation in their history after the crash. This week, trucks are carrying pieces of the plane home, but much of the wreckage still lies in Ukrainian fields.

Dutch investigators, leading a case involving 11 countries, have not concluded how the plane was shot down or identified suspects. The Netherlands “has completely botched” the fact-finding investigation and the legal framework of the case, said the letter, sent on behalf of 20 relatives from Belgium, Germany, the Netherlands and the United States. Dutch prosecutors have been unable to access the crash site, in a war zone disputed by Ukrainian troops and Russian-backed rebels, or not met international requirements to secure evidence, the letter said. “Nobody knows who is doing what,” said Bob van der Goen, a spokesman for the law firm. “There is no coordination, there is no leadership whatsoever (by) Holland.” Rutte said on Friday the Dutch teams were returning to the Netherlands. “We have done everything we could. In view of the safety situation and the weather, we cannot do anything more right now,” he said. An international inquiry is the only way to identify who shot down the plane and ensure they are brought to court, the letter said.

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What a story, the recent – foreign – additions to the Kiev government.

Ukraine’s Made-in-USA Finance Minister (Robert Parry)

Ukraine’s new Finance Minister Natalie Jaresko, a former U.S. State Department officer who was granted Ukrainian citizenship only this week, headed a U.S. government-funded investment project for Ukraine that involved substantial insider dealings, including $1 million-plus fees to a management company that she also controlled. Jaresko served as president and chief executive officer of Western NIS Enterprise Fund (WNISEF), which was created by the U.S. Agency for International Development (U.S. AID) with $150 million to spur business activity in Ukraine. She also was cofounder and managing partner of Horizon Capital which managed WNISEF’s investments at a rate of 2 to 2.5% of committed capital, fees exceeding $1 million in recent years, according to WNISEF’s 2012 annual report.

The growth of that insider dealing at the U.S.-taxpayer-funded WNISEF is further underscored by the number of paragraphs committed to listing the “related party transactions,” i.e., potential conflicts of interest, between an early annual report from 2003 and the one a decade later. In the 2003 report, the “related party transactions” were summed up in two paragraphs, with the major item a $189,700 payment to a struggling computer management company where WNISEF had an investment. In the 2012 report, the section on “related party transactions” covered some two pages and included not only the management fees to Jaresko’s Horizon Capital ($1,037,603 in 2011 and $1,023,689 in 2012) but also WNISEF’s co-investments in projects with the Emerging Europe Growth Fund [EEGF], where Jaresko was founding partner and chief executive officer.

Jaresko’s Horizon Capital also managed EEGF. From 2007 to 2011, WNISEF co-invested $4.25 million with EEGF in Kerameya LLC, a Ukrainian brick manufacturer, and WNISEF sold EEGF 15.63% of Moldova’s Fincombank for $5 million, the report said. It also listed extensive exchanges of personnel and equipment between WNISEF and Horizon Capital. Though it’s difficult for an outsider to ascertain the relative merits of these insider deals, they could reflect negatively on Jaresko’s role as Ukraine’s new finance minister given the country’s reputation for corruption and cronyism, a principal argument for the U.S.-backed “regime change” that ousted elected President Viktor Yanukovych last February.

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Small fish.

Prosecutor Freezes Accounts Of Former Vatican Bank Heads (Reuters)

The Vatican’s top prosecutor has frozen €16 million in bank accounts owned by two former Vatican bank managers and a lawyer as part of an investigation into the sale of Vatican-owned real estate in the 2000s, according to the freezing order and other legal documents. Prosecutor Gian Piero Milano said he suspected the three men, former bank president Angelo Caloia, ex-director general Lelio Scaletti, and lawyer Gabriele Liuzzo, of embezzling money while managing the sale of 29 buildings sold by the Vatican bank to mainly Italian buyers between 2001 and 2008, according to a copy of the freezing order reviewed by Reuters. The money in the three men’s bank accounts “stems from embezzlement they were engaged in,” Milano said in the October 27 sequester order.

Milano’s investigation follows an audit of the Vatican bank by non-Vatican financial consultants commissioned last year by the bank’s current management. The Vatican bank earlier this year also filed a legal complaint against the three men. The men have not been charged. The Vatican spokesman on Saturday issued a statement confirming the freezing but gave no names, amounts or other details. The Vatican bank said in a separate statement that it had pressed charges against the three as part of its “commitment to transparency and zero tolerance, including with regard to matters that relate to a more distant past”. The bank statement also gave no details, citing “the ongoing judicial enquiry”.

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For starters.

Australian Banks Seen Needing $25 Billion After Inquiry (Bloomberg)

Commonwealth Bank of Australia and its three main competitors may need as much as A$30 billion ($25 billion) after a government-commissioned inquiry called for “unquestionably strong” capital levels, analysts said. The shortfall is based on lenders needing to boost levels to within the top quartile of their global peers and set aside additional funds against potential losses on home mortgages, as recommended by the Financial Systems Inquiry report released today in Sydney by Treasurer Joe Hockey. Australia’s major lenders hold about 10% to 11.6% of their assets as Tier 1 capital compared with at least 12.2% at the world’s safest banks, the government’s first inquiry into the financial system since 1997 said. Given banks’ reliance on overseas investors for debt funding, the financial system must be robust, the report said,

“The onus on capital is in line with global changes and Australia has to fall in line,” John Buonaccorsi, a Sydney-based analyst at CIMB Group Holdings Bhd. said in a phone interview after the report was released. “I don’t expect a straight capital raising yet.” Australia’s largest banks are initially more likely to resort to dividend reinvestment plans, where investors swap all or part of their dividend for new shares, and limiting increases in payout ratios, he added. Buonaccorsi expects a shortfall between A$25 billion and A$30 billion. Omkar Joshi, who helps oversee A$1 billion as an investment analyst at Watermark Funds Management, estimated a A$15 billion to A$20 billion gap. Their predictions were based on an average mortgage risk weight of 25% to 30% and systemically important bank buffer of 2%.

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“.. if the progress of our lives starts looking too much like a random walk, then we tend to start asking ourselves difficult questions, like “What’s it all about?” and drinking too much. And that causes our walk to get even closer to random. ”

Minimum Viable Sociopathy (Dmitry Orlov)

If you simply wander aimlessly through life, breathing oxygen and eating and excreting organic matter, then you will still get somewhere. Statistically, a blind-drunk sailor who walks out of a bar will, on average, while stumbling along on his way to nowhere in particular, cover the distance of √n steps for every n steps he takes. This is known as a random walk, or Brownian motion, which is fine for molecules at anything above 0ºK, and perhaps for drunken sailors too, but most of us sentient beings want our lives to have a bit of meaning. And if the progress of our lives starts looking too much like a random walk, then we tend to start asking ourselves difficult questions, like “What’s it all about?” and drinking too much. And that causes our walk to get even closer to random. And therein lies a great danger, because this sort of downward spiral inevitably ends with somebody else telling you “What’s it all about” and what it is you have to do, supposedly for your own good, though it hardly ever is.

There is also the opposite danger. If you keep your eyes fixed on your goal and make a concerted effort to make n steps of progress in its direction for every n steps you take, then you will quickly happen upon a wall with a gate in it, and a guard at that gate will demand to see your permit, degree, qualification or certificate before letting you pass through that gate. And the process of you getting that permit, degree, qualification or certificate will end with somebody else telling you what your goal ought to be. The goal is, universally, to accumulate things: dollars or stripes on your uniform or publications and citations, or earwax. Details don’t matter, but what matters is that these things never have much of anything at all to do with your original goal.

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We need more people like Welby.

Archbishop Calls For £150 Million State-Backed Food Bank System (Daily Mail)

A new row over food banks erupted last night after a report backed by the Archbishop of Canterbury called for a £150 million state-backed system to combat hunger in Britain. The Most Reverend Justin Welby appeared to be on course for a clash with David Cameron after calling on the Prime Minister to reverse his decision not to take European funds to boost UK food banks. Writing in today’s Mail on Sunday, Archbishop Welby makes a powerful call for more help to prevent families going hungry. The Archbishop is to launch a Parliamentary report in Westminster tomorrow, and calls on the Government to take ‘quick action’ to implement its recommendations in full. Separately, this newspaper has obtained details of the report’s radical proposals, which call for:

  1. A new publicly funded body, Feeding Britain, involving eight Cabinet Ministers, to work towards a ‘hunger free Britain’.
  2. Bigger food banks, called Food Banks Plus, to distribute more free food and advise people how to claim benefits and make ends meet.
  3. A rise in the minimum wage and the provision free school meals during school holidays for children from poor families.
  4. New measures to make it harder to strip people of benefits for breaking welfare rules – including soccer style ‘yellow cards’ instead of instant bans.
  5. Action to make supermarkets give more food to the poor.

The report by the All-Party Parliamentary Inquiry into Hunger in Britain comes amid an intense debate over welfare and poverty. Experts claimed that Chancellor George Osborne’s Autumn Statement last week would mean massive cuts in welfare in the coming years. Praising food bank volunteers who have rescued the poor from hunger, the Welby-backed report says they have achieved the ‘equivalent to a social Dunkirk.’ Notably, it adds: ‘This extraordinary achievement has been done without the assistance of central government. If the Prime Minister wants to meet his Big Society it is here.’

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The growing poverty in Britain is indeed a disgrace.

