Dec 262014
 
 December 26, 2014  Posted by at 9:23 pm Finance Tagged with: , , , , , ,  27 Responses »


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: , , , , , , , , ,  2 Responses »


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.

Read more …

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: , , , , , , , , ,  6 Responses »


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: , , , , , , , , , ,  3 Responses »


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.”

Read more …

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’.

Read more …

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.

Read more …

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.

Read more …

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.

Read more …

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.

Read more …

Sep 182014
 
 September 18, 2014  Posted by at 9:17 am Finance Tagged with: , , ,  31 Responses »


DPC Old Charter Street burying ground, Salem, Massachusetts 1906

The Russian Union of Engineers has issued a report on what happened to flight MH17. The report has now been translated. It doesn’t leave open the option that MH17 was downed by a ground-to-air missile, something all other sources have so far labeled the most likely explanation for what happened on July 17. The Russian Union of Engineers instead claims the plane was attacked by a fighter jet, and that, since the east Ukraine rebels have no such jets, and multiple sides have confirmed there were no Russian jets in the vicinity, this jet had to have been Ukrainian air force.

At the very least the report should be broadly discussed in western media, and western experts asked to refute what parts of it they find fault with.

The full report can be downloaded here.


(Turn on subtitles)

Here is the conclusion of the report:



9. Reconstructing the event

Based on the above, we can draw the following conclusions:

9.1. In relation to the circumstances of the crash of the Malaysia Airlines Boeing 777 jet.

The Malaysia Airlines Boeing 777 was carrying out the 17.07.2014 flight Amsterdam – Kuala Lumpur in the flight corridor established by the dispatchers. At the same time, it is likely that manual control was turned off and the plane was on autopilot, flying in a horizontal plane along the route laid out and adjusted by air traffic controllers on the Ukrainian side.

At 17.17-17.20, the Boeing 777 was in Ukrainian airspace near the city of Donetsk at the height of 10100 m. An unidentified combat aircraft (presumably a Su-25 or MiG -29), which was a tier below, on a collision course, in the cloud layer, sharply gained altitude and suddenly appeared out of the clouds in front of the civilian aircraft and opened fire on the cockpit, firing from a 30 mm caliber cannon or smaller. The pilot of a fighter jet can do this while in “free hunting” mode (using onboard radar) or with the help of navigational guidance using airspace situation data from ground-based radar.

As a result of multiple hits from shells there was damage to the cockpit, which suddenly depressurized, resulting in instant death for the crew due to mechanical influences and decompression. The attack was sudden and lasted a fraction of a second; in such circumstances the crew could not sound any alarm as the flight had been proceeding in regular mode and no attack was expected.

Since neither the engines or hydraulic system, nor other devices required for the continuation of the flight were out of commission, the Boeing 777, running on autopilot (as is standard), continued on its horizontal flight path, perhaps gradually losing altitude.

The pilot of the unidentified combat aircraft maneuvered to the rear of the Boeing 777. After that, the unidentified plane remained on the combat course, the pilot provided a target tracking aircraft equipment, took aim and launched his R-60 or R-73 missiles.

The result was a loss of cabin pressure, the aircraft control system was destroyed, the autopilot failed, the aircraft lost the ability to maintain its level flight path, and went into a tailspin. The resulting overload led to mechanical failure of the airframe at high altitudes.

The aircraft, according to the information available from the flight recorders, broke up in the air, but this is possible only in the case of a vertical fall from a height of ten thousand meters, which can only happen when the maximum permissible overload is exceeded. One reason for stalling and going into a tailspin is the inability of the crew to control the aircraft as a result an emergency in the cockpit and the subsequent instantaneous depressurization of the cockpit and the passenger cabin. The aircraft broke up at a high altitude, which explains the fact that the wreckage was scattered over the territory of more than 15 square kilometers.

9.2. In relation to the party responsible for the death of 283 passengers and 15 crew members.

On 17.07.2014, the armed forces of the self-proclaimed Donetsk National Republic had no relevant combat aircraft capable of destroying an aerial target similar to the Boeing 777, nor the necessary airfield network, nor the means of radar detection, targeting and tracking.

No combat aircraft of the Armed Forces of the Russian Federation violated the airspace of Ukraine, which the Ukrainian side confirms as well as third parties who conduct space surveillance over the situation in Ukraine and in its airspace.

To establish the truth, it is necessary to objectively and impartially investigate all the circumstances of the destruction of the Malaysian Boeing 777, to interview the thousands of citizens who may have seen something. Naturally, experienced professionals should conduct the surveys. To ask the right questions – this is a rigorous science, and a great art in advancing the truth. Important information is contained in the wreckage of the aircraft and the remains of the dead, but this precise information is easy to destroy, distort and hide. And there are plenty of parties interested in concealing the real facts.

As confirmation, Ukraine, the Netherlands, Belgium and Australia signed an agreement on August 8 providing that information about the crash investigation would be disclosed only upon the consent of all parties. “The investigation is ongoing, [utilizing] expertise and other investigative actions” – announced the Spokesman of the Prosecutor General of Ukraine, Yuri Boychenko. “The results will be announced at the conclusion of the investigation and with the consent of all parties that have executed the agreement.”

Procrastination and the evasion of an objective investigation by all sides, with the participation of prestigious international organizations, raises doubts whether the concerned parties will make public the true circumstances surrounding the crash of the Malaysia Airlines Boeing 777.

Aug 092014
 
 August 9, 2014  Posted by at 8:02 pm Finance Tagged with: , , ,  13 Responses »


Harris & Ewing Young boy with bucket and pole on the Potomac Jun 1929

A lot of people will be paying attention today to the open letter published in his own paper by Gabor Steingart, the publisher of Germany’s leading financial newspaper Handelsblatt. And it’s admittedly not an everyday occurrence when a man like Steingart writes a letter like that. But the content is not that big a deal. He doesn’t call out any lies.

Mind you, the Handelsblatt is not some small paper, it’s Germany’s major financial publication, and Germany is Europe’s largest economic power. For the proper perspective, think of the publisher of the Wall Street Journal or the Financial Times writing a major article, in 3 languages, that denounces the politics of their respective governments and the coalitions they are part of.