Hunger in UK Shocks Me More Than Africa (Archbishop Of Canterbury)

In one corner of a refugee camp in the Democratic Republic of Congo was a large marquee. Inside were children, all ill. They had been separated from family, friends, those who looked after them. Perhaps, mostly having disabilities, they had been abandoned in the panic of the militia attack that drove them from their homes. Now they were hungry. It was deeply shocking but, tragically, expected. A few weeks later in England, I was talking to some people – a mum, dad and one child – in a food bank. They were ashamed to be there. The dad talked miserably. He said they had each been skipping a day’s meals once a week in order to have more for the child, but then they needed new tyres for the car so they could get to work at night, and just could not make ends meet. So they had to come to a food bank.They were treated with respect, love even, by the volunteers from local churches. But they were hungry, and ashamed to be hungry. I found their plight more shocking. It was less serious, but it was here.

And they weren’t careless with what they had – they were just up against it. It shocked me that being up against it at the wrong time brought them to this stage. There are many like them. But we can do something about it. Two weeks ago, people in churches up and down the land listened to the passage in St Matthew’s Gospel where Jesus describes who will enter the Kingdom of Heaven. When Christ returns, He will say: ‘Come, you that are blessed by my Father, inherit the kingdom… for I was hungry and you gave me food, I was thirsty and you gave me something to drink.’ The good people are surprised, they don’t remember helping anyone so powerful, and think He has mixed them up with someone else. Jesus tells them: ‘Just as you did it to one of the least of these… you did it to me.’ Those who did not give food to the hungry or a drink to the thirsty find out God has taken their lack of kindness into account too.

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Art reflects society before society reflects upon itself.

Has Modern Art Exhausted Its Power To Shock? (BBC)

Modern art’s desire to shock and to defy cliche has become a cliche in itself, and spawned a culture of fakery, argues Roger Scruton. “To thine own self be true,” says Shakespeare’s Polonius, “and thou canst be false to no man.” Live in truth, urged Vaclav Havel. “Let the lie come into the world,” wrote Solzhenitsyn, “but not through me.” How seriously should we take these pronouncements, and how do we obey them? There are two kinds of untruth – lying and faking. The person who is lying says what he or she does not believe. The person who is faking says what he believes, though only for the time being and for the purpose in hand. Anyone can lie. It suffices to say something with the intention to deceive. Faking, however, is an achievement. To fake things you have to take people in, yourself included. The liar can pretend to be shocked when his lies are exposed, but his pretence is part of the lie. The fake really is shocked when he is exposed, since he has created around himself a community of trust, of which he himself is a member.

In all ages people have lied in order to escape the consequences of their actions, and the first step in moral education is to teach children not to tell fibs. But faking is a cultural phenomenon, more prominent in some periods than in others. There is very little faking in the society described by Homer, for example, or in that described by Chaucer. By the time of Shakespeare, however, poets and playwrights are beginning to take a strong interest in this new human type. In Shakespeare’s King Lear the wicked sisters Goneril and Regan belong to a world of fake emotion, persuading themselves and their father that they feel the deepest love, when in fact they are entirely heartless. But they don’t really know themselves to be heartless – if they did, they could not behave so brazenly. The tragedy of King Lear begins when the real people – Kent, Cordelia, Edgar, Gloucester – are driven out by the fakes.

The fake is a person who has rebuilt himself, with a view to occupying another social position than the one that would be natural to him. Such is Molière’s Tartuffe, the religious impostor who takes control of a household through a display of scheming piety. Like Shakespeare, Moliere perceives that faking goes to the very heart of the person engaged in it. Tartuffe is not simply a hypocrite, who pretends to ideals that he does not believe in. He is a fabricated person, who believes in his own ideals since he is just as illusory as they are. Tartuffe’s faking is a matter of sanctimonious religion. With the decline of religion during the 19th Century there came about a new kind of faking. The romantic poets and painters turned their backs on religion and sought salvation through art. They believed in the genius of the artist, endowed with a special capacity to transcend the human condition in creative ways, breaking all the rules in order to achieve a new order of experience. Art became an avenue to the transcendental, the gateway to a higher kind of knowledge.

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At least.

California’s ‘Hot Drought’ Ranks Worst in at Least 1,200 Years (Bloomberg)

Record rains fell in California this week. They’re not enough to change the course of what scientists are now calling the region’s worst drought in at least 1,200 years. Just how bad has California’s drought been? Modern measurements already showed it’s been drier than the 1930s dustbowl, worse than the historic droughts of the 1970s and 1980s. That’s not all. New research going back further than the Viking conquests in Europe still can’t find a drought as bad as this one. To go back that far, scientists consulted one of the longest records available: tree rings.

Tighter rings mean drier years, and by working with California’s exceptionally old trees, researchers from University of Minnesota and Woods Hole Oceanographic Institute were able to reconstruct a chronology of drought in southern and central California. They identified 37 droughts that lasted three years or more, going back to the year 800. None were as extreme as the conditions we’re seeing now. One of the oddities of this drought is that conditions aren’t just driven by a lack of rainfall. There have been plenty of droughts in the past with less precipitation. (The drought of 1527 to 1529, for example, was killer.) What makes this drought exceptional is the heat. Extreme heat.

Higher temperatures increase evaporation and help deplete reservoirs and groundwater. The California heat this year is like nothing ever seen in modern temperature records. The chart above shows average year-to-date temperatures in the state from January through October for each year since 1895. California’s drought has withered pastures and forced farmers to uproot orchards and fallow farmland. It may cost the state $2.2 billion this year, with 17,100 jobs lost and 428,000 acres of land left unplanted. Tensions are still running high between farmers and salmon fishers, who rely on the same waters. Young salmon even qualified for migration assistance this year – via tanker truck – when river levels were too low to make the swim. The effects of prolonged drought are cumulative. Maps from the U.S. Drought Monitor below show the worsening of conditions over the last three years.

More than half of the state remains in “exceptional drought” (crimson). It’s a distinction marked by crop and pasture losses and water shortages that fall within the top two percentiles. Record rainfalls recorded across the state this week — including in San Francisco and Los Angeles — did little to overcome the state’s moisture deficit, the National Drought Mitigation Center reported yesterday.

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Oct 202014
 
 October 20, 2014  Posted by at 11:17 am Finance Tagged with: , , , , , , , , , ,  


John Vachon Houses in Atlanta, Georgia May 1938

Leveraged Money Spurs Selloff; ‘Liquidity Isn’t What It Used to Be’ (Bloomberg)
Fed’s Rosengren Sticks to 3% Growth Forecast, Sees End for QE (Bloomberg)
China GDP Report May Reignite Global Growth Panic (CNBC)
The ECB Changes Its Mind On Which Bonds To Monetize, Then Changes It Again (ZH)
Hedge Funds Cut Bullish Bets on Crude as Prices Tumble (Bloomberg)
Is The US Pushing Oil Prices Down To Hurt Russia? (CNBC)
Russia Credit Rating Nears Junk as Reserves Erode Amid Sanctions (Bloomberg)
Russia to Reject Conditions to End Sanctions After Ukraine Talks (Bloomberg)
Two Female Japan Ministers Resign in One Day in Blow to Abe (Bloomberg)
Abe Hints At Delaying Japan Sales Tax Hike (FT)
Deeper Oil Slump Seen as ‘Disaster’ Risk for Australian LNG (Bloomberg)
The $2 Trillion Megacity Dividend China’s Leaders Oppose (Bloomberg)
The Eurozone’s Problems Are Based in Politics (WSJ)
The Unending Economic Crisis Makes Us Feel Powerless And Paranoid (Guardian)
German Intelligence Claims Pro-Russian Separatists Downed MH17 (Spiegel)
China Wastes 35 Million Metric Tons of Grain a Year, Enough to Feed 200 Million (BW)
Ebola Patients Had Possible Contact With 300 in US (Bloomberg)
Ebola Front-Line Doctors at Breaking Point (Bloomberg)

” … you sell what you can, not what you want”

Leveraged Money Spurs Selloff; ‘Liquidity Isn’t What It Used to Be’ (Bloomberg)

When markets are buckling and volatility is signaling a crisis, you sell what you can, not what you want. That’s what happened last week on Wall Street, where slowing economic growth in Europe, Ebola anxiety and escalating conflicts in the Middle East and Ukraine tore through the calm with a force not seen in three years. Loath to find out what their record holdings of corporate bonds and leveraged loans were worth as liquidity thinned and markets slid, professional traders turned to stocks and Treasuries to defuse risk. The result was a frenzy. U.S. government debt volume surged to an all-time high of $946 billion at ICAP Plc, the world’s largest interdealer broker, more than 40% above the previous record. About 11.9 billion shares changed hands on U.S. equity exchanges on Oct. 15, the most since the European debt crisis of 2011.

“Whenever people can’t sell their illiquid assets, they turn to the U.S. stock market because everyone is involved in it and that’s what they can sell,” said Matt Maley, an equity strategist at Miller Tabak. “That’s why the market selloff was so sharp. You sell what you can, and the deepest, most liquid asset in the world is U.S. stocks.” Equity owners were blindsided by swings that erased the Dow Jones Industrial Average’s 2014 gain and wiped out $672 billion of global market value. The 30-stock gauge swung in a 458-point range on Oct. 15, the widest since 2011. Its 263-point rally on Oct. 17 trimmed the weekly decline to 1%, the fourth consecutive drop. Measures of turbulence soared this month. The Chicago Board Options Exchange Volatility Index (VIX) has gained 35% in October and touched its highest level since June 2012. A gauge compiled by Bank of America tracking swings in equities, Treasuries, currencies and commodities reached a 13-month high just three months after hitting its lowest level ever.