Thing is, if either of the latter would write such a thing, our first thought would be, and rightly so, that there are political reasons behind it. Steingart’s letter seems to fit that pattern. He doesn’t go so far as to say what the western media are claiming about Ukraine and Russia is wrong, he merely says that ‘our’ politics vis à vis the situation, and Putin in particular, are. Because they harm German interests.

I don’t think that goes nearly far enough. I don’t think we should say that what our politicians and press have claimed over the past 23 days since MH17 crashed is fine, or acceptable, or even pardonable, and that we should simply only try and find a different approach towards Russia going forward, because that would be more constructive. It wouldn’t help us understand, let alone solve, what happened, and more importantly, what’s wrong with us that makes us blindly follow the lies (a.k.a. lack of evidence).

In my view, it’s time for every single one of us to take a few large strides back and look at what evidence there is, and what there is not. When we’re done looking at that, and we know right from wrong, we can assign blame, and perhaps punishment. With a clear conscience. Right now, we have done no such thing, and we risk not ever doing it.

We’re instead engaged in a shouting contest for assigning blame, and we shout so loud precisely because we have no evidence. The louder our screams, the less the evidence seems to matter. In the course of this, we risk doing things that we will not easily, or not at all, be able to take back. We risk doing serious and lasting damage without a shred of evidence. Because our politicians and media tell us that’s the thing to do. It obviously is not.

Since the crash that killed 298 people, I have, right here at The Automatic Earth, been through what evidence I think we should demand, at least the minimum amount of it, before we pass judgment.

Politicians and media tell us the MH17 was brought down with a BUK rocket, but not one square inch of such a rocket was found on the crash site. Which means the involvement of such a rocket is merely a theory, nothing more. Nothing.

We don’t know what information is on the black boxes, though they were handed over to a British lab two weeks or so ago. We don’t know what’s on the Air Traffic Control logs, because those were taken away by the Ukraine Secret Service the day of the crash, and no-one ever heard from them again.

We don’t know why there were Ukraine jets near the MH17 plane when it got hit, but ti’s getting hard to deny that they were there. We don’t know why Ukraine deployed BUK installations in the area not long before July 17.

Malaysia was obviously one of the main parties involved in the crash: it lost many people, and it pretty much lost its major airline, which was delisted and taken over by its government at a huge price. Malaysia’s no. 1 newspaper, The New Straits Times, maybe not quite as big as the Handelsblatt, but still, published this 3 days ago:

US Analysts Conclude MH17 Downed By Aircraft

Intelligence analysts in the United States had already concluded that Malaysia Airlines flight MH17 was shot down by an air-to-air missile, and that the Ukrainian government had had something to do with it. This corroborates an emerging theory postulated by local investigators that the Boeing 777-200 was crippled by an air-to-air missile and finished off with cannon fire from a fighter that had been shadowing it as it plummeted to earth.

In a damning report dated Aug 3, headlined “Flight 17 Shoot-Down Scenario Shifts”, Associated Press reporter Robert Parry said “some US intelligence sources had concluded that the rebels and Russia were likely not at fault and that it appears Ukrainian government forces were to blame”.

In a statement released by the Ukrainian embassy on Tuesday, Kiev denied that its fighters were airborne during the time MH17 was shot down. This follows a statement released by the Russian Defence Ministry that its air traffic control had detected Ukrainian Air Force activity in the area on the same day .[..]

Yesterday, the New Straits Times quoted experts who had said that photographs of the blast fragmentation patterns on the fuselage of the airliner showed two distinct shapes – the shredding pattern associated with a warhead packed with “flechettes”, and the more uniform, round-type penetration holes consistent with that of cannon rounds. [..]

Parry also cited a July 29 Canadian Broadcasting Corporation interview with Michael Bociurkiw, one of the first Organisation for Security and Cooperation in Europe (OSCE) investigators to arrive at the scene of the disaster, near Donetsk. Bociurkiw is a Ukrainian-Canadian monitor with OSCE who, along with another colleague, were the first international monitors to reach the wreckage after flight MH17 was brought down over eastern Ukraine. In the CBC interview, the reporter in the video preceded it with: “The wreckage was still smouldering when a small team from the OSCE got there. No other officials arrived for days”.

That rhymes with the video of a rebel leader saying nobody came to pick up the bodies, and after 3 days they themselves started doing it – with respect -, because it seemed the right thing to do, and because leaving dead bodies in 3 days of 35ºC heat is a really bad idea. Nobody ever came in the first days.

“There have been two or three pieces of fuselage that have been really pockmarked with what almost looks like machinegun fire; very, very strong machinegun fire,” Bociurkiw said in the interview. Parry had said that Bociurkiw’s testimony is “as close to virgin, untouched evidence and testimony as we’ll ever get. Unlike a black-box interpretation-analysis long afterward by the Russian, British or Ukrainian governments, each of which has a horse in this race, this testimony from Bociurkiw is raw, independent and comes from one of the two earliest witnesses to the physical evidence. [..]

Retired Lufthansa pilot Peter Haisenko had also weighed in on the new shootdown theory with Parry and pointed to the entry and exit holes centred around the cockpit. “You can see the entry and exit holes. The edge of a portion of the holes is bent inwards. These are the smaller holes, round and clean, showing the entry points most likely that of a 30mm caliber projectile. [..]

“It had to have been a hail of bullets from both sides that brought the plane down. This is Haisenko’s main discovery. You can’t have projectiles going in both directions — into the left-hand-side fuselage panel from both its left and right sides — unless they are coming at the panel from different directions. “Nobody before Haisenko had noticed that the projectiles had ripped through that panel from both its left side and its right side. This is what rules out any ground-fired missile,” Parry had said.

Ironclad evidence? Certainly not. But no less credible than what we’ve heard thus far, and what nigh all western opinion is based on, much of which, especially in the first days, came from the US repeating what Kiev government social media said, information that has since all been torn to bits, or 99% of it: no source has less reliable than Kiev.