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Yet another Fed head speaks out. Starting to be a long series.

Fed’s Rosengren Sticks to 3% Growth Forecast, Sees End for QE (Bloomberg)

Federal Reserve Bank of Boston President Eric Rosengren said the Fed shouldn’t overreact to turmoil in financial markets as it approaches its next policy making meeting at the end of the month. “Volatility by itself isn’t a bad thing, it’s just reflecting there’s a lot of uncertainty in the market,” Rosengren said in an Oct. 17 interview in Boston. “Just because we’re seeing volatility in the last two weeks isn’t enough to have me fundamentally change my forecasts.” Rosengren said he believes the Federal Open Market Committee should halt bond purchases as planned when it meets Oct. 28-29, ending its campaign of so-called quantitative easing. He added the program could be extended if there is additional erosion in the outlook for economic growth. “If we get a lot of information in the next week and a half that indicates there’s a much more severe problem, I wouldn’t rule it out,” he said.

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What are the odds on that? Beijing will say whatever it wants to say.

China GDP May Reignite Global Growth Panic (CNBC)

China may ignite fresh panic over the state of the global economy when it reports its third quarter GDP on Tuesday, which could confirm a marked slowdown in the world’s main growth engine. The economy is forecast to have grown 7.2% in the July-September period, according to a Reuters poll, the slowest pace since the first quarter of 2009 and down from 7.5% in the previous three months. “The sagging housing market has affected the economy more broadly, weighing on investment and on commodity production,” Alaistair Chan, economist at Moody’s Analytics, wrote in a report. “A bright spot was the acceleration in exports, but this was not sufficient to keep the economy from growing below potential,” he said.

Recent economic indicators, including weaker-than-expected inflation, have painted a grim picture of the world’s second-largest economy. China’s annual consumer inflation slowed to 1.6% in September, a level not seen since January 2010, suggesting rising risks of deflation. The weakening inflationary pressure is a reflection that the economy is growing below its potential growth rate, with too much spare capacity and too little demand, economists explain.

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Just plain fun.

The ECB Changes Its Mind On Which Bonds To Monetize, Then Changes It Again (ZH)

To get a sense of just how chaotic, unprepared, confused and in a word, clueless the ECB is about just its “private QE”, aka purchases of ABS, which should begin in the “next few days” (but certainly don’t hold your breath) – let alone the monetization of public sovereign debt – here is Exhibit A. Because if you were confused about what is about to happen, don’t worry: it appears the ECB hardly has any idea either, because it was just on October 7 when 40 ABS bonds were dropped from the ECB’s “eligible for purchasing” list. And then, just a week later, the ECB changed its mind about changing it mind, and reinstated 19 of the ineligible bonds right back! Citi’s Himanshu Shrimali explains the stunning flip flop that only the ECB could have pulled off without losing all its credibility (perhaps because it no longer really has any):

As straight forward as the details of the ECB’s ABS purchase programme (ABSPP) released on 2 Oct 2014 seemed, many market participants were taken by surprise on 7 October when about 40 bonds became ineligible under the central bank’s collateral framework and 19 of them were again reinstated on 15 October. We understand that the bonds were initially removed from the list of eligible securities because of inadequate servicer continuity provisions – a requirement which came into force on 1 October 2013 but had a 1-year transitional period until 1 October 2014.

We believe the reinstatements occurred because the ECB had earlier misinterpreted the adequacy of servicer continuity provisions in these bonds. Some of these expelled bonds, which include Spanish and Portuguese RMBS, have lost 2–3 points in cash prices, according to our trading desk. A similar tiering is evident in the broader ABS market with ineligible bonds demanding 40–50bp spread pickup over eligible bonds.

Don’t worry though, and just repeat: “the bonds fell and rose not because of ECB frontrunning, or lack thereof, but because of fundamentals.” Keep repeating until it becomes the truth.

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Is short covering holding up the oil price temporarily?

Hedge Funds Cut Bullish Bets on Crude as Prices Tumble (Bloomberg)

Plunging oil prices spurred hedge funds to cut bullish wagers by the most in six weeks, losing confidence in the willingness of producers to constrict supply. Money managers cut net-long positions in West Texas Intermediate by 8.1% in the week ended Oct. 14. Short positions jumped to the highest level in 22 months, U.S. Commodity Futures Trading Commission data show. WTI tumbled 8.8% this month as U.S. production expanded to a 29-year high. That added to signs of a global supply glut just as the International Energy Agency cut its forecast for demand growth. Crude is now trading in a bear market, underpinned by speculation that OPEC members are favoring market share over prices.

“The price action this week is a reflection of the positioning,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone Oct. 17. The speculative betting makes further declines more likely, he said. WTI fell $7.01, or 7.9%, to $81.84 a barrel on the New York Mercantile Exchange in the period covered by the CFTC report. Futures rose 41 cents to $83.16 at 12:18 p.m. in Singapore in electronic trading on the New York Mercantile Exchange today. Global crude consumption will rise by about 650,000 barrels a day this year, the Paris-based IEA said in its monthly market report on Oct. 14. That was 250,000 fewer than last month’s estimate and the slowest growth since 2009. The adviser to energy-consuming countries cut its 2015 demand growth forecast by 100,000 barrels a day to 1.1 million.

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It seems silly to suggest there are any coincidences left in today’s financial markets.

Is The US Pushing Oil Prices Down To Hurt Russia? (CNBC)

The recent drop in oil prices could be due to more than just lower demand, according to some analysts, who have suggested that the U.S. could be deliberately manipulating the market to hurt Russia at a time of geopolitical stress. Patrick Legland, the global head of research at Societe Generale, conceded that he had no in depth knowledge of the situation but claimed that it was an “interesting coincidence” that the two events were happening at the same time. “Is it lower demand or is it the U.S. clearly maneuvering?,” he told CNBC Monday. “I’m not so sure that it is lower demand, it might be some sort of tactical move….I don’t know, but as someone from markets I’m always surprised by these kind of coincidences.” Brent crude futures edged higher on Monday morning to trade at $86.48 per barrel. The commodity has been trading near its lowest since 2010 and has seen a 25% dip since June with concerns of an oversupply and a lack of demand in key global markets.

The U.S. has stepped up its efforts towards self-sufficiency with its shale gas industry booming over the last decade, and has become a competitor for major oil-exporting countries such as Saudi Arabia and Russia. Meanwhile, economists have warned of mediocre global growth in the years ahead and there are also fears of deflation in places like the euro zone. Looking at his own research, Legland claimed that there was indeed a slowdown in the global economy but maintained that it wasn’t to the extent at which oil prices have currently fallen. The U.S. would obviously deny any acquisitions of manipulation and there is no evidence to suggest that this is the case. “It’s very hard to prove,” Timothy Ash, head of emerging markets research at Standard Bank told CNBC via email. “I have heard such suggestions before. It is clearly useful for the West, as it adds pressure on Russia,” he added.

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Russia doesn’t sound worried. It will simply establish, with China, an independent ratings agency.

Russia Credit Rating Nears Junk as Reserves Erode Amid Sanctions (Bloomberg)

Russia’s credit rating was cut to the second-lowest investment grade by Moody’s Investors Service, which cited sluggish growth prospects and an erosion of the country’s reserves amid sanctions over Ukraine. Moody’s downgraded the sovereign one level to Baa2 from Baa1 and kept a negative outlook on the rating on Oct. 17. It is in line with Fitch Ratings’s credit grade and one step above Standard & Poor’s, which lowered Russia to BBB- in April. Russia has spent $13 billion from its foreign reserves this month to slow the ruble’s weakening as tumbling oil prices add to the woes of an economy that’s teetering toward recession amid the sanctions by the U.S. and European Union. President Vladimir Putin and European negotiators are struggling to hold together a six-week truce in eastern Ukraine, inching forward in talks to prevent the fighting from escalating.

“It’s negative news, but it’s not really critical because it’s still an investment grade,” Vladimir Osakovskiy, chief economist for Russia at Bank of America Corp. in Moscow, said by phone yesterday. “It was expected and therefore the negative reaction will probably be limited.” The downgrade is driven by “Russia’s increasingly subdued medium-term growth prospect,” Kristin Lindow, an analyst at Moody’s Investors Service Inc., said in a phone interview on Oct. 17. “The gradual and ongoing erosion of the country’s international reserve buffer” contributed to a weakening of Russia’s creditworthiness, she said.

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These are the most useless talks imaginable. Ukraine, US, EU demand it all: surrender by rebels, getting back Crimea, low gas prices. They go into the talks on purpose with demands they know Russia can’t and won’t meet.

Russia to Reject Conditions to End Sanctions After Ukraine Talks (Bloomberg)

Russia’s foreign minister said his country will refuse to accept conditions to end sanctions after talks in Italy failed to produce a breakthrough to bolster a truce in the eastern Ukrainian conflict. Russia has been told to comply with various criteria before the U.S. and its allies revoke the limitations, Sergei Lavrov said in the transcript of an NTV interview posted on the ministry’s website yesterday. Explosions in the Ukrainian city of Donetsk were heard throughout the day after shelling had killed four people and wounded nine others earlier, the local authorities said on its website.

The U.S. and European Union imposed restrictions on Russian officials and companies after the March annexation of Crimea and July downing of a Malaysian passenger plane over eastern Ukraine. Russia’s partners, including overseas politicians and businessmen, understand that a policy designed to punish the country is doomed to failure, Lavrov said. “We respond very simply: we shall not agree to any criteria or conditions,” he said. “Russia is doing more than anyone else to resolve the crisis in Ukraine.”

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Japanese female politicians are all corrupt?

Two Female Japan Ministers Resign in a Day in Blow to Abe (Bloomberg)

After nearly two years without a single resignation from Japanese Prime Minister Shinzo Abe’s cabinet, two female ministers – appointed only last month – stepped down on the same day. Yuko Obuchi, 40, trade and industry minister, resigned over allegations of improper use of political funds, and Justice Minister Midori Matsushima, 58, quit over claims she breached election laws. The resignations are a double blow to Abe who has made promoting women a pillar of his economic policy. Abe’s government has enjoyed unusually stable voter approval since he took office in December 2012, helped by economic policies that have boosted the stock market and an absence of scandals. Faced with a shrinking workforce, he has sought to attract more women to paid employment, emphasized a goal of having women in 30% of leadership positions by 2020, and appointed women to high profile government positions.

“This is the first real bump in the road for Abe, who has been doing well, keeping support rates high even though his policies are not that popular,” said Steven Reed, professor of political science at Chuo University in Tokyo. With the resignation of the two ministers “one of his ways of distracting people from his less popular policies is no longer a distraction.” Abe, speaking after accepting the resignations, apologized and said he would quickly choose their successors. Internal Affairs Minister Sanae Takaichi was appointed interim trade minister, and Eriko Yamatani, the minister for abductee issues, was made justice minister on a temporary basis, according to documents from Abe’s office.

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Funny: “Mr Abe said: ‘By increasing the consumption tax rate if the economy derails and if it decelerates, there will be no increase in tax revenues so it would render the whole exercise meaningless.’ “. That’s exactly what happened after the first hike too.

Abe Hints At Delaying Japan Sales Tax Hike (FT)

Shinzo Abe has hinted that he may delay increasing Japan’s consumption tax, saying the move would be”meaningless” if it inflicted too much damage on the country’s economy. In an interview with the Financial Times, Japan’s prime minister,said the planned tax increase from 8% to 10% was intended to help secure pension and health benefits for “the next generation”. But he added: “On the other hand, since we have an opportunity to end deflation, we should not lose this opportunity.” The Japanese economy shrunk 7.1% between April and June compared with a year ago after Mr Abe’s government raised consumption tax from 5% to 8%. A second rise has strong backing from the Bank of Japan, the finance ministry, big business and the International Monetary Fund,which all want action to reduce the country’s mountainous debt. A postponement would require a change in the law.

But Mr Abe said: “By increasing the consumption tax rate if the economy derails and if it decelerates, there will be no increase in tax revenues so it would render the whole exercise meaningless.” His caution shows how much now rides on the strength of there bound in growth in the third quarter. He is expected to decide on the tax in early December when the final data come in, but early indicators have been disappointing. Concerns that Mr Abe’s plan to revive the Japanese economy is running out of steam added to gloom over global growth prospects that stirred financial markets around the world last week. On previous foreign trips, the Japanese prime minister has acted as a confident salesman for his reform program. Heonce urged traders at the New York Stock Exchange to “Buy my Abenomics.” But the exuberance has gone from Abenomics. Instead the effort to turn around the Japanese economy is looking like a long, hard, perilous slog.

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And all other LNG producers.

Deeper Oil Slump Seen as ‘Disaster’ Risk for Australian LNG (Bloomberg)

An extended slump in oil prices threatens an expansion of the liquefied natural gas industry and risks cutting returns for project developers in Australia, poised to become the world’s biggest supplier of LNG. The nation’s exports of natural gas converted to liquid are linked to the oil price, which has declined from a June peak. Brent crude, the global benchmark, reached an almost four-year low of $82.60 a barrel last week. Australia’s natural gas industry is already facing high costs as companies from BG Group to Chevron build seven export ventures to meet Asian demand. Developers across the nation are studying further investment of as much as A$180 billion ($160 billion).

Weaker oil prices may put proposed LNG projects “to sleep for a number of years,” Fereidun Fesharaki, chairman of Facts Global Energy, an industry consultant, said in a phone interview. “For the projects that are already under construction, it hits their pocketbooks seriously.” Prices below $80 a barrel may be a “disaster” for some projects, said Fesharaki, who forecasts Brent may decline to $60 a barrel before the end of the year, then rebound to about $80 by the end of 2015. In a 2012 presentation, he cited lower oil prices as a bigger concern for Australia’s LNG industry than supply competition from the U.S. Origin Energ’s long-term view of the economics of its project with ConocoPhillips is unchanged, the Sydney-based company said last week in an e-mail. In a November presentation, Origin said it needed a $55 a barrel price over the life of the project to recover its costs.

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Make China’s maga cities bigger?! To what 50 million, 100 million people? Just to boost GDP? Think they’ll be happy?

The $2 Trillion Megacity Dividend China’s Leaders Oppose (Bloomberg)

China needs a new prescription for growth: Cram even more people into the pollution-ridden megacities of Beijing, Shanghai, Guangzhou and Shenzhen. While this may sound like a recipe for disaster, failing to expand and improve these urban areas could be even worse. That’s because the biggest cities drive innovation and specialization, with easier-to-reach consumers and more cost-efficient public transport systems, according to Yukon Huang, a former World Bank chief in China. He estimates China’s leaders’ seven-month-old urbanization blueprint, which aims to funnel rural migrants to smaller cities, will slice as much as a percentage point off gross domestic product growth annually through the end of 2020.

“China’s big cities are actually too small,” said Huang, a senior associate at the Carnegie Endowment for International Peace’s Asia program in Washington. “If China wants to grow at 7% for the rest of this decade, it’s got to find another 1 to 1.5% percentage points of productivity from somewhere.” A strategy that supports the biggest cities’ expansion would add $2 trillion to China’s output in 10 years – more than India’s 2013 GDP – according to Shanghai-based Andy Xie, a former Morgan Stanley chief Asia-Pacific economist. With a population more than four times that of the U.S. living on roughly the same land mass, China should have big, densely populated urban areas, Xie said. To make that a reality, the megacities need to build up, not out, he added, citing Tokyo and its population of about 37 million as a workable example.

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Everything is.

The Eurozone’s Problems Are Based in Politics (WSJ)

Some say the euro crisis is back; others argue that it never really went away. A gloomy forecast from the IMF suggesting a 40% chance of a slide back into recession and a flurry of weak data pointing to a faltering recovery, particularly in Germany, have spooked markets. Once again, the eurozone is the focus of global attention amid fears that low growth will tip the Continent into outright deflation. European equities fell last week to their lowest level for 10 months, German bunds rallied and peripheral-country bond yields rose. Most eye-catching: Greek government 10-year yields briefly soared above 9% and ended the week just below 8%. A bit of perspective is necessary. First, the origins of this slowdown lie not in the eurozone but in emerging markets. This emerging-market downturn, which caught the IMF by surprise but has in fact been under way for most of the year, was the inevitable result of the U.S. Federal Reserve’s decision to start turning off the monetary taps.

As the extraordinary liquidity flows that fueled developing-country booms and commodity-price bubbles have unwound, developed countries with major export sectors such as Germany have been hit too. Geopolitical tensions have also played a part. The market is worried about future sources of global demand, but falling commodity prices are akin to a tax cut for developed economies that should underpin domestic demand. Second, the eurozone, on most measures, is in better shape than in 2012.Former crisis countries Spain, Portugal and Ireland are growing again and have exited their bailout programs; even Greece is likely to have grown in the third quarter of this year, after 24 quarters of recession. Budget deficits have been slashed. Eurozone banks are much better capitalized. The launch of the eurozone’s banking union should reverse some of the fragmentation in the banking system. The eurozone also now has rescue funds and a central bank willing to backstop the financial system.

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Much to say about the mental effects of a 7 year crisis that’s continuously denied.

The Unending Economic Crisis Makes Us Feel Powerless And Paranoid (Guardian)

Six years into the economic crisis we can still get days – as with last week’s market correction – where the froth blows off the recovery and reveals only something flat and stale beneath. The fundamental economic problems have not been solved: they’ve just been palliated. In today’s economy we never quite seem to turn the corner towards rising growth, falling poverty, stabilised public finances. Not so much winter without Christmas, but winter without ever getting to the shortest day. And that is doing something to our psychology. It is destroying our confidence in “agency” – the human ability to avoid danger, mitigate risk, regain control over fluid situations. [..] And it is logical to feel powerless if you witness the best educated and briefed people of your generation flounder – as politicians and diplomats have – in the face of a collapse of global order. But for economists – veterans of Lehman Brothers, Enron and the dotcom boom and bust before them – there is a feeling of deja vu.