Come to think of it, if ever you needed proof that the Ukraine government consists of a set of handpuppets, you can now be satisfied. PM Yatsenyuk announced on Friday that the country considers shutting off the Russian pipelines under its territory, so no gas can be delivered to Europe.

Ukraine would not dare say any such thing of its own accord. The Ukraine ‘leaders’ are handpuppets to US and EU interests. In turn, EU leaders are US handpuppets, or they would have never accepted a list of sanctions that hurt them, but not America. It spells ‘follow the money’ all the way to the next war. They all sing the same tune, and as long as they can get the majority of their people to go along, they can take it further. And risk doing serious and lasting damage. Without a shred of evidence.

Do read Steingart’s The Escalation of Politics : The West Has Lost Direction , and do read Dmitry Orlov’s reaction to it, but don’t forget, it’s important you make up your own mind about all this.

To that end, may I suggest y’all write to your Congressmen and MPs or whatever they’re called where you are, and your newspapers and TV outlets, and ask them to provide you the proof that either the east Ukrainians or the Russians, or all of the above, those parties that everyone today lays the blame on, are responsible for the crash of flight MH17. And that they crashed it on purpose, which is not a minor detail.

If you don’t receive- detailed – proof from anyone, that should tell you a lot. Don’t accept some ‘trust us’ line, that won’t do. Go for actual evidence. I for one would like to see some, any, evidence. I’d like to know what happened. And nobody wants to tell me.

I’d like to know so I can stop thinking about it, and writing about it, but most of all so I no longer have to listen to all the lies my ‘own people’ tell me 24/7.

Sometimes it makes me feel like I’m some kind of second class citizen, just because I don’t like war party talk, and I want to see with my own eyes, and judge with my own brain.

I should never have to feel like that just for asking questions. And if I do have to, that means there’s something wrong with ‘my people’.

Or, sure, with me.

The West Is On The Wrong Path (Handelsblatt)

German journalism has switched from level-headed to agitated in a matter of weeks. The spectrum of opinions has been narrowed to the field of vision of a sniper scope. Newspapers we thought to be all about thoughts and ideas now march in lock-step with politicians in their calls for sanctions against Russia’s President Putin. Even the headlines betray an aggressive tension as is usually characteristic of hooligans when they ‘support’ their respective teams. The Tagesspiegel: “Enough talk!“ The FAZ: “Show strength“. The Süddeutsche Zeitung: “Now or never.“ The Spiegel calls for an “End to cowardice“: “Putin’s web of lies, propaganda, and deception has been exposed. The wreckage of MH 17 is also the result of a crashed diplomacy.“ Western politics and German media agree.

Every reflexive string of accusations results in the same outcome: in no time allegations and counter-allegations become so entangled that the facts become almost completely obscured. Who deceived who first? Did it all start with the Russian invasion of the Crimean or did the West first promote the destabilization of the Ukraine? Does Russia want to expand into the West or NATO into the East? Or did maybe two world-powers meet at the same door in the middle of the night, driven by very similar intentions towards a defenseless third that now pays for the resulting quagmire with the first phases of a civil war? If at this point you are still waiting for an answer as to whose fault it is, you might as well just stop reading. You will not miss anything. We are not trying to unearth this hidden truth. We don’t know how it started. We don’t know how it will end. And we are sitting right here, in the middle of it. At least Peter Sloterdijk has a few words of consolation for us: “To live in the world means to live in uncertainty.“

Our purpose is to wipe off some of the foam that has formed on the debating mouths, to steal words from the mouths of both the rabble-rousers and the roused, and put new words there instead. One word that has become disused of late is this: realism. The politics of escalation show that Europe sorely misses a realistic goal. It’s a different thing in the US. Threats and posturing are simply part of the election preparations. When Hillary Clinton compares Putin with Hitler, she does so only to appeal to the Republican vote, i.e. people who do not own a passport. For many of them, Hitler is the only foreigner they know, which is why Adolf Putin is a very welcome fictitious campaign effigy. In this respect, Clinton and Obama have a realistic goal: to appeal to the people, to win elections, to win another Democratic presidency.

Angela Merkel can hardly claim these mitigating circumstances for herself. Geography forces every German Chancellor to be a bit more serious. As neighbors of Russia, as part of the European community bound in destiny, as recipient of energy and supplier of this and that, we Germans have a clearly more vital interest in stability and communication. We cannot afford to look at Russia through the eyes of the American Tea Party. [..]

If the West had judged the then US government which marched into Iraq without a resolution by the UN and without proof of the existence of “WMDs“ by the same standards as today Putin, then George W. Bush would have immediately been banned from entering the EU. The foreign investments of Warren Buffett should have been frozen, the export of vehicles of the brands GM, Ford, and Chrysler banned. The American tendency to verbal and then also military escalation, the isolation, demonization, and attacking of enemies has not proven effective. The last successful major military action the US conducted was the Normandy landing. Everything else – Korea, Vietnam, Iraq, and Afghanistan – was a clear failure. Moving NATO units towards the Polish border and thinking about arming Ukraine is a continuation of a lack of diplomacy by the military means. This policy of running your head against the wall – and doing so exactly where the wall is the thickest – just gives you a head ache and not much else. And this considering that the wall has a huge door in the relationship of Europe to Russia.

Read more …

German Stunner: “West is on the Wrong Path” (Dmitry Orlov)

Gabor Steingart, the the publisher of Germany’s leading financial newspaper Handelsblatt, just let loose with an editorial directly challenging Washington’s idiotic anti-Russian policies. The appearance of this document is very timely: just yesterday Russia unleashed the first round of counter-sanctions, banning the import of foodstuffs from the US and the EU. These counter-sanctions are cleverly designed to cause pain in proportion to the level of anti-Russian activity of the country in question; thus, the three Baltic countries, which are virulently anti-Russian in spite of having large Russian populations and surviving largely through trade with Russia, face staggering losses, followed by equally anti-Russian Poland, followed by the rest of the EU, including poor Greece, which is friendly to Russia and should be considered collateral damage.

The greatest beneficiaries of these sanctions are all those countries that opposed (11) or abstained (58) when the UN voted to condemn Russia’s annexation of Crimea: they get to leapfrog over EU and US economically by exporting foodstuffs to Russia. Russia’s consumers and Russia’s agricultural sector are also among the winners: Russians will eat healthier food, with no GMO contamination, while profits that used to flow to the US and the EU will now be invested in domestic agriculture, making Russia more self-sufficient in food and aiding in the development of rural districts. Another clever element to these sanctions is that farmers tend to be politically vocal and influential. I see tractors clogging the streets of Europe’s capitals and dumptruck-loads of manure decorating the steps of government buildings before too long.

As to his diagnosis of Obama’s true motivation, I think he has it wrong. It’s not all about pleasing the Tea Party. They, and American voters in general, are irrelevant, it makes no difference who gets elected, and Obama’s policies are not Obama’s. There is a deeper reason why the oligarchs who own and operate the country formerly known as America are currently attempting to enlarge every problem they see, be it stoking civil war in Ukraine or provoking ISIS into attacking Americans: they are desperate to avoid a scenario where the US collapses on its own, with no external enemy to blame. Not only would it be just too humiliating, but also the population, suddenly brought out of its stupor, might turn on those actually responsible rather than helplessly blame some foreign scapegoat. Putin has to fit the bill, reality be damned.

Steingart’s editorial is full of appeals to reason, ethics, morality, and historical wisdom. But he is the publisher of a financial newspaper, and I suspect that he did some arithmetic prior to writing his piece, and that his motivation for writing it might be rather basic: he realized that Obama just took away his sausage. I hope that other Germans, and other Europeans, make this realization as well, and start behaving accordingly.

Read more …

Hear that, guys?

We Will See A 25% To 30% Correction In The Second Half Of 2014 (Saxo Bank)

We’ve largely ignored geo-political risks, ignored a slowdown in European growth, ignored the fact that Germany is deteriorating fast while increasing the amount of risk we take. That’s the view of Saxo Bank’s Steen Jakobsen who says the market is so one sided and complacent he feels a need to scream.

Steen is urging traders and investors to take a serious reality check, pointing out that this decline is illustrated perfectly well on fixed income markets. German yields have fallen to record lows and there’s now a move towards safe haven assets. In recent weeks, we’ve seen an increase in global risks, not least with Russia and Ukraine and in the Middle East. On Thursday, President Obama authorised the use of airstrikes over Iraq. Steen tells investors not to panic.However, he’s predicted for a long time that in the second half of 2014 we would see a 25 to 30% correction from the top and that growth would slow dramatically.

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I changed the title of this, because it’s so good.

The Whole Global Financial System Is Booby Trapped (King World News)

Eric King: “Michael Belkin also told KWN that the Fed doesn’t understand the leverage they have created. Their easy money policy and money printing funnels into all kinds of hedge funds in mid-town Manhattan and according to Belkin, ‘they leverage up the wazoo in al these weird, arcane derivatives.’ He warned a great deleveraging is coming that is going to feed on itself.”

Stockman: “Yes. I think the whole global financial system is booby trapped with both visible and hidden leverage. The problem with the Fed, and Yellen in particular, is that they are looking at a very narrow set of indicators. For instance, the nominal balance sheets of the big banks. But the biggest source of leverage in the economy today is the whole area of structured finance and options trading of one type or another. These Wall Street mechanisms are inherently leveraged; and the market has been coiled up like a spring everywhere owing to the endless bid funded by that massive leverage. Well, on the way up this forces assets values to continue to inflate and rise. But on the way down, when these positions are liquidated, the adjustment can become very violent in the other direction.”

Eric King: “It sounds like we have a train wreck in front of us.”

Stockman: “Train wreck is a pretty good term to describe what is coming. But this train wreck isn’t simply going to hit a wall out of the blue. Actually, it has been forming and accumulating and expanding for many years now, and yet it has simply been ignored, particularly by the financial markets which have ridden this bubble to these extreme and historic heights. But when you take the balance sheet of the Fed from $900 billion to $4.5 trillion in less than 70 months, and when that pattern is replicated around the world, that is a train wreck in slow motion. The only issue is, when does it hit the wall? The answer to that question is it’s not very far down the road, and I can promise you that is when all hell is going to break loose.”

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Shell left all its Arctic options. How desparate is Exxon? Still, Washington lets them do what they want in Russia … What does that tell you?

Exxon Drilling Russian Arctic Shows Sanction Lack Bite (Bloomberg)

Sanctions, what sanctions? Exxon Mobil Corp. will start drilling a $700 million well in the Arctic Ocean tomorrow, Russia’s government said, showing that for all the talk of action against Vladimir Putin’s oil industry, the largest U.S. energy company is undeterred. As Russia’s relations with Europe and the U.S. deteriorated to the lowest point since the Cold war over the conflict in Ukraine, the European Union imposed a third round of sanctions last week, restricting the export of equipment used for offshore oil production. That doesn’t affect Exxon’s plans because the contract to hire the rig was signed before the measures were announced.

Developing the Arctic is vital for Russia, where energy provides half the state’s revenue, to maintain oil production near a post-Soviet high of more than 10 million barrels a day. For Exxon, where output fell to a five-year low in the second quarter, a discovery would offer a vital new source of crude. “The well is very important, it’s probably one of the most interesting wells in the global oil industry for many years,” James Henderson, a senior research fellow at the Oxford Institute for Energy Studies, said in a phone interview. After more than two years’ planning Exxon and its partner OAO Rosneft, Russia’s state oil producer, will start drilling the Universitetskaya prospect tomorrow, the Kremlin said in a statement today. Putin will give the signal to start Russia’s northernmost well accompanied by Rosneft Chief Executive Igor Sechin, who’s subject to U.S. sanctions himself, and Exxon Mobil Russia head Glenn Waller.