We know what it’s like to get all your preconceptions blown out of the water, and see talented people flounder. In economics, big, uncontrollable forces are the norm; but by understanding them – by charting the rules of the game we’re supposed to play – we gain the ability to act. So, as one Lehman trader anecdotally told his new recruit before the crash: “Stay here, keep your head down, do nothing extraordinary and in 20 years you will have a Lamborghini, just like me.” Agency in a normal capitalist system is about knowing the rules. But in a disrupted system, power flies to the extremes. The majority of people feel powerless because the rules no longer apply: you can keep your head down, do nothing extraordinary, and still leave the building with only a cardboard box. Meanwhile, for a tiny minority, disrupted systems seem to endow them with kryptonite powers.

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More claims. Let’s see that proof. Why keep on keeping everything a secret? What are the intentions behind that?

German Intelligence Claims Pro-Russian Separatists Downed MH17 (Spiegel)

Germany’s foreign intelligence agency says its review of the crash of a Malaysian Airlines Boeing 777 in Ukrainian has concluded it was brought down by a missile fired by pro-Russian separatists near Donetsk. After completing a detailed analysis, Germany’s foreign intelligence service, the Bundesnachrichtendienst (BND), has concluded that pro-Russian rebels were responsible for the crash of Malaysian Airlines Flight MH17 on July 19 in eastern Ukraine while on route from Amsterdam to Kuala Lumpur. In an Oct. 8 presentation given to members of the parliamentary control committee, the Bundestag body responsible for monitoring the work of German intelligence, BND President Gerhard Schindler provided ample evidence to back up his case, including satellite images and diverse photo evidence. The BND has intelligence indicating that pro-Russian separatists captured a BUK air defense missile system at a Ukrainian military base and fired a missile on July 17 that exploded in direct proximity to the Malaysian aircraft.

Evidence obtained shortly after the accident suggested the aircraft had been shot down by pro-Russian militants. Both the governments of Russia and Ukraine had mutually accused each other of responsibility for the crash. After a Dutch investigative commission reviewed the flight recorder, it avoided placing any blame for the crash. Some 189 residents of the Netherlands perished in the downing of Flight MH17. BND’s Schindler says his agency has come up with unambiguous findings. One is that Ukrainian photos have been manipulated and that there are details indicating this. He also told the panel that Russian claims the missile had been fired by Ukrainian soldiers and that a Ukrainian fighter jet had been flying close to the passenger jet were false. “It was pro-Russian separatists,” Schindler said of the crash, which involved the deaths of four German citizens.

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As the number of Chinese facing chronic hunger is 158 million.

China Wastes 35 Million Metric Tons of Grain a Year, Enough to Feed 200 Million (BW)

Chinese officials like to point out that their country has less than 10% of the world’s arable land but has to feed a fifth of the world’s population. So you would think that China obsessively ensures there is no wastage in its agriculture sector. You would be wrong. Every year China wastes at least 35 million metric tons of grain through subpar storage, during transportation by truck, rail, and boat, and through excessive processing, said a Chinese official earlier this week. “The losses can feed 200 million people for a year, which is shameful,” said Chen Yuzhong, an official with the State Administration of Grain, reported China Daily today. In particular, 27.5 million tons is lost through improper storage and transportation, while another 7.5 million tons is destroyed during processing, he said. Excessive processing that leads to waste happens as companies polish rice two or three times, according to Wang Lirong, a quality engineer in the State Administration of Grain.

“Nowadays, consumers have a higher demand for the appearance of rice in color and shape, but whiter rice doesn’t mean more nutrition,” Wang said. Of China’s 210 million farming families, only 3% stockpile the grain in the most effective fashion, according to statistics from China’s agriculture ministry. China’s major grain-producing provinces of Hebei, Henan, Shandong, Jilin, Liaoning, and Heilongjiang lack granaries for about 35 million tons of grain. Despite its massive waste, China is doing a good job of feeding its population, mainly by upping overall production through technological improvements, and by giving its farmers more incentives to produce, said Premier Li Keqiang earlier this week. [..] The proportion of people in China experiencing undernourishment has dropped from 22.9% in 1990 to 1992, to 11.4% in 2011 to 2013. Over the same period, the number of those facing chronic hunger has fallen from 272.1 million to 158 million, according to the FAO.

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Looking at US reactons to ebola, you’d think you’re in a kindergarten.

Ebola Patients Had Possible Contact With 300 in US (Bloomberg)

More than 300 people have had possible or verified contact with Ebola patients in the U.S., according to data released by health authorities yesterday. The new numbers were issued as the top public official co-ordinating the response to the deadly virus in Dallas said 48 of the original contacts with deceased Ebola patient Thomas Eric Duncan were cleared of risk for the disease over the weekend or were expected to be cleared today. Duncan’s girlfriend Louise Troh and three people in her Texas household are scheduled to come out of a 21-day quarantine today, barring any last-minute appearance of symptoms. “Big day today,” Judge Clay Jenkins, the highest elected official in Dallas County, said yesterday evening. “It marks a day on the curve where we begin to see a decline.” Numbers from the CDC, covering Texas, and from the Ohio Department of Health showed there are still many under monitoring for possible Ebola symptoms. The potential Ohio exposures to Ebola stem from a trip from Dallas to Ohio by Amber Joy Vinson, a nurse who contracted the disease from Duncan.

Ohio issued travel-restriction recommendations for residents who had contact with Vinson to limit the risk of spreading the disease. Counties that include Cleveland and Akron have begun notifying affected residents of the restrictions, said Scott Milburn, a spokesman for Ohio Governor John Kasich. Texas Health Presbyterian Hospital came under Congressional criticism in hearings last week for its handling of Ebola patients. In a full-page ad in the Dallas Morning News yesterday, the Dallas hospital apologized for failing to diagnose Duncan’s symptoms when he first showed up at the emergency room. In its defense, the hospital has said it followed CDC safety procedures. The protocols used to treat Ebola patients in Dallas were inappropriate, Anthony Fauci, director of the U.S. National Institute of Allergy and Infectious Diseases, said in talk shows yesterday. The guidelines were based on field experience in Africa unsuited for more-invasive treatments used in U.S. hospitals.

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Far too much is being demanded from these. Talk about heroes. And see what you get when you are one.

Ebola Front-Line Doctors at Breaking Point (Bloomberg)

At 3:30 a.m. in the world’s biggest Ebola treatment center, Daniel Lucey found the outbreak reduced to its essentials: patients lying on mattresses on the floor and vomiting in the dark, visible only by the wavering flashlight beam of a single volunteer doctor. “I don’t see a light at the end of the tunnel,” said Lucey, a physician and professor from Georgetown University who is halfway through a five-week tour in Liberia with Medecins Sans Frontieres, the medical charity known in English as Doctors Without Borders. “The epidemic is still getting worse,” he said by phone between shifts. That’s an increasingly urgent challenge for MSF and the global health community. As fear spreads in the U.S. over transmission of the virus to two nurses in a modern Dallas hospital, the main fight against the outbreak is still being waged by volunteers like Lucey half a world away.

MSF has been the first – and often only – line of defense against Ebola in West Africa. The group raised the alarm on March 31, months ahead of the World Health Organization. Now, after treating almost a third of the roughly 9,000 confirmed Ebola cases in Africa – and faced with a WHO warning of perhaps 10,000 new infections a week by December – MSF is reaching its limits. “They are at the breaking point,” said Vinh-Kim Nguyen, a professor at the School of Public Health at the University of Montreal who has volunteered for a West African tour with MSF in a few weeks. MSF has already seen 21 workers infected and 12 people die, and “there’s a sense that there’s a major wave of infections that’s about to wash everything away,” Nguyen said.

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Oct 102014
 
 October 10, 2014  Posted by at 12:17 pm Finance Tagged with: , , , , , , ,  Comments Off on Debt Rattle October 10 2014


NPC Berberich shoe store window, Seventh Street, Washington, DC June 1920

Buckle-Up: Global Stocks In For Long Roller Coaster Ride (CNBC)
Fed Aim Off Target as Inflation Descends Near Danger Zone (Bloomberg)
Why The Strong Dollar May Sink Junk Bonds (CNBC)
Iran Matches Saudi Oil Discounts in Bear Market for Crude (Bloomberg)
OPEC: Milder Winter To Pressure Oil Price Further (CNBC)
US Shale Drillers Hugely Overestimate Reserves Before Investors (Bloomberg)
US Firms Could Make Billions From UK Via Secret TTIP Tribunals (Independent)
Draghi Clashes With Germany’s Schaeuble Over Steps for Europe (Bloomberg)
Is China’s Bubble the Next Financial Crisis? (Bloomberg)
Health Of Global Economy Is Worrying: Stiglitz (CNBC)
Bad Loans At Italy Banks Up 20% In August To Record High (Reuters)
Barcelona Stirs as Spain Warns of Separatist Tinderbox (Bloomberg)
UKIP: From ‘Clowns’ To Contenders (CNBC)
Dark Money Groups Set Record in 2014 US Midterm Elections (Bloomberg)
MH-17 Report False Flag Exposed (Zero Hedge)
The Amish Farmers Reinventing Organic Agriculture (Atlantic)
The Ominous Math Of The Ebola Epidemic (WaPo)
Ebola Is ‘Entrenched And Accelerating’ In West Africa (BBC)

“Overnight the mindlessly bullish JBTD (Just Buy the Dip) crowd felt the cold steel of Edward Scissorhands.”