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Ukraine Threatens Oil and Gas Cut-Off in Russia Sanctions (Bloomberg)

Ukraine threatened to block Russian oil and gas supplies to Europe in new sanctions against Vladimir Putin’s government, which it blames for a separatist uprising that has ravaged the country’s east. Ukraine, which no longer receives any gas from Russia but acts as a conduit for its neighbor’s European customers, is considering a “complete or partial ban on the transit of all resources” across its territory, Prime Minister Arseniy Yatsenyuk told reporters today in Kiev. It may also ban Russian planes from its airspace and cut defense-industry cooperation.

“There’s no doubt that Russia will continue its course – started a decade ago – aimed at banning imports of Ukrainian goods, limiting cooperation with Ukraine, pressure and blackmail,” Yatsenyuk said. “In the most negative scenario for Ukraine, losses during the first year may reach $7 billion, not only because of sanctions but also because of the Kremlin’s aggressive policy.” The threat may signal that the government in Kiev calculates it has little to lose. It comes a day after Russia banned food imports from Ukraine, the U.S., the European Union and other countries that blame it for stoking the worst geo-political crisis since the Cold War. Gas prices in western Europe rose on the news of Ukraine’s sanctions plan, which would require parliamentary approval.

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Great piece by Orlov, but making fun of it won’t make the blood go away.

Saving Face (Dmitry Orlov)

in the case of flight MH17, the false flag theory rests on an untenable assumption: that the Ukrainians, if tasked with shooting it down, would in fact succeed in shooting it down. All previous evidence illustrates that when Ukrainians want to shoot down a plane, they may succeed in shooting down  a nursery school, a maternity ward, an apartment building full of elderly Ukrainians, but never a plane. Conversely, if Ukrainians set out to destroy a maternity ward or a kindergarten (as they are known to sometimes do) odds are that they will hit a Boeing. They inherited a now rather obsolete Buk M1 air defense system from the USSR, which, in skilled hands, is quite capable of shooting down a Boeing flying at cruising altitude, but you’d be wrong to think that they have figured out how it works. They held exactly one training exercise using this system, in 2001, and succeeded in… shooting down a Russian civilian airliner!

There were no training exercises in using this system until… it was used to shoot down MH17! It was used in Georgia during the war of 2008 over South Ossetia, where it did shoot down four Russian military aircraft, but there it was commanded by American mercenaries of Polish descent. Ukrainians excell at robbing, selling out, dismantling and destroying their own country; but achieving a specific, precise result as part of a highly coordinated mission? Not so much. Case in point: some Australian and Dutch troops wanted to go and maintain security at the crash site, but couldn’t, because the Ukrainians chose the occasion of their arrival to attack some neighboring towns and villages. You’d think that they would treat the opportunity to get some NATO boots on the ground as a Godsend, and act accordingly, but such rational behavior would be, you know, un-Ukrainian. The proper thing for them to do is to go and strafe some nearby village, and get themselves ambushed and slaughtered to a man by an angry babushka with a Kalashnikov.

Once you discount the theory that the downing of MH17 was a highly orchestrated false flag operation, everything falls into place. Why did the Ukrainians deploy their Buk M1 batteries and radar in Donetsk region, even though there was no enemy for them to shoot at? Because they are idiots. Why was there a Ukrainian Sukhoi 25 jet fighter in the air there? Trailing behind passenger jets and using them as human shields is standard Ukrainian practice. Why did that fighter zoom up into the Boeing’s flight corridor and pop up on air traffic control radar at the exact time the Boeing was shot down? That’s a standard evasive maneuver: the pilot saw a missile being launched, and tried to get out of its way by aiming up. If he hadn’t done that, then the story would have been that Ukrainians shot down their own jet fighter as part of a successful (by Ukrainian standards) exercise, held in the vicinity of an international passenger flight just to spice things up.

Why did Dnepropetrovsk APC redirect the flight over the war zone and the Buk M1 batteries? Because the Ukrainians had recently issued an order that closed the airspace over Donetsk, well below the plane’s cruising altitude and away from its flight path, but perhaps something was lost in translation to Ukraine’s wonderfully precise official language, and so the APC redirected the flight right over the closed airspace and told it to fly right above the minimum altitude. Why did the Ukrainians launch the rocket?[..] … the Ukrainian government, so carefully slapped together out of US State Department-approved dregs of Ukrainian society, has in the meantime come unstuck. The coalition goverment failed after a spectacular fistfight on the floor of the Supreme Rada, with the two rabidly nationalist parties walking out (OK, I won’t call them Nazi, but only today).

Prime minister Yatsenyuk (who had been hand-picked for the job and nicknamed “Yats” by Victoria Nuland of the US State Department) has resigned. [Update: he changed his mind and decided to stay: or did his American handlers change his mind for him?] President Piglet is still there, but it’s unclear what it is he is doing. In fact, it is becoming unclear whether there even is a Ukrainian government; of late, the officials in Donetsk have been receiving very strange, barely coherent missives from Kiev, obviously written in American English and clumsily translated, then signed and stamped by some Ukrainian monkey to make them look slightly more legit. If the Ukrainian translators run away too, then the American minders will be forced to resort to using Google Translate, making it the world’s first experiment in governance through word salad.

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How long before we send tropps back in? Bombing desert sand has never proven to be a great idea.

Washington Opened The Gates Of Hell In Iraq: Now Come The Furies (Stockman)

The late, great critic of the American Imperium, Chalmers Johnson, popularized the salient concept of “blowback”. That is, the notion that if you bomb, drone, invade, desecrate and slaughter—collaterally or otherwise— a people and their lands, they might find ways to return the favor. But even Johnson could not have imagined the kind of blowback coming ferociously Washington’s way now. Namely, the mayhem being visited on much of Iraq by American tanks, armored personnel carriers, heavy artillery, anti-aircraft batteries and other advanced weaponry that has fallen into the hands of the very jihadist radicals that have been the ostensible target of Washington’s entire multi-trillion “war on terrorism”. No question about it. The ISIS terrorists are winning against the hapless Iraqi military and even the formidable Kurdish peshmerga fighters—using some of the most lethal arms that the US military-industrial complex could concoct.

Yes, that wasn’t supposed to happen. During the bloody years after George W. Bush declared “mission accomplished” the Iraqi’s were ostensibly provided the arms and training to provide for their own defense. The American “occupation”, therefore, was really not all that. Instead, it was actually an exercise in “nation-building” that would bequeath to the people Washington had “liberated” a self-governing democracy equipped with the means to insure internal order and external security. Washington politicians—including President Obama—gave endless speeches about that. You can look them up! Except…except….Iraq was never a nation. At least the Ottomans knew that you don’t put Shiite’s, Sunni and Kurds in the same parliament or police force, and most certainly not the same army!

By contrast, it was the British and French foreign offices which in 1916 drew the Sykes-Picot boundaries and created the historical illusion that a nation called Iraq actually existed. And it was their successors in the west which installed a series of corrupt and brutal rulers, including kings, generals and Saddam Hussein himself, who maintained an always tentative and frequently blood-soaked semblance of governance within these artificial borders. Then came the neo-cons who for no discernible reason of national security could not leave well enough alone. By god, they were going to have regime change, a stable supplier of 6 million barrels of oil per day, and a stalwart ally armed to the teeth on the very doorstep of the Axis-Of-Evil; that is, the Iranian Shiite theocracy which happened to be religious kin to the single largest block of the Iraqi population.

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Ambrose is an idealist, not a neutral observer.

China Is Exporting Deflation To The World Again (AEP)

Two quick words of caution on the explosive rise in China’s exports in July. (Amazing how China always beats OECD states in compiling trade data). The category known as “non-specified exports” rose by 92pc in a single month, according to Morgan Stanley this morning. This is widely thought to be capital outflows, disguised in the trade data through over-invoicing. It typically occurs through Hong Kong and Taiwan. The 17.5pc rise in exports to Europe is probably real (since that data is harder to fiddle). Far from being healthy, it is alarming. Euroland is clearly not booming. A wealth of data suggests that the eurozone already has one foot in recession. Hans Redeker from Morgan Stanley said the 5pc-6pc fall the Chinese yuan against the euro in the first half of the year is undercutting southern Europe. Portugal and Italy – among others, with Spain a borderline case – have a great number of small companies in textiles, shoes, furniture, tiles, and increasingly electrical goods, machinery, and telecommunications that compete toe-to-toe with China.

They are famously “fishing in the same pool”, mostly mid-tier technology. The complementary index for European and Chinese exports shows that the EU is in direct competition with China on 35pc of 5,775 types of goods covered, up from 15 per cent in 2000. Germany is hit too, of course. Its solar industry has been largely wiped out by cheap Chinese copies. But it is southern Europe that is suffering the worst damage. China’s imports from the rest of the world fell 1.6pc year-on-year. Some of this is a base effect, no doubt. Yet the underlying pattern is that China is draining global demand. To the extent that its record surplus of $47.3bn is genuine, it is essentially negative for the world trading system.

The country is not rebalancing. The reforms have not yet gone much beyond talk. It is still over-investing, and still exporting deflation worldwide. The European Central Bank could take defensive action to weaken the euro by relaxing its extremely tight monetary policy (as defined by credit contraction and M3 contraction across Euroland, ex-Germany). Instead it is sitting on its hands, engaged in theological discussions about the definition of deflation, at best trying to talk down the euro without actually doing anything. Other than that, China’s soaring exports are marvellous news.

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Didn’t see that one coming?

Canadian Banks’ Rating Outlooks Downgraded to Negative by S&P (Bloomberg)

Canada’s six biggest banks including Toronto-Dominion Bank and Royal Bank of Canada had their outlooks cut to negative from stable by Standard & Poor’s because of regulatory changes that could affect bondholders. “The outlook revision reflects our expectation of reduced potential for extraordinary government support arising from implementation of the proposed new elements of the resolution framework for Canadian banks,” Tom Connell, an S&P credit analyst, said in a statement today. The other banks affected are Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Bank of Montreal and National Bank of Canada, according to the statement.

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Are Central Banks Out of Options? (Phoenix)

The Central Bank interventions of the last five years can be broken into two categories: actual monetary policy changes and verbal interventions. The period from 2009-2012 largely saw Central Banks engaging in the former. The only problem is that two primary monetary policies in Central Banks arsenals (cutting interest rates, launching QE programs) are either useless in combating solvency issues or have little to no effect in terms of generating growth. Regarding the first issue, if you are insolvent as most of the large banks in the world are, the ability to borrow more money at lower interest rates is of next to no value. If you’re leveraged at 26 to 1 or higher, borrowing more money accomplishes nothing when your equity is wiped out by a 4% drop in asset prices. Regarding the second issue (QE’s failure to generate growth), consider that both Japan and the UK have engaged in QE policies equal to or greater than 25% of their respective GDPs and have failed to generate a significant uptick in their GDPs or employment.

Moreover, the positive aspect of QE, the alleged “wealth effect” or the belief that individuals would spend more money based on higher asset prices, can quickly become a political issue as it is largely the top 1% of individuals who benefit most from this. As a result of this, beginning in 2012 Central Banks began to move towards using verbal intervention more than monetary policy. After all, if you can get the positive benefit of QE (higher stock prices) without actually having to do anything from a monetary perspective… why engage in QE at all? The Fed bucked the trend in 2012, launching QE 3 and QE 4 to boost Obama’s reelection chances. Since that time, every positive move the Fed has made has been verbal in nature (promising to maintain low interest rates, etc.). In terms of monetary moves, since that time Fed has been actively tapering QE.

However, we may be reaching the end of efficacy even for verbal intervention. Consider that Mario Draghi managed to kick off a two year rally in stocks and two year drop in bond yields in Europe simply by promising to “do whatever it takes” in mid-2012. The ECB didn’t implement any new monetary policies until June 2014 when it cut interest rates to negative. Since that time, EU markets have largely sold off. And when Draghi mentioned that the ECB was “considering QE” in yesterday’s press conference, the intraday rally was short-lived. In simple terms, the markets want Draghi to act again, not simply engage in verbal intervention. So, globally interest rates are at ZERO or even negative and the markets have realized that QE doesn’t do much. What exactly does this leave for Central Banks to do? Not much. The question is when the markets realize this…

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I think by now Wall Street’s buying it all, hiding it from view.