Buckle-Up: Global Stocks In For Long Roller Coaster Ride (CNBC)

Whipsawing global markets scream fears about global growth conditions and unless data from the world’s major economies improve, a deeper correction is on the cards, say strategists. Asian markets tumbled on Friday, extending the sharp selloff in U.S. and European equities overnight as intensifying concerns over the health of the euro zone economy hit risk appetite. Australia’s benchmark S&P/ASX 200 index led losses, falling 1.8% in the morning session, while Japan’s Nikkei 225 and South Korea’s KOSPI were both off 1.2%. “There are a lot of questions at the moment and not a lot of answers in regards to Europe’s economy, the stability of China’s housing market and the timing of the Fed’s first rate hike,” Chris Weston, chief market strategist at IG told CNBC.

“The hallmarks are in place for a stock market correction – Brent crude prices are falling, long-end U.S. bonds are telling the story that markets are starting to look at low growth and low inflation for a long period of time,” he said. In order to arrest the volatile downtrend in stocks, there needs to be a good run of economic data out the world’s leading economies, Weston said. Nicholas Ferres, investment director, global asset allocation, Eastspring Investments say the bearish price action suggests a market correction is already underway. “Overnight the mindlessly bullish JBTD (Just Buy the Dip) crowd felt the cold steel of Edward Scissorhands. Failure of the market to extend the rebound from the prior day probably suggests that a deeper correction is likely underway,” he said. “From my perch, this reflects a genuine growth scare, evident in the macro news flow from Europe, China and Japan, rather than a direct fear of U.S. policy normalization,” he said.

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People are not spending. They’re broke. How can you raise inflation in those conditions?

Fed Aim Off Target as Inflation Descends Near Danger Zone (Bloomberg)

Federal Reserve officials are hunting for new tactics to raise price increases to their target as slowing global growth, cheaper commodities and flat wages sound warnings that inflation is descending toward the danger zone. The Fed needs a clear strategy for getting the inflation rate higher after falling short of its 2% target for 28 consecutive months. Now, as longer-run inflation expectations erode in financial markets, the Federal Open Market Committee is shifting its focus toward prices after putting its main emphasis on jobs for months. Several officials worried that “inflation might persist below” the committee’s target for “quite some time,” minutes from the Sept. 16-17 meeting said. Too-low inflation “is getting to be a real issue again,” said former Fed Governor Laurence Meyer. With inflation at 1.5% according to the Fed’s preferred index, Meyer said FOMC policy makers aren’t likely to raise interest rates, even if the economy approaches full employment, defined as a jobless rate of 5.2% to 5.5%.

Unemployment was 5.9% last month. “The timing of the first rate hike is all about inflation,” said Meyer, now a senior managing director at Macroeconomic Advisers LLC in Washington. Policy makers including regional Fed Presidents William Dudley of New York, Charles Evans of Chicago and Narayana Kocherlakota of Minneapolis have in recent days all mentioned below-target inflation as a risk that weighs against raising interest rates too soon. An inflation rate approaching zero is bad for the economy because of its impact on behavior by businesses and consumers. Companies’ inability to raise prices hurts profits, and they rarely compensate by cutting wages, so they fire workers instead. Consumers anticipating falling prices may postpone discretionary purchases. This can combine to create a vicious circle of less spending and further downward pressure on prices.

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Not just junk bonds.

Why The Strong Dollar May Sink Junk Bonds (CNBC)

A simmering mix of a strong U.S. dollar and weak commodity prices may be brewing up trouble for junk bond exchange-traded funds (ETFs) with a hefty weighting in materials companies. “If the U.S. dollar stays strong, that will exacerbate the impact of the weaker commodity prices” on miners’ cash flow and the ability to meet debt payments, said May Zhong, a credit analyst at Standard & Poor’s. Coal companies, especially U.S.-based ones competing in the export market, are a particular concern, she said. Faced with oversupply, thermal coal prices have fallen to near five-year lows, while the U.S. dollar index has risen as much as 8.3% so far this year. But Australian miners may also take a hit, she said. “The Australian dollar hasn’t fallen to the same extent as major commodity prices. It’s still relatively strong compared to the U.S. dollar,” she said.

“You do need a weak local currency to help those [B-rated] miners or shield them from weaker commodity prices,” Zhong said. That may have a knock-on effect on the high-yield bond ETFs, which in turn may weigh the entire junk-bond segment. Around 14.7% of the holdings of the iShares iBoxx high-yield ETF, which tracks the Markit iBoxx index, are in the oil and gas industries, while another 6.5% are in basic materials. The ETF has around $13.3 billion in net assets. While that’s a drop in the bucket compared with a total bond market estimated at around $38 trillion, some analysts consider bond ETFs a market risk as they are more susceptible to hot money flows, potentially affecting the trading liquidity of underlying bonds. Around 37% of U.S. corporate credit is held by households and funds, according to RBS data from August.

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Everything must go.

Iran Matches Saudi Oil Discounts in Bear Market for Crude (Bloomberg)

Iran will sell its oil to Asia in November at the biggest discount in almost six years, matching cuts by Saudi Arabia as global crude benchmarks slide deeper into a bear market. State-run National Iranian Oil Co. cut official selling prices of its crude to buyers in Asia for November, two people with knowledge of the pricing decision said yesterday. The decrease came a week after Saudi Arabia, the world’s largest oil exporter, reduced the price of Arab Light crude for Asia to the lowest since December 2008. Brent crude, the international benchmark, fell to the lowest in almost four years today. “The timing of Iran’s price cuts makes the price war more and more probable,” Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt, said by phone yesterday. “Iran is fully aware of the direction of and the mood in the market. Given that we’ve seen consecutive cuts, this would seem to be some kind of action and reaction.”

Middle Eastern oil producers are facing greater competition in Asia, their largest market. Cargoes from the U.S., Russia and Latin America are finding buyers there amid a surplus on international markets. The pace of demand growth is lower in the region as the economy slows in China, the world’s second-largest oil consumer. Futures for Brent and West Texas Intermediate, the U.S. benchmark, have both fallen more than 20% from their June peaks, meeting the common definition of a bear market. Front-month Brent traded as low as $88.11 a barrel today on the ICE Futures Europe exchange in London, the lowest since December 1, 2010. WTI dropped as low as $83.33 a barrel on the New York Mercantile Exchange, the lowest since July 3, 2012.

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WTI is looking at $80 today. $84 now.

OPEC: Milder Winter To Pressure Oil Price Further (CNBC)

The oil price could face further downward pressure as a warmer winter is expected to hit demand further, the supplier of about 40% of the world’s oil warned. Official forecasts expect heating degree days in the U.S. to be 12% lower than last winter, implying lower demand, the Organization of Petroleum Exporting Countries (OPEC) said in its monthly oil market report as Brent traded close to a four-year low. At the same time, OPEC said the weather has been less of a factor determining U.S. fuel consumption, as heating oil now contributes below 20% of the demand for “middle distillates” or medium weight refined oil products in the country.

Brent crude fell below $90 on Friday, as supply rises and markets digested more grim economic news, with analysts now slashing their oil price forecasts. The free fall in the oil price has increased pressure on OPEC members to take action to cut supply, which analysts said is unlikely before its meeting at the end of November. But Saudi Arabia has shown reluctance to cut production at the risk of losing market share to other countries.

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This is just too crazy. This is what business in America has come to.

US Shale Drillers Hugely Overestimate Reserves Before Investors (Bloomberg)

Lee Tillman, chief executive officer of Marathon Oil Corp., told investors last month that the company was potentially sitting on the equivalent of 4.3 billion barrels in its U.S. shale acreage. That number was 5.5 times higher than the proved reserves Marathon reported to federal regulators. Such discrepancies are rife in the U.S. shale industry. Drillers use bigger forecasts to sell the hydraulic fracturing boom to investors and to persuade lawmakers to lift the 39-year-old ban on crude exports. Sixty-two of 73 U.S. shale drillers reported one estimate in mandatory filings with the Securities and Exchange Commission while citing higher potential figures to the public, according to data compiled by Bloomberg. Pioneer’s estimate was 13 times higher. Goodrich’s was 19 times. For Rice Energy, it was almost 27-fold. “They’re running a great risk of litigation when they don’t end up producing anything like that,” said John Lee, a University of Houston petroleum engineering professor who helped write the SEC rules and has taught reserves evaluation to a generation of engineers.

“If I were an ambulance-chasing lawyer, I’d get into this.” Experienced investors know the difference between the two numbers, Scott Sheffield, chairman and CEO of Irving, Texas-based Pioneer, said in an interview. “Shareholders understand,” Sheffield said. “We’re owned 95% by institutions. Now the American public is going into the mutual funds, so they’re trusting what those institutions are doing in their homework.” Investors poured $16.3 billion in the first seven months of the year into mutual funds and exchange-traded funds focused on energy companies, including drillers that create fractures in rocks by injecting fluid into cracks to enable more oil and gas to flow out of the formation. That’s almost twice as much as in the same period last year, bringing total assets to $128.2 billion, according to New York-based Strategic Insight.

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The TTIP is a malignant tumor growing secretly underneath our skins.