The US High Yield Bond Theatre Is On Fire (WolfStreet)

Suddenly there’s a laundry list of what went wrong. A “more hawkish Fed stance, heightened geopolitical risks,” Argentina’s default, another bank collapse and panicky bailout in Europe (Banco Espirito Santo), “and concerns over stretched valuations,” wrote Matthew Mish, Head of Credit Strategy at UBS Investment Bank, and Thibault Colle, Associate Credit Strategist; it triggered “a cascade of mutual fund outflows in recent weeks.” They weren’t exaggerating. Investors yanked $7.1 billion out of junk bond funds in the week ending Wednesday, a record amount, according to Lipper. This has been going on since early July, and junk bond prices have dropped, yields have jumped from all-time lows, and yield spreads have suddenly widened. After having been inflated to dizzying proportions, the junk-bond bubble has been pricked. And the hot air is hissing out of it. This chart by UBS is a picture of investors suddenly bailing out while they still can. The vicious taper tantrum of last summer looks comparatively tame:

Neither glorious economic fundamentals nor corporate financial engineering caused investors to pile helter-skelter, eyes-closed into this high-yield junk. The Fed’s financial repression did. The Fed has made it impossible for yield investors to earn a noticeable return above the rate of inflation with low-risk paper. So they chased after whatever yield they could get and they held their noses and ventured deeper and deeper into a swamp they normally wouldn’t want to be in. They did that in unison. The demand they created for junk drove up valuations and repressed yields further into low-yield purgatory, where potential losses are huge and potential gains very meager. Exactly as the Fed had wanted them to. But the Fed has changed its mind. And it’s communicating it on a near daily basis. The force that has driven up the junk bond market and that has allowed overleveraged corporations to sell a mountain of junk bonds at record low cost is in the process of disappearing: QE will be tapered out of existence this fall; ZIRP will be whittled down later. Instead of the Fed’s free money flowing into the high-yield market, money is now draining out of it.

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The new FICO scores, and Tyler Durden’s take on them.

FICO Recalibrates Its Credit Scores (WSJ)

A change in how the most widely used credit score in the U.S. is tallied will likely make it easier for tens of millions of Americans to get loans. Fair Isaac Corp said Thursday that it will stop including in its FICO credit-score calculations any record of a consumer failing to pay a bill if the bill has been paid or settled with a collection agency. The San Jose, Calif., company also will give less weight to unpaid medical bills that are with a collection agency. The moves follow months of discussions with lenders and the Consumer Financial Protection Bureau aimed at boosting lending without creating more credit risk. Since the recession, many lenders have approved only the best borrowers, usually those with few or no blemishes on their credit report.

The changes are expected to boost consumer lending, especially among borrowers shut out of the market or charged high interest rates because of their low scores. “It expands banks’ ability to make loans for people who might not have qualified and to offer a lower price [for others],” said Nessa Feddis, senior vice president of consumer protection and payments at the American Bankers Association, a trade group. As of July, about 64.3 million consumers in the U.S. had a medical collection on their credit report, according to data from credit bureau Experian. And of the 106.5 million consumers with a collection on their report, 9.4 million had no balance—and won’t be penalized under the new credit-score system. Some critics said that loosening standards could bring losses for borrowers and lenders. “A lot of people really just can’t handle credit—you’re not really helping them by allowing them to dig themselves into debt,” said Howard Strong, a lawyer in Tarzana, Calif. “It’s like a sharp knife—if you don’t know how to use it, you can cut yourself.”

Many types of debt, including credit cards, can be discharged in bankruptcy. If borrowers fall behind, they could file for bankruptcy and cause lenders to suffer losses, Mr. Strong said. Under the current system, collections can impact credit scores as much as foreclosures and bankruptcies do. But the infractions are often small. Borrowers can be on time paying their debts, for example, but thrown by a medical emergency. Collections stay on credit reports for as long as seven years, even if a borrower has paid off that balance and remained up-to-date on other debts. Some experts said the new model for FICO scores walks a fine line: It loosens standards without overstating the creditworthiness of borrowers. Fair Isaac said it ran studies to determine how likely borrowers are to repay their debts if they had a stellar credit record with the exception of such collections.

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A New ‘Housing Recovery’ Scheme Emerges: Boost FICO Scores (Zero Hedge)

Now that the the fourth dead cat bounce in US housing since the Lehman crisis is rapidly fading, and laundered Chinese “hot money” transfers into US luxury real estate no longer provides a firm base to the ultra-luxury segment, the US government is scrambling to find ways to boost that all important – and missing – aspect of any US recovery: the housing market. This is further amplified by the recent admission by the Fed that it is in fact encouraging asset bubbles, not only in stocks but certainly in all assets, such as houses. Well, the government may have just stumbled on the solution to kick the can yet again and force yet another credit-driven housing bubble, a solution so simple we are shocked some bureaucrat didn’t think of it earlier: changing the definition of the all important FICO score, the most important number at the base of every mortgage application.

First, a tangent. Recall that as we reported last week, a shocking 77 million Americans currently face debt collectors, a number that previously had received no prominence because credit card companies report delinquency numbers, not the number that is “what happens next” after a delinquency is charged off and goes to the repo man. Sure enough, as delinquencies have been declining over the past several years – a widely trumpeted phenomenon to boost confidence in the recoveryless recovery – collection numbers were never mentioned as the realization that 77 million Americans effectively have zero access to credit because of (partial) defaults, they are no longer seen as eligible debtors.

Well, not any more. According to the WSJ, in what is a desperate attempt to boost the pool of eligible, credit-worthy mortgage recipients, Fair Isaac, the company behind the crucial FICO score that determines every consumer’s credit rating, “will stop including in its FICO credit-score calculations any record of a consumer failing to pay a bill if the bill has been paid or settled with a collection agency. The San Jose, Calif., company also will give less weight to unpaid medical bills that are with a collection agency.” In doing so, it will “make it easier for tens of millions of Americans to get loans.” How many millions?

As of July, about 64.3 million consumers in the U.S. had a medical collection on their credit report, according to data from credit bureau Experian. And of the 106.5 million consumers with a collection on their report, 9.4 million had no balance—and won’t be penalized under the new credit-score system.

Because nothing says a stable recovery like picking at lowest hanging fruit – changing the definition of an eligible creditor – to prove the point. The impact won’t be long in coming: “The changes are expected to boost consumer lending, especially among borrowers shut out of the market or charged high interest rates because of their low scores. “It expands banks’ ability to make loans for people who might not have qualified and to offer a lower price [for others],” said Nessa Feddis, senior vice president of consumer protection and payments at the American Bankers Association, a trade group.”

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And they still deny there’s a bubble.

Average House Prices In London Jump 19% In A Year (Guardian)

Average house prices in London have jumped 19% in a year, with the typical cost of a property in one borough set to pass the £2m mark for the first time within weeks, according to new data. The report, issued by estate agency group LSL Property Services and research firm Acadata, stated that, following a “temporary waning” of growth in the capital’s market, the average London house saw 2% – or almost £11,000 – added to its value in June alone. In Lambeth the annual rate of price growth is running at 38.5%, while Wandsworth and Waltham Forest each notched up 25%-plus. Meanwhile, the average price-tag in Kensington and Chelsea – dubbed by some “the richest borough in Europe” – has climbed to £1.99m and “looks poised to set an average property price of £2m within the next few weeks”.

The report said the average price paid for a house in England and Wales now stood at £270,636 – up 9.9% on a year earlier. But David Newnes, director of Reeds Rains and Your Move estate agents, owned by LSL, said the government’s policies on housing “should not be led astray” by what was happening in prime central London. He added: “If London and the south-east are removed from the equation, the annual change in average houses prices drops to 4.6% … Outside of London, the south-east and east Midlands, prices dropped and stabilised across all other seven regions in June.” Newnes said further interventions or tighter rules “could fracture the health of the recovery”.

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Obama! You’re on!

Argentina Threatened With Contempt Order By US Judge (Reuters)

Argentina’s economy ministry once again defiantly asserted the country has made a required debt payment on restructured sovereign bonds on Friday night, just hours after a U.S. judge threatened a contempt-of-court order if Argentina did not stop issuing such statements. U.S. District Judge Thomas Griesa, who has overseen the nation’s long-running debt battle with hedge funds, railed at Argentina’s lawyers at a hearing in New York a day after the publication of another so-called legal notice insisting the government has met its payment requirements and was therefore not in default.

Holding a newspaper copy of the notice, Griesa said if the false statements did not stop, a contempt of court order will become necessary. Later on Friday, however, Argentina’s economy ministry issued a statement accusing Griesa of “clear partiality in favor of the vulture funds.” “Judge Griesa continues contradicting himself and the facts by saying that Argentina did not pay,” the statement said. Meanwhile, a spokeswoman for the U.S. State Department said the United States would not permit the International Justice Court in The Hague to hear Argentina’s claims that U.S. court decisions had violated its sovereignty.

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Ben and Jerry know how hard it is to be GMO free. It’s not about stop moving backward any more, it’s about needing to move forward, attack, or else.

The GMO Fight Ripples Down the Food Chain (WSJ)

Two years ago, Ben & Jerry’s Homemade Inc. initiated a plan to eliminate genetically modified ingredients from its ice cream, an effort to address a nascent consumer backlash and to fulfill its own environmental goals. This fall, nearly a year behind schedule, it expects to finish phase one, affecting its flavorful “chunks and swirls” like cookie dough and caramel. The only part left to convert: the milk that makes ice cream itself. Thanks to the complexities of sourcing milk deemed free of genetically modified material, that could take five to 10 more years. “There’s a lot more that goes into it than people realize,” said Rob Michalak, Ben & Jerry’s director of social mission.

Two decades after the first genetically engineered seeds were sold commercially in the U.S., genetically modified organisms—the crops grown from such seeds—are the norm in the American diet, used to make ingredients in about 80% of packaged food, according to industry estimates. Now an intensifying campaign, spearheaded by consumer and environmental advocacy groups like Green America, is causing a small but growing number of mainstream food makers to jettison genetically modified organisms, or GMOs. In addition to Ben & Jerry’s, a subsidiary of Unilever, General Mills this year started selling its original flavor Cheerios without GMOs. Post Holdings took the GMOs out of Grape-Nuts. Boulder Brands’ Smart Balance has converted to non-GMO for its line of margarine and other spreads. Chipotle is switching to non-GMO corn tortillas.

“Non-GMO” is one of the fastest-growing label trends on U.S. food packages, with sales of such items growing 28% last year to about $3 billion, according to market-research firm Nielsen. In a poll of nearly 1,200 U.S. consumers for The Wall Street Journal, Nielsen found that 61% of consumers had heard of GMOs and nearly half of those people said they avoid eating them. The biggest reason was because it “doesn’t sound like something I should eat.” Grass roots campaigns in several states are pushing for mandatory labeling of foods with GMOs – something most food companies staunchly oppose. In May, Vermont adopted the first state law requiring companies to label GMO foods, starting in 2016.

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Canada Quarantines Man With Ebola Symptoms (AFP)

A Canadian hospital put a patient in isolation Friday after he arrived in the country from Nigeria with symptoms of fever and flu – possible signs he is infected with Ebola – local media said. Nigeria is one of several countries in West Africa that has had confirmed cases of Ebola, in the world’s largest ever outbreak of the deadly haemorrhagic fever that has seen nearly 1 000 deaths and more than 1 700 people infected since the beginning of the year.

A doctor at the Brampton, Ontario hospital, near Toronto, said the patient had a fever and other symptoms similar to those seen in Ebola cases, the news channel CP24 said. Authorities decided to place him in isolation as a precaution, though there has been no official diagnosis and there are multiple diseases that could have caused his symptoms, stressed Eileen de Villa, an official with the region’s Public Health office, according to CTV news. In addition to quarantining the patient, the hospital also enacted other strict precautionary measures, she said.

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