US Firms Could Make Billions From UK Via Secret TTIP Tribunals (Independent)

Britain faces a real risk of being ordered to pay vast sums to US multinationals under the controversial TTIP trade deal being negotiated between Washington and the EU, an analysis of similar agreements has revealed. The Government has repeatedly played down concerns that secret tribunals established by TTIP will lead to large numbers of American corporations suing the UK in trade disputes. But United Nations figures uncovered by The Independent show that US companies have made billions of dollars by suing other governments nearly 130 times in the past 15 years under similar free-trade agreements. In one case alone the US oil company Occidental Petroleum successfully sued the government of Ecuador for $1.8bn. A separate case claiming $6bn has also be filed. The tribunals are used to rule on disputes between nation states and aggrieved companies.

Details of these cases are often kept secret, but notorious precedents include the tobacco giant Philip Morris suing Australia and Uruguay for restricting advertising and putting health warnings on packets. TTIP has provoked storms of protest from European campaign groups and largely left-leaning politicians. On Saturday, protesters will stage a “day of action” against the proposed deal in hundreds of cities across the UK and Europe. Critics say the tribunals, held under the so-called Investor-State Dispute Settlement (ISDS) system, subvert democratic justice, giving power over foreign citizens to big companies. Hearings are held in private, in international courts at the World Bank in Washington DC, bypassing the legal system of the country being sued, meaning details are often impossible to uncover. In some cases the very existence of the case is not made public.

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Draghi, Larry Summers, everyone has a go at Germany. Which is really bad timing gicen recent economic data coming from Berlin.

Draghi Clashes With Germany’s Schaeuble Over Steps for Europe (Bloomberg)

European Central Bank President Mario Draghi and German Finance Minister Wolfgang Schaeuble differed over what further steps to take if the euro-area economy keeps weakening as the region came under renewed foreign pressure to revive growth. As the International Monetary Fund’s annual meeting in Washington began, Draghi pledged anew to loosen monetary policy more if needed and called on those governments with the room to ease fiscal policy to do so. By contrast, Schaeuble warned against U.S.-style quantitative easing and urged continued budgetary discipline. The differences demonstrate the lack of a common front in euro-area policy making as its economy continues to deteriorate and the IMF estimates there is as much as a 40% risk of a third recession since 2008. Finance ministers and central bankers from the Group of 20 economies meet today, and Europe’s economic performance will be among the issues discussed, officials said.

“There is a concern about a deflationary spiral, we aren’t predicting it, but we want to preclude it,” Canadian Finance Minister Joe Oliver told reporters. “No one is saying it’s a piece of cake, far from it.” The euro-area has re-emerged as the main concern of officials worldwide after its economy stalled in the second quarter and inflation slowed to the weakest in almost five years. The IMF this week cut its euro-area growth forecasts to 0.8% for 2014 and 1.3% next year and said the ECB should consider buying government debt. “More, we hope, will be done,” IMF Managing Director Christine Lagarde told reporters. Speaking in Washington yesterday, Draghi reiterated his call on governments to overhaul their economies now and repeated the ECB is “ready to alter the size and/or the composition of our unconventional interventions, and therefore of our balance sheet, as required.”

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China is a danger first and foremost to itself, internal strife will rule the day. Its impact on the world will come after.

Is China’s Bubble the Next Financial Crisis? (Bloomberg)

Will China be the source of the next global financial disaster? The evidence increasingly offers reason for concern, though the nature of any calamity could be very different from what the world endured in 2008. At a time when consumers and governments in the U.S. and Europe have been trying – with limited success – to pare down or at least stabilize their debt burdens, China has been doing the opposite. Over the past five years, it has pumped more than $13 trillion of credit into its economy, in an effort to keep its growth rate up amid a weak global recovery. The Chinese credit boom has rapidly turned the country into one of the developing world’s most indebted, according to a new report from London’s Centre for Economic Policy Research. As of 2013, total private and government debt, excluding that of financial institutions, stood at 217% of gross domestic product, up from only 147% in 2008.

That’s more than in any major developing nation other than Hungary, though still significantly less than in advanced nations such as the U.S. or Japan. Such credit-fueled growth can’t be sustained for long without causing major distortions and setting the country up for a fall. The stimulus is already running into diminishing returns. Over the five years through 2013, government and private debt grew by about 3 yuan for each added yuan of economic activity, a level of credit intensity that the U.S. exceeded only in the years leading up to the 2008 crisis. As in the U.S., much of the money is going to borrowers with questionable ability to pay, fueling overbuilding and excess capacity.

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Nobel=clueless.

Health Of Global Economy Is Worrying: Stiglitz (CNBC)

The euro zone is “very much” at risk of a recession and U.S. continues to struggle with a mediocre recovery, said Nobel Prize-winning economist Joseph Stiglitz, sounding the alarm on the deteriorating global economy. If Europe were to enter a recession it would likely be “relatively minor,” but persistent stagnation puts the single-currency bloc “on target for a lost decade,” he said. “To me, the problem is not whether [euro zone countries] are growing a little positive or negative, the real point is they are not back to where they should be,” Stiglitz, a professor of economics at Columbia University, told CNBC on Friday. Austerity is the wrong prescription for repairing the euro zone economy and underlies economic stagnation, he said.

“European leaders have consistently overestimated where the economy was going. Unfortunately, the leaders of Europe, in particular Germany, don’t seem to recognize that austerity is one of the reasons Europe is doing so poorly,” Stiglitz said. There is a lot of slack in the U.S. economy, Stiglitz said. “The U.S. has been moving along in this very mediocre way. What’s remarkable is how low the growth is in spite of the fact that… we have some very strong positives,” he said, referring to the country’s huge discoveries of natural gas and thriving high-tech sector. Furthermore, a stronger U.S. dollar may prove to be a bane for the economy, putting the country’s exporters at a competitive disadvantage, he said. Asked whether the world’s largest economy will be strong enough to justify an interest rate hike by mid-2015, he said “almost surely no.”

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Get out of the EU, amici.

Bad Loans At Italy Banks Up 20% In August To Record High (Reuters)

The Bank of Italy said on Thursday bad loans in the country rose 20% year-on-year in August reaching a new record high as the third-largest economy in the euro zone struggles to recover from recession. The loans that are least likely to be repaid were worth €173.9 billion ($222 billion) in August, the highest level since the start of the current statistical series in 1998, central bank data showed. In July, non-performing loans rose 20.5% to €172.4 billion. At the same time, lending to companies and families continued to contract, with loans to households down 0.8% in August after falling 0.7% a month earlier. Credit to non-financial companies fell 3.8% after a contraction of 3.9% in July.

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There’d better be no blood flowing in Catalunya, or the world’s Hemingways may once again descend on Spain.

Barcelona Stirs as Spain Warns of Separatist Tinderbox (Bloomberg)

Tensions are rising in Barcelona. As Catalan President Artur Mas goads the Spanish courts, threatening to defy their suspension of a Nov. 9 vote on independence, Prime Minister Mariano Rajoy is preparing measures to ensure he can retain control of the police in Catalonia. Politicians and civic leaders in the region who want to remain part of Spain say they have been threatened by separatists. “There’s been a cat let out of the bag,” said James Amelang, a professor of Spanish history at the Autonomous University of Madrid. “I really think the politicians might have lost their capacity to put it back.” Mas’s independence drive has been propelled by a surge of support on the streets, with hundreds of thousands attending peaceful rallies in Barcelona last month. As the date of the proposed vote approaches, officials in Madrid are preparing for when the force of Catalan separatism crashes into the immovable object of the Spanish constitution.

Spanish Foreign Minister Jose Manuel Garcia-Margallo warned last week that events in Catalonia could be moving too fast for the regional leader to control. Mas “may see the political process shift away from the institutions, and particularly the regional government, and move onto the streets, which is extremely dangerous,’ Garcia-Margallo told state radio broadcaster RTVE. ‘‘When institutions lose control, we head down an unknown path.’’ Spain’s national police force put more officers on the streets of the Catalan capital this month to beef up security at government buildings, a government press officer said on Oct. 1. Europa Press reported reinforcements total about 300 policemen. The central government has also drafted a law that would give officers from the regional police, the Mossos d’Esquadra controlled by Mas’s government, the chance to transfer to the national police force commanded by Madrid.

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Ho much longer will Britain stay in the EU?

UKIP: From ‘Clowns’ To Contenders (CNBC)

Just last year, Conservative Party grandee Kenneth Clarke described them as a “collection of clowns” – yet now they represent the greatest electoral challenge to the three main U.K. political parties for decades. The U.K. Independence Party (UKIP) – the closest the U.K. has to the U.S. tea party – has emerged from the fringes to the limelight, winning its first seat in the U.K. parliament in a by-election on Thursday. UKIP candidate Douglas Carswell won a by-election in Clacton, south east England by a majority of 12,404 to become the party’s first member of parliament. The election was triggered by incumbent member of Parliament (MP) Douglas Carswell’s defection from the Conservative Party to UKIP. The party briefly had one MP in 2008, when then-Conservative MP Bob Spink defected. Clacton – with its working class, elderly, white and economically left-behind population – was already identified as one of the constituencies most likely to vote UKIP in May’s general election by Matthew Goodwin and Rob Ford, authors of “Revolt on the Right” and experts on the party.

A by-election further north may actually be more concerning for the main political parties. In Heywood and Middleton, a safe Labour seat to date, the death of the local MP has triggered a vote. Labour candidate Liz McInnes won the vote by a margin of 617 — a far cry from a 5,971 majority at the 2010 general election. The results suggest that UKIP has made significant inroads there and gone beyond attracting only right-wing Conservatives, but also left-wing voters, who feel threatened by cheap labor from immigrants. “UKIP supporters are very pessimistic on the economy,” John Curtice, professor of politics at the University of Strathclyde, told CNBC. “The improvement in the economy hasn’t trickled down to the older working-class, and that’s UKIP’s constituency.”

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The new way to spell democracy.

Dark Money Groups Set Record in 2014 US Midterm Elections (Bloomberg)

The Internal Revenue Service calls them “social welfare” groups – they don’t disclose their donors and so far this cycle they’ve spent $100 million trying to influence elections. Never before have these types of organizations spent so much, so soon in Congressional races, according to a new analysis by the Center for Responsive Politics. If the past is precedent, that means roughly $200 million in dark money will go toward influencing the 2014 elections, CRP estimates. The trend means it’s harder than ever to know who the big spenders are or which interest is taking which side in an election. The social welfare groups, organized under section 501(c)(4) of the tax code, raise and spend unlimited amounts of money. Their cousins, super PACs, also raise and spend unlimited cash, but must disclose contributors. Some of the election cycle’s mega-groups toggle between using dark money groups and super-PACs depending on need and donor preference.

The David and Charles Koch-backed political network stopped using their dark money group for TV ads in the final 60 days of the cycle, and are now funding election spots with their new super PAC. Generally, the nonprofits spend in multiple races — but there are a few examples this year of 501(c)(4)s dedicated to one candidate. The highest profile is the Kentucky Opportunity Coalition, a nonprofit that started running commercials this summer to support Senate Minority Leader Mitch McConnell. One hint as to who’s behind the group: The treasurer is listed as Caleb Crosby. He’s also the treasurer for Karl Rove’s American Crossroads – which just started running ads in Kentucky against McConnell’s Democratic opponent, Alison Lundergan Grimes. Democrats don’t tend to use dark money groups as much. They favor super PACs, and so far this year their super PACs are better funded than the Republicans’.

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It’s being reported as an unfortunate incident, but it says much more. The report by the Russian Union of Engineers has been totally silenced in the west.

MH-17 Report False Flag Exposed (Zero Hedge)

When exactly a month ago the supposedly objective, impartial Netherlands released its official, 34-page preliminary report of the MH-17 crash over Ukraine, presumably based on black box data, air traffic control records, and other “authentic, verified” information, there were precisely zero mentions of “oxygen”, “mask” or “oxygen mask.” Which is odd, because in what should become the biggest Freudian slip scandal in false-flag history, certainly since the Gulf of Tonkin, yesterday Dutch Foreign Minister Frans Timmermans accidentally revealed for the very first time ever, that one of the Australian passengers aboard the doomed airplane “appears to have donned an oxygen mask before the fatal crash, suggesting some on board might have been aware of their impending deaths, a Dutch official disclosed.”

Clearly a crucial aspect of the crash, as it points at the severity of the alleged explosion, yet one which was not noted until yesterday and which completely skipped the purvey of the official crash report for reasons unknown. Needless to say, this makes a complete mockery of the story that the plane had exploded upon impact with the “Russian” missile, and is why there was supposedly no trace of any impact on the flight’s black box recorder. Whether or not it also means that the alternative theory that a Ukraine jet had purposefully downed the Malaysian aircraft to serve as a pretext to implicate Russia, is unclear. But it also means that yet another conspiracy theory becomes fact: namely that whoever were the western powers who doctored and manipulated the “official” crash report of MH-17 to implicate Putin, not only lied but fabricated evidence.

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What happens when you don’t throw out in 1 generation the knowledge acquired in 1000.

The Amish Farmers Reinventing Organic Agriculture (Atlantic)

“In the Second World War,” Samuel Zook began, “my ancestors were conscientious objectors because we don’t believe in combat.” The Amish farmer paused a moment to inspect a mottled leaf on one of his tomato plants before continuing. “If you really stop and think about it, though, when we go out spraying our crops with pesticides, that’s really what we’re doing. It’s chemical warfare, bottom line.” Eight years ago, it was a war that Zook appeared to be losing. The crops on his 66-acre farm were riddled with funguses and pests that chemical treatments did little to reduce. The now-39-year-old talked haltingly about the despair he felt at the prospect of losing a homestead passed down through five generations of his family. Disillusioned by standard agriculture methods, Zook searched fervently for an alternative. He found what he was looking for in the writings of an 18-year-old Amish farmer from Ohio, a man named John Kempf. Kempf is the unlikely founder of Advancing Eco Agriculture, a consulting firm established in 2006 to promote science-intensive organic agriculture.

The entrepreneur’s story is almost identical to Zook’s. A series of crop failures on his own farm drove the 8th grade-educated Kempf to school himself in the sciences. For two years, he pored over research in biology, chemistry, and agronomy in pursuit of a way to save his fields. The breakthrough came from the study of plant immune systems which, in healthy plants, produce an array of compounds that are toxic to intruders. “The immune response in plants is dependent on well-balanced nutrition,” Kempf concluded, “in much the same way as our own immune system.” Modern agriculture uses fertilizer specifically to increase yields, he added, with little awareness of the nutritional needs of other organic functions. Through plant sap analysis, Kempf has been able to discover deficiencies in important trace minerals which he can then introduce into the soil. With plants able to defend themselves, pesticides can be avoided, allowing the natural predators of pests to flourish.

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Yes, the numbers keep getting worse.

The Ominous Math Of The Ebola Epidemic (WaPo)

When the experts describe the Ebola disaster, they do so with numbers. The statistics include not just the obvious ones, such as caseloads, deaths and the rate of infection, but also the ones that describe the speed of the global response. Right now, the math still favors the virus. Global health officials are looking closely at the “reproduction number,” which estimates how many people, on average, will catch the virus from each person stricken with Ebola. The epidemic will begin to decline when that number falls below one. A recent analysis estimated the number at 1.5 to 2. The number of Ebola cases in West Africa has been doubling about every three weeks. There is little evidence so far that the epidemic is losing momentum. “The speed at which things are moving on the ground, it’s hard for people to get their minds around. People don’t understand the concept of exponential growth,” said Tom Frieden, director of the U.S. Centers for Disease Control and Prevention.

“Exponential growth in the context of three weeks means: ‘If I know that X needs to be done, and I work my butt off and get it done in three weeks, it’s now half as good as it needs to be?’ Frieden warned Thursday that without immediate, concerted, bold action, the Ebola virus could become a global calamity on the scale of HIV. He spoke at a gathering of global health officials and government leaders at the World Bank headquarters in Washington. The president of Guinea was at the table, and the presidents of Liberia and Sierra Leone joined by video link. Amid much bureaucratic talk and table-thumping was an emerging theme: The virus is still outpacing the efforts to contain it. “The situation is worse than it was 12 days ago. It’s entrenched in the capitals. Seventy% of the people [who become infected] are definitely dying from this disease, and it is accelerating in almost all settings,” Bruce Aylward, assistant director general of the World Health Organization, told the group.

Aylward had come from West Africa only hours earlier. He offered three numbers: 70, 70 and 60. To bring the epidemic under control, officials should ensure that at least 70% of Ebola-victim burials are conducted safely, and that at least 70 percent of infected people are in treatment, within 60 days, he said. More numbers came from Ernest Bai Koroma, president of Sierra Leone: The country desperately needs 750 doctors, 3,000 nurses, 1,500 hygienists, counselors and nutritionists. The numbers in this crisis are notoriously squishy, however. Epidemiological data is sketchy at best. No one really knows exactly how big the epidemic is, in part because there are areas in Liberia, Sierra Leone and Guinea where disease detectives cannot venture because of safety concerns. The current assumption is that for every four known Ebola cases, about six more go unreported.

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There is very little out there that doesn’t signal a gross incompetence, lack of urgency and lack of understanding.

Ebola Is ‘Entrenched And Accelerating’ In West Africa (BBC)

The World Health Organization (WHO) has warned that Ebola is now entrenched in the capital cities of all three worst-affected countries and is accelerating in almost all settings. WHO deputy head Bruce Aylward warned that the world’s response was not keeping up with the disease in Guinea, Liberia and Sierra Leone. The three countries have appealed for more aid to help fight the disease. The outbreak has killed more than 3,860 people, mainly in West Africa. More than 200 health workers are among the victims. Speaking on Thursday, Mr Aylward said the situation was worse than it was 12 days ago. “The disease is entrenched in the capitals, 70% of the people affected are definitely dying from this disease, and it is accelerating in almost all of the settings,” he said. Meanwhile in Spain, seven more people are being monitored in hospital for Ebola. They include two hairdressers who came into contact with Teresa Romero, a Madrid nurse looked after an Ebola patient who had been repatriated from West Africa. She is now very ill and reported to be at serious risk of dying.

Elsewhere: The UK is investigating reports a Briton suspected of having the disease has died in Macedonia, though Macedonia’s health ministry says there are “high chances” this is not a case of the disease Britain is to begin enhanced screening for Ebola in people travelling from affected countries, the government announces. The US is introducing new security measures to screen passengers arriving from Ebola-affected countries in West Africa at five major US airports. In Texas, a county sheriff deputy was quarantined after visiting the home of the first person diagnosed with Ebola on US soil, who later died from the virus. The medical charity Medecins Sans Frontieres reported a sharp increase of Ebola cases in the Guinean capital, Conakry, dashing hopes that the disease was being stabilised there.

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